Case Study – Employee breach of restrictive covenants and copyright infringement

Our client came to us after becoming aware that two of their senior employees were working on setting up their own business and were approaching our client’s customers to try and secure their business. We immediately took steps to collate all evidence of the breaches of contract as well as the copyright infringement. The best evidence is vital to proving the case and must be done without tipping off the employees that it is happening to avoid destruction of evidence or concealment.

Having acquired all the necessary evidence a meeting with the employees was called where they were presented with the evidence and served with cease and desist letters. The cease and desist letter asked for various undertakings to be given by the employees. These included agreement to immediately cease the wrongful activities, give full disclosure of their activities and pay our client damages for any loss which our client calculated had been suffered as a result of the unlawful dealings.

Injunction application

The employees failed to agree that there was any wrongdoing.  Our client suspended the employees and we then applied for an immediate injunction to secure a court order preventing the employees from continuing to sell their services to our client’s customers or using our client’s copyright material.

After some very strong initial resistance from the employees we were able to come to a settlement on favourable terms to our client. These terms included an agreement that the employees would not approach or solicit our client’s customers, recovery of the bulk of our client’s legal costs as well as an interest in the employees’ new business. In exchange our client allowed the former employees to have access to a small number of clients that our client did not have a realistic prospect of preventing them using the services of the ex-employees.

Why you need Briffa

We look at the whole picture. Yes what these employees did was bad and many lawyers have the skills to send cease and desist letters and secure injunctions but those things are only tools – a means to an end and not an end in themselves.

When an employee turns on its employer in this way it is often very difficult for the employer emotionally. A person that you have hired, invested in, developed and trusted has decided to act in a way that is damaging to your business. The usual reaction is to do the worst and damn the consequences. This can leave you with a big bill and an empty victory. In this case we helped our client park the emotion and work out how to make good of the situation.

The first thing to accept is that employees who act in this way may very likely be determined to run their own business and be capable of making a go of it. Staring that fact in the face could there be an opportunity.

Our client was keen to make sure its client base was protected but was also aware of two or three clients where the employees had a stronger relationship and where our client could not realistically prevent these clients and the ex-employees working together in the future.

Our client therefore agreed that the employees’ new business could work for these named clients in exchange for a modest equity interest for our client interest in the ex-employees new business. In addition by allowing the ex-employees this lifeline and immediate access to paying clients our client was able to agree repaying of the legal costs over a period of time from profits of the employees new company.

In time the ex-employees new business developed a complimentary service which our client’s customers need from time to time but is not provided by our Client. As a relationship had been maintained and our client has an equity interest in the ex-employees new business our client is happy to sub-contact the ex-employees business to provide these services and so provide a seamless service to its clients.

Another Job Done – Happy Client = Happy Lawyer!

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