Jersey Unreported Judgments

Employment - application by the defendants to set aside interim injunctions.

[2015]JRC091

Royal Court

(Samedi)

5 May 2015

Before     :		J. A. Clyde-Smith, Esq., Commissioner and Jurats Marett-Crosby and Nicolle
Between	CPA Limited		Plaintiff
And	Mr John Keogh		First Defendant
And	Mrs Annette De St Paer		Second Defendant

Advocate N. M. Sanders for the Plaintiff.

Advocate S. C. Thomas for the Defendants.

judgment

the commissioner:

1.        The defendants apply to set aside interim injunctions that had been obtained against them ex parte on 23^rd March, 2015. 

2.        The interim injunctions were obtained by their former employer, CPA Limited ("CPA"), a company specialising in intellectual property services.  "CPA" stands for "Computer Patent Annuities".  It was founded in Jersey in 1969 when its focus was on patent renewal services but this has expanded over the years to include a whole range of intellectual property legal and support services, trademarks and global patent renewals.  It is a very large business employing some 2000 people and serving clients' needs in some 200 jurisdictions. 

3.        With effect from 1^st November, 2010, CPA employed the first defendant ("Mr Keogh") as an IP legal general manager, pursuant to the terms of a written contract dated 20^th October, 2010.  CPA describes Mr Keogh's role as a senior, leadership role that involved him in a wide range of CPA's business activities.  His employment with CPA terminated on 22^nd July, 2014.  He was subsequently engaged by CPA as a consultant for a short period, but nothing turns on that. 

4.        With effect from 1^st July, 2008, CPA employed the second defendant ("Mrs De St Paer") as an assistant treasurer, pursuant to the terms of a written contract dated 22^nd May, 2008.  Mrs De St Paer progressed to the position of head of FX and cash management, which CPA describes as a senior position with leadership and management responsibilities.  Her employment with CPA terminated on 3^rd March, 2015. 

5.        Their contracts of employment contained a non-compete covenant in the following terms:-

"During the Restricted Period, you shall not be engaged or interested in a Restricted Business in any capacity (without the prior written consent of the Company), whether on your own account or in conjunction with any other person.

This clause will not restrict you from

(i)        being an employee within an existing business, which prior to your employment already operated a business in competition with the Company.

(ii)       holding or being beneficially interested in shares or securities quoted on any recognised investment exchange, if you neither hold nor are beneficially interested in more than five per cent of any single class of shares or securities."

6.        Their contracts also included the following definitions:-

"The "Restricted Business" means any business which supplies services substantially the same as any services supplied by the Company, which you have been involved with at any time during the two years immediately before the termination of your employment.

The "Restricted Period" means the period of your employment and the period of 12 months immediately following the termination of your employment."

7.        This non-compete covenant was an addition to covenants against the solicitation of clients and enticement of employees.  Furthermore, under a separate provision, Mr Keogh and Mrs De St Paer agreed not to disclose any confidential or secret information to any other person or company at any time during or after the termination of their employment. 

8.        In the premises the "Restricted Period" in relation to Mr Keogh expires on 23^rd July, 2015, and in relation to Mrs De St Paer on the 3^rd March, 2016. 

9.        The Order of Justice alleges that in March 2015, the defendants commenced employment with IP Preferential Limited ("IP Preferential"), a small company established in Jersey in 2013 by another former employee of CPA, namely Christine Jennings, to provide patent and trademark management services.  It is not in dispute that, prior to the imposition of the interim injunctions, Mr Keogh was employed by IP Preferential and Mrs De St Paer provided services to IP Preferential as a consultant. 

10.      A formal letter dated 16^th March, 2015, was sent by Ogier on behalf of CPA to the defendants, requiring them to cease working for IP Preferential in order to avoid CPA applying for an emergency injunction.  Mr Keogh did not reply, although he had made it clear in earlier correspondence that he did not agree with CPA's interpretation of the non-compete covenant.  He said he was not restricted from being engaged by a competing business.  Mrs De St Paer responded by letter dated 17^th March, 2015, stating that the business of IP Preferential was not the same as CPA and that it was unfair for her to be prevented from using her skills and knowhow.  She was not prepared to leave IP Preferential "on the basis of your very unspecific and unfounded allegations".

11.      The interim injunctions preventing the defendants from being employed by or working with IP Preferential were obtained ex parte on 23^rd March, 2015.  As a consequence, Mr Keogh's employment with IP Preferential has ceased and his name has been removed from its website.  Mrs De St Paer has ceased providing consultancy services to IP Preferential and her name has also been removed from its website. 

Ex Parte Injunction

12.      It is a fundamental principle of justice that a Court order should not generally be made without giving the other party an opportunity to be heard.  This was considered in Milner v Milner Laboratories Limited, Leech, Smith and Sim [2000] JLR 266, where Bailhache, Bailiff, said this at page 270 quoting from the judgment of Hoffmann J in the case of In Re First Express Limited [1991] TLR at 439:-

"Mr Justice Hoffmann said that he was firmly of the view that it was wrong for the application to have been made ex parte.  It was a basic principle of justice that an order should not be made against a party without giving him an opportunity to be heard.  The only exception was when two conditions were satisfied:

First, that giving such an opportunity appeared likely to cause the applicant injustice, by reason either of delay or action which it appeared likely the respondent or others would take before the order could be made and

Second, when damage to the respondent was compensatable under a cross-undertaking or when the risk of uncompensatable loss was clearly outweighed by the risk of injustice to the applicant if the order were not made. 

Applicants tended to think that a calculation of the balance of advantage and disadvantage in accordance with the second condition was sufficient to justify an ex parte order.

That attitude should be discouraged.  One did not reach any balancing of advantage and disadvantage unless the first condition had been satisfied.

The principle audi alteram partem did not yield to a mere utilitarian calculation and could be displaced only by invoking the overriding principle of justice which enabled the court to act at once when it appeared likely that otherwise injustice would be caused.

Here there was nothing to preclude an inter partes hearing."

13.      As can be seen below, a non-compete covenant can be justified on the basis that it is the only practical way to protect against misuse of confidential information.  In its letter of 27^th March, 2015, to each of the defendants, Ogier explained that in the light of the defendants' refusal to accept the competing nature of IP Preferential's business, CPA was entitled to take urgent action to protect its business and this without notice.  However, in terms of the first condition set out in First Express, there is no evidence that the defendants were about to do something which would injure the interests of CPA.  In terms of delay, we accept that applying for an interim injunction on notice would be a slower process than applying to the Bailiff for an ex parte order, but on the assumption that the Court will grant time for the hearing of such an application, the delay would be short.  The defendants, having been subjected to these interim injunctions, were given Court time within sixteen days. 

14.      It is true, as Advocate Sanders submitted, that the Bailiff, in granting the interim injunctions did not require notice to be given to the defendants, but he had only heard from CPA and, having now heard from the defendants, we find that the first condition was not met. 

15.      Advocate Sanders pointed out that such orders have been obtained ex parte in a number of the cases cited before us, and we accept that is so, but we can think of nothing more drastic than removing a person's employment or means of livelihood from them and there must be very good reason to do so without notice.  In this case, we find that notice of the application for the interim injunctions should have been given to the defendants.  It was not, and that is sufficient to set these injunctions aside, which we now do.  We will proceed to consider afresh whether, having heard from both parties, they ought to be re-imposed. 

16.      Before doing so we would mention that the defendants also seek to have the interim injunctions set aside on the ground of material non-disclosure, in that they allege the plaintiff did not draw to the attention of the Bailiff the fact that in his correspondence with Ogier, Mr Keogh did not agree with its interpretation of the non-compete covenant.  The difficulty with this is that whilst Mr Keogh did say that in correspondence (which was amongst the documents disclosed to the Bailiff) he did not proffer an alternative interpretation to that put forward by Ogier.  That was only forthcoming after the event and we do not think CPA can be criticised for failing to guess what that alternative interpretation might be and then draw that to the attention of the Bailiff. 

Interlocutory Injunctions - the applicable principles

17.      The leading local authority is Rossborough v Boon [2001] JLR 416, which confirms that the principles laid down in American Cynamid v Ethicon Limited [1975] A.C.396 apply to interim injunctions in relation to covenants in restraint of trade.  It was also held, (paragraph 42) that English principles should be followed in the absence of local authority.  The American Cynamid principles are as follows:-

"1       Has the plaintiff shown on the evidence before the court that there is a serious question to be tried?  If not, then no injunction is granted.

2         If there is a serious question to be tried, then the court considers whether the damages awarded at the trial would be an adequate remedy for the plaintiff. If so, then no injunction is granted.

3         If damages would not be an adequate remedy for the plaintiff then goes on to consider if damages would be an adequate remedy for the defendant: if so, then normally an injunction will be granted.

4         If damages would not be an adequate remedy for the defendant, the court goes on to consider the factors affecting the balance of convenience, i.e. which party will suffer more uncompensatable damage from the grant or refusal of the injunction.

5         if the balance of convenience is fairly even, then it is prudent for the court to seek to preserve the status quo.

6         Finally, where there is approximately equal uncompensatable damage to both parties, it is proper to look at the relative strength of the parties' substantive cases.  Where one is disproportionately stronger than the other, this may swing the balance."

18.      In terms of the balance of convenience and applying the American Cynamid principles, we would find in favour of CPA, in that:-

(i)        We are satisfied that there is a serious issue to be tried in respect of the validity of the non-compete covenants. 

(ii)       Damages would not be an adequate remedy for CPA, as it would be difficult to assess its loss. 

(iii)      On the face of it, damages would be an adequate remedy for the defendants as it would comprise the remuneration they would have received during the Restricted Period and which the interim injunctions would have prevented them earning.  In relation to Mr Keogh, we are talking about a short period.  Our only reservation in this respect is the damage that might be (and indeed may have been) done to their careers and consequent earning potential as a consequence of being subjected to interim injunctions of this kind.  On balance, however, we conclude that damages would be an adequate remedy for the defendants, and that being the case, interim injunctions would ordinarily be granted. 

19.      As the Court found in Rossborough, however, this could be a potential cause of injustice to the defendants because this action cannot be tried before the Restricted Period has completely or largely expired.  That is certainly the case in relation to Mr Keogh, whose Restricted Period expires this July.  In the case of Mrs De St Paer, it is unlikely in our view that a full trial could take place before the end of the year at the earliest, which would mean that about three-quarters of the period of the covenant would have expired.  It would be unjust to the defendants if we were to grant the interim injunctions when we are of the view that the non-compete covenants are not likely to be held to be enforceable.  We therefore went on to consider the merits of each party's case.  In doing so, and as submitted by Advocate Sanders, the Court is not engaging in a full determination of the merits as to whether the covenants are actually enforceable.  The question at this interim stage is whether the covenants are likely to be enforced.  That question has been addressed in a very restricted time frame (one afternoon) and without any of the evidence being tested. 

20.      In Rossborough, the Court at paragraph 42 summarised the principles in the context of employment contracts as follows:-

"(a)     A covenant in restraint of trade between an employer and an employee is unenforceable unless it is reasonable as between the parties and reasonable with reference to the public interest.

(b)       A covenant intended merely to protect the employer against competition from his former employee will not be upheld.  The court will be careful to ensure that the law is not used to stifle bona fide competition or to prevent an employee from using his skills and knowledge, even if gained wholly or partly in the employer's service.

(c)       However, an employer is entitled to protection against an employee taking unfair advantage of information obtained during his employment.  As Lord Parker put it in Herbert Morris Ltd v Saxelby (15) [1916] 1 A.C. at 709):

"Wherever such covenants have been upheld it has been on the ground, not that the servant or apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge of and influence over the customers of his employer, or such an acquaintance with his employer's trade secrets as would enable him, if competition were allowed, to take advantage of his employer's trade connection or utilise information confidentially obtained."

Further guidance on the sort of matters which can be the subject of protection by a covenant in restraint of trade was given by Lord Wilberforce in Stenhouse Australia Ltd v Phillips (20) [1970]1 ALL E.R. at 122):

"Leaving aside the case of misuse of trade secrets or confidential information ... the employer's claim for protection must be based on the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee, may have contributed to its creation.  For while it may be true that an employee is entitled - and is to be encouraged - to build up his own qualities of skill and experience, it is equally his duty to develop and improve his employer's business for the benefit of his employer.  These two obligations interlock during his employment: after its termination they diverge and mark the boundary between what the employee may take with him and what he may legitimately be asked to leave behind to his employers."

The most common example of a matter which falls within Lord Wilberforce's description is goodwill arising from customer connections.

(d)       If a court is to uphold a covenant which imposes restrictions upon the freedom of action of the employee after he has left the service of the employer, the restrictions must be no greater than are reasonably necessary for the protection of the employer in his business.

(e)       The burden of satisfying the court that the covenant is no wider than is reasonably necessary lies on the employer.

(f)        Although the court may, where appropriate, interpret a covenant in a manner which renders it reasonable, and therefore enforceable, and may also apply the "blue pencil test" so as to strike out parts which render the covenant too wide but enforce the remainder if reasonable, the court cannot rewrite the covenant which the parties have entered into.  If, despite benevolent interpretation and the deletion of unreasonable parts, the covenant would still be wider than is reasonably necessary, the court will not enforce it even if it would have enforced a more narrowly drawn covenant to protect an employer's legitimate interest."

21.      The reasonableness of the non-compete covenants is to be determined at the date the contracts were formed (see Rokos v Brevan Howard [2014] JRC 232A at paragraph 21) and thereafter the test as set out in Rossborough is applicable.  

Burden of Proof

22.      The Court in Rossborough left over the question of whether, unlike English law, the burden of showing that the covenant is no wider than is reasonably necessary lies on the employee, as a consequence of the established principle of Jersey law that "la convention fait la loi des parties."  Quoting from paragraphs 43-44 of the judgment:-

"43     The first issue on which Jersey law may be different is the burden of proof.  It is clear that, under English law, the burden of showing that the covenant is no wider than is reasonably necessary lies on the employer.  Mr Thompson argued that, under Jersey law, the burden lies on the employee to show that it is wider than reasonably necessary.  He referred to Wallis v Taylor (21) where the court said (1965 JJ at 457):

"It is an established principle of Jersey law that 'la convention fait la loi des parties' and the Court will enforce agreements provided that, in the words of Pothier, (Oeuvres de Pothier, Traité des Obligations, 1821 édition, at p.91) 'elles ne contiennent rien de contraire aux lois et aux bonnes moeurs, et qu'elles interviennent entre personnes capable de contracter.'  Where an agreement is freely entered into between responsible persons, good cause must be shown why it should not be enforced, and the matter which we have to determine is whether and the extent to which, in Jersey law, a covenant in restraint of trade can be held to be invalid."

Although the court went on to say that it would have regard to English precedents in the absence of any local ones, Mr Thompson submits that the fact that 'good cause must be shown why it should not be enforced' means that the burden is on the employee.  This, he says, is consistent with the maxim of la convention fait la loi des parties, which places great importance on the need to uphold contracts into which parties have freely entered.  Furthermore, the outcome of the two reported cases could only be explained on the basis that Jersey law was more inclined to uphold covenants in restraint of trade than English law.  Thus in Nicol v Egan (127), the court upheld a 10-year non-competition clause preventing an employee from working as a physiotherapist in Jersey.  In Wallis v Taylor itself the court upheld a one-year clause preventing the employee from working as a driving instructor in Jersey.

44       We see the force of Mr Thompson's argument and, as at present advised, would be inclined to accept it.  However, we would wish to hear further argument on the exact effect of the maxim before reaching a final conclusion, as we have not heard full argument on this aspect during this interlocutory hearing.  For the purposes of this case, we have proceeded on the basis that the burden lies on the plaintiff to show that the covenants are no wider than is reasonably necessary to protect its legitimate interests."

23.      We found ourselves in the same position as the Court in Rossborough and proceeded on the same basis namely that the burden lies on the plaintiff to show that the covenant is no wider than is reasonably necessary to protect its legitimate interests; however we can say that our decision would be the same if the onus had been on the defendants.  The only time available for the hearing of the defendants' application was, as we have said, one afternoon and that was barely sufficient to enable counsel to take us through the affidavit evidence and make their main submissions.  However, we think there may be good reason for placing the burden upon the employer because this is not simply a matter of the contract between the employer and the employee to which the maxim would apply; the public interest is engaged. 

24.      The fundamental principle is set out in the House of Lords decision of Herbert Morris Limited v Saxelby [1960] AC 688 where at page 699 it cites the following passage from the judgment of Lord MacNaughten in the Nordenfelt v Maxim Nordenfelt Co. (1894) AC 535 at 565:-

"The true view at the present time, I think, is this: The public have an interest in every person's carrying on his trade freely: so has the individual.  All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void.  That is the general rule.  But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case.  It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interest of the parties concerned and reasonable in reference to the interest of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.  That, I think, is the fair result of all the authorities."

25.      The starting point, therefore, is that such a covenant is void.  Good cause must be shown why it should be enforced, rather than why it should not be enforced.  Assuming this reflects public policy in this jurisdiction, which we suggest it does, then any consideration of a covenant in restraint of trade is set against that general rule and it is therefore seems apposite that, as under English law, it is for the employer to show that the exception to that general rule applies. 

Protecting Confidential Information

26.      Protecting confidential information can be difficult.  As Warby J said in Elsevier Limited v Munro [2014] EWHC 2648 at paragraph 78:-

"The misuse of confidential information can be and often is insidious and hard to prove and the difficulties of establishing causation are considerable."

A covenant preventing an employee from working for a competitor is often the only practical way in which to provide effective protection for an employer's right to safeguard confidential information.  As Lord Denny MR said in Littlewoods Organization Limited v Harris [1987] 1 WLR 1472 at 1479:-

"It is thus established that an employer can stipulate for protection against having his confidential information or trade secrets.  But experience has shown that it is not satisfactory to have simply a covenant against disclosing information.  The reason is because it is so difficult to draw the line between information which is confidential and information which is not; and it is very difficult to prove a breach when the information is of such a character that a servant can carry it away in his head.  The difficulties are such that the only practicable solution is to take a covenant from the servant by which he is not to go back to work for a rival in trade."

27.      This, of course, pre-supposes that there is information which the employer can legitimately protect. 

28.      The critical question, as made clear by the English Court of Appeal in FSS Travel and Leisure Systems Limited v Johnston and Another [1999] FSR 505 at page 512:-

"....... is whether the employer has trade secrets which can be fairly regarded as his property, as distinct from the skill, experience, know-how and general knowledge which can fairly be regarded as the property of the employee to use without restraint for his own benefit or in the service of a competitor.  This distinction necessitates examination of all the evidence relating to the nature of the employment, the character of the information, the restrictions imposed on its dissemination, the extent of use in the public domain and the damage likely to be caused by its use and disclosure in competition to the employer."

29.      Lord Justice Mummery went on to say this at page 513:-

"In my judgment FSS Travel failed to adduce sufficiently cogent relevant evidence to identify and establish a separate body of objective knowledge qualifying for protection as a trade secret by means of a restrictive covenant.  It is not sufficient for the employer to assert a claim that he is entitled to an accumulated mass of knowledge which he regards as confidential."

30.      The English Court of Appeal in FSS Travel helpfully summarised the settled legal propositions under English law affecting restrictive covenants in employment contracts in this way:-

"(i)      The court would never uphold a covenant taken by an employer merely to protect himself from competition by a former employee;

(ii)       There must be some subject matter which an employer could legitimately protect by a restrictive covenant;

(iii)      protection could be legitimately claimed for identifiable objective knowledge constituting the employer's trade secrets with which the employee has become acquainted during his employment;

(iv)      protection could not be legitimately claimed in respect of the skill, experience, know-how and general knowledge acquired by the employee as part of his job during his course of employment, even though it might equip him as a competitor of his employer;

(v)       The critical question was to distinguish the trade secrets that the employer could claim as his property from the skill, experience, know-how and general knowledge that the employee could regard as his property, for only the former could be subject to such a restraint;

(vi)      This question could only be answered by examining all the evidence relating to the nature of the employment, the character of the information which the employer sought to protect, the restrictions sought, the extent of use of the information in the public domain, and the likely damage that would be suffered by the employer if the information were disclosed;

(vii)     It was a question of fact on which side of the line any piece of information would fall between employer's and employee's property, but lack of precision in pleadings and absence of solid evidence in proof of trade secrets were frequently fatal to enforcement of a restrictive covenant."

31.      We turn now to the construction of the non-compete covenants. 

Construction of non-compete covenants

32.      Advocate Thomas' submissions related to the first exception to the overall restriction on the defendants, which we set out again:-

"This clause will not restrict you from:-

(i)        being an employee with an existing business, which prior to your employment already operated a business in competition with the Company."

33.      He submitted that the words "prior to your employment" did not mean prior to the commencement of their employment with CPA, but rather their employment with a company that they joined once they had left CPA.  More accurately, he said the clause should read:-

"will not restrict you from .... being an employee with an existing business, which prior to your employment [within that existing business] already operated a business in competition with the Company."

34.      Thus construed, he said the clause would prevent an ex-employee joining a business which then enters into competition with CPA but what is not prohibited is joining an established competitor.  If, on the contrary, the words "prior to your employment" refer to the employment with CPA, then this, he said, has the arbitrary result that the extent to which an ex-employee is permitted to work for a competitor depends on the date on which he or she started employment with CPA with the options for future employment varying from employee to employee, depending on how long they had been employed. 

35.      Advocate Sanders pointed out that the words "your employment" were used throughout the contracts and described their employment with CPA.  He helpfully set out the entirety of the provision, inserting the definitions in square brackets for ease of reference and to aid construction:-

"During the Restricted Period [the period of your employment and the period of 12 months immediately following the termination of your employment.  In the case of summary dismissal for gross misconduct this will also mean an additional period equal in length the notice period], you shall not be engaged or interested in a Restricted Business [any business which supplies services substantially the same as any services supplied by the Company, which you have been involved with at any time during the two years immediately before the termination of your employment] in any capacity (without the prior written consent of the Company), whether on your account or in conjunction with any other person.

This clause will not restrict you from

(i)        being an employee within an existing business, which prior to your employment already operated a business in competition with the Company.

(ii)       Holding or being beneficially interested in shares or securities quoted on any recognised investment exchange, if you neither hold nor are beneficially interested in more than five per cent of any single class of shares or securities." (Emphasis added)

36.      Seen in context, he said the wording of the non-compete covenant was clear and unambiguous.  Its intention was to permit employees to leave and join a competitor which existed at the time of their employment with CPA.  In practice the longer the employee stayed with CPA then the more restrictive the covenant became. 

37.      We prefer the construction placed upon these covenants by Advocate Sanders, and agree that the words "your employment", consistent with their use throughout the contracts, refers to their employment with CPA.  In our opinion it is likely that this is the construction that would be placed upon it by the Court at trial. 

38.      In his skeleton argument Advocate Thomas raised the issue of the duration of the restricted period, namely twelve months, but did not pursue it in argument.  It would appear that it is a period that is consistent with and approved in many of the cases cited before us (including FSS Travel), and we do not think it likely that the Court at trial would regard it as unreasonable. 

39.      The skeleton argument also contended that IP Preferential was not a "Restricted Business" as defined.  That again was not pursued in argument but working from the evidence before us, including print outs of the websites of the two entities, we think it is likely that the Court at trial will find that IP Preferential supplies services substantially the same "as any services supplied by" (our emphasis) CPA and that the defendants (both senior employees) would have had an involvement (a wide term) in them during the two years preceding the termination of their employment.  We will not address the arguments on this any further. 

Subject matter of protection

40.      The key issue for the Court is whether CPA is likely to be able to establish at trial in the case of each defendant that there was identifiable objective knowledge constituting its trade secrets which it could legitimately claim as its property as distinguished from the skill, experience, know-how and general knowledge that the defendants could regard as their property.  In his affidavit, sworn in support of the ex parte application, Gordon Samson, the chief operating officer of CPA, said this in relation to Mr Keogh:-

"19      Mr Keogh held a very senior position at CPA from 1 November 2010 until his departure.  His role as the IP Legal General Manager meant that he was privy to a large amount of confidential information in respect of CPA's business, including its business structure, patent renewal systems, case management systems, processes and systems in respect of the restoration of lapsed IP, and the fees and processes associated with CPA's business in these areas. 

20       As a senior patent attorney operating in house, Mr Keogh's role was intertwined with all of the products and services offered by CPA.  The advice he provided and role he performed was not separate to CPA's product offering.  Any legal advice offered by Mr Keogh was not separate to the creation of products and services.  His role was fundamental in creating the final product for clients, and although the product itself would have been sold by others, he was certainly deeply involved with the product. 

21       Mr Keogh's role was intrinsic to the overall business in other aspects.  During his time at CPA he had significant relationships with CPA's agent network.  As a result of this, he was aware of fee structures, which demonstrates that his role was more significant from the point of view of the products and services offered by CPA than that of a pure in-house legal counsel - his involvement was closely linked to the services provided by CPA."

41.      In his second affidavit sworn for the purposes of the defendants' application to set aside the interim injunctions, Mr Samson noted one particular service to which he said Mr Keogh was central, and that was the software law update which provides clients of CPA jurisdiction specific updates on intellectual property law.  He acknowledged that the legal research and interpretation elements would be skills any attorney would possess but it was Mr Keogh's detailed knowledge of how CPA's processes around the research and importantly, how it was then applied to the software products and core renewal systems of CPA that would be invaluable to a third party who wished to establish the same systems or databases.  He went on to say  between paragraphs 22 and 24:-

"In my view, Mr Keogh's knowledge of CPA systems would be highly beneficial to any rival business, whether they use identical systems or not.  Ultimately the non-compete covenant is aimed at competing service providers. .... Mr Keogh had access to critical, sensitive and confidential information relating to CPA and its product offering which could be used to CPA's disadvantage.....in short, contrary to what is said in paragraphs 14 and 15 of the Keogh affidavit, CPA considers that Mr Keogh was involved in, and had knowledge of, most, if not all of CPA's services and operations.  Those are services which are to a very large extent now offered by IP Preferential and accordingly the reason for CPA to hold Mr Keogh to the non-compete covenant he agreed to is because his knowledge of CPA's business, methods and confidential information would be of significant value to a new competitor business such as IP Preferential."

In Mr Keogh's affidavit (sworn before Mr Samson's second affidavit in which he gives the example of the software law update), he accepted that he had a very wide knowledge of CPA's business and the processes that it utilises to deliver those services to its clients.  He agreed that in his most recent permanent role as head of IP Legal, he was involved in providing guidance to the business of CPA as to how to provide those services, as he was engaged in a supervisory role over much of the business.  However it does not follow that any of that information can properly be treated as confidential or a trade secret and he complains of the failure of CPA to particularise those "legitimate interests" it sought to protect or to point to any given examples.  

42.      CPA provides services across a broad range of IP matters in competition with others and we accept that in his role as IP Legal General Manager Mr Keogh would have built up a detailed knowledge of the whole of the business and the services it provided.  Mr Samson at paragraph 16 of his second affidavit says that "this goes to the very heart of the non-compete covenant" but that cannot be the case as mere knowledge of a business is not enough.  At paragraph 18 of his second affidavit Mr Samson refers to the knowledge and skill Mr Keogh built up at CPA dealing with "Restoration of IP Rights" to the point that he has become one of the leading experts in this field in the world (work which he undertook at IP Preferential before the ex parte injunctions were imposed), but arguably this is a professional skill that he can properly regard as his property.  In essence is CPA seeking to prevent Mr Keogh as a former employee using the professional skills he has acquired in competition with it-something the Court will never permit. 

43.      At paragraph 19 of his second affidavit Mr Samson concedes that CPA cannot seek to prevent Mr Keogh from using the skills he has acquired but asserts that it can legitimately prevent him from using those skills utilising his knowledge of CPA's operations and practices, all of which CPA asserts as being confidential.  Can CPA justify regarding such a mass of information across the whole of its business as a trade secret?

44.      At paragraph 46 of his second affidavit, Mr Samson describes the restrictive covenants in this way:-

"The restrictive covenants in Clause 14 of the Keogh Contract (mirrored in the St Paer Contract) are designed to provide, together, a reasonable framework to protect CPA's interests as a leading provider in the IP industry.  The global expertise that CPA offers its customers (having developed that expertise over a significant period of time and with very significant levels of commitment and investment), and with which employees become familiar whilst working with CPA, is something that in my view CPA is properly entitled to protect by seeking to prevent, for a reasonable period of time, the potential transfer of that information, expertise, knowledge and general 'know how' to competitors and specifically new IP businesses."

Thus CPA boldly asserts as its property all of the expertise that it offers its clients and in doing so arguably fails to distinguish between that and the skills, experience, know-how and general knowledge that the defendants have gained as their property. 

45.      We were left with this general assertion that Mr Keogh knew a great deal about CPA's business and that all of it was confidential.  AdvocateThomas submitted, echoing the words of Mummery LJ in FSS Travel, that CPA were in effect asserting a claim that it is entitled to an accumulated mass of knowledge which it regards as confidential.  The fact that Mr Samson was only able to give one specific example-the software law update-perhaps illustrates the point.  Therefore Advocate Thomas said the true purpose of CPA enforcing the non-compete covenant was to protect itself from competition from the skills, experience, know-how and general knowledge of Mr Keogh. 

46.      As against that we can see that in his particular position Mr Keogh might have gained a personal knowledge of and influence over clients of CPA and been able take advantage of its connections but we found it difficult to address the critical question posed in FSS Travel, namely to distinguish the trade secrets that CPA could claim as its property from the skills, experience, know-how and general knowledge that Mr Keogh could regard as his own and thus to say which side of the line the Court at trial, having had the evidence tested, would come down on. 

47.      The position of Mrs De St Paer is much clearer.  In his first affidavit, Mr Samson said this at paragraph 45 in relation to her work at CPA:-

"45      Mrs De St Paer was employed as a Treasury and Financial officer, which was a senior position.  Her last position held at CPA was "Head of FX and cash management".  She was a central expert resource spanning the entirety of CPA's treasury processes and services and advising on all aspects of treasury management, including cash management and FX issues, optimising and improving hedging and currency exposure strategies (see her job description).  Therefore she had a central involvement with the Treasury and FX advice and services which CPA provided to its clients."

46 ...  

47       CPA believe and IP Preferential's website indicates that the Treasury Services and/or advice offered by IP Preferential are the same or substantially the same as CPA offer their clients, and Mrs De St Paer has a detailed and complex understanding of the way in which CPA's services work.  This provides IP Preferential with a competitive advantage in order to provide their service, which they would not otherwise benefit from."

48.      Mrs De St Paer explained in her affidavit that she came to CPA after long experience in banking.  She held a senior management role in dealing with foreign exchange and money markets at HSBC, and gained a number of qualifications at her time there.  She joined CPA as assistant treasurer on 1^st July, 2008, and became group treasurer from 1^st October, 2010.  She had knowledge of the CPA systems only for the function of putting in day to day foreign exchange rates that were obtained by using Reuters and in some ways, she described her role at CPA as "a back office function" in the sense that she worked in a support role and did not have any client, agent or patent office contact.  Equally, she had no input in pricing issues.  She was not involved in the operational side of the patent and trade mark renewals.  She could not see how she could bring a competitive advantage to any CPA competitor. 

49.      In his second affidavit, Mr Samson did not accept that her role was back office.  He said she provided price and guidance to the team at CPA on currencies and was well aware of the way CPA's pricing structure worked and what services it offers.  The treasurer and fund management services that CPA offered as part of its overall offering was fundamental to the substantial levels of transactions that CPA carried out for its clients on a daily basis. 

50.      In our assessment of the evidence, it is accurate to describe Mrs De St Paer's role as a "back office function" in which she brought to bear very considerable financial skills, experience, know-how and general knowledge gained over a long career.  She may have had a detailed understanding of the CPA's treasury processes and services but it was entirely unclear why any of that could be equated to a trade secret; confidentially was again being asserted over a mass of knowledge.  In our view she would not have gained a personal knowledge of and influence over clients of CPA and been able to take advantage of its connections.  

51.      CPA is unlikely, in our view, to be able to identify at trial any confidential information or trade secret that can fairly be regarded as its property as distinct from those qualities which can fairly be regarded as her property to use for her own benefit or in the service of a competitor.  In the light of that, it would be unjust to re-impose the interim injunctions upon her pending the outcome of that trial. 

52.      The position of Mr Keogh was different as the arguments were finely balanced and it was difficult to say whether the Court at trial was likely to enforce the non-compete covenant or not; although we felt there was very considerable force in the arguments put forward by Advocate Thomas.  Ultimately the Court has a discretion whether to re-impose the interim injunctions against him.  Knowing that the Courts view covenants in employment contracts more jealously than in other commercial contracts (see Coppage v Safety Net Security Ltd [2013] EWCA Civ 1176) and taking into account all the circumstances, including the short period that the covenant now has to run, we decline to re-impose the interim injunctions against him. 

53.      As a consequence and in conclusion the interim injunctions are hereby lifted. 

Authorities

Milner v Milner Laboratories Limited, Leech, Smith and Sim [2000] JLR 266.

In Re First Express Limited [1991] TLR at 439.

Rossborough v Boon [2001] JLR 416.

American Cynamid v Ethicon Limited [1975] A.C.396.

Rokos v Brevan Howard [2014] JRC 232A.

Herbert Morris Limited v Saxelby [1960] AC 688.

Nordenfelt v Maxim Nordenfelt Co. (1894) AC 535.

Elsevier Limited v Munro [2014] EWHC 2648.

FSS Travel and Leisure Systems Limited v Johnston and Another [1999] FSR 505.

Coppage v Safety Net Security Ltd [2013] EWCA Civ 1176.