Any applicant for an interlocutory injunction must carefully consider the merits of the case and the urgency of the injunction before commencing this course of action, due to the potential exposure to substantial damages.
The recent decision in Howden Australia Pty Ltd v Minetek Pty Ltd  FCA 981 serves as a timely reminder of the necessary steps required for interlocutory injunction applications and the importance of protecting confidential information.
The case involved two manufacturers of large industrial-scale fans used in the mining industry; Howden and Minetek. Mr Bourcier was employed as Howden’s senior design engineer until 1 September 2016, when he left to commence work with Minetek. Shortly after, Minetek filed two mixed-flow fan patent applications, naming Mr Bourcier as the inventor. Howden alleged that Mr Bourcier and Minetek had used confidential information in designing the fan and sought an interlocutory injunction against Minetek to restrain the sale of these fans.
Establishing the basis for an urgent injunction
To secure an interlocutory injunction, applicants must demonstrate:
(a) it has a prima facie case, in the sense that there is sufficient or “some” likelihood that the applicant would be successful at the trial;
(b) it will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and
(c) the balance of convenience favours the granting of an injunction.
In her Honour’s decision, Jagot J stated that Howden failed to establish a sufficient likelihood of success at trial to justify the grant of an injunction pending the trial. The evidence provided by Howden:
(a) was general in nature and failed to specify how or in what respect any specific part of the Howden design was used in the Minetek fan; and
(b) did not establish that any of the allegedly “confidential” information was not publicly available in engineering literature and software.
Accordingly, the evidence did not demonstrate that Howden had a prima facie case warranting the grant of an interlocutory injunction, particularly when compared to the detailed report given by Mr Bourcier about how he designed the fan using standard texts, industry software and his own knowledge.
When applying for an interlocutory injunction, Howden reinforces the importance of identifying with sufficient specificity;
- what the confidential information is, and
- how the information has been misappropriated and used.
This is particularly important in instances where an injunction is likely to have practical consequences extending beyond merely pecuniary interests.
Remembering the undertaking as to damages
An applicant for an interlocutory injunction is typically required to offer the “usual undertaking as to damages”. This is an undertaking to pay compensation to any party affected by the order for an injunction. If it is shown at trial that the applicant should not have received the benefit of the injunction, it must pay damages to any party who suffered loss because of the restraint; even if the party was not directly involved in the litigation.
Although it was not necessary to consider (given Jagot J’s findings regarding the evidence discussed above), Jagot J considered that the balance of convenience did not favour the grant of an interlocutory injunction because there was evidence that an injunction would likely have:
a. meant that Minetek would have been unable to complete projects for multiple third parties, rendering it liable for substantial damages in breach of contract and also affecting the third party purchasers;
b. caused redundancy of Minetek employees; and caused irreparable damage to Minetek’s reputation in a small market.
These same aspects would also have meant that if the injunction was granted (Howden was eventually unsuccessful at trial), Howden would have been liable for substantial damages.
This case reinforces the seriousness of seeking an interlocutory injunction and the risks of treating the usual undertaking as a mere formality in the interlocutory injunction process.
Protecting confidential information
In a highly competitive marketplace, safeguarding the confidentiality of business information that provides a competitive advantage is critical. In Howden, Howden provided evidence that it had suffered $10m in lost business since Mr Bourcier’s alleged disclosure of the confidential information.
Although an injunction was not granted in this instance, the case shows the potentially serious financial consequences of unauthorised disclosures of confidential information. It also serves as a reminder for businesses to review their own procedures to safeguard against unauthorised disclosures like this.
Businesses should take the following steps to protect their confidential information:
- Businesses should take the following steps to protect their confidential information:
- accurately identify the specific information said to be confidential;
- ensure all employee contracts contain confidentiality clauses and that all employees understand their obligations in relation to the confidential information, including by conducting employee training sessions;
- arrange for all contractors or third parties dealing with confidential information to sign an appropriately drafted non-disclosure agreement; and
- implement business practices such as:
a. restricting access to physical and electronic confidential information;
b. refraining from discussing confidential information in online and offline public settings; and
c. properly disposing of written and electronic confidential documents.
If you would like to discuss this topic, or other IP Law issues in more detail please contact Kellie Stonier or Jack Collings.
Authors: Jack Collings, Senior Associate, and Mitchell Bruce, Law Clerk