The temptation for some employees to take their employer’s confidential information and use it to set up a competing company can sometimes be too much. Morality aside, having the confidential information at hand means their new company can potentially undercut prices and take business away from former employers. This then leaves a very serious problem for businesses who have to deal with the issue of the confidential information being taken by the employee, and then being used by a competitor company to their detriment. The case of Pintorex v Keyvanfar (2013) which was considered in the Patents County Court may be of some comfort to employers in such a situation.
In this case, Mr Keyvanfar was a long-standing employee at Pintorex Limited; a company supplying stationary products. Mr Keyvanfar decided to leave and set up a new company (called Parax Office Limited) with the financial backing of a friend. Pintorex alleged that Mr Keyvanfar downloaded their entire SAGE database prior to finishing his employment with them. The database contained information about customers and commercially sensitive price information. The database was found on a laptop owned by Parax, and this information was used to undercut prices and win business from two of Pintorex’s customers.
Pintorex commenced legal proceedings against Mr Keyvanfar, Parax and his friend personally as the financial backer of the new company. The Court disliked Mr Keyvanfar’s evidence as to how the SAGE database appeared on the laptop of his new employer (he alleged it was shown briefly to demonstrate what software could be used in the new business). Therefore, the Court found that Mr Keyvanfar had misused the confidential information of Pintorex. It also held that Parax was vicariously liable because Mr Keyvanfar was acting to further its interests, and that Parax had sufficient knowledge of what was going on to be jointly liable for the misuse. The financial backer was not held liable as the Court found he did not have sufficient knowledge of what had happened.
The decision may provide some ammunition when employers are faced with the issue of a departing employee taking and using their confidential information to set up a competitor company. However, the case really turned on the evidence with computer forensics demonstrating that the database had been taken and downloaded, coupled with the ‘implausible’ explanations by Mr Keyvenfar, leading to the decision made. In regard to the liability of Parax, there was evidence of Parax authorising Mr Keyvanfar to be their agent (to seek out warehouse facilities) even prior to him leaving his employment with Pintorex and therefore, Parex were held jointly liable with Mr Keyvanfar.
Readers should note that the loss of business to Pintorex from two customers taken by Parex was valued at a mere £1,800! The legal and computer forensic costs would certainly be well in excess of this, but we suspect Pintorex are pleased that their point was made.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).