Source: https://www.infolawgroup.com/blog/2010/10/articles/social-networking/is-social-networking-disclosing-your-trade-secret-customer-lists
Timestamp: 2019-04-24 15:50:11+00:00

Document:
It was inevitable. First came social networks, then came the lawsuits: In the e-discovery context, in impeachment situations (Ledbetter v Wal-Mart Stores Inc.(06-cv-01958-WYD-MJW) (D Colo April 21, 2009); Mackelprang v. Fidelity Nat’l Title Agency of Nevada, Inc. (D. Nev. 2007); and Beye v. Horizon Blue Cross Blue Shield (D. N.J. 2006)), in the tort context (Wolfe v. Fayetteville, Arkansas School, 600 F.Supp.2d 1011 (W.D. Arkansas 2009)), as to how much privacy settings matter, on passwords and access, and this list represents merely the proverbial tip of the issues iceberg.
One issue still bobbing below the surface, as it appears there are no fully tried cases on the matter as of this writing, is disclosure of trade secrets, such as a client/customer list, through use of social media and social networking.
“information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) 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, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (emphasis added).
See also Trade Secrets: A State-by-State Survey, Third Ed., with 2010 Cumulative Supplement; 18 U.S.C. 1839 (defining trade secrets for purposes of the Economic Espionage Act of 1996, which makes theft or misappropriation of a trade secret to benefit a foreign power or related to a product that is placed in interstate or foreign commerce a federal crime).
Various states expressly include a “customer list” in their UTSA’s definition of “trade secret.” (See Network Telecomms v. Boor-Crepeau, 790 P.2d 901, 902 (Co. 2010) (noting a trade secret under Colorado’s UTSA, Colo.Rev.Stat. Ann. § 7-74-102(4), includes the listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value); Industrial Insulation Group, LLC v. Sproule, 613 F. Supp.2d 844 (SD Texas 2009) (referencing Pennsylvania’s USTA, 12 Pa. Cons. Stat. Ann. 5301 et seq., which includes customer lists)).
However, even if a state’s UTSA does not expressly include customer lists in a provided definition such “low tech trade secrets” are routinely held by courts to fall within trade secret protection, under either UTSA-based or pre-UTSA common law as detailed by the Restatement (Second) of Torts §757. Section 757, Cmt. B specifies that “a trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” A customer list readily qualifies under this definition.
Regardless of whether the applicable source of a trade secret’s protection is state statutory or common law, key issues as to whether a party may successfully claim protection for a trade secret depend on a threshold fulfillment of requirements, among others, that the materials do in fact qualify as actual trade secrets because they hold independent economic value, since they’re not widely known outside the entity, and that the owning party has taken reasonable measures to safeguard the materials’ secrecy.
In the realm of customer lists courts commonly hold lists that are readily ascertainable are offered no trade secret protection. See, Dowell v. Biosense Webster, Inc., 179 Cal.App.4th 564, 571 (2009) (affirming lower court’s holding “that there was no evidence that Biosense's customer list is a trade secret because it appears that the customers for the products at issue ... are easily identified from any number of publicly available directories and resources"); Ken J. Pezrow Corp. v. Seifert, 197 AD2d 856, 857 (N.Y. App. Div. 4th Dept 1993)("where an employer's customer lists are readily ascertainable from sources outside its business, trade secret protection will not attach and their solicitation by the employee will not be enjoined.'") (citations omitted). In fact, New York courts have applied a “general rule” that an employee may solicit an employer's customers when the employment relationship has been terminated, in the absence of some other contractual agreement to the contrary. A & L Scientific Corp. v. Latmore et al., 696 N.Y.S.2d 495 (2d Dept 1999) (citing Catalogue Service of Westchester, Inc. v. Paul Wise et al., 405 N.Y.S.2d 723 (1st Dept 1978)).
Since the disclosure of an otherwise trade secret – even accidentally or “through inadvertence” – destroys the secrecy element and therefore removes what trade secret protection exists, Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476 (1974), at what point can using social networking to link-in, friend or make other connections with customers cross over into making a customer list, or a portion of a list, no longer protectable as a trade secret? With seemingly everyone, including us here at the Info Law Group, connecting to business associates as well as potential and actual clients, the question is not academic.
Indeed, witness a case filed earlier in the year, which is indicative of the issue. TEKsystems, Inc., a Hanover, Md-based recruiter of technical professionals, filed a federal action on March 16, 2010, TEKsystems, Inc. v. Hammerinick et al. (0:10-cv-00819-PJS-SRN), Complaint here, accusing former employees of wrongfully contacting former co-workers and clients in violation of the non-compete and non-solicitation agreements they entered into and for misappropriation of trade secrets. Docket available here. On the facts given above the case seems merely a run-of-the-mill action against former employees violating commonly used non-compete and non-solicitation prohibitions. But the topical kicker is that contacts by one of the former employees allegedly occurred through LinkedIn and that Teksystems claimed that the customers, described in the Complaint, as “key individuals responsible for recruitment [at outside entities] of professional placement staffing needs” were “valuable, confidential, and proprietary to TEKsystems, and  not generally known in the public domain” with “significant economic value to TEKsystems” – in short a trade secret under Maryland’s Uniform Trade Secret Act, Md. Code Ann., Com. Law §11-1201(e).
At what point does use of a social network, particularly in an industry where direct outside client contact is first and foremost, divulge a trade secret client/customer list by crossing the line between those contacts made during and as a direct result of one’s employment for a specific company (and as a result considered a “trade secret”) and those contacts made “off-hours” by virtue of a person’s being part of a given industry and, perhaps, say “Linking In” to contacts of contacts? LinkedIn’s entire business model is built around a “six degrees of separation” concept, but how many degrees away does an employee need to get before those “contacts of contacts” are no longer part and parcel of the employer’s existing or potential client/customer list?
•	the ease or difficulty with which the information could be properly acquired or duplicated by others.
So what can and should you do to address the social networking disclosure issue before a court potentially does it for you?
• Employees may be directed to select privacy settings to prevent "public" users from browsing or seeing their contacts.
Finally, the landscape of social networking is changing rapidly. It's extremely important to carefully periodically review the various use, privacy, copyright and other policies social networking sites require acceptance of to ensure that your employees aren't binding you to provisions you were unaware of, that may not be practical to comply with given your specific industry or usage, or that may result in disclosure of confidential or trade secret information by default.
As always, to discuss any of the above or your specific needs and issues, feel free to contact me or any other attorney at the Info Law Group.

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