United States: Making Memories: Trade Secrets Need Not Be In Tangible Form To Be Protectable

Developments in technology have led to advanced ways of protecting trade secrets. In an age where passwords, metadata, and paper trails are often the stories told to demonstrate misappropriation, it may seem that trade secrets must be reduced to a tangible form to be protected. However, a recent Oregon Court of Appeals opinion reminds us that this is not the case—if information is maintained as a trade secret it is equally protected regardless of form.

The story in Pelican Bay Forest Products, Inc. v. Western Timber Products, Inc. may appear at first blush a fairly common one in the trade secret world: a Pelican Bay employee provided customer list information to his son-in-law who worked for a competitor, Western Timber. Customer lists have been their own hot topic in trade secret law, but it has become generally accepted that they can provide companies with considerable value; and if their value is derived through keeping this information secret, customers lists can be protectable trade secrets. Indeed, Oregon's definition of "trade secret" expressly includes a "customer list."

A key difference in Pelican Bay, however, was the defendants' argument that the customer list information could not constitute a trade secret because the information resided in the employee's head, rather than tangible form. As the Pelican Bay court put it, "In [defendants'] view, information taken by memory cannot, as a matter of law, constitute a trade secret."

At first glance this argument may seem viable. After all, employees generally have freedom to take with them skills, experiences, and knowledge learned while working for an employer. And if the employee in question did not actually take a tangible document or list, then one could argue he was merely passing along residual knowledge. But the Oregon Court of Appeals firmly rejected this argument. The court found that nothing in the Uniform Trade Secrets Act suggests that information loses its trade secret protection merely because a person was able to take that information in an intangible form—i.e., by memorizing the information, rather than in a tangible medium. Any other conclusion, would create a limitation on trade secret protection that the legislature had not intended: "Rather, the terms of the act are written broadly so as to safeguard trade secrets, no matter the form in which they may be appropriated."

The Pelican Bay decision reminds us that companies should be vigilant in protecting trade secret information, regardless of what form the information may take. And ensuring employees know and understand what their employers consider a trade secret is especially important when such information is of a type that can be memorized and orally divulged.

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