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Sunday, February 10, 2013


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...

Tuesday, February 5, 2013

Associations and "Unclaimed Property"

By Mark Alcorn and MaryAnne Bobrow

A relative passes away.  Charged with administering the estate, all due diligence is taken to ensure all property of the decedent had been property disbursed and/or disposed of in accordance with the decedent’s wishes.  Yet several years later, a notice arrives from the state of California that there exists unclaimed property of the decedent that will belong to the state unless it is claimed following procedures specified in the notice.  If you were in this situation, you would take all steps necessary to resolve the issue.  As an association professional, what does your association do when faced with similar dilemmas?

Does your association possess "Unclaimed Property"?  Before you answer “no,” consider that unclaimed property includes such items as dues that were supposed to be returned, a refundable deposit on booth space, a check that was returned to the association due to lack of current mailing information, wages for a former employee that can no longer be found, and/or uncashed payments to vendors that have become stale?  While the temptation may be great to void transactions such as those described above, the association or business does not get to keep this property.  In fact, possession of this property triggers significant responsibilities for the holder.

Unclaimed Property Legal Requirements

Many associations and businesses do not realize that they hold unclaimed property, or that they are subject to reporting requirements and possibly the obligation to turn the unclaimed property over to the state.  

In California and many other jurisdictions, the law requires associations and businesses to give written notice to the owner of the unclaimed property.  If the property is not claimed, the association must report that it is holding the property to the State Controller on state issued forms.  Then, if the property remains unclaimed, the association must pay or deliver to the State Controller the "abandoned" property.  Property is presumed to have been abandoned when it remains unclaimed by the owner for more than three years after it became payable.  

Additionally, an association or business must maintain records concerning unclaimed property for a period of seven (7) years.  

Significant penalties can be incurred for failure to abide in these laws.  These penalties include fines and interest at a whopping 12% per year.  Some penalties can be excused under limited circumstances.


How can you ensure your association complies with laws governing unclaimed property?  We recommend that association bylaws make it clear that dues, booth fees, sponsorship fees, and similar funds are not refundable.  We also recommend that a special account be established for unclaimed property, and that the association adopt internal policies that help ensure that unclaimed property is handled properly.  If possible, return unclaimed property to its rightful owner not later than three (3) years from the date it first became payable/returnable.

We also recommend that associations inform and educate their respective memberships about laws pertaining to unclaimed property.  An informative summary of the law, an excerpt of the law, and simple forms the members can use could be a great service to the membership.


Information about California's unclaimed property law can be found at  Unclaimed property law and regulations are available at

Thank you for the help with this posting:

MaryAnne P. Bobrow, CAE, CMP, CMM, CHE
Bobrow & Associates
Association and Meetings Management
6060 Sunrise Vista Drive, Suite 1300
Citrus Heights, CA  95610
Phone:       (916) 722-8168
Fax:             (916) 722-8149