In a noteworthy, but dated, decision from July 2013, Judge Daniel on the federal district court bench ruled that an employer had failed to prove that a “referral source list” was a trade secret. Accordingly, in Continental Credit Corp v. Dragovich, Judge Daniel held that the employee’s noncompete was not enforceable and denied employer’s motion for preliminary injunction.
During his employment, the employee maintained a “referral source list” which contained the names and contact information of potential business contacts along with personal notes about recent contacts, telephone calls and meetings. The employer claimed that this list was a trade secret and sought to enjoin the employee from contacting and working with its customers and referral sources or for working for a direct competitor for one year pursuant to the employee’s noncompete agreement.
Judge Daniel found, however, that the “source list” contained little more than vague information about potential leads, telephone calls and meetings that may or may not occurred. He noted that a representative of employee’s new employer “credibly testifed” that the list could be recreated in a few days from information available to the public. As a result, Judge Daniel found that the employer had failed to meet its burden of proving that the list was a trade secret.
There is an important takeaway from the case. It’s easy for employers to claim that information is a trade secret. At a hearing, however, the employer has the burden of showing that the alleged trade secret is secret and has value. That burden can be difficult to sustain. Employers need to consider what evidence can be used to show the value and the secrecy of its trade secrets. Employees need to consider what evidence can be used to show that the alleged secrets really are publicly available.