Opinion ID: 604904
Heading Depth: 2
Heading Rank: 1

Heading: Customer Database

Text: 80 California has adopted the Uniform Trade Secrets Act (UTSA) which codifies the basic principles of common law trade secret protection. Cal.Civ.Code §§ 3426-3426.10 (West Supp.1993). To establish a violation under the UTSA, it must be shown that a defendant has been unjustly enriched by the improper appropriation, use or disclosure of a trade secret. 81 Peak argues both that the MAI Customer Database is not a trade secret, and that even if it is a trade secret, that Peak did not misappropriate it. 82 The UTSA defines a trade secret as:information, including a formula, pattern, compilation, program, device, method, technique, or process, that: 83 (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and 84 (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 85 Cal.Civ.Code § 3426.1(d) (West Supp.1993). 86 MAI contends its Customer Database is a valuable collection of data assembled over many years that allows MAI to tailor its service contracts and pricing to the unique needs of its customers and constitutes a trade secret. 87 We agree that the Customer Database qualifies as a trade secret. The Customer Database has potential economic value because it allows a competitor like Peak to direct its sales efforts to those potential customers that are already using the MAI computer system. Further, MAI took reasonable steps to insure the secrecy to this information as required by the UTSA. MAI required its employees to sign confidentiality agreements respecting its trade secrets, including the Customer Database. Thus, under the UTSA, the MAI Customer Database constitutes a trade secret. 88 We also agree with MAI that the record before the district court on summary judgment establishes that Peak misappropriated the Customer Database. 89 Misappropriation is defined under the UTSA as: 90 (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; 7 or 91 (2) Disclosure or use of a trade secret of another without express or implied consent by a person who: 92 (A) Used improper means to acquire knowledge of the trade secret; or 93 (B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was: (i) Derived from or through a person who had utilized improper means to acquire it; (ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or 94 (C) Before a material change of his or her position knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or by mistake. 95 Cal.Civ.Code § 3426.1(b) (West Supp.1993). 96 Peak contends that Francis never physically took any portion of MAI's customer database and that neither Francis nor anyone under his direction put information he had obtained from working at MAI in the Peak database. However, to find misappropriation under the UTSA, this need not be established. 97 The UTSA definition of misappropriation has been clarified by case law which establishes that the right to announce a new affiliation, even to trade secret clients of a former employer, is basic to an individual's right to engage in fair competition, and that the common law right to compete fairly and the right to announce a new business affiliation have survived the enactment of the UTSA. American Credit Indem. Co. v. Sacks, 213 Cal.App.3d 622, 262 Cal.Rptr. 92, 99-100 (Cal.Ct.App.1989). However, misappropriation occurs if information from a customer database is used to solicit customers. Id. 98 Merely informing a former employer's customers of a change of employment, without more, is not solicitation. Id. 262 Cal.Rptr. at 99 (citing Aetna Bldg. Maintenance Co. v. West, 39 Cal.2d 198, 246 P.2d 11 (1952)). However, in this case, Francis did more than merely announce his new affiliation with Peak. When Francis began working for Peak, he called MAI customers whose names he recognized. Additionally, Francis personally went to visit some of these MAI customers with proposals to try and get them to switch over to Peak. These actions constituted solicitation and misappropriation under the UTSA definition. We affirm the district court's grant of summary judgment in favor of MAI on its claim that Peak misappropriated its Customer Database and affirm the permanent injunction as it relates to this issue.