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Customer Lists: Are They Protected “Trade Secrets”

trade secrets

 

Many businesses contend that one of their most valuable assets is their customer list. The list may have taken years of careful management to create. To gather the list of customers or clients, a firm may have spent a fortune in advertising or devoted hours to directed marketing. Is the customer list considered to be a trade secret?

Trade Secrets: What Are They?

Generally speaking, a trade secret is some body of information that has value and provides a competitive advantage by virtue of remaining secret. The “owner” of the secret must also make reasonable efforts to maintain the secrecy of the information.

Customer Lists: When Are They Protected?

New York courts have held that, where customers are not known in the trade or are discoverable only by extraordinary efforts, customer lists may be protected as trade secrets. This is especially the case where “the customers’ patronage has been secured by years of effort and advertising effected by the expenditure of substantial time and money” [see Leo Silfen, Inc. v. Cream, 29 N.Y.2d 387, 392–393 (1972)].

Ordinarily, to qualify for protection, the list must represent some sort of selective accumulation of detailed information about clients or customers. Conversely, simply an alphabetical listing of customer names and addresses is little more than a phone book. The protected lists must generally be infused with value and information not known by competitors.

Many Lists Are Not Protected!

As just noted, a mere list is usually not protected, particularly in the Internet age where information is so readily available on the World Wide Web. For example, an online search of “residential plumbers in upstate New York” generates a list of many hundreds of businesses. If your business typically sells to or renders services for such plumbers, you can hardly maintain that the list itself is secret.

Courts are also reluctant, however, to require that a departing employee “forget” everything that he or she has learned while working for an employer. If the former employee gleans the contact information from his or her own memory and not from actually photocopying the employer’s proprietary information, the court may allow the use of the information – unless the employee signed a properly drafted and properly executed non-disclosure agreement.

Non-Disclosure Agreements May Provide Some Protection

Properly drafted non-disclosure agreements may provide some protection when it comes to your proprietary customer information. Great care is required, however, in preparing the necessary documents. A one-size-fits all approach usually won’t work.

Involved in a Trade Secret Dispute?

Is one (or more) of your former employees taking advantage of your hard-earned proprietary secrets? Alternatively, has your former employer accused you of improperly using information that you gained while working for that firm? In either case, having experienced and expert legal counsel is crucial. E. Stewart Jones Hacker Murphy has been representing clients in all forms of business litigation for more than 100 years. Our law practice has stood the test of time. We are one of the most highly respected law firms in upstate New York and the capital district. Make the right call. Call us now at (518) 274-5820 or complete our online form. The E. Stewart Jones Hacker Murphy law firm has an attorney available to assist clients 24 hours a day, 7 days a week, 365 days a year – even on holidays.