It is without dispute that customer lists can be of considerable value to a company.
To maximize protection and value for these valuable assets, the prudent business owner should consider trade secret protection against misappropriation statutes under applicable state or federal law. Courts generally recognize that customer lists are not automatically entitled to trade secret status. So, what on earth makes my customer list a trade secret and how do I protect it? The answer can be complicated and is always based on the facts of a particular situation.
A “trade secret” is broadly defined as any confidential business information which derives independent economic value from not being generally known or readily ascertainable by the public, which provides a company with a competitive advantage and for which reasonable measures are taken under the circumstances to protect and maintain its confidentiality.
Information that is not readily ascertainable by the public is a matter of degree.
For example, if a competitor could compile essentially the same customer list from names and addresses publicly available on the internet, that would cut against a claim that the information was not readily ascertainable. Conversely, if a competitor would find it extremely difficult to compile a list from publicly available information, that would lend support to a claim that the information was not readily ascertainable by the public. The requirement that the information must derive independent economic value from its confidentiality is more difficult to conceptualize. A general rule of thumb is such economic value is more evident when customer lists that are not readily ascertainable by competitors, whereas such lists that are readily ascertainable are not likely to have the requisite independent value.
Finally, what measures to protect the confidentiality of information are reasonable under the circumstances may be anything from marking documents “Confidential” or “Trade Secret” and locking them in an office file cabinet (not recommended), to not sharing the information publicly, to requiring employees sign so-called “non-disclosure agreements,” (strongly recommended) to employing effective protection systems on company computers. The closely guarded, 125- year-old Coca Cola receipt was written on a piece of paper which currently resides in a vault at the World of Coca Cola museum in Atlanta.
This is a very cursory overview of trade secret law. It is very prudent business practice for any company to discuss these matters with an attorney experienced in this highly specialized and complex field. Inadvertent or careless disclosure may destroy the trade secret with potentially disastrous results to the company.
This article is not legal advice but should be considered as general guidance in Intellectual Property law. You can contact us at 207.784.3200. Skelton Taintor & Abbott is a full-service law firm providing legal services to individuals, companies, and municipalities throughout Maine. It has been in operation since its founding in 1853.