As a LinkedIn user, the decision concerning whether to share your entire list of connections with any individual connection can often implicate a number of strategic questions. As of May 2014, LinkedIn boasts 300 million users globally and access, or lack thereof, to such a vast network can depend to some degree on how an account is configured insofar as that configuration determines how information is shared amongst a user’s connection. The business implications are apparent, but such a decision has started to engender legal actions, as encapsulated by Cellular Accessories for Less, Inc. v. Trinitas, LLC, No. CV 12-06736 DDP (C.D. Cal. Sept. 16, 2014).

Facts

Plaintiff Cellular Accessories for Less, Inc. (Cellular) and Defendant Trinitas LLC (Trinitas) are both in the business of selling mobile phone accessories to businesses. Defendant David Oakes (Oakes) worked for Cellular as a sales manager from 2004 to 2010. In order to receive approbation to start, Oakes was required to sign an Employment Agreement (the Agreement) which included a clause that stated in relevant part that Cellular requested that the “proprietary information remain property of this organization, and may not leave, either physically or electronically, unless approved in writing” by the CEO of Cellular. Oakes similarly signed a “Statement of Confidentiality” (the Statement) in which he avowed to not “knowingly, disclose, use, or induce or assist in the use or disclosure” of the Cellular proprietary information or anything related thereto, without the express written consent of Cellular.

Proprietary information was defined in the Statement as “information (a) that is not known by actual or potential competitors of the Company or is generally unavailable to the public, (b) that has been created, discovered, developed, or which has otherwise become known to the Company … and (c) that has material economic value or potential material economic value to the Company’s present or future business.” Oakes signed the agreement, but disputed such signature created a valid contract.

Shortly subsequent to his termination in 2010, Oakes emailed himself a file containing the contact information for more than 900 personal and business contacts (the ACT file), and another file that contained direct contact information for the purchasing agents of certain clients, information on clients’ billing preferences and procedures, clients’ past pricing requests, and at least one Cellular internal strategy document. Oakes likewise maintained his LinkedIn contact information after his termination. Consequent to termination, Oakes contacted Cellular clients alleging that the company committed “major unethical and deceitful acts.”

Oakes then started Trinitas, a direct competitor to Cellular in the corporate mobile phone accessory market. Plaintiff sued under various theories, including the cause of action that will be discussed here: trade secret misappropriation under the California Uniform Trade Secrets Act (CUTSA).

Legal Conclusions/Analysis

On summary judgment, the defendants claimed that there was not a triable issue of fact pertaining to the CUTSA claim. The court for the Central District of California disagreed.

The API File

This information was considered the “primary point of contention” in the case. A customer list can constitute a trade secret, but such a list is not automatically trade secrets. See Scott v. Snelling & Snelling, Inc., 732 F. Supp. 1034 (N.D. Cal. 1990) (customer lists are not per se trade secrets because many contain no information that is not easily discoverable through openly accessible sources). Customer lists tend to be trade secrets when it contains information that took effort to compile, and the methods used to do so are “sophisticated,” “difficult,” or “particularly time consuming.”

Oakes argued that the ACT file could be easily obtained through public sources, while Cellular averred that to create a robust and useful list requires significant amount of time and money, mostly through networking and cold-calling. The court agreed with Cellular that there existed a genuine issue of fact because there was a possibility that the effort designed to generate business, as epitomized by the information contained in the customer list, could constitute a protectable trade secret.

LinkedIn Contacts

Oakes similarly claimed that his LinkedIn contacts were hardly a secret since Cellular had encouraged its employees to create and use LinkedIn and Oakes’ contacts are automatically viewable to any other contact he has on LinkedIn. Cellular’s riposte was that Oakes had deviated from the default LinkedIn settings in deciding to share his contacts and that this illustrated that LinkedIn was not automatically configured to show a LinkedIn contact all of the other contacts of this contact. As the court declined to take judicial notice of the relevant functions of LinkedIn and there was insufficient information as to whether Oakes’ LinkedIn contacts were public (and whether this was done with the approval of Cellular), a material fact remained sufficient to survive summary judgment.

Emails Containing Contact Information, Customer Preferences and an Internal Memo

Oakes asserted that he retained the internal memo for “posterity” and all of the information about clients purchasing requirements or preferences cannot be a trade secret because in a commodity business, such aspects of a customer order fluctuate frequently, thereby rendering the value of information regarding past orders essentially null. The court rejected this argument. It noted that the internal memo appeared to describe a successful method for meeting a customer’s needs that could produce independent economic value irrespective of any purported change in market conditions. Likewise, a customer list in which a considerable amount of effort was invested can provide independent economic value even if market conditions oscillate with some frequency.

Conclusion

Defendant’s summary judgment motion on the CUTSA count was denied, although the summary judgment motion for trade libel and intentional interference with prospective business advantage claims was granted.