Pennwell Publishing (UK) Ltd v Ornstien

An employee’s preparatory steps towards future competition may be permissible, but sufficiently advanced commercial activity can amount to carrying on another business during employment. An employee’s duty to report a colleague’s misconduct depends on the contract, employment terms and the employee’s position in the hierarchy.

An electronic contact list maintained on an employer’s email system and backed up by the employer will generally belong to the employer and cannot be copied wholesale for use after employment. A journalist may retain independently maintained personal contacts, including selected professional contacts, but not an unfiltered export of the employer’s address book. Any relief must distinguish personal information from employer-owned material.

PennWell Publishing (UK) Ltd claimed that Junior Isles, a former publisher and conference chairman, had participated in establishing a competing company, failed to report misconduct by colleagues, and removed and retained confidential contact information.

The claims concerning competition, fidelity, reporting obligations, fiduciary duties, confidentiality and ownership of an electronic contact list were tried after claims against other defendants had been compromised. The central issues were whether the competing activity exceeded permissible preparation, whether Mr Isles owed duties to report or avoid conflicts, and whether the JuniorContacts.xls list belonged to PennWell or to him as a journalist.

1. Competition and employment duties. The absence of trading before departure was not determinative. The activities undertaken pursuant to the business plan went beyond reasonable preparation and amounted to carrying on a business. Through his directorship and shareholding, Mr Isles was interested in that business and breached the express contractual term prohibiting an interest in another business.
2. Mr Isles owed an implied duty of good faith and fidelity. His limited knowledge and involvement did not establish a general breach, or a fiduciary duty, except in relation to his assent to limited use of PennWell information and his permitting a rival to canvass at the Power-Gen conference. As conference chairman, he was required either to prevent the canvassing or to alert his superiors.
3. The duty to report colleagues’ misconduct was not automatic. It depended on the contractual and employment context and the employee’s position. Mr Isles was not shown to occupy a position requiring him to report the misconduct of the senior employee, and there was insufficient evidence concerning the other employee. The position differed in relation to the conference because Mr Isles had direct responsibility and was in an actual conflict of interest.
4. Contact list. The list was an export of the complete Outlook address book maintained on PennWell’s email system and backed up on its server. It was therefore PennWell’s property. Mr Isles could not retain or use the list as a whole, although individual contacts known independently could be used.
5. The court accepted that a journalist may ordinarily maintain a separately kept professional contact list and may retain personal or selected journalistic contacts. That qualification did not assist Mr Isles because he had exported the entire employer-held list without selection. He was nevertheless permitted to retain contacts predating his employment and purely private contacts identified in the evidence. PennWell was entitled to retain the database and to a permanent injunction against its use, subject to that limited relief.
6. The database legislation did not alter the result. Ownership depended principally on whether the database was made in the course of employment. The court did not decide whether the database was an original copyright work.