Employment agreements and other contracts have traditionally been drafted in a manner that prevents a former employee from sharing their former employer’s trade secrets and other confidential information with a new business. However, as professional social networking sites, such as LinkedIn, become more prevalent and users are more willing to share information on them, courts have begun to reconsider what type of corporate information should be considered confidential.

The United States District Court for the Eastern District of New York recently considered this problem. Sasqua Group, Inc. v. Courtney, 2010 U.S. Dist. LEXIS 93442 (E.D.N.Y. Aug. 2, 2010). The plaintiff, Sasqua Group (“Sasqua”), alleged that its former employer, defendant Lori Courtney (“Courtney”), provided her new employer with Sasqua’s confidential trade secrets, including its customer list. In its complaint, Sasqua asserted that their trade secrets included confidential, proprietary and competitively sensitive information about (a) its client contacts; (b) their individual profiles; (c) their hiring preferences; (d) their employment backgrounds; and (e) descriptions of previous interactions with client contacts. The company claimed that all of the information was kept in a central database and maintained by a computer technician. Sasqua also claimed that the information was not available from any public source and is not information that could be easily duplicated.

Under New York law, courts consider several factors in order to determine whether information constitutes a trade secret, including:

1) the extent to which the information is known outside of the business;

2) the extent to which the information is known by employees and others involved in the business;

3) the extent of measures taken by the business to guard the secrecy of the information;

4) the value of the information to the business and its competitors;

5) the amount of effort or money expended by the business in developing the information; and

6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Unisource Worldwide, Inc. v. Valenti, 196 F.Supp.2d 269, 278 (2002).

Additionally, “[a] customer list developed by a business through substantial effort and kept in confidence may be treated and protected at the owner’s instance against disclosure to a competition, provided the information it contains is not otherwise readily ascertainable.” Id. Knowledge of a customer’s needs and prices charged to that customer are also considered confidential.  In order to claim misappropriation of a trade secret, a plaintiff must prove that:

1) it possessed a trade secret; and

2) the defendant is using that trade secret in breach of an agreement, confidence, or duty, or as the result of discovery my improper means.

Computer Associates International, Inc. v. Bryan, 784 F. Supp. 982, 987 (E.D.N.Y. 1992).

Sasqua could not complete the first prong of this test because the Court did not find that its customer list was a trade secret. Courtney testified that the information could have been acquired through a series of Google searches as well as through professional networking sites such as Bloomberg and LinkedIn. The Court determined that, in earlier years, the information in Sasqua’s database might have been a protectable trade secret because greater time, energy and resources would have been needed to gather such detail. “However, for good or bad, the exponential proliferation of information made available through full-blown use of the Internet and the powerful tools it provides to access such information [today] is a very different story.” Sasqua at 63.

The Court’s decision in Sasqua may have a major impact on trade secret law. Traditional non-compete clauses may need to be revised and drafted in a way that grants protection over — or at least accounts for — information that might be available through social networking sites.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

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