The Gujarat High Court recently upheld the decision of the Trial Judge denying an injunction to Sonani Industries against its former employees with respect to confidential information and copyrights relating to diamond colouring technology. Sonani Industries claimed in the case that it held copyrights and confidential information in the High Pressure – High Temperature (HPHT) technology and machines for colouring synthetic and natural diamonds, and that no one else is permitted to use the same. The company’s former employees started a business by the name Prime Diamond Tech to offer diamond colouring related services using the same HPHT technology, and aggrieved by their actions, Sonani Industries filed a criminal case as well as a civil suit. Though the commissioner appointed found similar machines at Prime Diamond Tech’s premises, the Trial Court refused to grant an injunction against the company. Instead, the Court asked them to maintain accounts during the pendency of the suit.
Not happy with the Trial Court’s order, Sonani Industries appealed, and the Division Bench of the Gujarat High Court refused to interfere with the Trial Court’s order. To arrive at its decision, the Court first considered if Sonani Industries was in possession of any confidential information. As the technical know-how being claimed as confidential information was transferred to Sonani Industries by another entity, the Court observed that this information was not its proprietary information. The Court particularly emphasized on the fact that the technical know-how agreement had a limited term of 3 years, which had expired. Furthermore, the Court pointed out that as per the agreement, only the company that transferred the know-how can initiate proceedings, and not the recipient of such information.
Talking about misappropriation of the confidential information by the former employees, the Court stated that there was no confidentiality agreement between the parties, and that even if there was a duty of confidence, it did not extent to HPHT technology because the information formed part of prior disclosures in the form of research papers and publicly available videos. Though the former employees’ company, Prime Diamond Tech, was approaching the vendors of Sonani Industries, the Court stated that the said activity cannot be prevented. Citing Section 27 of the Contract Act, the Court stated that an employee cannot be prevented from carrying out his business, trade or profession in competition with the employer. Finally observing that the question of whether any copyrighted drawings have been copied or not is a question of fact that needs to be decided during the trial along with confidentiality questions, the Court upheld the Trial Court’s decision to refuse an injunction against the use of HPHT technology and drawings during the pendency of the suit.
Citation: Sonani Industries Pvt Ltd vs Prime Diamond Tech & Ors., 08th April, 2024, Gujarat High Court, C/AO/134/2023
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