Blackmagic is a company that provides computer software to the television and film production industry. The company took action against former employees who intended to establish a business for a video capture card.

Blackmagic alleged that the employees conceived the idea for the card whilst employed by Blackmagic and with reference to Blackmagic's confidential information. Blackmagic also argued the employees should not be able to commercially exploit the idea.

The Court distinguished between ownership of the confidential information that belonged to Blackmagic and ownership in the idea for the card. While the Court was prepared to restrain the ex-employees from using the confidential information, ownership in the idea for the card did not vest in Blackmagic.

It was indicated that had the employment contract contained an express provision requiring the employees to disclose their ideas to the employer and to acknowledge that ownership in those ideas will vest in the employer, the outcome was likely to have been more favourable for Blackmagic.

As there was no such provision in the employment contract, the Court allowed the ex-employees to continue to use the card within their new business.

On appeal, Blackmagic argued that the exemployees had a duty to disclose their idea for the card during their employment, as the card was a 'business opportunity' for Blackmagic.

The Court was unsympathetic to this argument and found that employees were not obliged to disclose ideas they conceive during their employment, unless their employment contract required them to do so.

The importance of intellectual protection ('IP') from misuse

The electronic storage of information in the workplace has made it increasingly difficult for businesses to protect their innovations and other intellectual property from being wrongfully exploited by employees and former employees, for their own personal benefit.

How then can businesses protect their innovations from misuse by employees?

Limits on patents or registered designs

Patents or registered designs can be a very effective means of protecting an innovation or invention. However, aside from being expensive, patents or registered designs cannot normally be registered over all of an employer's commercially valuable information.

Action against employees for breach of confidence

There is a general duty of employees not to use confidential information belonging to their employer to the detriment of the employer. Businesses may seek to take advantage of this duty as a means of controlling the poaching of the employer's IP. However the limits of this duty were illustrated in the Blackmagic case.

Protecting confidentiality in the employment contract

Given the limitations of the common law duty of employee confidence, businesses should consider amending their employment contracts to better protect their IP. Each employment contract should:

  • Require the employee to disclose innovative ideas to their employer
  • Carefully detail the non-competition and copyright obligations of the employee
  • Include a non-disclosure, non-compete and IP ownership provision
  • contain provisions that are not unreasonable, as a Court may not enforce provisions which stifle innovation or a competitive market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.