Court Opinion

ID: 9675862
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:07:48.742701+00
Date Added: 2024-06-11T12:13:31.929000
License: Public Domain

David Newbern, Justice, dissenting. Prior to the adoption of Act 439 of 1981, Ark. Code Ann. § 4-75-602 (1987), we defined a “trade secret” as “secret formula, method, or device that gives one an advantage over competitors.” Rector-Phillips-Morse v. Vroman, 253 Ark. 750, 489 S.W.2d 1 (1973); Miller v. Fairfield Bay, 247 Ark. 565, 446 S.W.2d 660 (1973). That definition was too narrow to include a customer list. In Orkin Extermination Co., Inc. v. Weaver, 257 Ark. 926, 521 S.W.2d 69 (1975), we made it clear that a customer list was not a trade secret. Our discussion of the two matters in that case was appropriately separated. The enactment of § 4-75-602 revised the definition of “trade secret,” and provided, in subsection (4): “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (A) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable from proper means by, other persons who can obtain economic value from its disclosure or use; and (B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. In Girard v. Rebsamen Ins. Co., 14 Ark. App. 154, 685 S.W.2d 525 (1985), the Arkansias Court of Appeals, without referring to the Statute, continued to consider protection of a customer list separately from protection of a trade secret. The Court wrote, “While we agree with appellant that no trade secrets were shown to exist in appellee’s business, the appellee’s proof did show that its customer list and related information were protected interests.” Since the decision in the Girard case, the Court of Appeals has continued to refer to trade secrets and customer lists in the disjunctive, and as if they were completely separate subjects. See Federated Mut. Ins. Co. v. Bennett, 36 Ark. App. 99, 818 S.W.2d 596 (1991); Duffner v. Alberty, 19 Ark. App. 137, 718 S.W.2d 111 (1986). Against this background, we are called upon for the first time to interpret the statutory language. Has it elevated to the status of “trade secret” the customer list previously protected only by the common law of unfair competition? I have no doubt a customer list is a “compilation” of “information,” thus satisfying the general requirement of § 4-75-602. Nor do I doubt that in this case there is substantial evidence that Johar, Inc., expended “efforts that are reasonable under the circumstances to maintain its secrecy,” with respect to its printed customer list, thus satisfying subsection (B). I question, however, whether Johar took reasonable efforts to protect secrecy of the list maintained in Allen’s mind. The majority opinion notes that reference was made in the Trial Court to a noncompetition agreement but that we do not have it in the record before us and it is not a part of this appeal. It seems to me that the only reasonable effort an employer can make toward keeping the names of its customers secret is to contract with its employees not to reveal those names and not to compete for a reasonable period should the employment end. A noncompetition agreement in these circumstances is a standard device; however, I believe it should be written by the parties and not by the Chancellor. To hold that a memorized customer list is protected as a “trade secret” will, I believe, lead to problems which could be avoided if the holding were limited to lists in writing. To say that the list in this case is a trade secret but to be protected only for 18 months raises the question whether it is not, thereafter, a trade secret. Why does it cease to fulfill the statutory definition after that period has passed? Again, it seems to me that the Chancellor has simply written an agreement for the parties. In Rector-Phillips-Morse v. Vroman, supra, this Court held the covenant not to compete placed unnecessary restrictions upon Vroman, and it was found to be invalid. At the request of the appellants, this Court declined to rewrite the contract to make it valid. We wrote, “Our rule is that when a restriction such as this one is too far-reaching to be valid, the court will not make a new contract for the parties by reducing the restriction to a shorter time or to a smaller area.” See also Federated Mut. Ins. Co. v. Bennett, supra. This Court further wrote that to adopt a doctrine whereby the court is allowed to write an agreement for the parties “would confer upon the courts the power to make private agreements, a matter certainly not within the judicial province as it has been traditionally understood in our law.” Rector-Phillips-Morse v. Vroman, supra. I would hold that a customer list is not protected under the Statute except as a written document. The only reasonable effort an employer can make to protect a list not in writing is to enter an agreement with the employee. If such an agreement exists, it may raise the memorized customer list to the level of a trade secret, but it should be protected only to the extent of the agreement between the parties for two reasons. First, in no event should the information be protected as a trade secret in perpetuity because that would violate the same public policy against restraint of trade we have declared to control noncompetition agreements. Hyde v. CM Vending Co., 288 Ark. 218, 703 S.W.2d 862 (1986); Evans Laboratories v. Melder & Cingolani, 262 Ark. 868, 562 S.W.2d 62 (1978); Federated Mut. Ins. Co. v. Bennett, supra; Rebsamen Ins. v. Milton, 269 Ark. 737, 600 S.W.2d 441 (Ark. App. 1980). Second, by entering a reasonable noncompetition agreement, the parties will supplant the protection of the trade secret Statute. I respectfully dissent. Dudley and Brown, JJ., join in this dissent.