ARE CLIENT LISTS SECRET UNDER VIRGINIA LAW?

Once upon a time, Fred decided he wanted to be his own boss. Fred told his current company, Flintstone manufacturing, he was going to quit. On Fred’s last day of work, he copied Flintstone’s client lists, packed his rock brief case, and scooted home for the weekend.

Come Monday morning, Fred is served with papers stating he has violated the Bedrock Trade Secret Act for taking the client list from Flintstone.

Fred alleges that the list was not secret, or private – and he can call any of his old clients. Fred does not have a non-compete agreement after all, so he must be free to compete, right?

The judge appears in the case and writes as follows:

“Addressing the former contention first, I find that client lists may constitute trade secrets and that there are sufficient factors alleged in this Count to bring the client lists within the ambit contemplated by the Act. Citing 59.1-336 of the Bedrock Code. Bedrock Code defines trade secret as “information . . . that (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” See, Dionne v. Southeast Foam Converting & Pkg., 240 Va. 297, 397 S.E.2d 110 (1990) (“The crucial characteristic of a trade secret is secrecy rather than novelty”); Annotation, Former Employee’s Duty, In Absence of Express Contract, Not to Solicit Former Employer’s Customers or Otherwise Use His Knowledge of Customer Lists Acquired in Earlier Employment, 28 A.L.R. 3d 7, § 7 (1969). The pleadings amply set forth both the economic value and the confidential nature of the customer lists at issue here.”

WOW. So client lists may be considered trade secret, if and only if they are secret. The judge said “If the list is to be protected, it must, in fact, be secret with sufficient measures taken to safeguard the lists and information contained therein.”

If a company posts their clients on the website, or in brochures – then perhaps the list is not protected by the Act. Otherwise, chances are good they may be deemed trade secret.

Fred may be in trouble. If Flintstone can prove the client list was secret, then Fred may be in violation of the Act. I wish Fred had called here first. I would have saved him allot of trouble by advising him the client list was not his to take!
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Lauren Ellerman

In 2011, Lauren Ellerman was named "Young Lawyer of the Year" by the Roanoke Bar Association for her work in the community. To speak with Lauren about your personal injury case, contact her at lellerman@frithlawfirm.com.