Customer List Not Always a Trade Secret

On May 14, 2013, in Trade Secrets, by Brian A. Hall

UnIntellectual Property (UnIP): Trade Secret for Customer List

An Arizona Court of Appeals Court has determined that a cause of action for trade secret misappropriation must fail where the Plaintiff can not establish that the customer list at issue is a protectable trade secret.  In doing so, it overturned the trial court.  The Court recognized that a customer list may be trade secret under the Arizona’s Uniform Trade Secrets Act where it “represents a selective accumulation of detailed, valuable information about customers such as their particular needs, preferences, or characteristics that — naturally “would not occur to persons in the trade or business.””  However, here, an employee left his employer, where he was a financial advisor, and went to work for a another employer, as a CPA.  After sending out a mass email to the client list, the lawsuit commenced.

The Court deemed the customer list to be unprotectable as a trade secret because of a lack of evidence of “specialized, valuable information about its customers, such as information concerning their financial requirements, tax strategies, investment objectives, and risk and investment preferences that could constitute a protectable trade secret.”  There was a lack of identification of what unique information could qualify as a trade secret.  Moreover, the Court held that the customer list was not held in secrecy because the new employer actually had information from a previous mutual referral arrangement involving employees of the employers.

Once again, the facts determine the outcome in these cases, and opinions can differ.  The appellate court applied the question of law, namely whether the customer list is a trade secret, de novo relying upon those same facts as the trial court.  That said, this decision does not surprise me.  While a customer list may be protectable, a trade secret attorney would likely be able to help before litigation commences as much as after in ensuring such a list can and will qualify.

Calisi v. United Financial Services, Inc., No. CV 2010-000795 (Ariz. App. April 11, 2013).


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