| Summary |
PRACTICE AND PROCEDURE – Authority ordered suppression of confidential information due to commercial sensitivity – Director and shareholder of second applicant (“K”) was sister and daughter of first and second respondents (“J” and “C”) – First applicant incorporated by K’s husband (“B”) – Second applicant manufactured portable sawmill products - First applicant distributed products - Applicants traded together under same name – C’s company transferred patents and all intellectual property rights to first and second applicants – K employed J as product designer and C as casual sales consultant – J and C’s individual employment agreements (“IEA”) contained restraint of trade and confidentiality clauses – Serious issues arose regarding C and J working on own projects and C’s website selling own products in competition with applicants – C’s employment terminated when casual sales work ran out – J later resigned – GOOD FAITH – Applicants claimed C failed to negotiate in good faith as failed to disclose prior sawmill design work and did not challenge restraint of trade clause in IEA – C argued relationship between job applicant and employer not covered under s4(2) Employment Relations Act 2000 (“ERA”) - Authority found s60C(ia) ERA required good faith behaviour when entering into and varying IEAs – C argued applicants did not come to proceedings with clean hands – Authority found applicants entitled to make business decisions made – Found C began work after employment began, when privy to applicants’ customer requests and planned designs – Found C did not mislead or deceive applicants at time negotiated IEA – Found C under no obligation to challenge restraint of trade clause – Estoppel – Respondent argued applicants estopped by their conduct regarding one patent – Authority found respondents did not alter position detrimentally – Privity of contract – Respondents argued C’s restraint of trade clause referred to both applicants, where only one was employer – Authority found permitted by s4 Contracts (Privity) Act 1982 - BREACH OF CONTRACT – Confidentiality – Authority found IEAs contained express terms regarding confidentiality of technical information and information on company operation and performance – Found patents confidential information - Found information regarding planned or underway developments confidential – Found marking information, customer lists and information gleaned from customer queries which could be used to develop or modify products all confidential – Found respondents took design information, design plan information, and customer request information and used it to design modifications and plans which applicants had intended to design and market – Found C took customer lists for marketing purposes – Found J passed on information to C that J gained in course of employment – Found respondents used confidential information to develop products for personal gain both during and after employment – Found deceived applicants by acting in secret and withholding information – Found use of confidential information breached IEAs, duty of fidelity and good faith – Found case law established where in course of employment invention made, implied term invention property of employer – Found J employed to invent and design for applicants, so lockpeg invention belonged to applicants – Found although C not employed as inventor or designer, only able to design angle cutter because privy to customer information and information about skillmill – Found C used this for own benefit, in breach of IEA, and should not be permitted to retain benefit – Found first sawmill patent filed while J employed, and incorporated information belonging to applicants, so belonged to second applicant – Found applicants entitled to share information – Found T Frame sawmill used applicants’ confidential information – Found information taken by respondents used for applicants’ detriment as respondents designed and built a mill and filed patents intending to compete with applicants – Found patent applications breached duty of fidelity and confidentiality - RESTRAINT OF TRADE – Respondents claimed restraint unreasonable – Authority found clauses only prohibited respondents from manufacturing or selling similar portable sawmills or parts - Respondents argued clause not reasonably necessary to protect applicants’ proprietary interests because respondents already aware of relevant information prior to employment – Authority found C sold information to applicants – Found respondents only privy to information and did not own it – Found J was designer and clearly privy to proprietary interests – C argued not involved in manufacturing for applicants so had no access to proprietary interests that should be protected – Authority found C had knowledge of customer database and modification requests, and required knowledge of products to sell them – Found knowledge constituted proprietary interests to be protected – Found restraints not unreasonable given respondents’ histories with patents and related companies – Found applicants given consideration for restraints, in C’s higher rate of pay and J’s shares – Found reasonable for clause to have no geographic limitation because applicants’ products sold worldwide – Found clause had no temporal limitation, and part of restraint which prohibited carrying out of any other activity which may constitute a conflict of interest was far too broad - Found clause should be modified pursuant to s8(1)(b) Illegal Contracts Act – Found at time J entered IEA, one year period reasonable – Found C’s employment only of casual sales representative so lesser term of six months reasonable – Found modified restraint clauses now expired so sole relevance was penalties for breach of contract – Found even if restraints invalid, respondents used confidential information to design, patent and manufacture competing equipment - BREACH OF CONTRACT - Duty of fidelity – Found respondents under duty of fidelity during employment to do nothing deliberately likely to injure applicants’ business, and do nothing after employment to misuse confidential information – Aiding and abetting breach – Applicants claimed C persuaded J to obtain quotes, place orders, apply for patents and set up partnership with C – J said C asked J to do it and J emailed drawings for C – Authority found C aware of provisions of J’s IEA – Found C aided and abetted four breaches of J’s IEA, under s134 ERA - Damages – Applicants claimed entitled to damages and account of profits for breaches found – Authority advised applicants to provide more information on quantum - BREACHES OF INTERIM INJUNCTION – Authority found C put information on website several times, left sawmill in public view, and operated sawmill at two commercial premises where also visible to public – Found C breached interim injunction issued by Authority – Also found J discussed confidential information with public at marketing event - INJUNCTION – Authority found damages not adequate alternative remedy to applicants – Authority issued several injunctions relating to respondents’ uses of applicants’ patents, confidential information and trade secrets - COMPLIANCE ORDER – Respondents ordered to provide copies of patents designed and manufactured in competition with applicants using applicants’ confidential information and trade secrets – C to return customer information – Respondents ordered not to continue to use confidential information, trade secrets of patents to design or build sawmills, parts or accessories – C ordered to remove references on C’s website to applicants and applicants’ products and add disclaimers to website – Respondents ordered not to display, market, test, use or provide information to others about applicants’ confidential information or trade secrets - PENALTY – Authority found each of respondents’ breaches warranted penalty to mark seriousness of actions – Found breaches wilful – Imposed penalty of $2,500 for each global breach – Found five causes of action attributed to J: misuse of confidential information during then after employment, setting in business after employment, unauthorised giving of information to C and unauthorised use of applicants’ premises and equipment – Found six causes of action attributed to C: misuse of confidential information during then after employment, setting in business, aiding and abetting J’s breach of IEA, unauthorised use of applicants’ premises and equipment and manufacturing and marketing of angle cutter - Found applicants lost opportunities as result of respondents’ actions, and breaches were between parties not of statutory obligations - Found suitable case for whole of penalties to be awarded to applicants - $12,500 payable by J to applicants - $15,000 payable by C to applicants |