There are various ways, both legal and practical, to protect yourself against the risk of an ex-employee making use of your valuable business information and poaching your customers. One of the ways in which employers are protected is through the doctrine of confidential information. However, understanding the limitations of that protection is important.
A recent decision of the Queensland District Court provides a useful illustration of an employer overestimating the protection offered by confidential information, leading it to invest time and money in ultimately unsuccessful litigation.
Totally Aussie Security (TAS) alleged that an ex-employee, Ms Hadley, took with her confidential information in the form of an operating manual. TAS’s evidence in support of this allegation was the discovery on its computer system of a copy of its own operating manual rebranded for Ms Hadley’s new company, “Security Sales (Australasia)”.
The Court accepted that Ms Hadley took such a document with her when she left. However, while TAS provided the Court with a copy of the document Ms Hadley was alleged to have taken, it failed to provide a copy of the original document. Without having the original and the alleged copy documents to compare, the Court was unable to conclude that the document taken by Ms Hadley contained the information set out in the original.
The second problem for TAS was that, even if the document taken was accepted as a word for word copy of the original, the doctrine of confidential information offered no protection. This is because the Court won’t protect as confidential something that is in the public domain (in this case, the director of TAS admitted during his evidence that he had distributed the manual freely to clients on request and that “everything contained in the manual was common knowledge”), nor will the Court protect as confidential something which is of no value (the Court found that the manual contained “fundamental errors concerning the law”, “contained no trade secrets”, and was “so below standard” that neither TAS nor Security Sales (Australasia) would be likely to use it).
We note that, although not considered in the judgment, it appears that copyright may have afforded TAS some protection where confidential information did not.
Separately, TAS alleged that Ms Hadley’s new company had misused TAS’s confidential information by poaching a TAS client. Most of us are familiar with the idea that a customer list can constitute confidential information. It is more difficult to make out the case that information concerning a single customer is confidential. In this case, TAS failed because the Court found that “the very presence of [TAS’s] guards [at the client’s premises] robs that fact of any confidential quality”.
Click here for a copy of the decision.