Are Contact Lists and LinkedIn Contacts Trade Secrets?

On September 16, 2014, the United States District Court for the Central District of California denied defendants’ motion for summary judgment in a case involving whether customer lists and LinkedIn contacts could constitute trade secrets under the California Uniform Trade Secrets Act (“CUTSA”). Plaintiff Cellular Accessories for Less, Inc. (Cellular) sells mobile phone accessories to businesses. Defendant, David Oakes (Oakes) worked for Cellular as a sales account manager for six years before being terminated in December 2010. During his employment, Oakes signed two agreements acknowledging that Cellular’s proprietary information could not be removed from the organization and that such information would be kept confidential.

Shortly after being terminated, Oakes emailed himself a digital file (the “ACT file”) containing the contact information for some 900+ business and personal contacts. He also maintained his LinkedIn contact information after his termination and allegedly 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. Oakes started his own company, Trinitas, which directly competes with Cellular for business in the corporate mobile phone accessory market.

In response to Plaintiff’s CUTSA claim, Oakes and Trinitas moved for summary judgment. CUTSA defines trade secrets as information that “derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and are the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

The plaintiff presented evidence that the ACT file required the expenditure of a significant amount of time and money, including hiring and paying employees to cold call companies and identify the cellular accessories procurement officer. The Court found that this was sufficient to create a disputed issue of material fact as to whether the ACT file was a protectable trade secret. The plaintiff also raised an issue of material fact with respect to Oakes’ LinkedIn contacts because it was unclear to what degree those contacts were made available to the public and whether it was done with Cellular’s permission. Finally, there was an issue of material fact with respect to whether the emails taken by Oakes were trade secrets because Cellular claimed it used the information to compete and maintain relationships with clients.

This is a curious decision. It relies on “economic value” and virtually ignores the requirement that a trade secret does not arise unless the data is a secret – that is, not “generally known to the public or to other persons who can obtain economic value from its disclosure or use.” The record as described did not support such a claim with respect to the ACT file and surely not with respect to the LinkedIn contacts. To avoid such issues, companies that seek trade secret protection for customer lists, contact information, LinkedIn contacts, and the like should make sure that the confidentiality of such data is expressly mentioned in employee manuals and/or contracts, explaining that the compilation of such data – even if individual aspects of the data are publically available – is a valuable asset of the company and that contact lists, including LinkedIn lists – generated in whole or in part relying on employment by the company – are also an asset of the company, and not the employee.