Opinion ID: 1699373
Heading Depth: 1
Heading Rank: 2

Heading: Use of confidential data and trade secret data taken from plaintiff.

Text: In order to determine whether the defendants used confidential information or trade secrets belonging to plaintiff, it is necessary to define two central concepts. The first, confidential information, is defined in the contract as     information not generally known, about `C' processes and products, including information relating to research, development, manufacture, purchasing, accounting, engineering, marketing, merchandising and selling. The other key term, trade secret, seemingly has no universally recognized definition; however, a generally accepted one is  `   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. It may be a formula or a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers   .' Elcor Chemical Corp. v. Agri-Sul, Inc., 494 S.W.2d 204, 211 (Tex.Civ.App.1973) (quoting Restatement, Torts, § 757). Certain common elements can be distilled from these definitions and fashioned into a workable test encompassing both concepts. The elements comprising that test are: (1) the protected matter is not generally known or readily ascertainable, (2) it provides a demonstrable competitive advantage, (3) it was gained at expense to the employer, and (4) it is such that the employer intended to keep it confidential. It is commonly recognized that     matters of general knowledge within the industry may not be classified as trade secrets or confidential information entitled to protection. Whitmyer Bros. v. Doyle, 58 N.J. 25, 33, 274 A.2d 577, 581 (1971). The fundamental question here is whether the names of the consulting engineers gleaned by the plaintiff were protected under the employment agreement or were matters of general knowledge that may not be classified as confidential. Defendants argue that the customers' names are not protected because early in 1975, prior to Grounds' receiving his first contract for an O & M manual, Watkins started receiving computer printouts from state and Federal environmental agencies that publish the names of municipalities that have received grants for sewage treatment projects and information regarding the size and type of those projects. Although the printouts only occasionally name the consulting engineer for the project, that information can be obtained from city clerks. Defendants claim that they compiled their list of prospective customers from these printouts. However, the existence and alleged use of these printouts are not sufficient to establish that the information was readily ascertainable. There are about 10,000 potential customers (consulting engineers working on projects), and O & M manual preparers must learn the names of these engineers. In late 1974, Grounds had not yet received the printouts and had to rely in part on contacts he had made in the past. Also, even though it may be possible to obtain the names of consulting engineers from city clerks, plaintiff's information provided more detail regarding these prospects. Furthermore, even assuming the presence of an alternate means of obtaining the names of consulting engineers, this, without more, is not sufficient to establish that the information is generally ascertainable. By inference, there is a reasonable basis to find that a demonstrable competitive advantage could be obtained through use of plaintiff's customer information. As the trial court found  The first 20 contracts and a total of 23 of the total of 40 contracts obtained by Grounds or Grounds & Associates, Inc., for O & M Manuals were either with Cherne's customers or prospective Cherne customers. Either Watkins, Grounds or Peterson had contact with the contract purchasers while employed at Cherne. The names of many of these contract purchasers appear in the confidential information taken by Grounds, Watkins and Peterson from Cherne. There is also the fact that 624 documents were taken from plaintiff's business by the defendants. There would be little purpose in taking such a quantity of documents if defendants did not believe the information was valuable. Plaintiff was the first entrant into the O & M manual business and had compiled a great deal of experience and information. The lists and materials defendants took could only work to enhance their business. Consequently, the information would afford one a demonstrable competitive advantage. It is clear that the information was gained at expense to the plaintiff. From 1970 to 1974 plaintiff lost $141,224. Part of that cost was attributable to soliciting customers, compiling a list, and hiring company representatives. The evidence suggests that plaintiff sought to keep the information confidential. At various times, plaintiff mailed advertisements about his business; yet, plaintiff never published a list of consulting engineers who purchased the O & M manuals. Plaintiff's manuals were open to public inspection; however, the information as to prospective customers was not available. Therefore, although the names of consulting engineers appeared on the face of the manuals, plaintiff did not reveal his prospective clients. The names of customers for the seven projects involved in this suit were part of the information plaintiff wished to keep confidential. In Elcor Chemical Corp. v. Agri-Sul, Inc., supra , defendants developed in a garage a process for manufacturing fertilizer and did not disclose the discovery to their employer as required by their employment contract. In ruling against the defendants, the court declared:    It does not matter that Miller and Kruse could have gained their knowledge from a study of books and magazines. The fact is that they did not do so. Instead, they gained this knowledge from ELCOR by way of their confidential relationship and in so doing they incurred a duty not to use it to ELCOR's detriment. This duty was breached by them and because of this breach, we are compelled by equity to extend to ELCOR adequate injunctive relief. 494 S.W.2d at 213. Likewise, even if the consulting engineers' names were otherwise available, the defendants' reliance on information gained from their relationship with plaintiff would still make them liable. Watkins admits calling on plaintiff's customers or prospective customers, and using people he knew to make up in part the list of prospects for Grounds. Defendants also challenge the district court's finding that other information taken by defendants from the plaintiff was confidential. This information included letters, phone reports, and records regarding customers and potential customers; lists and evaluations of Cherne representatives and territories; price lists; production information; and financial information. It appears that the trial court may have been overinclusive in finding that all of this information was confidential. In framing the remedies, however, the court focused on the taking and use of the customer lists. The damages were based on profits gained on contracts with Cherne customers or prospective customers; the injunction restricted rendering services to seven firms that Cherne had previously contacted. Because a finding that the customer lists are confidential was reasonably supported by the evidence, it is not necessary that this court remand for reconsideration of whether the other information is confidential.