Ohio has joined a host of other states which protect memorized customer lists (and other trade secrets) from being used competitively by former employees. In Al Minor & Associates, Inc. v. Martin, 2008-Ohio-292 (Ohio February 6, 2008), the Ohio Supreme Court upheld an award of damages against a departed employee who solicited his former clients using information solely from his memory. The Court held that even in the absence of any employment contract or noncompete agreement, Ohio's Uniform Trade Secrets Act ("UTSA") O.R.C. § 1333.61 et seq ., will protect against the use and/or disclosure of trade secret information (including, but not limited to, client lists) whether the trade secret is maintained in physical form or merely is committed to memory.
More than 40 other states have adopted the UTSA in substantially similar form, and the majority position is that memorized information can be the basis for a trade secret violation. Notably, some states such as Georgia and Louisiana recognize trade secret protection only for customer lists in tangible form.
In order for a customer list or other proprietary information to be protected by the UTSA, it must meet the statutory definition of a "trade secret" which, among other things, means that it derives value from not being generally known or readily ascertainable by others, and it must be subject to reasonable efforts to maintain its secrecy. See e.g. , O.R.C. § 1333.61(D). In a majority of states which have adopted the UTSA, information that meets the definition of a trade secret will be protected from unauthorized disclosure/use regardless of the manner, mode, or form in which it is stored – whether on paper, in a computer, in one's memory, or in any other medium.
The departed employee in Al Minor & Associates, Inc. took no documents containing confidential client information from his former employer (an actuarial firm that designs and administers retirement plans), but successfully solicited 15 of his former clients with information from his memory. After learning of the departed employee's competing business, the former employer sued and was awarded nearly $26,000.00 in fees that it would have earned from its former clients. The former employer sought injunctive relief, but was unsuccessful.
We have, in the past, advised that the proper drafting of noncompete and confidentiality agreements is crucial for a business to maintain its competitive advantage (see December 2006 Employment and Labor Newsletter). The Al Minor & Associates, Inc. decision reinforces that notion even though the UTSA can prohibit the competitive use of memorized information. Noncompete and confidentiality agreements can offer much broader protection against the disclosure/use of proprietary information than that which meets the strict, statutory definition of a trade secret. Moreover, it is our belief that an employer's prospects of obtaining injunctive relief against a departed employee are enhanced when a confidentiality and noncompete agreement are in place.