IMPORTANT POINT
Customer lists are not copyrightable works, and non-compete clauses in employment contracts are void under Section 27 of the Contract Act.

JUDGMENT :

TARA VITASTA GANJU, J.:

Preface

1. The present appeal impugns the judgment dated 17.09.2018, passed in CS (COMM) 735/2016 [hereinafter referred to as “Impugned Judgement”], wherein the learned Single Judge, allowed the Application filed by Respondents No. 3 and 5 being IA No. 13684/2016 under Order VII Rule 11 of the Code of Civil Procedure, 1908 [hereinafter referred to as “CPC”], and rejected the plaint filed by the Appellant/Plaintiff [hereinafter referred to as “Appellant”].

Brief facts

2. Briefly, the facts are that Appellant, is engaged in logistics and freight forwarding services, and claims to possess distinctive and confidential data, customer databases, and other business information, which it asserts are trade secrets and are protected under the Copyright Act, 1957 [hereinafter referred to as “Copyright Act”].

3. The Appellant is a logistics and freight forwarding service provider and filed a suit against 12 Defendants alleging that they misappropriated its proprietary data and trade secrets. The Respondent No.1 to 8 are the former employees of the Appellant/Company [hereinafter referred to as “Former Employees”]. Respondent Nos.1 to 8 leaked confidential data of the Appellant to Respondent Nos.9 to 11 and Respondent No.12, a Competing Company, Respondent No.9 is also the wife of Respondent No.2.

4. The Former Employees, were working in various capacities such as Customer Service Executive, Deputy Manager (Commercial), and Assistant Manager (Pricing). It is the case of the Appellant that the employment contracts of the Former Employees contained clauses regarding confidentiality, non-competition, and protection of the Appellant’s intellectual property and that they provided these employees with electronic devices including laptops containing confidential information for work purposes.

5. Between 09.05.2016 to 25.05.2016, the Former Employees resigned from their positions with the Appellant. The Appellant contends that upon return of electronic devices from the Former Employees, a forensic examination of the laptop/computers of the Former Employees was conducted. Based on this examination, it was discovered that confidential data had been deleted. The Appellant further alleged, that subsequent data recovery revealed Skype chats suggesting a conspiracy among the Former Employees to use the Appellant's confidential information for their benefit and to divert business to the Competing Company.

6. It was contended by the Appellant that it had meticulously developed and maintains comprehensive business data including customer information agreement and financial records, digitally stored and despite stringent confidentiality agreements, the Respondents retained sensitive information. It was contended that the retained information and data was exploited for personal gain by these Respondents and business was diverted to competitor(s). The Appellant explained that upon resignation of the Former Employees from their services with the Appellant, they retained crucial data with the wrongful intent to exploit it for financial gain.

6.1 The Appellant in the plaint alleged that the Respondents are infringing its copyright, misusing confidential information, and violating the terms of their employment agreements. Based on these allegations, the Appellant sought mandatory and permanent injunctions, rendition of accounts, delivery up and recovery of Rs. 1,50,00,000/- from the Respondents as damages.

7. The learned Single Judge on 03.06.2016, passed an ex parte ad interim order restraining the Respondents from utilizing, exploiting, copying, transmitting, publishing, or releasing any confidential information and trade secrets of the Appellant. Directions were also issued appointing Local Commissioners to examine the Respondents' com