UnIntellectual Property (UnIP): Trade Secret for Customer List

The United States District Court for the Eastern District of Texas denied Plaintiff’s motion for a new trial.  Plaintiff, Amway, who operates a multi-level marketing business, sued various defendants and alleged various causes of action.  One of those causes of action was for trade secret misappropriation.  Plaintiff’s Rule 59 motion argued that the great weight of the evidence favored a finding of trade secret misappropriation.  The claimed trade secret appears to have been a customer or contact list as part of a database.  The Court found that “The issue was not whether a trade secret was misappropriated but whether it was a trade secret. There is testimony and evidence to support a finding that it was not a trade secret. Plaintiffs rely on their contract that said it was unique and proprietary, but that does not conclusively make it so. There was testimony that the contacts and information provided by Combden were his contacts that he developed, and the Court does not think there was evidence that he stole or took, or provided bHIP with the replica of the way Amway organized and/or stored its information. Even if Combden utilized his contacts, the jury still had evidence to conclude it was not a trade secret, and the jury made that choice.”

Also at issue was whether the district court’s jury instruction regarding what can be a trade secret was correct.  The Plaintiff requested the following:

Customer information and customer or distributor lists including contract terms, renewal dates, sales information, customer names and addresses and contact information, and customer billing information, and marketing information and strategies including pricing can be a trade secret.

The district court instead gave a more traditional instruction.  This Court refused to find that the there was any failure to provide a key jury instruction.  “The Plaintiffs’ proposed instruction suggested an answer to the jury, which is inappropriate. The Court’s charge should not suggest the answer. The instruction given by the Court highlighted the seminal cases from Texas defining trade secrets. The Court’s instructions followed Texas law. In addition, customer lists are not as a matter of law trade secrets. The jury was still required to do the six-factor analysis.”

This decision is important because it may be one of the last decided before Texas joins 47 other states and implements the Uniform Trade Secrets Act, effective September 1, 2013.  Most relevant to the above decision is the fact that the Texas Uniform Trade Secrets Act (TUTSA) specifically includes a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers.  Had TUTSA been in place at the time of the alleged misappropriation in this case, it may have turned out very differently, especially since a customer list were the key trade secret at issue.  At the very least, the jury instruction would be different.

Amway Corp. v. bHIP Global, Inc., 4:10-CV-549, 2013 WL 2355083 (E.D. Tex. May 29, 2013).


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