Showpo settles alleged data ‘theft’ dispute: What to do when an ex-employee steals confidential information
Technology has made it easy for ex-employees to improperly use confidential information obtained during their employment. It only takes an employee to copy information to an external hard-drive or email information to their personal account for your valuable information to be at risk. According to Deloitte, 14 per cent of data breaches are caused by disgruntled ex-employees stealing confidential information. When your confidential information has been distributed to competitors, there are a number of legal remedies that may be available.
What can employers do?
If the breach is serious, you may be entitled to take legal action against the former employee. In these circumstances, the court has the option to:
- Grant an injunction to refrain the employee from using the information;
- Order the employee to pay damages for breach of contract;
- Order the employee to pay damages for copyright infringement; or
- Order the employee to pay any legal costs incurred by the employer.
Alternatively, if the employee is still working for your company, it may be possible to terminate their employment contract or company policy. If you are unsure, it is best to contact a solicitor for advice to prevent an employment law dispute.
Case Study 1: Showpo Data Theft
Australian fashion label, Showpo, has recently settled a dispute with rival company, Black Swallow, regarding the alleged theft of confidential information. Showpo claimed that former employee, Melissa Aroutunian, stole the company’s customer database and passed it on to her new employers at Black Swallow. The database included the contact information of over 306000 customers, which Black Swallow allegedly used to begin sending promotional emails to listed contacts. Showpo claims that since receiving their customer list, Black Swallow has adopted similar branding to Showpo in an attempt to market itself as an affiliate of the label.
Black Swallow has been ordered to pay $60000 to Showpo and both parties are to pay their own legal costs. Following this, the case is to be dismissed. Furthermore, Ms Aroutunian has been restrained from using the confidential information and ordered to cover her own legal costs.
Case Study 2: SAI Global Property Division Pty Ltd v Johnstone  FCA 1333
In this case, a senior business development manager, Mr Johnstone, copied confidential information onto a USB before his employer, SAI Global, terminated his employment. Mr Johnstone made use of that information in his new position working for a competitor. SAI Global brought an action for unauthorised use of information under s183 of the Corporations Act, and damages for breach of copyright under s115(4) of the Copyright Act.
1. Injunctive Relief: The court made orders for injunctive relief which prevented Johnstone from using SAI Global’s confidential information unless he was legally required to do so or SAI Global had granted him written permission. The court based the appropriateness of the remedy on the fact that Mr Johnstone had demonstrated an obvious disregard for his obligations of confidentiality. In cases where an employee has unknowingly or unwittingly taken or shared confidential information, it is less likely that an injunction will be granted.
2. Damages for Breach of Contract: SAI Global was entitled to $4320 worth of damages from Mr Johnstone as a result of his breach of contract. The breach was caused by Mr Johnstone stealing confidential information, as well as taking up a position at a competitor when his employment contract prohibited him from doing so.
3. Damages for Copyright Infringement: The court ordered Mr Johnstone to pay nominal damages of $1 to SAI Global pursuant to damages available under the Corporations Act. Significantly, the court also awarded a further $5000 damages under the Copyright Act to deter others from engaging in similar behaviour.
4. Order for Costs: An employer may be entitled to recover all costs from their employee if they succeed. However, the court may decide that the employer incurred costs that are ‘disproportionate’ to the importance of the matter, and grant the employer the recovery of only partial costs. In this case, Mr Johnstone was ordered to pay slightly more than half of the plaintiff’s costs. This is due to the fact that Mr Johnstone stopped having access to SAI Global’s confidential information at an early point in the proceedings, thereby preventing him from using the information to interfere with the business of the company.
Tips for employers:
- Evaluate who has privileged access to company data;
- Include a confidentiality provision in the business contract and company policy; and
- If you believe your confidential information has been stolen, talk to a solicitor about your options.
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