“Intellectual Property is the oil of the 21st century.”
Mark Getty KBE, grandson of Jean Paul Getty (billionaire founder of “Getty Oil”)
A trade restraint is only enforceable to the extent that it protects the legitimate business interests of the party seeking to enforce it. Example of legitimate business interests which can lead to enforceable trade restraints include:
- The purchaser of a business wishes to prevent the seller from opening up a new business in competition with the business they just sold or seducing clients of the business to go elsewhere
- An employer wishes to prevent an ex-employee from poaching clients, using confidential information or copying business methods
The starting point is that a trade restraint is presumed to be void and unenforceable and the onus is on the party seeking to enforce the restraint to show that it should be enforced.
So when will trade restraints will be enforced?
This is the big question when you wish to prevent someone from injuring your interests or you want advice as to whether you can lawfully proceed with you plans, for example, are you free to open up a new business in competition with your ex-employer of not? The answer will depend on several factors, including the following, which may be considered by courts when considering a specific restraint clause:
- The public interest in not preventing free trade unnecessarily
- The nature of the business interests of the party seeking the restraint
- The geographical area covered by the trade restraint
- The time period of the trade restraint
- The acts prevented by the restraint
- Whether the restraint continues after the relationship between the parties has ended (for example, after an employee has resigned)
- Relevant bargaining power of the parties
- The benefits received by the party who agreed to the restraint
Hint: a restraint clause preventing an ex-employee from obtaining any job anywhere in the world if they leave your employ will NOT be enforced by a court! And yes, an employment agreement we have heard rumours of DID contain an alleged restraint clause to this effect.
Contact us before you take any steps when a trade restraint is involved as the costs can be substantial if you procced according to a mistaken belief as to the effect of a trade restraint, despite the restraint clause being written in apparently plain English. Take advantage of our expertise in this area to prevent costly errors.
Intellectual property (IP) is created when a person applies their mind to create something original. Courts will act to protect IP rights from infringement by those who seek to make money from the ideas and property of others.
Casestudy: Raimondi v Dürer
The courts in Venice in the early 1500s held that Raimondi (a well-known Italian engraver) could make and sell copies of Dürer’s wood engraving “Life of the Virgin”, which he had been doing for substantial profit, as long as he didn’t copy the monogram of Dürer’s initials which certified it as a Dürer’s original.
So what’s changed in 500 years? Well, not much!
Whereas an exact copy of works protected by copyright, patent or trademark won’t be permitted by the courts it may be possible to design a product that is similar to the product protected but which won’t result in IP infringement. An example is the famous dispute between Philips and Remington in the early 1990s over whether the Remington three headed shaver infringed the Philips trademarks. In that situation the courts found that there was no infringement. So Philips had to “take one on the chin”.
The key takeaway is that you need careful legal advice where products are being copied or where allegations of IP infringement are made against you whether you have registered IP protection or not.
Confidential information and trade secrets
This is where courts find that there is an equitable obligation of confidence concerning certain information, the information was used or disclosed in a manner which wasn’t authorised and the unauthorised use of the confidential information caused damage. The remedies available include injunctions to prevent conduct, orders for the return of the information and a compensatory award of damages against the infringing party.
In recent times, much potential IP infringement happens online, for example competitors may copy substantial elements of websites such as colour, headings, general layout and “feel” and that may constitute IP infringement.
The tort of passing off prevents the misappropriation of your reputation or goodwill by a person claiming a relationship with you, that you have approved or sponsored them or by confusing customers into thinking they are buying your products when they are really buying your competitor’s products.
The remedies available to you when somebody engages in passing off include an award of damages, an injunction to prevent the passing off and a payment to you of any profits they’ve made due to the passing off.