Keyfresh IT Ltd v Itech Information Technology Ltd

On an application for an interim injunction, the court must consider whether there is a serious issue to be tried, whether damages would be an adequate remedy, and where the balance of convenience lies. Damages may be inadequate where unlawful use of copyright, confidential information or goodwill causes unquantifiable competitive loss, particularly where recovery from a new company is uncertain. The court may protect a purchaser of a business against seriously arguable unlawful conduct while limiting relief to avoid unjustifiably destroying an embryonic competing business. Preserving the status quo may be appropriate where the claimant has acquired the relevant goodwill and intellectual property.

Keyfresh acquired the undertaking, goodwill and intellectual property of iTech IT Limited from its administrator. Shortly afterwards, iTech Information Technology Limited was formed by a former participant in the business. Emails were diverted, control of a domain name was retained, and customers were approached as though the new company were the successor business.

Keyfresh sought interim injunctive relief against the new company and individuals, relying on passing off, copyright infringement and breach of confidence. The court considered whether there were serious issues to be tried, whether damages would provide an adequate remedy, and how the competing risks should be balanced.

1. Serious issues to be tried. Passing off raised a serious issue because of the similarity between the company names, the use of the former domain name and customer communications suggesting continuity of the business. Copyright infringement was seriously arguable both in relation to changes to passwords disabling licence-cancellation functionality and in relation to the provision of support services involving the software. Breach of confidence was also seriously arguable. Customer log-in details and passwords could retain their confidential character even where they were remembered rather than recorded in a database.
2. Confidentiality claim. The court noted the caution in Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 that a lack of specificity may enable a claimant to harass a competitor or former employee. The claim had been sufficiently narrowed to identify the customer log-in details and passwords relied upon.
3. Adequacy of damages. Damages would not necessarily be adequate. The alleged conduct could cause unquantifiable loss concerning potential customers and the establishment of a competitor using the claimant’s copyright material, confidential information and goodwill. There was also uncertainty whether the new company or the individual defendant could satisfy a damages award.
4. Balance of convenience. The court weighed the risk of wrongly restraining a new business against the claimant’s entitlement to protection following its purchase of the business assets. The new company had traded for only about four weeks and could create a new brand if necessary. The balance favoured preserving the status quo as it existed immediately after completion of the sale.
5. Disposition. The claimant had cleared the first hurdle. The court granted the more limited injunctive relief sought.

First-instance decision. No prior or subsequent appellate decision is stated in the judgment.