Client Lists Are Trade Secrets – Until Disclosure Strips the IP Rights Away

A recent case decided in Illinois regarding trade secrets reaffirmed that client lists are not always held to be trade secrets. Illinois, which follows the Uniform Trade Secrets Act and the Defend Trade Secrets Act recently heard a case that reaffirmed that attorneys’ fees can be recovered in trade secrets litigation and that clients list will not be deemed trade secrets if disclosure of the list has been made.

Illinois Case Finds Client List Not a Trade Secret After Disclosure

The 1st Appellate District of Illinois decided in Multimedia Sales & Marketing, Inc. v. Marison Murzullothat sales lead lists no longer qualify for trade secrets protection once the list has been disclosed to a third party. The Multimedia case arises from a set of facts where three former employees of Multimedia Sales & Marketing, Inc. (“MSM”) left and joined its main competitor, Radio Advertising, Inc. (“RAI”). MSM and RAI compete with each other to sell advertising on the radio to businesses, and when the three former employees joined RAI, they also brought sales lead lists of both potential and former purchasers with them. MSM sued RAI over theft of trade secrets, claiming that the sales lead/client lists were MSM’s trade secrets.             

RAI moved for summary judgment, arguing that while they did not deny that they took sales lead lists with them, the lists in question were not, in fact, trade secrets at all. Instead, RAI was able to establish from testimony that the sales lead lists of purchasers did not qualify for trade secrets protection because they were not secret as they had already been previously disclosed to a number of radio stations during negotiations for pricing and purchasing of airtime.  

Client Lists Not Confidential Trade Secrets By Nature and Attorney Fees May Be Awarded to Defendant

The court entered summary judgment against MSM and awarded attorneys’ fees to RAI. The decision to award RAI attorneys’ fees was decided under the Illinois version of the fee-shifting provision of the Uniform Trade Secrets Act, which allows courts to deter frivolous filings by awarding attorney fees. This holding reaffirms that companies must do their utmost to protect the confidentiality of information they consider to be trade secrets or want to keep confidential. 

While many companies incorrectly assume that sales lists are trade secrets by nature, they must instead understand that such “confidential” lists only qualify for protection if they remain truly confidential. As such, even if the disclosure is made to only a handful of parties or in the normal course of business, such disclosure still invalidates a trade secret’s qualification for protection.

Key Takeaways on Keeping Client Lists Trade Secrets

The recent holding Multimedia Sales & Marketing, Inc. v. Marison Murzullo reaffirms:

• disclosure of a trade secret, no matter how limited, will remove a trade secret’s qualification and eligibility for protection; and

• attorneys’ fees may be awarded for lawsuits deemed frivolous by the court.

For more information on trade secret protection, see our Technology & Data Legal Services and Industry Focused Legal Solutions pages.