Protecting Your Arizona Trade Secrets after Calisi v. Unified Financial Services, LLC.
A trade secret is information that derives “independent economic value” from not being generally known or readily ascertainable by others. The hallmark of a trade secret is, not surprisingly, secrecy. In this case an employer claimed a former employee misappropriated the company’s trade secrets by using the customer list to generate business for the employee.
This decision highlights that a customer list is a trade secret if it consists not only of names and general information, but includes selectively accumulated, detailed, and valuable information about each customer not easily obtained by competitors. Examples of valuable information are: particular needs, preferences, credit history, pricing agreements, personality traits, and hobbies. The company must also show it spent significant time and resources developing that information, and that the information (and its secrecy) gives the company a competitive advantage. In addition, the company must demonstrate the reasonable efforts it took to protect that information, to keep it secret. The test here is how the company divulged the information to its employees. If a customer list is given to employees freely, with no conditions or restrictions, then courts will not protect the information as a trade secret. Even if employees are required to sign confidentiality and non-disclosure agreements, that alone will not be sufficient to warrant protection as a trade secret. Courts want to see conditions placed on the use and disclosure of the information, including only disclosing the information to employees on a “need to know” basis.
In light of Calisi, today’s Arizona employer needs to protect its confidential information by putting specific procedures in place. Companies need to be prepared to demonstrate that their trade secrets are independently valuable, not simply lists of customer names and contact information. They must also be able to prove their efforts to compile and obtain the specific information needing protection. Once that information is compiled, employers should have specific policies in place for employees and management to protect the valuable information. Udall Law Firm regularly counsels and assists its business clients in protecting confidential information, propriety trade secrets, as well as other assets. Please contact one of Udall Law Firm’s transactional attorneys to schedule an appointment.