Association Law Blog

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...