Often times, an ex-employee caught taking or using confidential information will argue that the information is not entitled to “trade secret” protection because each piece of the allegedly misappropriated information could have been derived from a source other than his/her former employer. In some cases, this argument is sufficient to defeat a misappropriation of trade secrets claim. However, there are other cases in which the compilation of information is protectable as a “trade secret” even if each individual piece of information could have been compiled by other means. That was the factual pattern presented to the court in Hamilton-Ryker Group, LLC v. Keymon, No. W2008-00936-COA-R3-CV (Tenn. Ct. App. Jan. 28, 2010). The Keymon decision also provides an important “best practices” reminder for an employer who suspects that a recently departed employee may have misappropriated trade secrets.
Tammy L. Keymon worked for Hamilton-Ryker as a supervisor in charge of a facility that prepared mailing labels for telephone directories (technically, Hamilton-Ryker prepared the labels for Oasis, Inc., which had the contract with the telephone company). During a reorganization, Hamilton-Ryker eliminated Keymon’s position and offered her a new position. Although the new position paid the same salary and required less travel (which met one of Keymon’s requests), Keymon rejected the position as unacceptable. As a result, Hamilton-Ryker temporarily laid off Keymon for ninety days while the parties tried to reach an agreement regarding her new position.
The day after she was temporarily laid off, Keymon called her contacts at Oasis and the telephone company and told them that she had been laid off. As a result of those conversations, it was decided that Oasis and Keymon (in the place of Hamilton-Ryker) would perform the telephone directory preparation work. Later that day, Keymon e-mailed from her work e-mail address (which had not yet been shut off) to her personal e-mail address approximately fifty-six documents related to Hamilton-Ryker’s telephone directory work, including the anticipated telephone directory production schedule for the year, a profit-loss analysis for completed projects, mailing addresses from the telephone company that had already been reformatted with Hamilton-Ryker’s computer software and Hamilton-Ryker’s invoices to the telephone company for completed projects.
In the subsequent litigation, Hamilton-Ryker presented testimony that the documents Keymon e-mailed to herself were “pretty much everything that was needed to service [the telephone directory] account” and that the company took steps to limit access to that information. In response, Keymon argued that the information was not a “trade secret” for purposes of the Tennessee Uniform Trade Secrets Act because she could have “easily obtained the same information directly from [the telephone company]” and “the process of assisting [the telephone company] in preparing its telephone directories for distribution constituted general knowledge that was well known or easily ascertainable.” In rejecting this argument, the court reasoned as follows:
Even if Keymon could have obtained “the individual pieces of information” by other means, the integration and aggregation of it may be deemed confidential or a trade secret. Moreover, even if the information could have been developed by independent means, it may be protectable if the former employee does not develop it by independent means but in fact obtains his knowledge … from his former employer and then uses this knowledge to compete with the former employer.
(internal citation and quotation omitted) (ellipsis in original). In the end, the court’s decision rested on a very practical observation – i.e., aggregated information in a ready-to-use format is valuable to a potential competitor because it allows that competitor to avoid the time and cost of compiling and formatting that information herself. As noted by the Keymon court: “the speed with which Keymon utilized this information to begin competing directly with Hamilton Ryker – a mere six days … – demonstrate[d that the aggregated information had] independent economic value.”
As noted above, the Keymon case also provides an important reminder for an employer who suspects that a recently departed employee may have misappropriated trade secrets. Keymon was undone by the electronic trail she left when she e-mailed confidential documents from her work e-mail account to her personal e-mail account. Often, employers are quick to wipe and reissue computers to new employees or wait until after e-mail files have been destroyed in the normal course of business before letting human resources or the legal department know about suspicions regarding a recently departed employee. If Hamilton-Ryker had failed to preserve this e-mail evidence, it may never have been able to prove its claim against Keymon. In such situations, the most cautious approach is to have the IT department save the employee’s work e-mail files and also take a forensic image (i.e., a digital snapshot) of the employee’s work computer before it is wiped and reissued (note: your electronic communications policy should contain the appropriate language regarding any lack of an expectation of privacy in such e-mails and you should also consult with counsel regarding whether your jurisdiction has recognized any invasion of privacy claims with respect to the review of such materials).