Memorized Client List Is Protected

The Ohio Supreme Court has ruled that a confidential client list does not lose its character as trade secret merely because a former employee used his memory of the list rather than writing or other tangible source.

Robert E. Martin, a former employee of Al Minor & Associates, Inc. ( AMA ), appealed a judgment that entered a $25,973 verdict in favor of AMA for fees not generated from former clients Martin had solicited using information he memorized while working for AMA.

The issue concerns whether the use of a memorized client list can be the basis of a trade secret violation pursuant to Ohio s Uniform Trade Secrets Act. We conclude that the client information did not lose its status as a trade secret because it had been memorized by a former employee.

AMA is an actuarial firm that designs and administers retirement plans and that employs several pension analysts who work with approximately 500 clients. Al Minor Jr., who founded AMA in 1983 and serves as its president and sole shareholder, developed AMA s clientele, for which the firm maintains a confidential list.

AMA hired Martin as a pension analyst but did not require him to sign either an employment contract or noncompete agreement. In 2002, while still employed by AMA, Martin organized his own company to provide the same type of services as AMA. In 2003, he resigned from AMA and, without taking any documents containing confidential client information, successfully solicited 15 AMA clients with information from his memory.

After learning of Martin s competing business, AMA sued for monetary and injunctive relief, claiming he had violated Ohio s Trade Secrets Act by using confidential client information to solicit those clients. A magistrate determined Martin had misappropriated AMA s client list in violation of the UTSA. In addition, the magistrate specifically concluded that the fact that Martin had solicited AMA s clients from memory did not prevent the finding of a trade secret violation. The magistrate recommended finding against Martin for $25,973 in fees AMA would have earned from its former clients and denying injunctive relief. The court adopted the magistrate s findings and entered judgment in favor of AMA.

Martin appealed arguing a memorized client list does not satisfy the definition of a trade secret. The court of appeals affirmed the trial court because a client list such as the one at issue fits the statutory definition of a trade secret.

Martin asserts a client list memorized by a former employee cannot be the basis of a trade secret violation and that the appellate court s decision in this case overly restricts his right to compete in business against AMA. He also argues AMA should not have the right to control the use of his memory and that AMA had the opportunity to protect its confidential information by way of an employment contract, which it did not do.

AMA counters that public policy in Ohio favors the protection of trade secrets, whether written or memorized; that the definition of a trade secret should focus on the nature of the information and the potential harm that its use would cause the former employer; and that no meaningful difference exists between a written and memorized client list.

Ohio s protection of trade secrets arose at common law. In one of the earliest appellate decisions concerning trade secrets, an Ohio circuit court defined a trade secret as a plan or process, tool, mechanism, or compound, known only to its owner and those of his employees to whom it is necessary to confide it, in order to apply it to the uses for which it is intended. In 1937, this court acknowledged the authorities are quite uniform that disclosures of trade secrets by an employee secured by him in the course of confidential employment will be restrained by the process of injunction, and in numerous instances attempts to use for himself or for a new employer information relative to the trade or business in which he had been engaged, such as lists of customers regarded as confidential, have been restrained.

In 1994, the General Assembly enacted the UTSA. No provision of UTSA suggests that, for purposes of trade secret protection, the General Assembly intended to distinguish between information that has been reduced to some tangible form and information that has been memorized. The statute makes no mention of writings or other physical forms that such information might take. Furthermore, nothing in our sixfactor test indicates that the determination of whether a client list constitutes a trade secret depends on whether it was capable of being memorized or had been memorized.

The legislature could have excluded memorized information from the definition of a trade secret or added a requirement that such information be reproduced in physical form in order to constitute a trade secret. But it did not, and we are not in a position to read such language into the statute.

In addition, more than 40 other states have adopted UTSA in substantially similar form, and the majority position is that memorized information can be the basis for a trade secret violation. Among others, Massachusetts and Rhode Island have so ruled.