Customer Lists Not Protected By Agreement Were Not Considered Trade Secrets Under Illinois Law

Posted: Monday, July 13, 2009

By: Joshua C. Dickinson

Topic: Agreements

Illinois Court holds that customer lists and other confidential customer specific information used by former employees in competition with former employer are not protectable as trade secrets

By Patrick McLaughlin

In a recent case that underscores the importance of having valid and enforceable non-compete agreements with key employees, an Illinois appellate court recently held that names, addresses, and contact information contained in customer lists of a computer network services company, as well as customer specific confidential technical information, were not protectable as trade secrets under Illinois law against former employees who formed a competing business.  System Development Services, Inc. v. Haarmann, 907 N.E.2d 63, 2009 WL 1041096 (Ill. App. 5 Dist).  The former employees, computer technicians, resigned and formed a competing business in the same geographic location as their former employer.  Even worse, the evidence showed that they used their former employer’s customer lists and certain customer specific “technical and confidential” information to compete with their former employer. 

Unfortunately, the company did not require that the computer technicians sign non-compete agreements.  Nevertheless, in an effort to stop what it considered to be unfair competition, the company sued the competing technicians, alleging that its former employees violated the Illinois Trade Secrets Act by using its customer lists and information about its customers computer systems and networks to unfairly compete with the company.  Unfortunately for the company, proving that information is protectable as a trade secret is difficult.  The court held that the information contained in the customer lists was generally known by others in the computer network industry or otherwise was readily available from public sources, such as telephone directories, chamber of commerce directories and a variety of other sources.  Similarly, the court also held that the intricacies of the company’s customers’ computer systems and networks were not protectable because the former employees’ knowledge of such information was similar to general skills and knowledge acquired in the course of employment, which is not a trade secret.

Although non-compete agreements are not always enforceable under Illinois law, this case demonstrates that for most companies, having key employees executing properly crafted non-compete agreements afford an employer more protection against unfair competition than does the Illinois Trade Secrets Act.