TRADE
SECRETS AND ASSOCIATIONS
Would you be upset if
an employee leaves your association and starts a competing entity using your
association's membership, vendor or sponsor list?
How about a vendor
using your membership directory to market directly to every one of your
members?
Would any of your members
object to their membership records in your possession (such as continuing
education courses taken, private telephone numbers, plans to attend an upcoming
trade show, names and contact information of the members office staff, and
similar information) be accessed or used by anyone other than association staff
to provide membership services to that member?
If you answered "yes" to any of
these questions, then this blog posting will be of interest to you.
Almost every
association has "confidential" and "trade secret"
information. That confidential and trade
secret information may be legally protectable in many instances if the right
steps are taken by the association to safeguard that information.
Confidential Versus
Trade Secret Information
First, what is the
difference between "confidential" and "trade secret"
information? A trade secret is a subset of confidential information; only
some confidential information also meets the definition of a trade secret.
Confidential information is information that is intended to be held in
confidence or kept secret.
In contrast, “trade secret”
refers to information that (1) has economic value from not being generally
known to, and not being readily ascertainable by proper means by, others, and
(2) is the subject of reasonable efforts to maintain its secrecy.
Examples of
Confidential and Trade Secret Information
The information an
association member provides to the association about his or her employees or
business may be confidential information, particularly when the member disclosed
the information with the understanding or expectation that it would be held in
confidence. So, a member that routinely advertises its business address
would probably not have an expectation that that information would be held as
confidential by the association. On the
other hand, that member would probably expect that his or her plans to attend
your next conference, or his or her back office telephone number would not be
disclosed to others.
The association's
membership database (which is presumably more complete than a mere membership
list) may be trade secret. It probably has economic value because it is
not generally known to others, and is not readily ascertainable by others.
However -- and this is a problem in many instances -- the information
must be maintained with reasonable secrecy. So, if an association
publishes its membership directory on its website, its membership directory is
not being maintained as secret, and is not a trade secret (which is why it is
not unlawful or actionable if a vendor uses an association’s membership directory
if that directory is not maintained as a secret). If however, there are
components of membership data that are NOT included in the membership
directory, then that information might be trade secret if reasonable steps are
taken to maintain its secrecy.
The existence and
terms of association's contracts with its vendors are probably confidential,
and may also be trade secret to the extent that the information holds economic
value, is not readily ascertainable by others (very probable), and it is the
subject of reasonable efforts to maintain secrecy.
Protecting Trade
Secrets
As noted above, the
efforts taken to maintain secrecy of the "secret" information is
absolutely critical. Unless the information is maintained as a trade
secret, it can be difficult to enforce trade secret law when a misappropriation
occurs. In order for trade secret law to be enforceable, the trade secret
information must be treated as secret on an everyday basis. This is
frequently the reason that trade secret obligations cannot be enforced.
Trade secret files
should be locked up in a file cabinet or restricted-access room, or password
protected. Access to and use of this information should be governed by
carefully crafted policies and procedures to ensure that only those persons
with a need to have access to the information have that access. Log-in
and log-out records are helpful. Do not give customers or members your address
labels or data file; rather, have them give you the materials they want mailed,
and charge them a reasonable fee for doing so. Employees or contractors
having access to that information should be required to sign nondisclosure and
confidentiality agreements.
These measures not
only help ensure the enforceability of trade secret laws, they go a long way
towards avoiding theft and misappropriation in the first place. Beef up your security protocols, and
treat your key information as secret, and make your employees and contractors
do the same. And when a violation of the information occurs, your
association will have a reasonable chance to do something about it.
More on trade secrets
soon...
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