Paradigm Shift Technologies Inc. v. Alexander Oudovikine, et al., 2012 ONSC 148

CITATION: Paradigm Shift Technologies Inc. v. Alexander Oudovikine, et al., 2012 ONSC 148

NEWMARKET COURT FILE NO.: 11-103100-00

DATE: 20120118

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

PARADIGM SHIFT TECHNOLOGIES INC.

Plaintiff

A. Patrick Wymes, for the Plaintiffs

• and -

ALEXANDER OUDOVIKINE also known as ALEXANDRE OUDOVIKINE, ANDREI OUDOVIKINE and ISG PREVENTIVE TECHNOLOGY INC.

Defendants

Sandra L. Secord, for the Defendants

HEARD: December 20, 2011

REASONS FOR DECISION

LAUWERS J.:

[1] In the Statement of Claim, Paradigm Shift Technologies Inc. (“PST”), describes itself as carrying on business continuously from May 1995 “in the areas of technology development and engineering” particularly in relation to military applications. The plaintiff is the former employer of Alexander Oudovikine (“Alex”). The defendant Andrei Oudovikine is Alex’s son. ISG Preventive Technology Inc. is Alex’s company.

[2] The plaintiff moves for an interlocutory injunction to prevent the defendants from:

(a) soliciting business from or communicating in any manner whatsoever, directly or indirectly, with any customers, business contacts, clients, potential clients or client contacts of the plaintiff;

(b) acting in any way directly or indirectly so as to interfere with the relationship, goodwill, or communication of the Plaintiff with its customers, business contacts, clients, potential clients and client contacts;

(c) making any use, directly or indirectly, of any confidential or other trade information, lists or other information relating to the Plaintiff’s customers, clients, potential clients, client contacts and business contacts or any other physical intellectual or intangible property belonging to the Plaintiff, whether in original or COPY form including, without limitation;

1. The Plaintiff’s ISG Technology;

2. The Plaintiff’s ISG intellectual property;

3. The Plaintiff’s Prognostica™ Technology;

4. The Defendants’ “Saturation Technology”;

5. The Defendants’ “NANO-CMS” Technology.

(d) providing services to any customers, clients or potential clients of the plaintiff;

(e) acting in any way directly or indirectly so as to impede, obstruct or interfere with the normal operation of the business of the plaintiff.

[3] The plaintiff also seeks other relief including a preservation order relating to computers, hard drives and other electronic storage mechanisms relating to “ISG Technology,” “Prognostica™ Technology” and “Nano-CMS” Technology, and a preservation order concerning email communications, records and accounts relating to that technology.

[4] The facts are highly disputed. There are serious credibility issues which cannot be resolved on a motion. Adding difficulty is the fact that the intellectual property area within which the dispute is centered has not been well defined by the plaintiff or by the defendants. The parties are clearly paying “cat and mouse” with each other and, perforce, with the court. The technology is important enough to warrant a lawsuit. The material and the argument seemed in many ways, however, to amount to shadowboxing in a shadow world. This unsatisfactory state of affairs affects the way in which the court must exercise its responsibility under the Courts of Justice Act.

Factual Context

[5] Alex holds a PhD in mechanical engineering and, according to his factum, has: “devoted his adult life to the development of mechanical lifetime prediction/failure forecasting technology, which he invented and has always referred to as “ISG Technology”.” The term “ISG” is an acronym for “Integrated Strain Guage”.

[6] Alex submitted two patent applications to the United States Patent and Trademark office with respect to ISG Technology in 2006 and 2007 and he submitted a patent application to the Canadian Intellectual Property Office. The American patents have been granted. The Canadian patent is pending.

[7] The defendant ISG Preventative Technology Inc. was incorporated by Alex and Bruce Lewis in 2007 in order to develop and eventually sell ISG technology. By August 2009 it became clear that the company would not be able to support the further development of ISG technology. Alex states that the company is dormant.

[8] Alex found himself in difficult financial circumstances and on October 26, 2009, entered into an Employment Agreement with the plaintiff under which he was to be the “Principal Scientist” as well as the “Technology Manager.”

The First Employment Agreement

[9] Alex’s duties as employee were described in the first Employment Agreement:

Employer employs Employee as Technology Manager to perform the customary duties of those positions set forth in the By-laws, and as Employer, by action of its President, may provide from time to time. During the term of this Agreement, Employee shall devote his full time, ability and attention to the business of Employer on a regular, “best efforts,” and professional basis and at all times such efforts shall be under the direction of the President.

Alex’s compensation package was a draw with performance bonuses related to sales under which he could earn as much as $900,000.00.

[10] The Employment Agreement had two confidentiality clauses. The first provided:

Employee agrees that he will not, at any time during or after the termination of his employment under this Agreement, use for his own benefits, either directly or indirectly, or disclose or communicate in any manner to any individual, corporation, or other entity, other than Employer, any confidential information acquired by him during his employment, regarding any actual or intended business activity, product, service, plan or strategy of Employer. As used in this Agreement, confidential information shall include all information disclosed to or known by Employee as a consequence of or developed through or during his employment by Employer including all knowledge, information and materials regarding Employer’s products, services, processes, know-how, customers, suppliers, product and/or service development, business plans, and research, as well as confidential information about financial, marketing, pricing, cost, compensation or any other proprietary matters relating to Employer whether or not subject to other protection.

[11] The second confidentiality clause provided:

Employee agrees that he will not, at any time during or after the termination of his employment under this Agreement, use for his own benefits, either directly or indirectly, or disclose or communicate in any manner to any individual, corporation, or other entity, other than Employer, any confidential information and/or any information acquired by him during his employment regarding any actual or intended business activity, product, service, plan or strategy of Employer.

As used in this Agreement, confidential information shall include all information disclosed to or known by Employee in relation to the ISG Technology including the information known to Employee prior to his employment with Employer or as a consequence of or developments through or during his employment by Employer including all knowledge, information and materials regarding Employer’s products, services, processes, know-how, customers, suppliers, product and/or service development, business plans, and research, as well as confidential information about financial, marketing, pricing, cost, compensation or any other proprietary matters relating to Employer whether or not subject to other protection. (Emphasis added.)

[12] The Agreement does not define “ISG Technology” with precision, but describes it in the preamble as “the specialized health management and lifetime prediction technology known as “ISG Technology.” The plaintiff highlights the second confidentiality clause, which it submits catches all Alex’s prior work whether or not it falls within the description of “ISG Technology.”

[13] The Agreement also had some “Special Conditions” which the plaintiff acknowledges have been satisfied:

In order for this Agreement to take effect the following special conditions shall be satisfied:

• Employee will cause all patent applications and any other intellectual property such as trade-marks, trade-names, etc. related to the ISG Technology to be reassigned to Employer;

• Employee will cause all software and hardware in his possession and related to the ISG technology to be transferred to the Employer;

• Employee will provide an original of the Full Release document executed by the CEO of ISG Preventive Technologies Inc. that releases Alexander Oudovikine from any obligations and potential claims in any way related to ISG Preventative Technologies Inc.

• Employee will provide an original of the discharge document executed by CEO of ISG Preventive Technologies Inc. that renounces Alexander Oudovikine as an Employee and the President of ISG Preventive Technologies Inc.

[14] In his Affidavit of June 12, 2001, Alex swore:

At the time when ISG Inc. stopped operating, ISG Technology had been developed to the point where it was marketable for “project-by-project” realization; meaning, the technology had been developed to the stage where a project could be developed to meet a specific client’s needs. I would then execute the project on the client’s behalf. My goal was to one day develop ISG technology to the point where it could be produced as a commercial product which could then be marketed for general sale to companies. [para. 20]

[15] He also testified that he carried out a test of updated ISG Technology in or around May/June 2010 that was witnessed by Mr. Yumshtyk: “Indeed, the results of this test were quite accurate, which exemplified the advancements to the ISG Technology that had been made since my employment at PST.”

The Employee Non-Compete Agreement

[16] The plaintiff asserts and Alex denies that on the same day that he signed the Employment Agreement, Alex also signed a separate “Employee Non-Compete Agreement.” This Agreement provided that: “…the employee shall not own, manage, operate, consult or to be employed in a business substantially similar to, or competitive with, the present business of the Company or such other business activity in which the Company may substantially engage during the term of employment.” The term of the Employee Non-Compete Agreement was ten years starting with the date of Alex’s employment.

[17] Mr. Wymes submits that this Employee Non-Compete Agreement was probably signed after the first Employment Agreement and is in full force and effect despite an “Entire Agreement” clause in the first Employment Agreement which provided:

This written agreement contains the sole and entire agreement between the parties, and supersedes any and all other agreements between them. The parties acknowledge and agree that neither of them has made any representation with respect to the subject matter of this agreement or any representations inducing the execution and delivery hereof except such representations as are specifically set forth herein, and each party acknowledges that he or it has relied on his or its own judgment in entering into the agreement. The parties further acknowledge that any statements or representations that may have heretofore been made by either of them to the other are void and of no effect and that neither of them has relied thereon in connection with his or its dealings with the other.

[18] The plaintiff has been unable to produce an original signed copy of the Employee Non-Compete Agreement. Alex says that the photocopy the plaintiff produced is a forgery.

The Second Employment Agreement

[19] According to the plaintiff, when it became clear that Alex was not able to function effectively as “Technology Manager” the parties entered into a second Employment Agreement dated April 1, 2010, which described Alex only as “Principal Scientist.” His salary and bonuses were reduced. The clauses quoted above from the first Employment Agreement were repeated in the second, except for the “Special Conditions” section, which was omitted since it had been completed.

[20] By letter dated January 20, 2011, Alex resigned and proposed to work until April 29, 2011. The resignation and the date were accepted by PST’s president Gennady Yumshtyk, but it appears that Alex left the employment in February. Alex alleges that Mr. Yumshtyk was personally abusive of him and that he was constructively dismissed.

[21] Alex testified that he was unemployed from February until October of 2011 and since October has worked as a machinist. His evidence is that he is not doing any more work on ISG Technology.

[22] Since Alex left the plaintiff’s employment, emails have come into the plaintiff’s possession that the plaintiff relies on to establish that Alex breached his Employment Agreement, his confidentiality obligations, and the Non-Compete Agreement. Alex alleges that these emails were surreptitiously obtained by the plaintiff by hacking into Andrei Oudovikine’s email account.

Discussion

[23] It is common ground that in order to succeed on this motion, the plaintiff must meet the test in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 at page 334, para. 43:

(i) there is a serious question to be tried;

(ii) irreparable harm will be suffered if the injunction is not granted; and,

(iii) the balance of convenience favours granting the injunction.

The Supreme Court held that where the injunction would effectively result in a final determination of the action, the moving party must show a "strong prima facie case."

RJR-MacDonald in the Employment Context

[24] The moving former employer’s obligation to establish a strong prima facie case in cases involving restrictive covenants in employment contracts, and in injunction actions against former employees, has displaced the “serious issue to be tried” element of the test by judicial consensus: BMO Nesbitt Burns Inc. v. Ord, [2007] O.J. No. 2620 (S.C.J.) per Pattillo J., at paras. 25-26; Sherwood Dash Inc v. Woodview Products Inc. [2005] O.J. No. 5298 (S.C.J.) per Perell J. at para. 58; Jet Print Inc. v. Cohen (1999), 43 C.P.C. (4th) 123, [1999] O.J. No. 2864 (S.C.J.), per Nordheimer J. at para. 11; Gerrard v. Century 21 Armour Real Estate Inc., (1991) 1991 CanLII 7104 (ON SC), 4 O.R. (3d) 191 (Gen. Div.) per Feldman J. at p. 198, leave to appeal to Div. Ct. refused, (1991), 4 O.R. (3d) 191n.

[25] This heightened test reflects the basic policy orientation of the common law against restrictive covenants and restrictions on an individual’s ability to pursue his or her employment opportunities: IT/NET Inc. v. Doucette (2005), 2005 CanLII 18412 (ON SC), 5 B.L.R. (4th) 71, [2005] O.J. No. 1814 (S.C.J.) at para. 21 per Kealey J., aff’d (2007), 2007 ONCA 52, 25 B.L.R. (4th) 49, [2007] O.J. No. 245 (C.A.).

Issues

[26] The following issues arise in this motion:

1. Has the plaintiff demonstrated a strong prima facie case?

2. Has the plaintiff demonstrated irreparable harm?

3. Has the plaintiff established that the balance of convenience favours it?

Each of these issues will be considered in turn.

Issue 1 - Has the plaintiff demonstrated a strong prima facie case?

[27] In deciding this issue, I find that the plaintiff cannot rely on the Non-Compete Agreement on this motion for two reasons. First, the evidence on the status of the Non-Compete Agreement is unsatisfactory. Alex alleges that it is a forgery; PST submits that his allegation is late-breaking and inconsistent with his previous evidence, but cannot produce an original of the Agreement. This is only one of a number of credibility issues which, in my view, can only be resolved at trial. Second, there is the difficulty posed by the plaintiff’s own failure to properly integrate its own documents, given the “Entire Agreement” clause in both Employment Agreements.

[28] That does not, however, relieve Alex from confidentiality obligations under the Employment Agreements. In my view the confidentiality clauses in both Employment Agreements amount to restrictive covenants.

[29] Does Alex owe the plaintiff related fiduciary duties? Fiduciary duties will be imposed on employees who were part of management or were “key personnel” or “key employees” with ability to “unilaterally exercise their authority in a way that could affect their employer’s legal and economic interests”: Boehmer Box L.P. v. Ellis Packaging Ltd., [2007] O.J. No. 1694 (S.C.J.) per D.M. Brown J. at paras. 45-46. Other cases involving sales personnel take a similar approach: see, for example, IT/NET Inc., supra (S.C.J.) at paras. 17-18, Medtronic of Canada Ltd. v. Armstrong, [1999] O.J. No. 4860 (S.C.J.) per Archibald J. at para. 53, Jostens Canada Ltd. v. Gendron (1993), 1 C.C.E.L. (2d) 275, [1993] O.J. No. 2791 per Valin J. at paras. 48-49.

[30] The court will act to restrain the abuse of confidential information: Boehmer, supra at paras. 49-50, 62-63. As Adams J. noted in C.H.S. Air Conditioning Ltd. (c.o.b. Dial One Temp Control) v. Environmental Air Systems Inc. (1996), 1996 CanLII 8137 (ON SC), 20 C.C.E.L. (2d) 123 (Ont. Gen. Div.) at p. 23, “where former employees exploit obviously and highly confidential information in a manner that strikes a court as grossly unfair, it is more likely that a fiduciary obligation will be found to exist or that the information will be treated as the equivalent to a trade secret.”

[31] In Boehmer, supra, Brown J. stated:

62 In order to establish an action for breach of confidence, a plaintiff must prove that: (i) the information has a quality of confidence about it; (ii) the information was imparted in circumstances importing an obligation of confidence; and, (iii) there was an unauthorized use of that information to the detriment of the party communicating it: Stenada Marketing Ltd. v. Nazareno, [1990] B.C.J. No. 2118 (S.C.).

[32] The defendants submit that Alex was neither part of management nor a key employee within the meaning of the cases, and accordingly, did not owe a fiduciary duty to the plaintiff.

[33] In my view, the fact that Alex invented ISG Technology and was the only person, on his own evidence, who understood it at PST adds a serious element of confidentiality to his role and function whether it was managerial or not. I find that Alex owes fiduciary duties to PST in relation to ISG Technology.

The development and confidentiality of ISG Technology

[34] The plaintiff alleges that Alex breached his obligations with respect to the development and confidentiality of ISG Technology, and that he breached the non-competition provisions of the Employment Agreements and his associated fiduciary duties. I address each allegation in turn.

[35] The plaintiff alleges that Alex was working separately on ISG Technology under the name of “Saturation Technology” and/or “NANO-CMS” while he was employed by PST. The plaintiff takes the position that Saturation Technology and NANO-CMS are both related to and developments of ISG Technology and therefore belong to the plaintiff.

[36] Alex’s evidence is that no one at PST understood ISG Technology. In his Affidavit of June 12, 2011, at para. 38 he said: “…I understood my role at PST to be that I was responsible for the continuous development and advancement of the ISG Technology. This belief was based on my earlier discussions with Mr. Yumshtyk in the fall of 2009, set out above, as well as the fact I was the only individual at PST who understood the Science/technology involved.”

[37] It seems strange therefore that Alex would testify in the Affidavit of October 25, 2011, at para. 35 that: “I never “sold my interest in ISG Inc. Technology” (sic) to the Plaintiff. Rather, as per my employment agreement, I assigned both of ISG Inc.’s patent applications and transferred the software related to ISG Technology to the Plaintiff.”

[38] Alex takes the position that “Saturation Technology” and “NANO-CMS” technology are not developed forms of ISG Technology. He asserts in his Affidavit of June 12, 2011 at para. 112 that:

Fully aware that I no longer owned the rights to the Applications and any other intellectual property related to ISG Technology, and that I would no longer be able to pursue this technology outside of PST, I began discussing my other ideas, as set out above, with various contacts of mine. Needing a name through which to refer to these ideas, I began referring to same as “Saturation Technology” and/or “NANO-CMS” Technology. Again, Saturation Technology and NANO-CMS are names that I have given to what are currently purely theoretical ideas, and which, if developed, would have no bearing on/connection to ISG Technology. These names are not involved in any way with my relationship with PST. PST was not the creator of these names.

[39] Alex explains that he used the reference to ISG Technology in some of the emails because: “It is a term that many of these individuals who knew me prior to my employment with PST are familiar with, and thus provides me with a starting point in my discussions with them.” He then goes on to state: “ISG means much more than just ISG Technology.”

[40] I note that in distinguishing ISG Technology from what he alleges are new technologies, Alex fails to describe ISG Technology in any comprehensible detail and fails to outline material differences between ISG Technology and the new technology that he says is quite distinct.

[41] I also note that an email exchange with Brian Dabell of HBM-n-CODE, described as the plaintiff’s “indirect” competitor on June 9, 2010, demonstrates Mr. Dabell’s serious concern about Alex’s rights in the technology in view of the plaintiff’s patents. It may explain why there appear to have been no more dealings between Alex and HBM-n-CODE.

[42] The plaintiff says that it is not certain what Alex has developed. Mr. Wymes admitted candidly that the plaintiff has no existing contracts with customers for ISG Technology or Prognostica™ Technology, which is its version of ISG Technology.

[43] Neither side made much reference to the extensive cross-examinations of the principals, Alex and Mr. Yumshtyk, except to criticize refusals. Most of those refusals were related to what I would loosely call confidentiality.

[44] I decline to accept the defendants’ invitation to draw an adverse inference from the plaintiff’s failure to adduce expert evidence on this issue. Given the absence of full disclosure by Alex of the nature of the new technology and its relationship with ISG Technology, it does not lie in Alex’s mouth to complain about the lack of expert analysis on the part of the plaintiffs.

[45] It is arguable that the technology labeled as “Saturation Technology” or “NANO-CMS” Technology that Alex claims is new and is not covered by his employment obligations, is in actuality a further elaboration of ISG Technology that belongs to the plaintiff. PST has the protection of the assignments of the patents by Alex and the assignments of the association intellectual property. These are associated remedies that the plaintiff is not pursuing in this court.

[46] On the evidence I am not able to assess this issue, largely because neither the plaintiff nor the defendants have adequately defined ISG Technology. While I consider that the plaintiff has demonstrated a serious issue to be tried, I do not find that the plaintiff has demonstrated a strong prima facie case that Alex has breached his obligations in respect of the development of ISG Technology.

Breaches of the non-competition clauses

[47] The plaintiff’s second major complaint concerns Alex’s alleged breaches of the non-competition clauses in the Employment Agreements. The plaintiff alleges that Alex was in communication with at least two of the plaintiff’s “indirect” competitors, namely HBM-n-CODE and Spectra Technical Solutions Inc., or SpecTech Inc. This action was started in March 2011 when the plaintiff became aware of Alex’s efforts.

[48] While he was employed by PST Alex met with Mark Pompetzki of HBM-n-CODE in Detroit on a couple of occasions. There was apparently exchange of non-disclosure agreements but Alex refused to produce a copy during cross-examinations. Alex testified that he gave no information to HBM-n-CODE despite the details of the discussion in the emails.

[49] Alex also had an exchange of communications with David White of SpecTech Inc. while he was employed by PST.

[50] The Employment Agreements called for Alex to devote substantially his whole time and effort to the plaintiff’s employment. It appears that he did not do so. He also appears to have breached the non-competition provisions in the Employment Agreements. Taking the evidence together, I find that the plaintiff has demonstrated on a strong prima facie basis that Alex breached the related provisions of the Employment Agreements.

Issue 2 - Has the plaintiff demonstrated irreparable harm?

[51] The onus is on the plaintiff to demonstrate that it will suffer irreparable harm if the injunction is refused. In its first factum the plaintiff makes the following allegations, essentially quoting the allegations in Mr. Yumshtyk’s Affidavit of March 2, 2011:

I verily state that it is of significance that the business relationships which the defendants have attempted and continued to attempt to destroy represent a substantial portion of the Plaintiff’s potential revenue. The Plaintiff has invested substantial funds, time and effort in securing business from its customers and potential customers and loss of existing customers or potential customers would cause serious and irreparable harm to the continued business and operations of the Plaintiff.

I verily state that it is therefore imperative, if the Plaintiff is to be able to survive, that the defendants be enjoined immediately as requested in the relief claimed herein. If no such injunction and corollary relief is granted the Plaintiff will suffer irreparable harm and may be put out of business.

I verily state that the Plaintiff will suffer serious and irreparable harm, loss of business, income, reputation and goodwill in the event the defendants are not restrained from their wrongful contact as described herein.

[52] There is insufficient evidence to support these allegations. The plaintiff conceded that it has no contracts for the sale of products using ISG Technology. The plaintiff refused to provide details on its financial health, its investment in ISG Technology, and its marketing efforts for ISG Technology; I draw an adverse inference from these refusals.

[53] The plaintiff argues that there is a presumption of irreparable harm where the employee breaches a restrictive covenant: Canpark Services v. Imperial Parking Canada Corp., (2001) 2001 CanLII 28004 (ON SC), 56 O.R. (3d) 102 (S.C.J.) at para. 15. Mr. Wymes submits that the loss of potential customers, and the actual and potential loss of goodwill that diminishes the plaintiff’s reputation, also constitute irreparable harm: Church & Dwight Ltd. v. Sifto Canada Inc., 1994 CanLII 7314 (ON SC), [1994] O.J. No. 2139 (Gen. Div.) at para. 19.

[54] That is not how I read the current cases. The evidence of irreparable harm must be clear and not speculative: Brown v. First Contract Software Consultants, [2009] O.J. No. 3782 (S.C.J.) at para. 55, 754223 Ontario Ltd. v. R-M Trustco, [1997] O.J. No. 282 (Gen. Div.) per Epstein J. at para. 40. The basic proposition of law is set out in Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 CanLII 34862 (ON SC), [2002] O.J. No. 4116 by Mesbur J. at para. 18:

…[E]vidence of irreparable harm must be clear and not speculative. Barton-Reid has provided no real evidence, other than its bald statement, that it will either lose market share, or be put out of business. Lost sales and market share can be compensated in damages, and can generally be calculated on the basis of sales histories, and sales projections. Although perhaps difficult, the damages can be calculated. If the nature of the damage can be calculated in money, then no matter how hard it may be to quantify the damages, the court should decline to grant an injunction.

[55] Where the survival of the business is not threatened, and damages are capable of being quantified, there is no irreparable harm: BMO Nesbitt Burns, supra, at paras. 38-39, 44. The obligation is on the plaintiff to put forward the financial information necessary to establish irreparable harm: Jet Print Inc., supra at paras. 20-21.

[56] I find that the plaintiff has not demonstrated that it will suffer irreparable harm as required by the cases. The motion for an interlocutory injunction is therefore dismissed.

Issue 3 - Has the plaintiff established that the balance of convenience favours it?

[57] In light of my determination on irreparable harm, there is no need to consider the balance of convenience at length. There is no evidence the plaintiff’s viability is threatened by anything that Alex does. Alex needs to earn a living. And the plaintiff is protected by its patent rights. In my view the balance of convenience favours Alex.

Other Relief

[58] The plaintiff seeks other relief including a preservation order under rule 45.01 of the Rules of Civil Procedure in respect of Alex’s computers, hard drives and other electronic storage mechanisms relating to “ISG Technology,” “Prognostica™ Technology” and “Nano-CMS” Technology, and a preservation order concerning email communications, records and accounts relating to that technology.

[59] In order for a preservation order to issue, the assets sought to be preserved must constitute the very subject matter of the dispute, or there must be a serious issue to be tried regarding the plaintiffs' claim to that asset and the balance of convenience must favour granting the relief sought by the applicant or moving party: Taribo Holdings Ltd. v. Storage @ccess Technologies Inc., [2002] O.J. No. 3886 at para. 5.

[60] While I have found that the plaintiff has not demonstrated a strong prima facie case that Alex has breached his obligations in respect of the development of ISG Technology, I did find that it is a serious issue to be tried. Given Alex’s clear breaches of the Employment Agreements and his central role in the development of the Plaintiff’s ISG Technology, I am prepared to provide the plaintiff with some interim relief. I therefore order that:

The Defendants, including their servants and agents and anyone acting on their behalf shall preserve any and all software, hardware and intellectual property belonging to the Plaintiffs including, without limitation, any and all software, hardware and intellectual property pertaining in any manner whatsoever to:

1. The Plaintiff’s ISG Technology;

2. The Plaintiff’s ISG intellectual property;

3. The Plaintiff’s Prognostica™ Technology;

4. The Defendants’ “NANO-CMS” Technology.

The Defendants shall identify in writing and thereafter preserve any and all computers, hard drives, DVD’s, portable hard drives as well as any other format and/or mechanism that contains and/or stores electronic files together with any and all back ups of same pertaining thereto in respect of the following:

1. The Plaintiff’s ISG Technology;

2. The Plaintiff’s ISG intellectual property;

3. The Plaintiff’s Prognostica™ Technology;

4. The Defendants’ “Saturation Technology”;

5. The Defendants’ “NANO-CMS” Technology.

The Defendants shall identify in writing and preserve any and all email communications, records and accounts pertaining to or in respect of the following:

1. The Plaintiff’s ISG Technology;

2. The Plaintiff’s ISG intellectual property;

3. The Plaintiff’s Prognostica™ Technology;

4. The Defendants’ “Saturation Technology”;

5. The Defendants’ “NANO-CMS” Technology.

[61] I recognize that preserving this material is only a first step. There is, for example, a live issue as to whether “Saturation Technology” or “NANO-CMS” Technology is properly the property of the plaintiff. That will be an issue in the litigation. In order for there to be reasonable production and useful examinations for discovery, the preserved material must be assessed in a way that does not compromise any legitimate confidentiality or privilege rights asserted by the defendants: CIBC World Markets Inc. et al v. Genuity Capital Markets et al, 2005 CanLII 3944 (Ont. S.C.).

[62] The plaintiff has not suggested a method for doing so. One possibility would be the identification of a “supervising solicitor” who would take possession of copies of material in the form in which it exists, and then prepare an inventory of the material and report back to the court. If the issues concerning confidentiality could not be resolved between the parties, then the court would be in a position to make a decision on what if anything would be produced.

[63] I would hope that the parties can agree to some mechanism, but if not then an additional motion may be needed. I would think it could be done in an hour so the matter should go on to the ordinary weekly motions list.

Costs

[64] I will accept written costs submissions from each of the parties within ten days accompanied by a Bill of Costs. The parties will then have ten additional days to file replies. If the parties are able to agree on costs, they should advise the trial coordinator.

[65] Owing to the sensitive nature of the commercial material in the file, by agreement of the parties, I order it to be sealed.

[66] Order accordingly.

Justice P.D. Lauwers

DATE: January 18, 2012