June 2008
Trade Secrets Move Beyond Written Documents to Memorized Lists
By Lisa Moran McMurdo and Kenneth J. Moran
In February of this year, the Supreme Court of Ohio rendered an opinion in a trade secret/misappropriation case that may have far-reaching results. In Al Minor & Assocs. v. Martin, 881 N.E.2d 850 (2008), the court faced the question of whether the use of a memorized client list could be the basis of a misappropriation action under Ohio’s Uniform Trade Secrets Act (“Act”). Not surprisingly, the court answered in the affirmative, and adopted the majority rule that “the appropriation by memory will be restrained under the same circumstances as will appropriation by written list.” Id. at 854 (internal citations omitted).
In motions practice involving the quest for trade secret information, the requesting party often attempts to avoid the burden of showing a heightened need for the information by pointing to the protective order in the case. The requesting party questions any suggestion of unwarranted disclosure as being prohibited by the restrictive protective order, usually granted to the producing party at the beginning of discovery. The problem with this argument is that it ignores the reality of modern litigation.
Typically, the requesting party wishes to share the trade secret information with an expert to bolster that expert’s opinion. Once the trade secret information is in the expert’s head, the information cannot be retrieved at the close of the litigation (and ostensibly is beyond the reach of the Court’s protective order). As the Ohio court recognized, that information still constitutes a trade secret under state law. Nevertheless, the expert may inadvertently or intentionally disclose the trade secret in other litigation involving the producing party’s competitors. In the era of Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the expert may feel compelled to disclose this information to underscore the basis for his or her opinions and methodology.
Some courts have recognized the problem of “inevitable disclosure” of information stored in one’s memory where it may be impossible for a person who knows a trade secret to segregate that information from other non-proprietary materials. In PepsiCo v. Redmond, 54 F.3d 1262 (7th Cir. 1995), for example, the Seventh Circuit affirmed an injunction against a former employee, preventing the employee from assuming certain duties with his current employer that would inevitably result in the disclosure of PepsiCo’s trade secrets. Given the employee’s knowledge of PepsiCo’s trade secret information, disclosure of that information appeared inevitable unless he “possessed an uncanny ability to compartmentalize information.” Id. at 1269.
The Ohio Supreme Court’s recent opinion reinforces the concerns raised by the Seventh Circuit. Most individuals, whether employees or experts involved in litigation, do not have the ability to compartmentalize trade secret information from other information in their heads. Accordingly, the risk of improper disclosure of trade secrets remains a real threat regardless of the presence of any protective order.
For further information, please contact Lisa McMurdo or Kenneth Moran, or any of the firm’s other lawyers.