SEO firm sues former employees, accuses both of establishing rival company while still employed

A Melbourne SEO firm is suing two former employees, accusing the pair of setting up a rival business selling printer cartridges while remaining employed at the company.

Melbourne-based Websyte Corporation claims that not only did the two create a rival business, but that this business was actually Websyte’s own idea and it had given the two employees responsibility for developing the back-end for the new venture.

Websyte alleges that not only did the two, named as Lachlan Alexander and Shane McGrath, use the company’s software to do this, but they actually promoted the company through a directory business owned by Websyte.

Legal representation for former employee Shane McGrath was contacted by SmartCompany repeatedly, but no reply was received prior to publication.

According to court documents, Lachlan Alexander did not appear in court at a hearing on February 1.

The case is scheduled to return to court on March 5.

Websyte alleges that its software was used by McGrath and Alexander to create the printer cartridge business but was modified to delete any reference to the company’s name, and “to remove obvious visual clues that the respondents’ websites were being run on the applicant’s software, with the intention of concealing their activities from the applicant”.

The company also produced alleged communications between the former employees, suggesting changes were deliberately made to exclude references to Websyte Corporation.

For example, Websyte has accused McGrath of saying to Alexander in an email on November 7, 2010: “I reckon when you can… change the interface to no say website eCommerce login… cause that can be one of the only things out there that could get us”.

These alleged emails were uncovered through a search order made during March 2011, when solicitors obtained information and materials from the respondents.

However, there are some complexities in the case. When Websyte managing director Paul Meyers obtained a search order in March 2011, he gave an undertaking in April 2011 that he would use documents obtained solely for the purpose of the proceedings against Alexander and McGrath.

But he then gave his Statement of Claim to Victorian police, suggesting that the information found during the search could be useful for them. Meyers also gave evidence saying the Statement of Claim was given to police so they could provide the court with evidence regarding the case. 

Howvever, during an application by Meyers to have certain documents released to police, Judge Jessup found the Statement of Claim was provided to the police not solely for the purpose of the proceeding, and therefore contrary to the undertaking Meyers had given the court. As a result, Jessup dismissed the application on February 13. 

When asked to explain why he had given this information to police, Judge Jessup said Meyers’ reply was “less than convincing”. As a result of all of this, Jessup said he must view certain evidence in certain ways and that the applicant’s position is “necessarily compromised”.

Meyers was contacted by SmartCompany, who said there are some difficulties with the case as it involves intellectual property.

“We’re finding it difficult to get this case resolved because it’s a complicated system, intellectual property. There are lots of areas not dealt with in legislation.”