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Setting up a Competitor using Stolen Business Contacts
Setting up a Competitor using Stolen Business Contacts

Are you protected from the enemy within?

Are you protected from the enemy within?

We’ve written a string of blog posts now about how social media sites can impact your business.  There’s the need to make sure that inappropriate pictures don’t make it to Facebook.  There’s the need to make sure disgruntled employees can’t post Tweets on your behalf.

We also posted an article on the ownership of business contacts gathered on social media sites. There is now some case law that helps clarify the position and highlights the need for businesses to take action.

Setting Up a Rival Business

The case in question is Whitmar Publications Ltd v Gamage. In this case Gamage, along with other senior employees, attempted to set up a rival business whilst still employed by Whitmar Publications.

  • Business Cards – They tried to solicit clients and employees for their new business as well as taking around 450 business cards with client contact information from the employer’s premises.
  • LinkedIn – They also tried to use the Whitmar LinkedIn account to promote their new business.

When the employees then left the business, they refused to give Whitmar the user name and password for the LinkedIn account.  As a result, Whitmar could not access their own LinkedIn pages.

One of the ex-employees also took all of the client contact details from the Whitmar LinkedIn page and used the information to invite all of Whitmar’s clients to the launch party of their new venture.

The outcome

Whitmar sought an injunction to prevent the ex-employees from using confidential information in order to gain competitive advantage and were successful.

The ex-employees were instructed to hand over the user name and password for the LinkedIn account, and prohibited from entering into contractual relationships with any of the clients from the business cards they had removed.

No contractual protection

Whilst the story is around the ownership of contacts held on social media sites, there’s another important point to be noted here: The employees did not have a written contract of employment in place with any post-termination restrictions.  As a result, there was nothing to stop them from entering into competition with Whitmar.

Thankfully for Whitmar, the employees had begun setting up their new venture whilst they were still employed by Whitmar. During employment there is an implied term that employees will act in good faith and fidelity. This implied term does not extend beyond employment.

The actions of the employees during their employment resulted in a breach of the implied term which Whitmar was able to take action against. Had the employees not started to work in competition until after they left employment then this implied term would have no longer applied and there would have been nothing that Whitmar could have done to prevent them.

How to protect your business

There are two important points to taken from the Whitmar case.

  • Firstly, make sure you have a Social Media Usage Policy in place.  This policy will cover not only inappropriate usage but also the very important topic of ownership of contacts gained through social media sites that are in anyway related to your business.  It will also cover disclosure of user names and passwords.
  • Secondly, we can’t stress strongly enough how important it is to protect your business with a sound employment contract.  You have worked incredibly hard to build your business; you’ve had sleepless nights, no holidays, faced financial pressure and, without an employment contract in place, there’s very little you can do should one of your employees decide to leave and set up in competition with you right next door.

Getting help protecting your business

If you’d like to find out more about we could help you protect what you’ve worked so hard to build then give us a call on 0203 319 1649.  Alternatively, you can use our contact form to email us and one of our advisers will give you a call.