Illinois Trade Secrets and Customer Lists

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Garon Foods v. Montieth, 2013 WL 3338292 (S.D.Ill. 2013), analyzes the Illinois Trade Secrets Act, 765 ILCS 1065/1 et seq. (ITSA) and the governing preliminary injunctive relief standards in a diversity dispute over the distribution of pepper jack cheese products.

The plaintiff peppers distributor sued a former employee after she resigned and went to work for one of plaintiff’s suppliers.  The distributor sued for breach of contract and violation of the ITSA and claimed the defendant was violating a confidentiality agreement by soliciting business from plaintiff’s customers. After filing its complaint, plaintiff requested a preliminary injunction barring defendant from using plaintiff’s confidential information or trade secrets in connection with soliciting business from various cheese manufacturers.

Held: Preliminary injunction granted in part.

Rules/Reasoning:

A preliminary injunction claimant must show: (1) a likelihood of success on the merits; (2) no adequate remedy at law; and (3) irreparable harm if injunction is not granted.  Once plaintiff establishes elements (1)-(3), the court balances the harms to both parties.  If the court finds that plaintiff has a greater chance of winning on the merits, the less the balance of harms must weigh in his favor.  *1

– Illinois courts will enforce a confidentiality agreement where the information is truly confidential and the subject of reasonable efforts to keep the information secret;

– Customer lists are treated as confidential only where the list’s contents are developed by an employer at great time and expense and kept under tight security;

– Where the customer list is generally accessible by third parties or can be easily reconstructed or duplicated, it’s not confidential. 

Here, since the defendant offered evidence that the manufacturers she contacted in her new position were through her internet research efforts and memory (and not by resorting to plaintiff’s physical customer list), the court found that it wasn’t likely that the plaintiff could show that its customer list was sufficiently confidential.  *4-5. 

The Court did find though that the defendant violated the confidentiality agreement by divulging the plaintiff’s key supplier’s identity (by providing unique product specs information in sales pitches) and by using plaintiff’s customers’ past purchasing history in soliciting business from those customers.  *5. 

On the ITSA claim, the court found that  plaintiff established two trade secrets: (1) the supplier’s identity (to third parties) and (2) its customers’ purchasing needs and sales histories.  

The Court also found that defendant misappropriated (used) plaintiff’s trade secrets by revealing plaintiff’s supplier’s identity and secret product data by sending plaintiff’s product specs to plaintiff’s customers in efforts to induce them to do business with the new employee. 

The Court crafted an 8 month preliminary injunction during which time the defendant was forbidden to contact certain customers of the plaintiff.  *7-8. 

Conclusion.  Garon provide a good synopsis of preliminary injunction standards and some Illinois trade secrets law basics. The case reaffirms how difficult it is for an employer to enforce a restrictive covenant in the context of an employee confidentiality agreement and to show that its customer list merits trade secret protection. 

The case also serves as a good example of a court balancing the harms and considering public interest factors in connection with drafting an injunction that gives equal voice to the countervailing interests of an employer (protecting its confidential business data), a former employee (the ability to make a living) and the general public (free and open business competition).

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.

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