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Not Much is Needed to Prove Trade Secret Misappropriation in California

Trade secrets are valuable business assets, and trade secrets are not the dramatic stuff of Hollywood action movies locked up in high-tech vaults. Under the California Uniform Trade Secrets Act (“CUTSA”), Cal. Civ. Code § 3426.1(d), trade secrets can be mundane like customer lists, pricing sheets, and delivery schedules. It is important to have a good San Diego corporate attorney give advice and counsel with respect to protecting your trade secrets. One key factual component of nearly every trade secret lawsuit is the existence of confidentiality and nondisclosure agreements. Having those types of agreements — and having the right types of agreements — is important.

As the courts are now interpreting the trade secrets laws, not much is required to prove a case of trade secret misappropriation. A recent case from the US Court in Los Angeles provides an example. See Sun Distributing Company v. Corbett, Case No. 18-cv-2231 (S.D. Cal. Oct. 12, 2018).

To have a protectible trade secret under the California Trade Secret Act (and under the federal version), a business must

  • Have some information or data
  • That is not known to the general public (is secret)
  • That has commercial value from being not generally known and
  • Reasonable steps have been taken to keep the information/data confidential

In Sun Distributing, the court found that Sun Distributing met this standard with respect to customer lists, distribution maps, customer needs, and pay rates. That information was commercially valuable (if only slightly). Not much commercial value is needed. In addition, the company had taken at least some minimally reasonable step to secure the information, including inserting confidentiality provisions in its employee contracts.

The facts of the case were that a general manager for Sun Distributing, Paul Corbett, resigned and, shortly thereafter, began attempting to convince customers to switch to his new employer. When Corbett began working for Sun Distributing, Corbett signed an employment agreement which contained a confidentiality provision. Essentially, he agreed not to use Sun Distributing’s trade secrets after separation.

Sun Distributing learned of Corbett’s efforts to convince existing customers to switch to his new employer from one email that was accidentally sent to Corbett’s old email address at Sun Distributing. This single email was held to be sufficient to justify imposition of a temporary restraining order.

The gist of the misappropriation claim was the Corbett used his former employer’s secret information. Corbett argued that he did not use Sun Distributing’s data because the customer provided the information to Corbett (and no other customer information was disclosed or used). Corbett argued that it is not misappropriation if the information comes from the customer — it is not secret information to the customer. However, the court rejected that argument based on these facts:

  • Corbett and the customer used Sun Distributing maps and circulation data in their discussions
  • The customer stated that he would not pay more than what he paid Sun Distributing and Corbett proposed rates lower than that
  • Corbett knew what was charged based on information gained as a general manager for Sun Distributing

Based on the foregoing, the court held that the defendant “used” the customer and pricing data that was trade secreted by Sun Distributing in an effort to lure the customer away.

As can be seen by the case example, it does not take much to have protectible trade secrets in California and it does not take much for a court to hold that a trade secret has been misappropriated.

Contact San Diego Corporate Law

For more information, contact corporate attorney Michael Leonard, Esq. at San Diego Corporate Law. Mr. Leonard has the experience to draft your contracts properly to help you protect your trade secrets. San Diego Corporate Law focuses on providing transactional legal services for San Diego businesses. Contact Mr. Leonard by email or by calling (858) 483-9200.

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