The Quebec Court of Appeal's decision in Gotar Technologies Inc. v. Arseneault emphasizes that a non-compete clause and assignment of intellectual property to an employer cannot be interpreted so broadly that a person is prevented from earning a living in a similar field once the relationship with the employer is over. Moreover, a business opportunity that is rejected or not developed by an employer may be fair game for development by former employees.
In March 2008, the Quebec Court of Appeal upheld a decision by the Superior Court rejecting a request by Gotar Technologies Inc. (Gotar) for a permanent injunction preventing two of Gotar's former directors from using a process for transforming aluminum. Gotar alleged that the process had been assigned to it by one of the former directors, and also that the use of the process by the directors violated their contractual and civil 'non-compete' and loyalty obligations.
The defendant, Émile Arseneault, had been one of the initial shareholders and directors of Gotar when it was incorporated in 1997. Previously, Mr. Arseneault had worked for Les Traitements Villeneuve Inc., a company specializing in the recovery, treatment and reuse of contaminated and non-contaminated metals. Gotar provides de-oxydization, delipidation and industrial cleaning services for industrial equipment using bio-degradable and non-toxic products and application methods.
While still working for Gotar, in 2001, Mr. Arseneault brought up the idea of recovering aluminum shavings and submitting them to a chemical decontamination process to render them reusable. The idea was discussed with a patent agent, but was never developed further.
Mr. Arseneault's relationship with Gotar began to deteriorate in 2003, and he left the company permanently in 2004. In April 2004, Mr. Arseneault and another former director of Gotar, André Simard, created the company Alumitherm International Inc. (Alumitherm). Alumitherm is in the business of supplying reusable, spherical, calibrated aluminum particles created by applying a transformation process to aluminum shavings.
Gotar applied to the Quebec Superior Court for a permanent injunction against Alumitherm, claiming that it was the owner of the transformation process used by Alumitherm, and that Mr. Arseneault and Mr. Simard had competed unfairly and deprived Gotar of a business opportunity.
In his contract with Gotar, Mr. Arseneault had assigned his rights in various de-oxydization, de-greasing, and decontamination products that he had invented. Both former directors had agreed that Gotar would own any intellectual property that they invented, created or developed while employed by Gotar.
However, the Superior Court found that these contractual provisions did not give Gotar any rights to the process used by Alumitherm, primarily because it found persuasive the defendants' expert report explaining that the mechanical transformation process used by Alumitherm bore no similarity to the chemical decontamination processes and products owned and performed by Gotar.
On appeal, the Quebec Court of Appeal agreed that the two processes were fundamentally different, and not competitive with one another. The Court of Appeal also observed that although the contracts signed by the former directors were drafted very broadly, they could not be interpreted to mean that any technologies conceived of by Mr. Arseneault during his employment were automatically transferred to Gotar, where those technologies were so different from those actually used by Gotar.
With respect to the allegations of unfair competition and failure in the obligation of loyalty, the Court of Appeal affirmed the Superior Court's finding that Gotar was not deprived of any business opportunity. The idea of recovering and rendering reusable aluminum shavings had been raised by Mr. Arseneault in 2001, but for various reasons, Gotar decided not to develop this concept. In this circumstance, according to the courts, nothing prevented Mr. Arseneault from revisiting the idea in 2004, developing it, and putting it into action.