Today, a unanimous Ohio Supreme Court ruled that the Uniform Trade Secrets Act was violated by a former employee who had formed his own actuarial business and – based strictly on his own memory of customers he had met during his employment -- solicited a few customers from his former employer’s trade secret customer list. Al Minor & Assoc., Inc. v. Martin, Slip Opinion No. 2008-Ohio-292. In doing so, the Court affirmed the Franklin County Court of Appeals and Court of Common Pleas which had imposed a verdict of $25, 973 against the former employee.
According to the Court's opinion, the defendant employee had never been required to sign a non-competition agreement during his employment with the plaintiff employer. When he ultimately resigned his employment and started his own competing business, the employee took no confidential or trade secret documents with him. Nonetheless, he solicited 15 of his former employer’s 500 customers based on his own memory of the individuals and companies with whom he had previously done business. The former employer sued for lost business in the amount of $25,973 and sought, but was denied, an injunction against the former employee.
Importantly, the defendant employee failed to preserve the issue as to whether the client list at issue in fact satisfied the statutory definition of trade secret. Therefore, the Court was not faced with deciding whether the employer had taken appropriate steps to keep information on the list secret, etc. and was, instead, limited to assuming that the list was a trade secret. “Every employee will of course have memories casually retained from the ordinary course of employment. The Uniform Trade Secrets Act does not apply to the use of memorized information that is not a trade secret pursuant to R.C. 1333.61(D).”
Where the underlying customer list was a trade secret, “[n]either R.C. 1333.61(D) nor any other provision of the UTSA suggests that, for purposes of trade secret protection, the General Assembly intended to distinguish between information that has been reduced to some tangible form and information that has been memorized.” While some older trade secret cases in some states recognized a distinction between memorized information and information derived from a written list, “[i]n principle, however, the distinction between written and memorized information should not be encouraged. The form of the information and the manner in which it is obtained are unimportant; the nature of the relationship and the defendant’s conduct should be the determinative factors. The distinction places a premium upon good memory and a penalty upon forgetfulness, and it cannot be justified either from a logical or pragmatic point of view.”
“Based on the foregoing, we conclude that the determination of whether a client list constitutes a trade secret pursuant to R.C. 1333.61(D) does not depend on whether it has been memorized by a former employee. Information that constitutes a trade secret pursuant to R.C. 1333.61(D) does not lose its character as a trade secret if it has been memorized. It is the information that is protected by the UTSA, regardless of the manner, mode, or form in which it is stored – whether on paper, in a computer, in one’s memory, or in any other medium.”
Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/newpdf/0/2008/2008-Ohio-292.pdf.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.
