Cygnal wins injunction against former employee

Cygnal Technologies Corp. won a court fight Wednesday that will prohibit a rival company started by a former employee from approaching its customers.

An Ontario Superior Court granted an injunction restraining unfair competition

from Activo Inc., a provider of voice, video and data network infrastructure. Activo was founded in March by James Taylor, a former senior executive at Cygnal. Taylor joined the company when it acquired his previous firm, Integrated Cable Systems Inc., five years ago.

“By keeping in his possession documents that contained sensitive information about Cygnal and its customers, and by competing with the company starting only five months after resigning from its board, Mr. Taylor competed in an unfair manner,” the court decision said. “As a director and high-level employee of Cygnal, Mr. Taylor owed fiduciary obligations to the company.”

Cygnal boasts a number of high-profile customers, including Hydro One Telecom, which awarded it a contract two years ago to build a fibre-optic network for Catholic and public schools in Peel Region. In June, the Great Canadian Gaming Corp. signed a deal with Cygnal to install voice-over-IP and wireless applications based on Nortel equipment.

Activo is playing in a similar space, offering a number of products to help enterprise organizations move to IP-based private branch exchange (PBX), unified messaging and antivirus protection. Recently Activo said it is offering interoperability with its IP-PBX product and legacy Nortel handsets. 

The court injunction won’t keep Activo away for long, however. It expires at the end of next month, which will mark one year since Taylor left Cygnal.

“We’re open for business and we will be for a long time,” Taylor said. “(The injunction) bars me from talking to their customers, but they don’t have every customer.”  

Cygnal had been seeking damages in addition to the injunction, according to chief financial officer Paul Horsley. The company had also hoped for an injunction longer than 12 months, but Cygnal has accepted the judge’s decision, he said.

Cygnal’s growth has come largely through acquisition. The company was formed in 1998 through the merger of two other firms, and in the last few years it has acquired 12 more. Horsley said Cygnal had been “reasonably opportunistic” in its early days but decided a few years ago to shift its approach.

“Our strategy would be to buy and integrate right away, rather than own a lot of divisions with an owner-operator on site,” he said, adding that Cygnal has also moved 17 different units with their own general ledger system onto the former J.D. Edwards product. “We’re of a size and significance now that we can consolidate (new acquisitions) much more efficiently.”

Taylor said his stormy relationship with Cygnal does not necessarily preclude him from courting a buyer for Activo some day.

“Times are improving, the telephony market’s changing quite a bit with IP. The next few years coming will be good ones,” he said. “I learned a lot in the last go-around. Anything is possible.”

Cygnal last month expanded into the broadband services business, signing up 45 accounts to which it will sell bandwidth and Internet services through a program called CygnalConnex.

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