Misappropriating trade secretsAn Ohio funeral home sued another funeral home and its former employee for alleged trade secret misappropriation. The plaintiff is also suing for defamation and tortious interference with its business expectancies.

As to the trade secret claim, reporting from the Tribune Chronicle, by Renee Fox, indicates the plaintiff funeral home alleges its client list meets the statutory definition for a trade secret. The suit goes onto claim that the list was used by its former employee to contact plaintiff’s customers (presumably those customers who had not already used the plaintiff’s services).

What is a “trade secret?” 

Since 2001, I’ve collaborated with clients on trade secret issues and litigation. And it is always interesting the learn what clients or opposing parties consider “trade secrets.” But simply saying information is a “trade secret” does not make it so.

Instead, a true “trade secret” requires meeting certain statutory requirements. For example, under Michigan law (for anyone looking for free legal research, that law is MCL 445.1902(d)), a party claiming information should be classified as a “trade secret” must show it:

  1. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
  2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

And there are risks for asserting a party has misappropriated information claim to be “trade secret.” Returning to Michigan law, if a party makes a trade secret claim in bad faith, that party could be subject to sanctions in the form of paying attorney fees.

For example, we represent several parties sued for allegedly misappropriating trade secrets. In one case, we have a pending motion arguing the misappropriation claim was brought in bad faith and entitles our client to their attorney’s fees. As to the other cases, we are pursuing discovery likely to support similar motions.

This is not to suggest that the funeral home has made a bad faith trade secret claim. However, it is important to understand that factual issues may undercut the ability to satisfy the statutory definition of a trade secret. Those issues should be addressed before pursuing litigation.

So what should your company do about trade secrets?

Before pursuing trade secret misappropriation claims, it is important to know whether you can meet the statutory definition for a trade secret. Ideally, this determination will have been made in advance of suing for misappropriation.

In this regard, management should take steps to audit their company information to determine what can and cannot be protected as a “trade secret.” From here, you can assess whether appropriate steps to protect the secrecy of the information have been taken. If not, you will need to address what additional protections should be implemented.

Use this link to contact Michigan attorney Jason Shinn, if you have questions about this article, trade secret protection, or litigating misappropriation claims.