Ohio Supreme Court rules that memorization of information does not absolve former employee of trade secret misappropriation claim

February 7, 2008

The Ohio Supreme Court issued a decision yesterday that directly addressed whether a person can be liable for misappropriating a trade secret by memorizing the contents of a client list but not physically removing a tangible copy of the client list.   In Al Minor & Assocs., Inc. v. Martin (Feb. 6, 2008), the Court unambiguously ruled that this practice will be considered a misappropriation.

The defendant was a pension analyst that worked for an actuarial firm that designs and administers retirement plans.  The firm maintained a confidential list of its approximately 500 clients.  The lower courts concluded that this list satisfied the six-factor test for determining a trade secret under Ohio law:  (1) the extent to which the information is known outside the business; (2) the extent to which it is known to those inside the business, i.e. by the employees, (3) the precautions taken by the holder of the trade secret to guard the secrecy of the information;  (4) the savings effected and the value to the holder in having the information as against competitors; (5) the amount of effort or money expended in obtaining and developing the information; and (6) the amount of time and expense it would take for others to acquire and duplicate the information.

The pension analyst did not have any type of employment agreement or a non-compete agreement.  However, after forming a competing business while still employed, he resigned and began soliciting his former employer’s clients from memory.  By soliciting those clients, his former employer lost out on approximately $25,000 in fees that it otherwise would have earned from those clients.

In reaching its decision, the Ohio Supreme Court recognized that “the [Ohio] General Assembly has determined that public policy in Ohio, as in the majority of other jurisdictions, favors the protection of trade secrets, whether memorized or reduced to some tangible form.”  Therefore,  "[i]nformation that constitutes a trade secret . . .  does not lose its character as a trade secret if it has been memorized.  It is the information that is protected by the [Uniform Trade Secret Act], regardless of the manner, mode, or form in which it is stored -- whether on paper, in a computer, in one’s memory, or in any other medium.”

The Ohio court determined that by using his memory of his former employer’s client list and obtaining those clients’ business accounts for a competing firm, the former employee had misappropriated trade secrets.   Ohio trade secret law does not require that the employee take a tangible version of the trade secret.  The former employer’s damages were based on the “fees not generated from former clients [that the individual] had solicited using information he had memorized while working for [the former employer].” 

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