Can a confidential customer list qualify under trade secret laws if it is merely memorized by a former employee if the employee didn't sign a non-compete or non-solicitation agreement? According to the Ohio Supreme Court and the Ohio Trade Secrets Act, it can. Robert Martin, a former employee of Al Minor & Associates, took 15 of his former clients with him when he left the company in 2003. Martin remembered the customer information purely from memory and solicited those clients to a new company. Upon hearing of this competition, Al Minor filed for damages and an injunction in the trial court. The trial court referred the trade secret case to a magistrate, who awarded AMA $25,973 in fees that they otherwise would have earned from their former clients.
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Martin appealed to the Franklin County Court of Appeals who affirmed the decision of the trial court. The Court of Appeals held that Martin's memories were, in fact, trade secrets under the Ohio Trade Secrets Act. Martin filed a discretionary appeal with the Ohio Supreme Court and appeal was granted.
Martin argued that Al Minor couldn't control his thoughts by arguing that his memory contained trade secrets. If Al Minor was really concerned about trade secret laws, Martin argued, they should have made him sign an employment contract that contained a non-compete and non-solicitation agreement. Al Minor argued that there was no difference between a written customer list and a memorized customer list: either way, the damage was done.
In 1994, the Ohio General Assembly enacted USTA RC 1333.61-1333.69, which defines a trade secret as:
[I]nformation, including the whole or any portion or phase of any scientific or
technical information, design, process, procedure, formula, pattern,
compilation, program, device, method, technique, or improvement, or any
business information or plans, financial information, or listing of names,
addresses, or telephone numbers, that satisfies both of the following:
(1) It derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use.
(2) It is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
The Ohio Supreme Court reasoned that nothing in the case law or the General Assembly language required a trade secret to be written or otherwise fixed in a tangible form. The court looked to the Uniform Trade Secrets Act, adopted by 40 states, which is also of the opinion that memorized customer lists can constitute trade secrets. In the end, the court determined that “by adopting the Uniform Trade Secrets Act, with the express purpose 'to make uniform the law with respect to their subject among
states,' the General Assembly has determined that public policy in Ohio, as in the majority of other jurisdictions, favors the protection of trade secrets, whether memorized or reduced to some tangible form.”
If you are navigating the trade secret, non-compete, non-solicitation, or employment agreement waters, it is best to talk to an attorney or law firm experienced in this area. Non-compete agreements can vary by state, occupation, and duration, and the best way to protect the goodwill that you have invested in your customer lists, innovations, and even your ability to accept similar employment after having signed one of these agreements is by talking to an attorney familiar with your factual situation. A settlement or compromise between employer and former employee can often benefit both parties, so investigate your options before resigning yourself and your information to the terms of a seemingly sound agreement.
Can a customer list be confidential? If a customer list can be treated as a trade secret, then what legal factors or elements control?
Posted by: Confidential customer list | 07/11/2008 at 02:46 PM