In brief

  • Employers should ensure that they enter into written employment contracts setting out an employee’s obligations of confidentiality and return of intellectual property on ceasing employment.
  • In this case, a former employee was found not to have infringed copyright owned by his employer when he copied material on his personal computer for the purpose of returning the material to his former employer.  

Introduction

Blackmagic Design Pty Ltd (Blackmagic)1, designs, manufactures, markets and sells hardware and software for television and video production and for feature film post-production.

The first and second respondents, Ian Overliese and Jeremy Young, were employed until May 2008 by Blackmagic. Overliese and Young were the directors and share holders of the third respondent, Atomis Audio Pty Ltd (Atomis). During the course of their employment with Blackmagic, Overliese and Young undertook preparations to establish a business venture which would be conducted by Atomis.

Copyright infringement claim

It was accepted by Blackmagic that incidental to Overliese’s employment, Overliese had copied onto his personal computer certain documents which contained original literary and/or artistic works in which Blackmagic claimed copyright. After termination of his employment, Overliese copied these documents onto a DVD and USB drive. Blackmagic argued that this amounted to unauthorised reproductions of the works, and thus infringements of copyright within the meaning of section 36 of the Copyright Act 1968 (Cth).

Overliese admitted that he had reproduced the works but claimed his copying of the relevant files was implicitly licensed by Blackmagic. He argued that his unwritten employment contract implied terms to the effect that after cessation of his employment Overliese was either to return or destroy all copyright works in his possession and that Overliese had a licence to reproduce the copyright works to enable him to comply with the return or destroy term.

Counsel for Blackmagic did not take issue with the jurisprudential basis of this defence, but they submitted that the facts did not line up with it. Attention was drawn to comments made by Overliese in his evidence in chief that, after having made the DVD he ‘did not particularly want it for anything’; that he ‘did not consider particularly what to do with it afterwards’; and that he did not think he had any of Blackmagic’s information that it would want returned. Despite these comments, his Honour was satisfied the sole purpose of Overliese copying the file onto the DVD and later onto the USB was to separate out, and then delete or destroy Blackmagic’s files. Since it was implicit in the submissions made on behalf of Blackmagic that, if the facts did accord with the defence, the defence would be good, the claim in copyright was dismissed.

Other claims

Confidential information

It was found that Overliese, but not Young, had used Blackmagic’s confidential information for the purposes of establishing a potentially competing business. Prices and profit margins used by Overliese in a spreadsheet for the purposes of Atomis were deemed to be confidential as they were Blackmagic’s own commercial information.

An injunction was ordered restraining the respondents from using the confidential information without Blackmagic’s prior written consent.

Diversion of business opportunities

The business opportunity alleged to have been diverted from Blackmagic was the development of a 1-lane version SDI video card incorporating the features of one of Blackmagic’s products DeckLink HD Extreme (the Simple Card). Jessup J held that the Simple Card did not represent a business opportunity but rather a ‘product concept of some potential’. As Overliese had not devised a practical way of producing the card while in the employ of Blackmagic, there was no basis to Blackmagic’s claim that a business opportunity had been diverted away from it. As Overliese was no longer employed by Blackmagic, there was no basis for a permanent injunction.

Breach of fiduciary duty

Jessup J readily dismissed Blackmagic’s contention that as a fiduciary, Overliese was obliged to inform Blackmagic of his ideas in relation to the Smart Card with long-established authority to the effect that obligations imposed by equity upon a fiduciary are proscriptive, not prescriptive.

Conclusion

While Blackmagic was successful in prohibiting the respondents from using its confidential information it was unsuccessful in its claims that the respondents had diverted business opportunities away from it and that Overliese had breached fiduciary duties. A licence to reproduce copyright material in order for its return or destruction was implied in to Overliese’s unwritten contract of employment. This case illustrates the importance of a written agreement of employment which sets out obligations of confidentiality and return of intellectual property after termination of employment.