The issue of whether information about a company’s clients can qualify as a trade secret is a tricky one, since much of this information can be obtained from the clients themselves. In Central Trust and Investment Co. v. Kennedy, 2013 WL 268687 (Mo. Ct. App. Feb. 19, 2013), the Missouri Court of Appeals concluded that the customer information at issue is not a trade secret and strongly suggested that this information could never be a trade secret.

Here, the plaintiff, a financial-services firm, sued a former employee who left the company following its sale. The defendant employee started his own financial-services firm and immediately targeted his former firm’s clients. He was successful; 85 of his firm’s 90 clients were previously the plaintiff’s clients.

Although the defendant employee signed a noncompete, by its terms it became void upon the company’s sale. (As an aside, this is a bad idea.) Thus, the plaintiff brought claims under Missouri’s Uniform Trade Secrets Act (UTSA), alleging that its customer information was a trade secret.

The court concluded that this information was not a trade secret. Under the UTSA, the plaintiff must take reasonable efforts to protect the alleged trade secret. The court here gave a list of reasons why the plaintiff’s efforts were not reasonable, including:

  • The employment contract did not specify that client information needed to remain confidential;
  • The plaintiff shared its client information with affiliates and all of its employees, many of whom did not sign confidentiality agreements;
  • Other former employees actively solicited the plaintiff’s clients but the plaintiff did not pursue legal action against them; and
  • There was no evidence in the record that this information “had any recognizable extrinsic or intrinsic value.”

The court then strongly suggested that customer information can never be a trade secret when it said that “a non-compete agreement is the proper means of preventing an employee who leaves employment from disseminating information relating to customer or client lists once the employee leaves employment.” Because there was no longer an enforceable noncompete here, “this Court fails to see how [the plaintiff] could, as a matter of law, regulate [the defendant’s] use of” the client information.

I disagree. Companies often spend tremendous amounts of time and money developing databases or other repositories of information about their clients; this information would be incredibly damaging in a competitor’s hands. Assuming this information is reasonably protected, it should qualify as a trade secret. Courts in other states have found client information to be a trade secret when the company seeking enforcement meets all requirements of the Uniform Trade Secrets Act. That is the proper result.

Regardless, this case highlights some of the common ways companies fall short when trying to protect their proprietary information. Perhaps the most important takeaway from this case is that companies must make sure that employees with access to customer information that would be damaging in a competitor’s hands sign noncompete agreements.

This case also shows that companies must implement protections for all proprietary information, including client lists. And a company should diligently pursue its legal remedies against any trade-secret violations, or else a court may later find that it waived the right to do so.

8 Comments

  1. Overall, Business Link seems very consumer friendly, with added specifics of Services
    not merely products being covered inside act, and giving
    the customer tips on how to handle it in the situation and what ought to be covered by the retailer in terms to some product going wrong.
    You can then click on the connect to observe the entire comes from the
    Wikipedia site. To my mind the idea of woman president
    is one area speculative, going after dark generally accepted rules and at
    the very best at the mercy of the theoretical and
    philosophical comprehension.

  2. And unfortunately, up until very recently, driver’s education has not been taken seriously in the United
    States. Driving school in Sydney helps you in the best possible way:.

    t have asked for a kinder and more understanding instructor.

  3. Rent is perhaps the most important concept
    to understand when signing onto a tenancy agreement. The best way
    to enjoy in quality vacation is to rent a car. Make sure that if you have been told
    that utilities are included, that it is stated
    on the contract prior to signing.

  4. , now represents a new generation that continues the conspiracy.

    Unfortunately, only few recollect a saying that everything old is new again. When this happens, over time the water can eventually cause a foundation to sink.

  5. Most of the Limestone is created through chemical deposition or by shells accumulation. Floor Tiles: Granite is widely
    used to make floor tiles. Summary: Our site is usually where you finish
    your search for buying there are some rocks, pebbles,
    natural stones and so on.

  6. Modern tattoo artists and practitioners have such exacting tools, technologies and
    inks that they say they can replicate the “look” of hair follicles.
    Hair transplantation is a team effort, and each member of our surgical team is
    highly trained to achieve the desired result.

    The highest blunder a health care provider will
    make as soon as managing the patient together with hair
    loss is usually to perform a hair transplant on a man or woman who is too small, as
    anticipation are likely to be high and the sample regarding upcoming baldness unstable.

  7. Request more time to gather your records or
    confer with a professional. ‘ You should be regularly
    employed with a minimum salary of at least 1000 pounds
    per month or should have a proof of the capability to repay the amount.
    Harvard-educated Blumberg has represented the US and Canada
    at international squash and is also a keen photographer.

  8. Today’s pantyhose styles call for shades that match your skin. This variation had been a darker edition of the
    story and was directed by Tim Burton. She has given this literary account on how to get selective for the bridesmaid dresses in trend and
    also to look into the other aspects before going for the ultimate buy for bridesmaid dresses at.
    Guaranteed to be one of the latest high-fashion pumps around.
    Once you made your decision on the color of your shoes,
    you still have to select the style of shoe that works best for your comfort and the style
    of attire you will be wearing. Refer to Mens Dress Shoes Styles for their differences.
    Business Images: Free Digital Photos by image
    creater Ambro and used under the terms of use,.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s