On 23 October 2014 the Federal Court of Australia handed down a decision that dealt with the downloading of software by an employee immediately before his departure from that firm and his taking up employment with a competitor.

Despite the court’s finding that the employee received no material benefit from use of the information, and his new employer had no access to the information, significant monetary compensation was payable by the employee.  The facts are as follows.

Leica Geosystems Mining is a company in the business of selling software products and providing services for the mining industry.  In particular they provide GPS controlled mine equipment control systems.  The Defendant in the proceedings was employed by Leica as a software engineer for approximately 18 months.  The employee concluded employment with Leica in November 2011 and commenced employment with a competitor company 4 days later.  From 11 October until 3 November the employee deliberately copied large volumes of Leica’s material onto an external hard drive that he removed from the premises when he finally left their employment.

Approximately 3 months after his departure from Leica, the employee was socialising with a friend from Leica – Ms Vella.  The friend saw a folder named “Leica” and its contents on a screen the employee was scrolling through when visiting at his home.  Ms Vella, who was still employed with Leica, advised her employer.

The employer then sought search and seizures orders from the court.  These were granted at the end of February 2012 and all data storage devices including such source code and materials was seized and examined.  That data revealed the extent of the copied information. 

As a result Leica took action against its former employee.

Breach of Copyright

It was not difficult for the court to be satisfied that Leica had substantiated their claim against the employee concerning infringement of copyright.  The employee maintained that the materials had not been used in respect of the work with his new employer but the court concluded that the mere fact that it wasn’t used or benefited from did in no way answer Leica’s claim that in copying the material without their licence, consent or authority and later reproducing it on its own computer, he infringed Leica’s copyright in that material.

Breach of Duty of Confidence

In addition, the Court held that the employee owed a duty of confidence to their employer not to use or misuse confidential information.  Again, it was easy for the Court to find that the former employee had breached that duty. 

Breach of Employment Contract

It was equally easy for the court to find that he had breached 5 separate provisions of his employment contract.

Result

It was accepted that the employee had not used the information or disclosed the information to his new employer and Leica confirmed that they had suffered no material loss as a result of his conduct. 

Notwithstanding that position, Leica sought compensation of $40,000 for breach of confidence and $250,000 for breach of copyright together with interest and costs. 

Although the court was not minded to make an award of that magnitude, the former employee was ordered to pay $50,000 plus Leica’s costs in relation to the proceedings. 

Lesson

The lesson to learn from this is that an employer need not suffer an actual loss if an employee downloads material during the course of their employment that they intend or could intend to use in later employment scenarios. 

From an employee’s point of view the essential lesson is to respect the fact that the law protects your employer’s confidential information and copyright – even if you don’t use or benefit from that information after you leave.

Remembering that the former employee made no money out of the information he downloaded and the former employer made no loss, it is telling that the court still imposed a fine of $50,000 plus payment of Leica’s legal costs as a penalty for the improper conduct.

Tal Williams, Partner
t:02 9390 8331
e: tal.williams@holmanwebb.com.au