When most companies think of trade secrets, they tend to think about the technical aspects of their work; manufacturing processes, formulas, and the like. But a surprising number of trade secret cases revolve around something much simpler – client lists. And the “secret” nature of such lists can often be obscured by the fact that they are likely open on every computer in the business.
But the consequences can be both deadly and expensive. (See verdict here) SS&C Technologies Holdings sued Clearwater Analytics alleging that a former employee had purloined detailed client lists before changing employers, and that these lists enabled the defendants to pursue unfair competitive advantage
The employee who took the information sent a series of email to himself just before being fired, including “voluminous attachments,” which he later admitted were the client lists, sales and marketing information and other sensitive documents. This violated both a non-compete and a non-solicitation agreement that he has signed some eight years before the suit.
Clearwater and Rossa admitted he had shared certain SS&C documents with Clearwater but denied the information was a trade secret, arguing the information was publicly available and not secret, according to court documents. They also disputed that SS&C was damaged by the shared information, contending the company exaggerated its importance and value.
The jury rejected the defense argument that the materials were publicly available and not secret, and that the plaintiff has grossly exaggerated the value of the information. The jury didn’t see it that way, with the whopping verdict you can read above. Interestingly, they seemed to find more fault with the corporate defendant than the faithless employee, awarding only $1 in damages against him.
THE BUSINESS TAKE-AWAY: I found the defense argument of “public knowledge” the most interesting, even though it is a staple of trade secret defense. One of the tenets of trade secret protection is that a commercially reasonable effort must be made to actually keep the information secret. It’s not hard to imagine a business that allows widespread employee access to such information, maybe couple with a high employee turnover and weak efforts at containing private information being on the wrong side of such a defense. A true need-to-know basis, coupled with anti-copying technical measures, would help a lot.