In a recent decision from the United States District Court for the Northern District of Illinois in Intertek USA Inc. v. AmSpec, LLC, the Court found that certain financial information, aging and sales reports and laboratory equipment wish list qualified as trade secrets and entered a preliminary injunction to protect the use of that information by a competitor and former employees.
Intertek tests and inspects petroleum products and chemicals and owns about 60% of the market share of petrochemical testing and inspection in the Chicago market. AmSpec was a competitor of Intertek that sought to expand into the Chicago market. When the branch manager of Intertek’s Chicago operation learned that AmSpec was seeking to expand into the Chicago market, he, along with an administrative assistant and lab manager, contacted AmSpec about jobs and provided AmSpec with the following information of Intertek:
- Aging and sales reports that listed Intertek’s Chicago area clients and their outstanding balances;
- Recent profit and loss statement that included information about quantities of chemicals tested, payroll structure of the branch office and the branch office rent and electricity costs; and
- A list of methods and instruments that Intertek’s lab manager thought AmSpec should have in the lab of its Chicago office (this list closely resembled Intertek’s lab).
The Court found that the information above to be trade secrets. Intertek took adequate measures to protect the secrecy of the above information by having its employees execute Employee Confidentiality and Innovation Agreements; only allowed employees access to information if such information was necessary for that employee’s job; and protected computer access to such information with passwords.
In addition, the Court found that while AmSpec may have been able to obtain a list of methods and instruments needed for its lab from publically available information, such as customers and recognized testing methods, the precise mix and volume of methods that Intertek used and the profitability of those methods was not public knowledge. And while AmSpec might have been able to discover this information from communicating with customers, that process would have taken time, effort and expense.
The relief granted by the court was aimed at eliminating the unfair advantage that AmSpec gained by using plaintiff’s trade secret information, not to punish AmSpec, which presumably would occur if a verdict were rendered against it at trial. The preliminary injunctive relief entered, among other things, prohibited AmSpec from opening its Chicago office for an additional two months and barred the use of Intertek’s trade secrets until trial. In addition, the Court ordered AmSpec to pay the salaries of the former Intertek employees during the two-month period to mitigate some of their injury and as punishment for encouraging these former employees to disclose Intertek’s trade secrets.
There are several takeaways that business owners should recognize from this case. First, taking steps to protect the confidentiality of information is critical to a court finding that the information is a trade secret. Second, should Intertek have been more vigilant to prevent employees from taking its trade secret information? For example, if Intertek had been monitoring employee email usage would it have known that company files were being emailed to employee personal email accounts. Third, Intertek did not have agreements restricting non-competition or non-solicitation of customers with its employees. While favorable, the Court’s decision may have been more favorable if Intertek had such agreements with its employees.