Can Business Relationships Be Trade Secrets? VA Federal Court Says No.

Business relationships are certainly valuable. But can they be trade secrets? In Cablecom Tax Services, Inc. v. Shenandoah Telecommunications Co., 2013 WL 2382969 (W.D. Va. May 30, 2013), the court said no.

Here, the plaintiff offered services designed to reduce its clients’ ad valorem and sales tax liability. The defendants, cable companies, contracted with the plaintiff for this purpose. After the plaintiff apparently obtained tax reductions, the defendants allegedly did not pay amounts owed to the plaintiff. The plaintiff sued for misappropriation of trade secrets under Virginia’s Uniform Trade Secrets Act, among other claims.

The plaintiff identified two trade secrets allegedly misappropriated, including its “valuable relationships with taxing authorities.” (The case does not explain how the defendants used these relationships, but that’s not important for our purposes.) Essentially, the plaintiff is saying that it spent time and money developing these relationships, which offered it economic value.

The court spent little time flatly rejecting this theory:

The court cannot fathom how Cablecom’s alleged ‘valuable relationships’ with taxing authorities could conceivably fall under the definition of a trade secret. Simply put, such a relationship is not information that derives independent economic value from not being generally known and which could be the subject of reasonable efforts to maintain secrecy.

This is the right result. A relationship exists between people; it is not possible for another person to misappropriate a relationship.

But this got me thinking. Perhaps there is a way to protect business relationships as trade secrets, the same way customer information can become a trade secret. If a company invests time and money creating and reasonably protecting a database containing information about its business relationships, there’s certainly an argument that the database—as opposed to the relationship itself—could be a trade secret. But as I’ve discussed in prior posts, it can be difficult to convince courts to treat customer information as trade secrets. It would likely be even more difficult to do so with business relationships.

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