Doubts arise over database ownership

The procurement of a customer list highlights property rights.

The launch of Landis in the UK has undoubtedly created ripples throughout the past few months causing a wave of rivalry within the tightly knit group of specialist networking distributors.

However, when it emerged last year that the Dutch distributor had procured a private customer database from Azlan, it seemed that friendly competition was beginning to turn nasty. (PC Dealer, 10 December). The situation has certainly raised questions over ownership of customer databases and what legal means are available to companies that find themselves in a similar position.

Jim Warner, head of corporate clients at solicitor firm Deborah Mills and Associates, said: 'The database would most likely be classed as intellectual property as it has been created specifically for a company and was confidential information for Azlan only.'

He added: 'The company could seek injunctive relief but it may be hard to show damages later on due to the difficulty in proving financial loss through the theft of its customer database.'

Although the case between Azlan and Landis seems, as one distributor said 'cut and dry', the situation does open up a whole can of worms in legal terms.

As it stands in the UK, companies are protected in instances like this by the law of confidence. This specifies that these protected secrets such as a database, are usually of a commercial nature, and would be of value to a competitor if they came into their possession.

But it is understood that for a company to protect itself from turncoat employees, certain contractual specifications should be in place concerning confidentiality.

However, Rachel Burnett, partner in the IT division at solicitor firm Masons, said: 'A company cannot prevent someone from using the skills and knowledge which were acquired during the course of employment as being distinct from the employer's secrets.'

Robert Adams, managing director at Logitek, said: 'When employers pay money for people they are also acquiring customers and contacts.'

In terms of employers' rights, however, Burnett said: 'Since 1 January, Database Regulations implement the EU Database Directive which protects databases compiled with creative intellectual effort under copyright.'

But Burnett points out the new database ruling fails to protect mundane databases with no intellectual creation.

And this is the crux of the matter. At the time, Paul Kuiken, managing director at Landis, said in defence that the company had bought a database of reseller details with the same names available to every other distributor.

Adams said: 'There is a huge number of resellers in the industry that are known to all distributors.'

Phil Keddie, director of channel sales UK and Ireland at Newbridge Networks, said: 'We have a database compiled by a market research company which is also employed by other vendors.'

He added: 'It is what you add to the database that makes it valuable like turnover and stock listings.'

A source said the database, which was obtained by Landis and eventually returned to Azlan, did include the entire purchasing history which adds value to an otherwise mundane list of companies.

He added: 'Distributors need a list of people that must be very detailed, including purchasing patterns which the Azlan customer database must have included.'

Another concern raised by the incident between the two distributors centred around how Azlan discovered the customer database had been taken.

It appears that the system, employed by some but not all the channel, involves planting dummy names within the database so the mailshots sent by - in this case Landis - were sent to a dormant company set up by Azlan.

Peter Rigby, director of marketing and communications at CHS Electronics, expressed surprise that some companies do not use a dummy system.

'Apart from a distributors point of view, vendors also employ this method by setting up dormant reseller companies to check if they are getting the right service like mailshots and other marketing activities from their partners,' he said.

It seems that most distributors questioned had heard of cases similar to the Landis and the Azlan situation.

But Warner said: 'People are often reluctant to report cases of copyright or intellectual property theft because they think it shows weakness and that they have lost their competitive advantage.'

He added: 'Companies worry that other secrets may be exposed in the course of litigation when evidence must be produced.'

The case with Azlan and Landis may provide some hope to companies that find themselves in a similar situation.

But with the complex legalities involved in such a case proving a deterrent, and a fear tainting the company image, it seems a very real problem is being prevented from seeing the light of day.