UnIntellectual Property (UnIP): Trade Secret for Customer List

The Supreme Court of Nebraska has clarified the difference between the Uniform Trade Secrets Act (UTSA) and Nebraska’s Trade Secrets Act (which interestingly enough was modeled off of UTSA but clearly not identical).  In this case, Plaintiff, a crop insurance agency, sued its former insurance salesperson and the competing insurance agency to which she went to work for, among other things, misappropriation of trade secrets.  In particular, the alleged trade secret was a customer list.

Defendant argued that the customer list was not a trade secret because it was “nothing more than each crop insurance client’s own insurance information, which was and is ascertainable by proper means and could never constitute a trade secret as a matter of law.” Plaintiff argued that the information was proprietary and valuable and that it was a trade secret. The Court held that because the customers’ identities and contact information were ascertainable from public sources, and because the other information on the list was also ascertainable by proper means, the customer list was not a trade secret.  In so holding, the Court heavily relied upon language not present in Nebraska’s Trade Secrets Act’s definition of a trade secret.  Under UTSA, a trade secret is something that derives independent economic value “ ‘from not being [generally] known to, and not being [readily] ascertainable by proper means by, other persons….’ ”  Nebraska’s, however, deleted the qualifiers “generally” and “readily” from the statutory definition, and in doing so narrowed the definition of a trade secret.  The Court recognized commentary that “[U]nder the literal terms of the … language, if an alleged trade secret is ascertainable at all by any means that are not ‘improper,’ the would-be secret is peremptorily excluded from coverage under the [Act].”  Thus, the Court analyzed whether the information on the customer list was ascertainable by proper means.

The evidence showed that simple Internet searches could identify which farmers farmed what land and could provide contact information for those farmers.  In addition, the Defendant also demonstrated that she could recite most of her customers’ information from memory.  Finally, the rest of the information on the list essentially reflected the farmers’ previous insurance coverage on their crops. “It is undisputed that the individual farmers had all of that information and that Arlene could have obtained the information from them through a simple telephone call.  Also, once a customer changed agencies, all of the customer’s prior insurance information became available from the insurance carrier’s Web site. Though the exact information required to transfer a customer is a bit unclear, the record shows that, at most, all that is required is the customer’s name, address, type of crops, and signature, all of which are ascertainable by proper means.”
Although reversing the lower court and finding in favor of Defendants as it relates to the misappropriation of trade secrets claim, and thus reducing the damages by $140,000, Plaintiffs still prevailed on its breach of contract claim to the tune of over $360,000.
First Express Servs. Grp., Inc. v. Easter, 286 Neb. 912 (2013).

 

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