IP Connect

India: Delhi High Court on the issue of theft of company data by former employees

Brief Facts of the Case 

In this case, an individual namely, Tarun Tyagi (hereinafter referred to as the Petitioner) filed the present petition for quashing an order passed by the Chief Metropolitan Magistrate on November 6, 2013 in the matter.

Background of the case

Initially, the complaint was filed against the Petitioner by the company Unistal Systems Pvt. Ltd. (hereinafter referred as the Complainant Company) of which the Petitioner was an employee from 2003 to 2005. The Complainant Company is engaged in the business of providing data recovery services. 

Allegedly, after leaving the services of the Complainant in September, 2005 the Petitioner set up a company namely M/s Prodata Doctor Private Limited (hereinafter referred as the Petitioner’s Company). The Petitioner’s Company was also engaged in a similar business of data recovery and developing software applications for computers.

The Complainant Company in suspicion of theft of its source code by the Petitioner registered a FIR with the CBI (Central Bureau of Investigation) wherein it alleged that somewhere around March, 2005 the Petitioner had stolen the source codes of a software known as “Quick Recovery” and the same was offered for sale by the Petitioner’s company under the name “Prodatadoctor”.

In view of the above complaint, the CBI conducted seizure of documents and disks from the Petitioner’s company. Meanwhile in 2008, the Complainant Company preferred a suit for perpetual injunction and damages against the Petitioner alleging infringement of its copyright of software named, Quick Recovery. The suit of the Complainant Company was based on the footing that the Petitioner had stolen the source code of a software developed by it and the same was put up for sale by the company owned by the Petitioner by making some cosmetic changes in the software.

Pursuant to the aforesaid, the CBI filed a charge sheet against the Petitioner under Section 66A of the Information Technology Act and Copyright Act.

Thereafter, the Petitioner preferred an application seeking supply of copies of documents but the said application was dismissed by the impugned order passed by the Chief Metropolitan Magistrate stating that no cloned copies of hardware containing incriminating evidence can be prepared with the protected software to avoid its further misuse by the Petitioner during pendency of case.

Petitioner’s submission

That the rewriting of a language which is otherwise freely available online on the basis of an original idea of which the Petitioner or such other person may have carried, is clearly permissible in law and hence as contended the Complainant had no copyright in the software source code. 

Court’s order

The High Court of Delhi in view of the facts and circumstances of the case did not set aside the impugned order of Trial Court and observed that the facts indicated that there were chances of the software being misused by the Petitioner.

The Court was of the view that the findings in the impugned order were free from any infirmity and hence no interference was warranted in the same.

Conclusion

The present case reflects a very sensitive issue i.e. theft of data or source codes by the employees. As a company’s data is accessible by employees, it becomes vulnerable to IP infringement. Hence, it is essential that adequate protection of data is ensured and confidentiality clauses are incorporated in employment agreements in such a manner that they firmly prohibit misuse of data by employees.