In the back and forth battle between companies and former employees regarding the confidential nature of customer information, the United States District Court for the District of Nebraska has just issued a decision of note in Softchoice Corp. v. MacKenzie, 08-cv-00249. By the decision, the Court dismissed the action as against the defendant, finding that despite plaintiff’s treatment of the information as secret, had plaintiff truly wished to protect the information it should have had defendant enter into a properly tailored covenant not to compete instead of only having him sign a nondisclosure agreement.

The action was brought by Softchoice against MacKenzie, a former employee, alleging the usual panoply of claims: breach of confidentiality, misappropriation of trade secrets and confidential business information, unfair competition and tortious interference with business relations. The confidential information was alleged to be customer contact information and pricing. MacKenzie had not signed a non-compete covenant, but had signed a nondisclosure agreement.

In dismissing the action, Judge Joseph F. Batailon found that:

“The plaintiff cannot succeed on its claims for breach of contract, misappropriation of trade secrets or unfair competition without a showing that the information he allegedly misappropriated was a trade secret … MacKenzie has [] shown that he obtained the only information that could arguably be categorized as ‘secret,’ that is, pricing information, from the potential customers themselves, who freely shared the information with him in hopes of obtaining a lower price. MacKenzie has also shown that his suppliers shared this sort of information …”

This segued into the Court’s interpretation of the extent nondisclosure agreements will protect customer information:

“Softchoice, or its predecessor, could have limited MacKenzie’s contact with his former customers, and consequently protected its pricing information, through a narrowly drawn, valid and enforceable covenant not to compete, but id did not do so. Softchoice cannot achieve by way of a nondisclosure agreement what it could not have obtained via a non-solicitation agreement …”

It will be interesting to watch if any other courts pick up on Judge Batailon’s interpretation of nondisclosure agreements.