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by Justice Paul E. Pfeifer
When Robert Martin resigned from his position with Al Minor & Associates, Inc., in 2003, there was initially no reason to believe that it was anything out of the ordinary; just an employee leaving one job to begin another. But as it turned out, there was more to it than that.
Al Minor & Associates (“AMA”) is an actuarial firm that designs and administers retirement plans. The firm employs several “pension analysts” who work with approximately 500 clients. Al Minor Jr., who founded AMA in 1983 and serves as its president and sole shareholder, developed AMA’s clientele, for which the firm maintains a confidential list.
In 1998, AMA hired Martin as a pension analyst. When Martin was hired, the firm did not require him to sign either an employment contract or a noncompete agreement. In 2002, while still employed by AMA, Martin organized his own company – Martin Consultant, L.L.C. – with the purpose of providing the same type of services as AMA.
When Martin resigned from AMA in 2003, he left without taking any documents containing confidential client information. Nevertheless, he successfully solicited 15 AMA clients. How did he manage to do that? Martin used information that he had memorized from confidential lists.
After learning of Martin’s competing business, AMA filed an action against him for monetary and injunctive relief, claiming that he had violated Ohio’s Uniform Trade Secrets Act (“UTSA”) by using confidential client information to solicit those clients. After reviewing the evidence, a trial court magistrate determined that Martin had misappropriated AMA's client list in violation of the UTSA.
According to the magistrate, the fact that Martin had solicited AMA’s clients from memory did not prevent the finding of a trade secret violation. The magistrate also recommended finding against Martin for $25,973 in fees that AMA would have earned from its former clients. The trial court adopted the magistrate’s findings and recommendations and entered judgment in favor of AMA.
Martin appealed that judgment. Before the court of appeals, Martin argued that a memorized client list does not satisfy the definition of a trade secret. What, exactly, is the definition of a trade secret?
In 1994, the Ohio General Assembly enacted the Uniform Trade Secrets Act. The act defines a trade secret as information, including technical information, business information, financial information, or a “listing of names, addresses, or telephone numbers, that satisfies both of the following:
“(1) It derives independent economic value…from not being generally known to…other persons who can obtain economic value from its disclosure or use.
“(2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
Despite Martin’s argument, the court of appeals affirmed the trial court, stating that because a client list such as the one at issue fits the definition of a trade secret under the UTSA, AMA’s memorized client list warrants trade secret status.
After that ruling, the case came before us – the Supreme Court of Ohio – for a final review.
Martin argued before our court that a client list memorized by a former employee cannot be the basis of a trade secret violation and that the decision by the court of appeals overly restricts his right to compete in business against AMA. He also argued that AMA should not have the right to control the use of his memory and that AMA had the opportunity to protect its confidential information by way of an employment contract, which it did not do.
For its part, AMA countered that public policy in Ohio favors the protection of trade secrets, whether written or memorized. The firm also argued that the definition of a trade secret should focus on the nature of the information and the potential harm that its use would cause the former employer, and that no meaningful difference exists between a written and memorized client list.
Before the passage of the UTSA, the protection of trade secrets in Ohio was maintained through court decisions. The earliest of those decisions came from a circuit court ruling in 1902 that defined a trade secret as “a plan or process, tool, mechanism, or compound, known only to its owner and those of his employees to whom it is necessary to confide it, in order to apply it to the uses for which it is intended.”
Subsequent decisions followed a similar line of reasoning, and then the UTSA sort of tied them all together. When the legislature enacted the UTSA it could have excluded memorized information from the definition of trade secret or added a requirement that such information be reproduced in physical form in order to constitute a trade secret. But it did not.
In fact, nothing in the language of the UTSA suggests that for purposes of trade secret protection the legislature intended to distinguish between information that has been reduced to some tangible form and information that has been memorized.
By adopting the UTSA, the Ohio legislature determined that public policy in Ohio, as in the majority of other states, favors the protection of trade secrets, whether memorized or reduced to some tangible form.
Therefore, our court – by a seven-to-zero vote – affirmed the judgment of the court of appeals. Our decision means that the determination of whether a client list constitutes a trade secret in accordance with the UTSA does not depend on whether it has been memorized by a former employee.
Writing for the majority, Justice Terrence O’Donnell said that information that constitutes a trade secret under the UTSA “does not lose its character as a trade secret if it has been memorized. It is the information that is protected by the UTSA, 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.”
Thus, AMA’s client list constituted a trade secret, and the fact that Martin had memorized that list before leaving AMA does not change its status as a trade secret or remove it from the protection of the UTSA.EDITOR'S NOTE: The case referred to is Al Minor & Assoc., Inc. v. Martin, 117 Ohio St.3d 58, 2008-Ohio-292. Case Nos. 2006-2340 and 2007-0121. Decided Feb. 6, 2008. Majority opinion written by Justice Terrence O'Donnell.