Many companies today derive a benefit from the customer lists they compile over the years of dealing with customers, which increase in value due to the knowledge the company gains about the customer, its special needs and preferences, and the history of transactions or work between the companies. If this information is not generally known to competitors in the same industry, then it may qualify as a trade secret which the law allows a company to protect and claim as it's own proprietary property. "Trade Secrets" are nothing new, and neither is a company protecting private customer lists as trade secrets.
But what about when a company obtains and compiles customer lists from publicly available sources, such as trade show lists, phone books, industry guides, etc. Can those be considered trade secrets as well? One wouldn't think so, probably. However, once again, the answer is: They could be. Again, it all depends.
What is or isn't a trade secret often depends not upon what the final item is, such as a customer list, but how and where the information contained within that customer list was derived. If it was derived through a complicated, secret, or unique process, then, even though your competitors may have general knowledge of a particular customer, the unique process by which one company identified the customer could allow that company to claim it as a trade secret against departing employees or associates of the company with whom the company shared the information, subjecting the employee or associate to an injunction against disclosing or sharing the information with others, and/or having to pay damages to the employer if a competitor swoops in and steals the customer away from the company.
Of all the hard-fought cases I have tried throughout my career, Customer List Trade Secret cases have been among the most brutal and expensive battles. Businesses take their customers seriously. Very seriously. They work to build relationships, then work to maintain those relationships and cultivate new business within those customer relationships. So, when an affiliate, departed employee, or competitor tries to take that customer away from a company, it can turn into an all out war, going on for years, and costing hundreds of thousands of dollars to resolve. Why? Because the stakes are simply that high to many companies.
In the Northwest, we have many technology companies which proliferated in the late 1990's and 2000's. Along with that proliferation, has occurred a proliferation of Confidentiality and Non-Competition Agreements companies require employees to sign, which frequently include provisions requiring employees to agree that any information shared with them by the company is considered to be company trade secrets. Whether those contractual terms would hold up in court is uncertain, but if you read them, and are asked to sign a contract that includes them, then we need to talk!
My short-hand advice about Trade-Secrets is this: 1. Think about the infamous "New Leads" from the movie Glenn-Gary, Glenn-Ross. Think about how that company treated and protected those leads. Think about the police investigating the crime after those leads were stolen. But mostly, think about how much the company valued those leads, and how they dangled them over the salesmens' heads as rewards for their performances. 2. Think about the fomula for Coca-Cola. How valuable is that information? How many billions, year-in, and year-out, are earned by Coca-Cola on account of that formula. How much of a difference would it make to Coca-Cola if someone took that formula and posted it on the internet? Or gave it to a competitor? In both of the above scenarios, the protected information would certainly qualify as trade secrets in any court. But in other cases, whether information qualifies as Trade Secrets or not can be a very costly issue to resolve in Court. So, my best advice is this: Do not sign any significant contract without consulting an attorney first. If you do so, you may hear what a client of mine was once told by a King County Superior Court Judge: "You're a big girl. And you signed the contract." Nearly two months later, she returned to her job. But not without spending thousands of dollars she really couldn't afford getting an injunction lifted and the contract stricken. Which brings up number 3. Your signature matters! Do not sign legal documents without carefully reading them first. Especially Contracts that deal with Customer Lists and Trade Secrets! Any questions? Any concerns? Call us first!
But what about when a company obtains and compiles customer lists from publicly available sources, such as trade show lists, phone books, industry guides, etc. Can those be considered trade secrets as well? One wouldn't think so, probably. However, once again, the answer is: They could be. Again, it all depends.
What is or isn't a trade secret often depends not upon what the final item is, such as a customer list, but how and where the information contained within that customer list was derived. If it was derived through a complicated, secret, or unique process, then, even though your competitors may have general knowledge of a particular customer, the unique process by which one company identified the customer could allow that company to claim it as a trade secret against departing employees or associates of the company with whom the company shared the information, subjecting the employee or associate to an injunction against disclosing or sharing the information with others, and/or having to pay damages to the employer if a competitor swoops in and steals the customer away from the company.
Of all the hard-fought cases I have tried throughout my career, Customer List Trade Secret cases have been among the most brutal and expensive battles. Businesses take their customers seriously. Very seriously. They work to build relationships, then work to maintain those relationships and cultivate new business within those customer relationships. So, when an affiliate, departed employee, or competitor tries to take that customer away from a company, it can turn into an all out war, going on for years, and costing hundreds of thousands of dollars to resolve. Why? Because the stakes are simply that high to many companies.
In the Northwest, we have many technology companies which proliferated in the late 1990's and 2000's. Along with that proliferation, has occurred a proliferation of Confidentiality and Non-Competition Agreements companies require employees to sign, which frequently include provisions requiring employees to agree that any information shared with them by the company is considered to be company trade secrets. Whether those contractual terms would hold up in court is uncertain, but if you read them, and are asked to sign a contract that includes them, then we need to talk!
My short-hand advice about Trade-Secrets is this: 1. Think about the infamous "New Leads" from the movie Glenn-Gary, Glenn-Ross. Think about how that company treated and protected those leads. Think about the police investigating the crime after those leads were stolen. But mostly, think about how much the company valued those leads, and how they dangled them over the salesmens' heads as rewards for their performances. 2. Think about the fomula for Coca-Cola. How valuable is that information? How many billions, year-in, and year-out, are earned by Coca-Cola on account of that formula. How much of a difference would it make to Coca-Cola if someone took that formula and posted it on the internet? Or gave it to a competitor? In both of the above scenarios, the protected information would certainly qualify as trade secrets in any court. But in other cases, whether information qualifies as Trade Secrets or not can be a very costly issue to resolve in Court. So, my best advice is this: Do not sign any significant contract without consulting an attorney first. If you do so, you may hear what a client of mine was once told by a King County Superior Court Judge: "You're a big girl. And you signed the contract." Nearly two months later, she returned to her job. But not without spending thousands of dollars she really couldn't afford getting an injunction lifted and the contract stricken. Which brings up number 3. Your signature matters! Do not sign legal documents without carefully reading them first. Especially Contracts that deal with Customer Lists and Trade Secrets! Any questions? Any concerns? Call us first!