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Is your customer list a trade secret?

| Oct 20, 2020 | Firm News

Your list of customers is invaluable to your business operations. As such, you must always guard against the stealing of this type of information. There are several steps you can take to help limit the threat of your client list falling into the wrong hands. One potential means of doing so involves seeking trade secret protection for your list of customers.

Is my list protected under federal law?

In 2016, Congress passed the Defend Trade Secrets Act. The DTSA created a federal cause of action for the theft of trade secrets. Before the DTSA, businesses had to file suit in state courts where the laws and applications could differ wildly.

Ever since the passage of the DTSA, courts have been attempting to define how far the law should reach. Some courts have granted trade secret protection to client lists, while others have been reluctant to do so. A court may be more likely to grant trade secret protection to a client list if a business takes the following steps:

  • Keep the list in written form: You may have all of your client information stored in your brain. However, this is of little help should you decide to claim the list is trade secret protected. If you have the list memorized, an ex-employee could just as easily make the same claim. Maintain the list in some written form, either as a hard document or as an electronic file.
  • Take steps to protect the list: It’s hard to argue that a list is secretive if it’s pinned to a bulletin board in the company breakroom. Take some steps to protect the list. This can include keeping the list password protected and having employees sign confidentiality agreements.
  • Limit access: If everyone from the vice president to the janitorial staff can access the list, a court may not consider its secretiveness to be all that important. Ensure the list is only available to people who need it to do their jobs effectively.
  • The list should contain more than names: A list of names isn’t anything special. A court is more likely to grant trade secret protection to a list containing additional information, such as non-public contact info. Sales history and past customer needs are also useful in showing a list should be a trade secret.
  • Keep the list up-to-date: Courts have found that customer lists that contain pricing information can lose their economic value relatively quickly. Ensure your list is current, even if changes in your particular industry are incremental.

Remember, the law surrounding trade secret protection for client lists is involving. The above points are by no means exhaustive. A skilled legal professional can help you take the steps you need to ensure your valuable client list remains protected.