Injunctions are an important part about the company litigation and they can be a powerful tool for employers to protect their businesses. Typically, the injunctions are used to protect the status quo especially when a business relationship is threatened.
A trade secret case with a former employee is a perfect example as to how the injunction can be used in practice. If the employee who is leaving threatens to take a trade secret with him or her and divulge that to a competitor, in those cases, the employer should consider applying for a temporary injunction to protect his position before a final award is issued against a departing employee. It is important to prevent the disclosure of trade secrets from happening as soon as possible and the best way to achieve it is through the temporary injunction (the trial always takes years so even if the employer wins at the end, the damage may be already done).
Applying for a temporary injunction is not a hugely complicated process. In order to convince the judge to issue the injunction, a careful analysis of the case must be carried out. The employer should act swiftly and resolutely. A temporary injunction should be issued in Poland within 7 days after submitting the application. The judge takes decision about granting or refusing the injunction solely on the basis of the documents presented by the applicant. The other side is not being notified about the process until the injunction is granted (ex parte). Only then, the other side can appeal to the upper court.
Some of the challenges of applying for a temporary injunction and obtaining a relief to prevent the use of trade secrets by former employees are highlighted in the case which we have handled recently: ABC sp z o.o. vs X and Y.
The case considered the evidence which the employer applying for an injunction must present to the court for an application to succeed.
Facts of the case
Mr X and Mr Y were employed by a logistics company called ABC Sp. z o.o. in senior positions. Both employees were subject to restrictive covenants which prevented them from soliciting or dealing with ABC’s customers or suppliers for a 6-month period after the termination of their employment. Mr X and Mr Y decided to go into partnership together with the intention of setting up a competing business. They resigned on the same day and their employment terminated on 1 September 2017. Neither employee disclosed their true intentions in relation to the partnership or the competing business.
It subsequently emerged that before leaving ABC’s employment Mr X and Mr Y had copied confidential information belonging to their employer, including blueprint of the operational scheme, customer and supplier lists and information about prices and orders. A few days after the 6-month period of their restrictive covenants expired, Mr X and Mr Y set up a new company and started their business. The way they operated was very similar to ABC.
ABC immediately applied for a temporary injunction to prevent Mr X and Mr Y from using or disclosing the trade secrets belonging to ABC. It was not easy to specify what actually is the trade secret and what is not, but ABC decided to list the documents and blueprints which should be included in the injunction. The application was successful and the temporary injunction was granted. The Court ordered that the applicant should file the statement of claim against Mr X and Mr Y within 2 weeks. The trial continues.
ABC’s application for temporary injunction hit the nail on the head. The Court granted ABC an injunction to prevent employees from using or disclosing the specified confidential information that they had taken, and this saved the company from serious difficulties. Both ABC and former employees can now wait for the final verdict on the case, knowing that as long as the dispute is not resolved, the disclosure will not happen.
The decision in this case is a useful reminder of the heavy evidential burden placed on applicants when applying for a temporary injunction. The applicant must satisfy the Court that the unlawful act has resulted in an unfair advantage, the unfair advantage existed on the date that the application for injunction was made and the unfair advantage will result in serious financial loss to the applicant if the conduct is allowed to continue.
Practical points for employers to take away from this case
There are a number of practical points that employers can take away from this case:
- A heavy evidential burden is placed on employers when applying for an injunction against their employees. Direct evidence of wrongdoing by the employee is needed to support an application, as well as evidence of there being a real risk of the unlawful conduct resulting in a serious financial loss to the employer if the conduct is allowed to continue;
- It is in the interest of the company that employees employed at senior positions who have a direct access to the company’s trade secrets should be under relatively strict control when it comes to access to information;
- the non-compete period should be long enough to protect the employers business; 6 months is not sufficient because trade secrets are kept in human brains and there has to be some time for the secrets to “evaporate”; a contractual penalty should also be considered.