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Archived updates for Friday, February 08, 2008

Former Employee's Use of Client Information from Memory Violates Uniform Trade Secrets Act

In Al Minor & Assoc., Inc. v. Martin (February 6, 2008), the Ohio State Supreme Court held that use of protected trade secret information by a former employee who had memorized it during his employment violated the state’s trade secrets law.

The case involved a dispute between Al Minor & Associates, a company providing third-party pension administration services to client companies, and a former employee, Robert Martin of Columbus. Martin, who worked for Minor as a pension analyst, was an at-will employee and was not bound by any formal non-competition or trade secrets agreement. Martin resigned in 2003 and opened his own pension analyst business. He began soliciting clients including a number of companies that he recalled from memory as being current or former clients of Minor.

Minor filed suit in the Franklin County Court of Common Pleas, alleging that Martin’s successful solicitation of 15 of its clients violated provisions of state law that prohibit the “misappropriation of trade secrets.” The trial court ruled in favor of Minor, and assessed civil damages against Martin totaling $25,973. On review, the 10th District Court of Appeals affirmed the trial court’s judgment and award, but certified that its ruling was in conflict with a decision by the 8th District on the same legal issue. The Supreme Court agreed to review the case to resolve the apparent conflict between appellate districts.

Writing for a unanimous Court, Justice O’Donnell noted that “In 1994, the General Assembly enacted the UTSA, R.C. 1333.61 through 1333.69, which defines a ‘trade secret’ as: ‘[I]nformation, including ... any business information or plans, financial information, or listing of names, addresses, or telephone numbers, that satisfies both of the following: (1) It derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. (2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.’”

Applying that definition to the client information obtained by Martin during his employment with the Minor firm, Justice O’Donnell wrote: “Neither 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. … Furthermore, nothing in our six-factor test adopted in [State ex rel. The Plain Dealer v. Ohio Dept. of Ins. (1997)], indicates that the determination of whether a client list constitutes a trade secret depends on whether it was capable of being memorized or had been memorized.”

Justice O’Donnell concluded that “The legislature, when enacting R.C. 1333.61(D), could have excluded memorized information from the definition of a trade secret or added a requirement that such information be reproduced in physical form in order to constitute a trade secret. But it did not, and we are not in a position to read such language into the statute. ... The General Assembly has determined that public policy in Ohio, as in the majority of other jurisdictions, favors the protection of trade secrets, whether memorized or reduced to some tangible form. 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. ... 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.”

The decision also acknowledged that employees who leave their jobs inevitably have “memories casually retained from the ordinary course of employment,” and noted that the use of memorized information pertaining to a former employer that is not a trade secret under R.C. 1333.61(D) is not actionable under the UTSA.
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