A real eye-opener as injunction preventing use of competitor’s customer database is discharged
Justice Burley in the Federal Court has discharged an interlocutory injunction preventing Expertise Events from using the confidential customer database of the Optical Distributors & Manufacturers Association of Australia (ODMA) to organise the trade show SILMO 2017, a competitor to ODMA’s own 2017 exhibition.
ODMA had discovered that the SILMO 2017 website was pre-filling the registration details of visitors, including email addresses and passwords, from ODMA’s database, which Expertise Events had been given in the course of prior work for ODMA.
The judgment demonstrates the difficulties in obtaining an interlocutory injunction and the importance of taking proactive steps to protect intellectual property rights.
Ex parte injunction granted in December 2016
In December 2016, ODMA obtained ex parte orders which, amongst other things, restrained Expertise Events from using ODMA’s confidential customer database. On 28 February 2017, the parties were heard on whether the orders made in December should be discharged.
Principles Relating to the Grant of Interlocutory Injunctions
In considering whether it was appropriate to discharge the injunction, Justice Burley applied the principles set out in Castlemaine Tooheys Ltd v South Australia  HCA 58, namely that an applicant seeking an interlocutory injunction must show that:
- There is a serious question to be tried, meaning they have an arguable case at trial;
- Damages would be inadequate compensation were the injunction not granted and the applicant ultimately succeeded; and
- The balance of convenience favours the injunction, whereby the effect of granting the injunction is weighed against the effect of not granting it.
Did ODMA have an arguable case against Expertise Events?
Expertise Events did not deny using the ODMA database to assist the registration of visitors to SILMO 2017, which Justice Burley found was sufficient to demonstrate an arguable case.
Would damages be adequate to compensate ODMA’s loss?
His Honour found that any losses suffered by ODMA would be compensable by damages, as the harm was likely to be ‘slight’ due to the reasons outlined below.
Did the balance of convenience favour granting an injunction?
ODMA’s CEO gave evidence that ODMA 2017 was critical for the organisation, as it would generate the majority of its income. She claimed that certain exhibitors were either reducing their presence at ODMA 2017 or not exhibiting at all, due to favouring SILMO 2017. She also expressed concern that SILMO was gaining an advantage by auto-filling the visitor details from ODMA’s database.
Expertise Events argued that the interlocutory injunction was prejudicial to it as it prevented the use of all of its customer databases (whether from ODMA or otherwise) in the organisation of SILMO 2017, making communication with exhibitors impossible and threatening the existence of the event. According to Expertise Events, changing the software would cost over $120,000 and take months, which was unjustified because only 7.5% of SILMO registered visitors appeared in the ODMA database.
Injunction discharged by Federal Court
Justice Burley agreed that SILMO 2017 represented competition to ODMA 2017, however did not accept that exhibitors were more likely to choose SILMO 2017 due to the use of ODMA’s confidential information. There was no evidence that the ODMA database had been used to solicit the business of exhibitors, and its use on the website was after a visitor had already decided to register for SILMO, making diverted business unlikely.
Coupled with the inability of Expertise Events to alter the software prior to SILMO 2017 and the inconvenience caused by the injunction, this meant that the balance of convenience did not favour the grant of the interlocutory injunction. Therefore Justice Burley discharged the injunction, allowing Expertise Events to resume using customer databases, including that of ODMA, for the organisation of SILMO 2017.
The decision brings into focus the difficulties in seeking and maintaining an interlocutory injunction for the purpose of protecting intellectual property rights. Where the balance of convenience does not favour the injunction, such an injunction will be difficult to obtain regardless of the strength of the case.