In a unanimous decision debunking the common misunderstanding that former employees can use information they retain through memory (as opposed to information contained in materials pilfered from former employers) without violating trade secret law, the Ohio Supreme Court ruled that a company’s confidential customer list is a protected trade secret even if a former employee accesses it strictly from memory.
In Al Minor & Assoc., Inc. v. Martin, 2008-Ohio-292, Martin, a pension analyst, signed neither a noncompetition nor a non-solicitation agreement during his employment with Al Minor. When he resigned to establish a competing business, Martin contacted and successfully solicited 15 clients using information that he memorized while working for Al Minor. Al Minor sued Martin for misappropriating its trade secret client information. Following trial, Martin was ordered to pay nearly $26,000 in damages to Al Minor, representing lost earnings from former clients successfully solicited by Martin. Although Martin appealed, the Franklin County Court of Appeals upheld the trial court’s decision. Martin then appealed to the Ohio Supreme Court where his arguments in support of his actions were once more rejected.
In particular, the Supreme Court answered “yes” to the following question on appeal: “whether customer lists compiled by former employees strictly from memory can be the basis for a statutory trade secret violation.” Looking to the plain language of the Uniform Trade Secrets Act, adopted by Ohio in 1994, the Court noted that the Act expressly governs confidential listings of client names, addresses, and phone numbers. The Court also concluded that nothing in the Act’s language distinguished between memorized information and information reduced to tangible form, such as documents or computer discs. Accordingly, the Court held that protected information does not lose its protected status simply because it is not in physical form. This decision puts Ohio in line with the majority of states on this issue — i.e., that memorized confidential information can serve as the basis for a trade secret violation.
At its core, the Al Minor decision clarifies for Ohio the rather unremarkable notion that a trade secret is a trade secret regardless of whether it is memorized or in a more tangible form. The Supreme Court did not, however, provide details regarding the trade secret at issue in Al Minor other than to call it a “confidential client list.” As a result, the decision muddies, to some extent, the question of exactly what types of memorized information are entitled to trade secret status. Most significantly, the Court refused to consider Martin’s argument that the client list did not constitute a trade secret because it contained public information that could be accessed on the internet due to Martin’s failure to raise the argument in a timely manner. Furthermore, although the Court acknowledged that not every “casual” memory retained by an employee from the ordinary course of employment will constitute a trade secret under Ohio law, it offered no guidance as to what constitutes a “casual” memory.
These ambiguities are not just theoretical; they have the potential to present real-life dilemmas to employers and employees alike. For example, the decision provides little guidance as to what the outcome should have been if Martin, hypothetically, had used an internet search engine, such as Google, to obtain contact and other information about a handful of Al Minor clients that he recalled off the top of his head. In this scenario, could Martin have used the information obtained from Google to solicit business without violating the Act even though the client names (but not other company data) were part of Al Minor’s confidential client list? It is not yet clear the extent to which Martin could have avoided liability by separately compiling and using client information from publicly available sources such as the internet in order to solicit business or whether the simple knowledge that the Al Martin clients were in need of pension analysis services would have trumped the publicly available information to preserve the protection of the trade secret. Or could Martin have avoided liability by arguing that the client names were merely “memories casually retained from the ordinary course of employment?” Because the Supreme Court left such questions unanswered while creating the impression that employers may prevent former employees from contacting clients even in the absence of non-competition or non-solicitation agreements, the Al Minor decision likely will lead to increased trade secret litigation.
Considering Al Minor from the perspective of a hiring employer also yields uncertainty. Employers concerned with avoiding liability based on hiring decisions generally ask whether potential employees are encumbered by non-solicitation or non-competition agreements. Cautious employers also generally admonish new hires not to bring with them to their new jobs any documents or computer files from their former jobs. Now, although Al Minor highlights the additional importance of ensuring that new employees do not use memorized confidential information from prior employment, the decision does nothing to help employers ensure compliance. Will hiring employers now face the risk of trade secret liability simply by allowing prospective employees to recount their work with specific clients?
The Al Minor holding — that intangible confidential information can be a protected trade secret — makes sense under Ohio’s Trade Secret Act and puts Ohio in line with the majority of the states that have addressed the issue. But, by deciding the issue in the context of a client list and by providing little descriptive information about what exactly that client list entailed, the Court, unfortunately, has opened the door to questions and possible confusion for Ohio’s employers and employees alike.