What happens when your departing CEO has been secretly building a competing product on your dime? In Intellimedia Limited Partnership v Jawad, 2026 ABKB 247, the Court of King’s Bench of Alberta (the “Court”) answered that question by granting an interlocutory injunction against a former CEO who used his position to lay the groundwork for a rival AI product targeting the same market as his employer.
Fiduciary Status
The employee at issue co-founded a company whose flagship software product, Dossier, served K-12 school districts in Alberta. In 2020, Intellimedia Limited Partnership (“ILP”) acquired this company’s assets and hired the employee as their CEO pursuant to an employment agreement that expressly recognized his fiduciary status and contained an obligation to devote his full working time, attention, and effort to ILP’s business. The CEO was also subject to a five-year post-employment non-compete clause and a non-solicitation clause pursuant to the terms of the purchase agreement.
The Secret Side Project
Days before the deal closed, the CEO covertly incorporated a new company, DOCEOAI Analytics Inc., to pursue AI opportunities in the education sector. While serving as CEO of ILP, he secured a government grant, hired graduate students to conduct AI research (some of which involved access to the Dossier software), and used ILP’s bookkeeper and long-standing contractor to build his new company’s brand.
By May 2024, the CEO was publicly presenting his company’s AI product at industry seminars. When ILP raised concerns, he assured them his work was “in no way competitive” without disclosing the details of his company’s project. After the CEO’s employment ended in the summer of 2024, ILP discovered that his company was marketing a software product set to launch by May 2026.
What the Court Decided
The Court granted the injunction on narrower terms than ILP had sought. It restrained the former CEO from creating or licensing AI-powered software products in the K-12 sector that directly compete with Dossier and enforced the non-compete clause.
A higher bar for the injunction. Because ILP’s claims were rooted in fiduciary obligations and the proposed injunction would effectively end the former CEO’s new business, the Court applied the higher “strong prima facie case” standard rather than the lower “serious issue to be tried” threshold.
Fiduciary duty. The Court found that the former CEO identified the corporate opportunity of leveraging AI in the K-12 sector as early as 2019, then pursued it for his own benefit instead of advancing it for ILP. He used ILP’s resources in the process and failed to disclose his conflict of interest, even after learning in early 2024 that ILP was independently pursuing AI integration.
Breach of confidence. While the Court noted this claim would have met the lower “serious issue to be tried” standard, the evidence fell short of the “strong prima facie case” threshold. Specifically, ILP did not sufficiently establish what confidential information was taken or the purposes for which it was used.
Direct competition. The former CEO argued the new App was not directly competitive with Dossier because it performed different functions. The Court disagreed. Both products drew from the same raw data, targeted the same K-12 market, and sought to help educators make data-informed decisions. Even if the new App could complement Dossier for existing customers, it would directly compete for school districts not yet using Dossier.
Non-compete clause. The Court held that the non-compete was unambiguous and reasonable in scope (i.e., the creation or licensing of education software products for K-12 institutions that directly competed with the software products sold under the purchase agreement), duration (i.e., five years following termination of employment), and geography (i.e., the provincial jurisdictions where ILP carried on Dossier business, with Alberta being the main battleground). Because the clause was tied to a commercial asset sale between sophisticated parties rather than a pure employment relationship, it enjoyed a presumption of enforceability. The Court also held it could apply "blue pencil" severance to narrow the geographical reach if necessary.
Non-solicitation clause. The Court held that the non-solicitation clause in relation to customers, suppliers, licensees, licensors, employees, contractors, referral sources, and other business relations of ILP, with a duration equal to the same five-year restricted period as the non-compete, was ambiguous and unreasonably broad, as it was not limited to those people connected to ILP during the former CEO’s employment.
Key Takeaways
- Fiduciary duties have teeth. Courts will scrutinize whether a fiduciary employee diverted corporate opportunities or laid the groundwork for competition during their employment. Failing to disclose conflicts and pursuing opportunities for personal benefit can carry serious consequences.
- Non-competes tied to asset sales are more likely to be upheld as enforceable. Restrictive covenants negotiated between sophisticated parties in a commercial transaction will be presumed enforceable absent a bargaining power imbalance, and courts may apply blue pencil severance where the agreement contemplates it.
- Clear and narrow drafting remains essential. While restrictive covenants tied to the sale of a business are afforded greater deference than those in pure employment relationships, they must still be unambiguous and reasonable in scope, duration, and geography. Covenants that fail to clearly define the restricted activity, tie restrictions to a reasonably knowable group of persons, or establish ascertainable boundaries risk being struck down as ambiguous and overbroad.
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