New York District Court Denies Preliminary Injunction Motion Sought Under the Defend Trade Secrets Act
Plaintiff Art & Cook, Inc., a cookware and kitchenware company, brought suit in New York federal court against a former salesperson, Abraham Haber, when a search of his work computer revealed that he had emailed to his personal email account two categories of documents alleged by Art & Cook to be trade secrets: (i) its customer contact lists and (ii) its designs and branding/marketing strategies. Although the court already had issued a temporary restraining order, in Art & Cook, Inc. v. Haber, No. 17-cv-1634, 2017 U.S. Dist. LEXIS 164366 (E.D.N.Y. Oct 3, 2017), the court denied Art & Cook’s motion for a preliminary injunction brought exclusively under the Defend Trade Secrets Act (“DTSA”) because the company failed to demonstrate a likelihood of success on the merits of a DTSA cause of action.
First addressing the customer lists at issue, the court noted that the Second Circuit has long held that, under certain circumstances, a customer list may be deemed a trade secret – particularly where the customer list contains individual customer preferences or represents the list owner’s work to create a market for a new service or good. Where the list contains little more than publicly available information, even if it takes considerable effort to compile, it is not accorded protection under DTSA. The customer lists at issue in this case fell into the latter category, as they contained nothing more than a compilation of publicly available information including emails and phone numbers. The court said that that the fact that it took the company “tens if not hundreds of hours” of research to compile those lists was insufficient under DTSA.
Turning next to the company’s designs and branding/marketing strategies, the court noted that such material was exactly the kind of business information that DTSA was designed to protect because they derive independent economic value from not being generally known. However, the company failed to show that it took “reasonable measures” to keep the information secret. For example, the company’s president testified that he spoke to Haber many times about confidentiality, but the company did not require him to sign a non-disclosure agreement. In fact, the company asked him to sign a non-disclosure agreement three years into his employment and, when he refused to sign, nevertheless gave him access to what it contended was confidential information. The court found that the company’s other steps to secure its information, such as utilizing a password-protected server and folders, were inadequate given such circumstances.
Given the lack of a likelihood of success on the merits as to the DTSA claim, the court denied Art & Cook’s motion for a preliminary injunction and advised that the claim was susceptible to a motion to dismiss. The court’s decision provides companies with insight into what kinds of information are trade secrets under DTSA and how they should protect their trade secrets.