Keeping your Trade Secrets Safe: The Runaway Employee
How can a business protect its critical information when an employee goes to work for a competitor? Many employers simply assume that if it considers information “confidential,” the law automatically protects it when an employee snatches it up and leaves to work for a competitor. That’s not necessarily the case. In order to protect its confidential information, such as intellectual property, information, systems, customer lists, pricing information and the like, an employer must take affirmative steps long before the rogue employee leaves to ensure that its information is protected. Such information can be protected from disclosure both under Illinois common law and pursuant to the Illinois Trade Secrets Act (“ITSA”).
An employer’s trade secrets, such as its customer lists, are a protectable interest. An employer has a clear and ascertainable right in protecting its trade secrets. To establish that an employer’s information is a trade secret under ITSA, an employer must meet two threshold requirements. First, it must show the information was sufficiently secret to provide the employer with a competitive advantage. Second, the employer must show that it took affirmative measures to stop others from acquiring or using the information. Examples of steps employers typically take to keep information confidential include keeping the information under lock and key, limiting computer access, requiring that employees sign confidentiality agreements, and other employer efforts to advise employees that the information imparted to them must be kept secret. Establishing this second prong is where employers typically fall short.
Where employers have invested substantial time, money, and effort to obtain a secret advantage, the secret should be protected from an employee who obtains it through improper means. Although employees may take general knowledge or information with them that they developed during their employment, they may not take confidential information, including trade secrets. The taking does not have to be a physical taking by actually copying a list. A trade secret can be misappropriated either by physical copying or by memorization. Using memorization to rebuild a trade secret does not transform the trade secret from confidential information into non-confidential information. A trade secret can also be obtained through reverse engineering
Whether and how an employer keeps information secret is one of the most important factors when determining whether information is a trade secret. When information is generally known or understood in an industry, even if it is unknown to the public at large, it does not constitute a trade secret. If a business fully discloses information throughout an industry through a catalog or other literature, it is not considered a trade secret. If the information can be readily duplicated without considerable time, effort, or expense, it is not considered a trade secret. If a customer list, for example, is generally available to all employees and the employees are not required to sign confidentiality agreements, the list is likely not considered a trade secret.
By far the most litigation in this area relates to whether an employer’s customer list is a confidential trade secret. Whether customer lists constitute trade secrets largely depends on the facts of each case. Customer lists and other customer information can be considered a protectable trade secret if the information has been developed by the employer over a number of years at great expense and kept under tight security. However, the same type of information is not protectable where it has not been treated as confidential by the employer, was generally available to other employees and known by persons in the trade, could be easily duplicated by reference to telephone directories or industry publications, and where the customers on such lists did business with more than one company or otherwise changed businesses frequently so that their identities were known to the employer’s competitors.
Illinois courts have found that customer lists do not constitute protectable trade secrets where, for example: a) the particular industry was competitive and customers often dealt with multiple companies; b) the employer had failed to produce sufficient evidence to demonstrate that the customer list was subject to reasonable efforts to protect its secrecy; and c) sufficient efforts had not been taken to maintain the list’s secrecy. To be a protectable trade secret, the employer must demonstrate the information it seeks to protect was sufficiently secret to provide it with a competitive advantage. However, for steps to be deemed sufficient to protect a trade secret, extensive steps must be taken to protect both the electronic and hard copies of the purported trade secret.
For more information regarding the protection of a company’s confidential information, please contact Howard Teplinsky at (312) 368-0100.
