What is a Trade Secret?

Claims of trade secret misappropriation involving misuse of a customer list are frequently litigated. Often a plaintiff claims its customer list is a trade secret because the company has spent a lot of time, effort, and money in compiling a list of customers who have a proclivity to purchase the company's unique product(s). The defendant, on the other hand, will argue that the customer list is not a trade secret because the same information can easily be obtained from the internet and/or other publicly available sources such as the Yellow Pages. To make matters worse, there is no bright line rule as to what constitutes a trade secret. This is why California courts look at customer list – trade secret claims on a case by case basis. To assist courts in making this determination, the California Legislature has enacted the Uniform Trade Secret Act that is codified in Civil Code § 3426.1(d) (“UTSA”).

The first prong of the UTSA states that the information at issue must have independent economic value, actual or potential, from not being generally known to the public or to other persons who could obtain economic value from its disclosure or use. The term "independent economic value" means that the secrecy of the information provides a substantial business advantage. And the value must be more than trivial to the owner. In addition to a defense of general knowledge, if the information at issue is readily ascertainable by proper means -- even if not generally known-- it does not have any independent value.

In addition to the foregoing, courts have found that: (1) a list identifying buyers of products that are inherently difficult to sell merits protection; (2) a list containing specialized information on each customer such as discounts offered and purchase history is more likely to be protected as trade secret; and (3) a list is more likely to be deemed trade secret if the customer’s purchase decisions are influenced primarily by its special needs or susceptibilities, as opposed to factors such as price, quality, reliable delivery and efficient service.

Finally, whether or not a customer list is a trade secret requires an objective analysis because a party's belief that something is a trade secret is not dispositive. Nor is a contract labeling information as a trade secret because a contract cannot make a trade secret where none exists under the law.

If you are involved in a dispute concerning misappropriation of trade secrets, it is vital to have the experienced business litigation attorneys of Fisher & Talwar on your side. Available remedies for trade secret misappropriation include: injunction, exemplary damages, attorney fees and costs, compensatory damages and payment of royalties. Attorneys at Fisher & Talwar are skilled in litigating misappropriation of trade secret claims. Contact Los Angeles trade secret attorneys at Fisher & Talwar at 213-891-0777 or vt@fishertalwar.com for immediate assistance.