Paul Peter Nicolai
Data Revealed on Open Zoom Meeting Is Secret No More
Updated: Sep 13, 2021
A business that does not take reasonable steps to protect its confidential information while using Zoom cannot receive trade secret protection, according to a Delaware Court. The court said a failure to use Zoom’s safety features, like requiring a password for access to a meeting or placing participants into a waiting room while verifying identity, meant confidential information was not protected.
The conflict began when a person expressed interest in a mobile trash compaction business franchise operated by two parties. After learning about the franchise opportunity, he had several calls on Zoom with contractors and franchisees to learn about the company. To proceed in the franchisee process, he signed an NDA. After signing it, he decided he would use his engineering and business background to form a competing mobile trash compaction business, while he would continue to attend meetings to gather information.
Later, the original franchisor sued to stop him from doing business or stop him from making false comparisons between the two companies’ products
To obtain a preliminary injunction, a plaintiff must demonstrate (i) a reasonable probability of success on the merits, (ii) a threat of irreparable harm if an injunction is not granted, and (iii) that the balance of the equities favors the issuance of an injunction. The court explained that the elements are not weighed equally and a strong showing of one element can overcome the weakness of another element. However, a failure of proof on one of the elements will defeat the request.
After analyzing each cause of action on its reasonable probability of success, the court denied a business-stopping injunction. The court said that while the defendants engaged in disingenuous and underhanded conduct, the information plaintiffs sought to stop defendants from using was (i) made publicly available by the defendants, (ii) not Confidential Information within the meaning of the NDA, or (iii) not a trade secret.
The crux of the ruling was rooted in the plaintiffs’ lack of proper protection of trade secrets. The court explained that for information to qualify as a trade secret, it must both derive independent economic value from not being generally known or readily ascertainable and be subject to reasonable efforts to maintain its secrecy.
Even if some of the information, like business routes and pricing models, gave the defendants an independent economic advantage over its competitors, the defendants did not take reasonable steps to protect the information’s secrecy.
The defendants freely provided the Zoom meeting information to anyone that expressed interest, did not use the password-protection feature for the meetings, or the waiting room feature to screen attendees. The court also found the defendants did not follow their own procedures and take roll at the beginning of each call or remove anyone who did not belong. There was also no indication that the twenty participants in defendants’ meeting signed NDAs.
Because much of the information at issue was either made public by the plaintiffs or left unprotected, the court ruled that a broad business-stopping injunction was unwarranted and disproportionate.
WHY THIS IS IMPORTANT... Although this is a Delaware court decision, these general rules of law on both injunctions and trade secrets apply throughout most of the United states with some minor variation. Maintaining the confidentiality of trade secrets is critical to being able to enforce them. Once the cat is out of the bag, it is gone.