In a recent California Federal case decided this past September, a judge denied a summary judgment motion arguing that LinkedIn Contacts were not trade secrets.

Cellular and Trinitas are both a cell phone accessory businesses.  David Oakes worked for Cellular from June 2004 to December 2010 as a sales manager.  Oakes signed an Employment Agreement that contained a clause stating: CAFL [i.e., Cellular] requests that proprietary information remains the property of this organization and may not leave, either physically or electronically unless approved in writing by Mitch[ell Langstein]. This included Cellular’s “customer base.” In addition, a “Statement of Confidentiality” was signed which stated that Oaks would not “ knowingly disclose, use, or induce, or assist in the use or disclosure of any Proprietary Information… or anything related to Proprietary Information… without the Company’s prior express written consent.” “Proprietary Information” was defined in the Statement as: “Information (a) information (a) that is not known by actual or potential competitors of the company or is generally unavailable to the public, (b) that has been created, discovered, developed, or which has otherwise become known to the Company . . . and (c) that has material economic value or potential material economic value to the Company’s present or future business.”

Oakes was terminated in 2010. Oakes then emailed himself a digital file containing the contact information for some 900+ business and personal contacts. He also maintained his LinkedIn contact information after he was terminated. Cellular alleges Oaks emailed himself the direct contact information for the purchasing agents of certain clients, information on clients’ billing preferences and procedures, clients’ past pricing requests, and at least one internal strategy document regarding a client. Further, Cellular alleges that Oakes contacted clients when he started his own company in Texas (Trinitas).

In California under Cal. Civil Code §3426.3, trade secrets are defined as “any information, including a … compilation… that: (1) Derives independent economic value, actual potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

The main focus of the court was to determine whether the digital file containing customer’s information was a trade secret. Previous cases have determined that customer lists are not automatically trade secrets because many customer lists contain no information, which is not “easily discoverable through public sources.” However, it has also been determined that where “the employer has expended time and effort identifying customers with particular needs or characteristics,” it could possibly become a trade secret. This lends itself to the question of the amount of effort involved of compiling the list, which is a genuine issue of fact to be determined by a jury. The court determined with regard to the LinkedIn Profile that a jury should also determine the matter because there is a genuine issue of fact to the extent to which Oakes’ contacts were viewable to other LinkedIn users. If a jury finds that the contacts can be viewed by other users, then the contacts may not be protected under California’s definition of a trade secret.

The lines between business ownership and business related social-media are often blurred. It will be interesting to see how this case turns out. One thing remains clear, though — employers should re-address their social media policies in light of this case.

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Citations

  • Cal Civ Code § 3426.3.
  • Cellular Accessories for Less, Inc. v. Trinitas LLC,2014 U.S. Dist. LEXIS 130518(C.D. Cal.Sept. 16, 2014).
  • Daniel J. McCoy, Dan Ko Obuhanych, Are LinkedIn contacts the employer’s trade secrets?, (Oct. 23, 2014, 5:02 PM), http://www.lexology.com/library/detail.aspx?g=53812249-aab1-4395-8b74-194b256dd040.