Confidentiality Agreements and Injuctive Relief

2012-08-29

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CONFIDENTIALITYAGREEMENTSANDINJUNCTIVERELIEF
A.SASHAMANDY*
ROBIC,LLP
LAWYERS,PATENTANDTRADE-MARKAGENTS
Canaconfidentialityagreementbeusedinordertoobtaininjunctiverelief?What
conditionsmustbemetsothataconfidentialityagreementbindstheemployeesof
thecompanywhichsignedit?ThesewereamongsomeofthequestionstheCourtof
Queen’sBenchforSaskatchewanhadtograpplewithinAutomatedTank
ManufacturingInc.vMiller2012SKQB300,whichwasrenderedonJuly26,2012.
Thiscaseisimportanttopatentpractitionersandagentsbecauseitprovides
guidanceonhowtocounselclientswithregardtodisclosuresandconfidentiality.The
casemayalsointerestthoselitigatorswhomayaskthecourttoenjoinapartyfrom
disclosingorusingconfidentialinformation.
Facts
Inmosttechnicalfields,confidentialityornon-disclosureagreementsare
commonplace.Inpatentlaw,suchagreementscanbeessentialtomaintainingthe
validityofapatentifitisevercontestedincourt.Mostjurisdictionsconsider
confidentialdisclosurestobenon-anticipatory,meaningthattheydonotcountasa
disclosurepriortothefilingofapatentapplicationwhichmayvitiatetheeventual
patent’svalidity.Confidentialityagreementsalsoprovideapossibleremedytothe
injuredpartyifevertheirconfidentialinformationisdisclosedinviolationofthe
agreement.Theseremediescanincludedamages,aswellasequitablerelief.
AutomatedTankManufacturing(ATM)broughtsuitagainstPeterMiller,anemployee
ofBAREngineeringCo.(BAR)whichprovidedservicestoATM.ATMalsosued
LarryBertelsen,theformerpresidentandCEOofATM.ATMallegesthatMiller
obtainedconfidentialandproprietaryinformationduringhisworkforBAR,andthat
MillerdisclosedsomeofthisinformationtoBertelsen.ATMalsoallegesthatboth
MillerandBertelsenconspiredtogetherwithintenttomisusetheconfidential
informationtoharmATM.Asaresult,ATMsufferedlosses,andseeksaninterimor
interlocutoryinjunctionagainstbothMillerandBertelsentopreventthemfromusing
ordisclosingATM’sconfidentialinformation.BothMillerandBertelsendenythe
©CIPS2012.*LawyerandJuniorEngineer,A.SashaMandyisamemberofROBIC,LLP,amultidisciplinaryfirmof
lawyers,andpatentandtrademarkagents.PublishedintheSeptember2012issueoftheWorld
IntellectualPropertyReport.Publication142.268.

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allegations.Milleralsopleadsthatsinceheisnotapartytotheconfidentiality
agreement,heisnotboundbyitsrestrictions.
Theagreementinquestion,entitled“ConfidentialityandProtectionoftheInvention
Agreement”,wasenteredintobyATMandBARinApril,2008.Aswithmostofthese
agreements,thedefinitionofwhatconstitutes“confidentialinformation”isleftvague.
Millersignedtheagreement,butonlyasanauthorizedrepresentativeofBARand
notinanypersonalcapacity.TheagreementrequiredBAR’semployeeswhohad
accesstotheconfidentialinformationtoalsosignaconfidentialityagreement,but
thatwasneverdone.
Judgement
ThetestforinteriminjunctivereliefwassetoutbytheSupremeCourtofCanada
[RJR-MacDonaldInc.v.Canada(AttorneyGeneral),[1994]1S.C.R.311]asfollows:
(i)Whatisthestrengthoftheapplicant’scase?
(ii)Willtheapplicantsufferirreparableharmiftheinjunctionisnot
granted?
(iii)Doesthebalanceofconveniencefavourthegrantingofan
interiminjunction?
Inthefirststep,itisonlynecessaryfortheapplicant(ATMinthiscase)toraisea
seriousissuetobetried.Ifsuchanissueisraised,theCourtmustconsidertheother
twofactors.Withregardtoirreparableharm,theapplicantmustdemonstratethatthe
lossitmaysufferiftheinjunctionisnotgrantedcannotbecompensatedwith
damages.Finally,thethirdfactoriswherecourtsusuallyperformthebulkoftheir
analysis.Here,“thejudgemustweightheriskoftheirreparableharmthe[applicant]
islikelytosufferbeforetrialiftheinjunctionisnotgranted,andheorshesucceedsat
trial,againsttheriskoftheirreparableharmthedefendantislikelytosufferifthe
injunctionisgrantedandheorsheprevailsattrial.”
InassessingthestrengthofATM’scase,theCourtconsideredwhetherMilleror
Bertelsenhadeitheracontractualorfiduciarydutynottousetheconfidential
information.WithrespecttoMiller,theCourtfoundthattheagreementbetweenATM
andBAR,onitsface,doesnotbindMillerinapersonalcapacitytoadutynotto
discloseconfidentialinformation.TheCourtfurtherconcludedthat“untilthetrial
judge’sdecision,[…]thisagreementcannotbeusedasproofofthetypeof
informationtobeconsideredasconfidentialnorasproofthattherewasan
enforceablenegativecovenantagainstdisclosureofsuchinformation.”Despitethese
findings,theCourtconcludedthattheaffidavituponwhichATM’sstatementofclaim
reliesraisedatleastaseriousissuetobetried,andthereforetheCourtneededto
assesstheothertwofactors.

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Movingnowtotheirreparableharmfactor,theCourtfoundthatcertainlossesATM
allegesitwouldsuffercanbereasonablycompensatedwithmoneydamages,and
thusdonotconstituteirreparableharm.Otherallegedlosses,suchaslossof
businessreputationorlostopportunitiesinfindingabuyerforATM’sbusiness,were
movedwithsufficientspecificitythattheCourtconcludedtheremaybeameaningful
riskofirreparableharm,eveniflittledirectevidencewaspresented.Therefore,the
Courtmovedontothethirdfactor.
Turningnowtothebalanceofconvenienceanalysis,theCourtconcludedthatthis
all-importantfactordoesnotfavourATM.AlthoughATMraisedaseriousissuetobe
tried,itdidnothaveastrongprimafaciecase,nordidithaveanyevidencethatit
hadactuallysufferedaloss.MillerandBertelsenraisedtwopointstoarguethatthe
balanceofconveniencestiltedintheirfavour.First,theyarguedthatoneaspectof
theinjunctivereliefrequested,thedeliveringupof“allconfidentialinformationintheir
possession”,wasfartoovagueandwouldbeimpossibletoperform.Second,both
MillerandBertelsensubmittedthatATMisrequestingsuchreliefforthesolepurpose
ofpreventingMillerfromassistingBertelseninaFederalCourtofCanadapatent-
infringementlawsuitthatBertelsenlaunchedagainstATM.TheCourtfoundthis
secondallegationtobepersuasive:
Inmyopinion,interiminjunctivereliefshouldnotbegrantedifthereasonitissought
istogainanadvantageforATMintheFederalCourtAction.Millermaybeawitness
intheFederalCourtActionandunlessoruntilATMcanestablishMillerissubjectto
theconfidentialityagreementorhassomecommonlawdutyofconfidentiality,ATM
cannotpreventcommunicationswithhimforthepurposesofpreparationforthat
action.Thereisnopropertyinawitness.
TheCourtthereforerejectedATM’smotionforaninterlocutoryinjunction,withcosts.
Conclusion
Althoughitispossibletoobtaininjunctivereliefpreventingapartyfromusingor
disclosingconfidentialinformation,thepartyrequestingsuchreliefshouldputtheir
ducksinarow.
InjunctivereliefisaremedyinEquity,andthepartyrequestingitmusthaveclean
hands,orattheveryleast,mustdemonstratethatthebalanceofequitiesfavours
them.IntheparticularcasewheretheapplicantisaskingtheCourttoenforcea
confidentialityagreement,thefollowingpointsshouldbeconsidered:
Donotaskthecourttoenforceavagueorpoorly-wordeddefinitionof
“confidentialinformation”;

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Itmayhelptoaskforspecificrelief(i.e.deliveryupofaharddriveormass-
storagedevicecontainingtheinformation,aninjunctionagainstdisclosureofa
particularsetofschematicsrelatedtoaspecificproject,etc.);
Whenenteringintoaconfidentialityagreementwithacorporation,ensurethat
itsemployeeshaveadutyofconfidentialitytowardsthecorporation(i.e.as
definedintheiremploymentcontract),orbetteryet,towardsthedisclosing
partyitself;and
Incertaincases,itmaybepossibletosuethecorporationwhoseemployees
violatedtheconfidentialagreement(itisunclearwhyATMdidnotdosointhis
case).
Finally,withanyinjunctiverelief,factsarecrucialtoobtainingthereliefrequested.
Courtswillnotrelyontheallegationsinthepleadings,butwillinsteadlooktothe
factsleadbyaffidavit.Inthiscase,morespecificdetailsaboutthelossesATMmight
havesufferedmayhavehelpedtiltthebalanceofconveniencesinitsfavour.
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