Executives Depart with Secrets and IP


Four key employees of a software company resign and start up a competing venture.  The former employer stumbles. The new company aggressively targets the customers of the former employer, and develops into a successful and profitable business, twice the size of the former employer.

On the surface, that’s the story of GasTOPS Ltd. and MxI, a story spanning 13 years, leading to an epic lawsuit (295 days of trial… that’s like going to trial 5 days a week every day for over a year). Last month, when the Ontario court handed down its 675-page decision, the former employees who left GasTOPS and started MxI were hit with an $11 million damage award, for usurping corporate opportunities, and misappropriating trade secrets, confidential information and intellectual property of the former employer.  The decision [3.7 MB PDF] covers the issues in great detail and if you can wade through the analysis, it’s a great survey of current case-law in this area.

The take-home message: departing executives owe a continuing fiduciary duty to their former employer, not to use confidential information or poach business opportunities. In this case, the judge said that duty should continue for 10 years after employment ends.

Related Reading: Departing Employees & Trade Secrets

Calgary – 11:45 MST

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