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Ontario Court grants injunction against software developer’s former employee

December 5, 2019

Order permits defendant to continue to service existing customers who are reliant on the software, but resulting revenues to be paid into trust

Knowmadics Inc., a US-based software developer, sought and obtained an interlocutory injunction against a former employee in the Ontario Superior Court of Justice for marketing a similar and competing product. 

The employee had been the principal developer of Knowmadics’ software product, known as SilverEye. SilverEye was principally marketed in conjunction with the plaintiff’s CASES mobile application to the military and law enforcement for the collection and analysis of data from mobile devices. At the beginning of her employment with Knowmadics, she signed an employment agreement that contained “obligations pertaining to ownership of intellectual property, confidentiality, conflict of interest and client servicing.” The defendant, Ms. Cinnamon, left her employment with the plaintiff in 2017 and agreed to continue to provide support to the company. The two also signed a non-disclosure agreement

According to the decision of Justice Hackland, Knowmadics v. Cinnamon, it came to the plaintiff’s attention that Ms. Cinnamon, shortly after leaving her employment, was selling two software products though her company LDX Inc, FireCat and GhostCat, that had similar features to SilverEye and CASES. The plaintiff commenced a lawsuit against Ms. Cinnamon and her company, alleging that the FireCat software infringes Knowmadic’s copyright and for breach of her employment agreement and the post-employment agreements. 

The plaintiff and defendant jointly retained a consultant to review the code of the software at issue. The consultant made the following conclusions:

i) certain FireCat source code is identical or substantially similar to the Knowmadics source code;

ii) “a significant proportion of the LDX database structure and source code has been copied from the Knowmadics BlueBird database”;

iii) “approximately 10 percent of the Knowmadics BlueBird database schema matches 40 percent of the database tables and 30 percent of the table-column pairs in the LDX database schema. Several of these similarities include clear indicia of copying from the Knowmadics database schema”;

iv) similarities in the tables contained in the Knowmadics database and the LDX database “include a number of identical matches indicative of copying”;

v) “some of the LDX stores procedures still contain isolated references that are indicia of copying from the Knowmadics code”;

vi) certain columns that appear in both the Knowmadics and LDX databases “contain identical misspellings” and that it “is highly unlikely that these identical mistakes in each database are coincidental, as there is no legitimate reason for a developer to intentionally incorporate such errors into a database schema”; and

vii) “comparison of the Knowmadics and LDX database schemas identified significant structural and functional overlap indicative of copying by LDX.  Furthermore, both databases also contain a significant amount of source code that is either identical or substantially similar, providing further evidence of copying”

The defendant also retained a consultant to determine what portion of the FireCat code was derived from third party code and how much was derived from software she had written before working for Knowmadics. That consultant concluded that much of the code was available elsewhere. The relevance of this would be left to the trial judge:

[15] It is admitted by Ms. Cinnamon that she used what she claimed was her own prior code in developing SilverEye for the plaintiff during the tenure of her employment with the plaintiff.  She did so without identifying this to the plaintiff. The position of the defendant Ms. Cinnamon is that she incorporated the Technocality database (which she wrote for her earlier client Technocality) into SilverEye software she developed for the plaintiff and subsequently incorporated it into the FireCat software she wrote for her company, the defendant LDX.

[16] In these factual circumstances, I would respectfully agree with and adopt the plaintiff’s statement (from paragraph 76, plaintiff’s factum).

The relevant issue as far as the database goes is a legal one for the Court to determine at trial: once Ms. Cinnamon delivered SilverEye to Knowmadics incorporating that prior database without identifying that she was doing so, and Knowmadics copyrighted SilverEye with that database code and schema, was Ms. Cinnamon then permitted under copyright law or her agreements with Knowmadics to take a shortcut and use the same code and schema to create a competing software with the same functionalities?  This is a serious issue to be determined at trial…

The defendant also argued that an injunction would be catastrophic for her clients, who have come to rely on the FireCat software and all of whom are based in Canada. Many of them are former clients of the plaintiff, but the defendant has not acquired any of the plaintiff’s US-based clients. 

A particularly tailored injunction was ordered, described by the Court:

[27]           In the court’s opinion an interim interlocutory injunction which permits the defendants to continue to service only their existing Canadian based clients with their FireCat software until the trial of this action achieves an adequate balancing of the interests of both parties and avoids irreparable harm to either one. The object of such an order would be to maintain the status quo pending trial.

[28]           As the evidence establishes that the defendants have not obtained any customers for LDX’s FireCat software in the United States, I would exercise the court’s discretion to limit the application of the interlocutory injunction to the Canadian market.

[29]           The plaintiff has submitted that the defendant LDX should be subject to an order that pending further order of this Honourable Court, the defendant LDX Inc. shall  provide a monthly accounting of all its gross revenues to counsel for the plaintiff and pay all such revenue into Court to the credit of this action on a monthly basis.

[30]           I will order that the monthly accounting of gross revenues be provided to plaintiff’s counsel until the trial of the action. I decline at this time to order any such revenues to be paid into court but will consider a further application in this regard if a proper case can be put forward to justify doing so.

Costs were to be costs in the cause, as the order was intended to preserve the status quo and the court did not make any findings on the merits. 

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