How Can You Protect Your Customer List As A Trade Secret?

How Can You Protect Your Customer List As A Trade Secret?

Client Resources | April 2, 2018

A customer list may be the most valuable information held by a small business.  Yet the law does not always protect this information.  Indeed, customer lists may be less likely to receive trade secret protection from courts than other, more technical information.

Whether or not a customer list is a trade secret depends very much on the list itself—how the company keeps the list and what the company has put on the list for example.  Trade secret status does not necessarily depend on how long a list took to create—as a small business learned in a recent case.

Case Overview

That recent case, Art & Cook, Inc. v. Haber, involved a common situation.[1]  A small cookware and kitchenware business, Art & Cook, (about 20 employees) sued a former salesperson who left the business after emailing Art & Cook’s documents to his personal email account.

The emailed documents included two spreadsheets.  One spreadsheet was a customer list with the names, phone numbers, and email addresses of about 72 customers or potential customers.  The other spreadsheet had logos, branding/marketing strategies, target customer lists, and sales projections for a new product line.  Art & Cook claimed the spreadsheets contained trade secrets.  The Court disagreed.  The Court reasoned that the “lists do not include information, such as customer preferences, that would be difficult to duplicate” and that “the lists are little more than a compilation of publicly available information.”[2]  The Court acknowledged, “That the compilation of these lists may be an arduous task, involving ‘tens if not hundreds of hours’ of research.”[3]  Still, the Court did not find the spreadsheets likely to be trade secrets.

This New York federal case matters in Georgia because of the new (May 2016) Defend Trade Secrets Act (“DTSA”).  The DTSA applied in the Art & Cook case and applies nationwide.  Unlike the Georgia Trade Secrets Act (“GTSA”), the DTSA does not specifically include lists of actual or potential customers in its definition of “trade secret.”[4]

Takeaways From Case

Although Art & Cook did not get the injunction, it still received almost six months of protection because of a temporary restraining order that lasted until the Court’s decision on the injunction.  Under the temporary restraining order, the salesperson could not use any of Art & Cook’s information and could not sell to any of the people or companies listed on any spreadsheets or other files.  Notably, Art & Cook received this protection even though the salesperson did not sign an employee handbook, a non-disclosure agreement, a non-solicitation agreement, or non-compete agreement.

Protecting Customer Lists

Ultimately, the Art & Cook case is a good reminder of the steps to increase the chance of being able to protect a customer list as a trade secret.  Those steps can include the following:

  • Have employees sign non-disclosure agreements;
  • Have written policies on confidentiality and have employees acknowledge the policies in writing;
  • Put the customer list in a specific document. Under the GTSA, a company cannot claim the information in an employee’s head as a trade secret;
  • Add non-public customer preferences to the list—everything from historical purchases, to future plans, to personal information on key decisionmakers (birthdays, family information, personal preferences, etc.);
  • Include non-public contact information;
  • Mark the customer list as confidential;
  • Restrict access to the customer list to those who need to use it;
  • Log who uses the customer list;
  • Keep separate lists for customers and for potential customers; and
  • Be able to estimate how long the customer list took to create.

[1] Art & Cook, Inc. v. Haber, No. 17CV1634LDHCLP, 2017 WL 4443549, at *3 (E.D.N.Y. Oct. 3, 2017).

[2] Id., at *3.

[3] Id. 

[4] 18 U.S.C.A. § 1839(3).

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