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In this blog post, we will look at the federal courts and the need to evaluate the protection of customer lists as trade secrets. Contextually speaking, the federal statute is in place for the purposes of misappropriation.

In order to meet the standard of a misappropriation, there must be:

(1) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means or  (2) disclosure or use of a trade secret of another without express or implied consent. When the alleged misappropriation is based on disclosure or use, the person who disclosed the information must have: “(i) used improper means to acquire knowledge of the trade secret; (ii) at the time of the disclosure or use, knew or had reason to know that the trade secret was; (I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or (iii) before a material change of the position of the person, knew or had reason to know that—(I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or mistake.” 18 U.S.C. § 1839(5).

Customer lists can be considered one of the most valuable assets that a company can have.  Theft or trade of such information can cost some companies up to hundreds of thousands, if not millions.  That is why there has been a move to guard the trading of this within the United States of America.  The scope of the internet and the way we interact in the current climate is affected by digital marketing, online purchasing and through the selling of products via social media.  This often requires tracking of customers via a list or database of clientele that is accumulated by business over the years.

In the past, violations have been met with a lawsuit.  Now there has been a change in legislation and at a Federal level.  Misappropriation now equals a breach of law in the absence of a suit.  Previously, such claims were subject to diversity in legislation. Under the legislation, a company whose customer list is misused is entitled to equitable relief, actual damages, punitive damages, and attorney fees. Continue reading