Contracts Not Enough To Protect Trade Secrets

A former employer sued an exemployee for misappropriation of trade secrets. The employee had worked for the employer for several years and during his employment signed two noncompetition covenants. After leaving, he and an owner of one the former employer s customers started a competing company that began selling to the former employer s customers.

Because of the lengthy process needed to get customers in this line of business, the court ruled that the customer information was sufficiently secret to derive economic value from not being generally known to others who could obtain economic value from its disclosure or use. However, the evidence was insufficient to meet the second requirement: that the employer took reasonable steps to keep the information secret. The only security measure it took was to have its employees sign an employment and confidentiality agreement. There was no evidence presented that it did anything more in this regard. Had it taken additional measures, like limiting access to its customer information by computer password or keeping track of hard copies of the information, the court might have held otherwise.

The limited security measure of a confidentiality agreement was not enough to satisfy the second requirement of a trade secret.