UnIP (UnIntellectual Property): Trade Secret for Customer Database

The United States District Court for the Western District of Michigan, applied North Carolina law, to deny a company’s motion to enjoin a former employee from competing.  The employee relied upon a on non-compete and non-solicitation agreement, which defined Trade Secrets as “all techniques, methods of doing business and procedures used by Employer in its business which are not generally known or used in the industry; lists of Employer’s current and prospective customers and associated customer information; computer hardware and software algorithms developed by Employer and related technology; and any other information or data which meets the definition of trade secrets under the North Carolina Trade Secrets Act.”  Despite this language in the agreement, the Court noted that customer names and customer lists are not always protected information under North Carolina law.  Based upon this, the Court held that the employer failed to sustain its strong burden of proof and was not likely to prevail on the merits.

This is a good example of recognizing where, or just as importantly not where, certain kinds of information may qualify as a trade secret.  Had Michigan law been applied, this case may have turned out differently.  Note to clients and counsel alike, while it is difficult to plan for every kind of scenario when drafting agreements, it may be worthwhile to spend a few more resources to research and plan for the most likely ones.  This case is not over, however, and the employer may still ultimately prevail, despite not being awarded injunctive relief at the outset.

NDSL, Inc. v. Patnoude, 2012 WL 6096584 (W.D. Mich. Dec. 7, 2012).

 

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