Use of confidential information – the springboard injunction

The “springboard doctrine” is entwined with the concepts of misuse of trade secrets and confidential information and reflects one party’s misuse of another’s confidential information to produce a service or product in a timeframe or manner that would otherwise not have been achievable.  In the recent UK decision in Forse & Ors v Secarma Ltd & Ors [2019] EWCA Civ 215, the Court of Appeal of England and Wales upheld the High Court’s decision to grant an interim springboard injunction and held that injunctive relief in springboard cases “must be no greater in scope or duration than is reasonable to remove a defendant’s unfair competitive advantage”.  This article discusses the legal concept of a springboard injunction as well as the finding in the Forse case and the Australian position.

What is a springboard injunction?

A springboard injunction is a legal remedy which is designed to cancel out any head start, unlawful advantage or “springboard” that a former employee may have gained through the misuse of the employer’s confidential information.  In contrast to a confidentiality injunction, where such information has already been used and is not confidential anymore, the springboard injunction places the former employee under special restrictions to ensure that the person cannot obtain an unfair competitive advantage.

Factors which must be established for the grant of a springboard injunction

In addition to the general principles required for granting an injunction, the applicant must satisfy the following elements before the Court will grant springboard relief:

• that the former employee or director has engaged in unlawful behaviour, such as misuse of confidential information and/or breach of duty;
• that the former employee or director has gained an unfair competitive advantage over the employer as a result of the unlawful activity;
• that the period and nature of such competitive advantage is more than short term; and
• that the advantage still exists at the date the springboard injunction is granted and will continue to exist unless such relief is granted.

Interim springboard injunction – the Forse & Ors v Secarma Ltd & Ors case

Secarma Ltd (Secarma) is a cyber-security company who alleged that former employees procured key employees of Secarma build a competing business (Xcina) – a clear breach of the defendants’ post-employment restraints.  Secarma obtained an interim springboard injunction against the defendants, and a number of them appealed the decision.  The Court of Appeal focused the purpose as well as the scope of length of the springboard injunction.

When considering the purpose of a springboard injunction, the Court said:

“the object of an interim springboard injunction is to preserve the status quo, in the sense of freezing until trial, the relevant business activity of the defendant.  On the assumption that damages would not be an adequate remedy, the interim injunction is necessary to hold the position between the parties so that further unfair competitive advantage cannot be obtained by the defendant between the application for the interim injunction and trial.  That includes the ability to obtain work from new clients.“

The Court found that Xcina, in carrying out its activity, would be competing with Secarma in relation to past, existing and new clients, and therefore it was appropriate for the judge to have granted a springboard injunction.

In considering the scope and length of the springboard injunction, the Court held:

“the injunction must be no greater in scope and for no greater period than is reasonable to remove the unfair competitive advantage secured by the defendant… as for the length of the period necessary to remove the unfair advantage, it will always depend on the nature of the advantage and how it can reasonably be expected to be removed, bearing in mind that the object is not to punish the defendant but to correct the wrong to the claimant.”

On this issue, the Court determined that the injunction granted by the primary judge was too wide in its scope as it prevented Xcina from carrying out existing business and prevented two (2) of the defendants from undertaking activity when they were not subject to post-termination restrictions.  The defendants successfully argued that the interim springboard injunction was of such a scope that it punished the defendant rather than preventing loss to the claimant.  The Court upheld the decision to grant the injunction, dismissing the appeal, save for finding that the scope of the injunction granted by the judge was too wide.

The case highlights the importance of ensuring the scope of the springboard injunction is within reasonable limits.  When persuading the Court as to the reasonable length of time for which the injunction is required, the Court will consider the following factors:

• the length of time it has taken the defendant to secure the advantage;
• the length of time and ability of the company to recruit employees; and
• evidence of market conditions.

The Australian position

Whilst the aforementioned cases have been outside the Australian jurisdiction, Justice Beach of the Australian Federal Court has determined that Australian Courts have a similar or wider discretion to award springboard injunctions:

“… I do not doubt that a springboard injunction can be granted in a patent infringement case.  Section 122(1) of the Patents Act 1990 (Cth) provides that “relief which a court may grant for infringement of a parent includes an injunction…Moreover, s23 of the Federal Court of Australia Act 1976 (Cth) would also provide adequate power.”

Justice Beach has highlighted the following principles in relation to granting of springboard injunctions:

• the basis for granting the injunction is to “deprive an infringer of an unwarranted advantage gained from their act of infringement”;
• the terms of the injunction must be proportionate to and linked with the unwarranted advantage;
• the injunction must not place the applicant in a better position than they would have been in the absence of the unlawful activity;
• a springboard injunction should not be granted if other available remedies would be adequate, such as an account of profits or damages; and
• restraint should be exercised where the injunction would adversely affect innocent third parties.

Takeaways

A springboard injunction may be an effective method to prevent a former employee from unlawfully obtaining a head start and competing with your business.  In order to successfully obtain a springboard injunction, a party should be confident in the case’s merits, have well drafted post-termination restrictions and ensure the springboard injunction applied is not wider or longer than what is necessary to protect your business from the defendant’s unlawful activity.

Links and further references

Legislation

Federal Court of Australia Act 1976 (Cth)

Cases

Forse & Ors v Secarma Ltd & Ors [2019] EWCA Civ 215

Streetworx Pty Ltd v Artcraft Urban Group Pty Ltd (No 2) [2015] FCA 140

Further information about confidential information

If you need advice on unauthorised use of confidential information or unlawful activity by a former employee or competitor, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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