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The Law Moves Fast to Protect Software Company’s Rights

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

The wheels of justice have a reputation for moving slowly, but a case in which three directors quit a technology company, taking a cohort of its strategic staff with them before setting up in rivalry, showed just how quickly the courts can move.

The High Court found that it was arguable that the directors had acted in breach of the fiduciary duties that they owed to the software development company. The company’s claim that its intellectual property rights had been infringed by misuse of its software in the directors’ new venture was also arguable.

A number of employees, who left the company and joined the new business, had also arguably breached their obligations of fidelity and restrictive covenants in their employment contracts which prevented them from soliciting the company’s customers or working for competing businesses for specified periods.

The Court issued an emergency injunction to protect the company’s position pending a full trial of the action, in which a permanent injunction and substantial damages would be sought. The interim order placed tight restrictions on the new venture’s activities but was carefully tailored to ensure that it was not forced out of business.

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