Impact | Business Risk Management Blog

In a recent decision from the United States District Court for the Northern District of Illinois in Intertek USA Inc. v. AmSpec, LLC, the Court found that certain financial information, aging and sales reports and laboratory equipment wish list qualified as trade secrets and entered a preliminary injunction to protect the use of that information by a competitor and former employees.

A recent Illinois Appellate Court decision found that one’s physical location is irrelevant in determining whether one has violated a non-competition provision.

In this case, the defendant owned and operated an integrative medicine business that provided services to patients in and around Bloomington and Peoria, Illinois. Defendant sold his business to the plaintiff through an asset purchase agreement. Among the assets purchased by the plaintiff were the patient list, patient records, goodwill, books, files, marketing data and all creative and promotional materials. The asset purchase agreement contained a non-competition clause that prohibited the defendant from providing integrative medical services within 30 miles of Bloomington and Peoria for three years after the sale.

Most business owners believe that their business has important confidential information which must be protected from competitors. Obvious examples of confidential information are secret formulas or recipes for certain cola drinks or fragrances. But what about customer lists, customer ordering patterns or preferences, pricing formulas, marketing strategies, product designs, sales strategies, and the like? Most business owners would not dream of disclosing these types of information to a competitor. But when an employee resigns or is fired, the former employee may decide to disclose this confidential information to a competitor or the employee may become the competitor. Most business owners believe that everything about their business is a trade secret, but they may be in for unpleasant surprises. Just because a business labels something a trade secret, does not mean that a court will recognize it as a trade secret. The goal of this article is to give business owners a better understanding of what factors courts consider to determine whether a business has a trade secret and what business owners can do to increase the chance of the court finding that their information is a trade secret.

Whether big or small, a customer base is vitally important to any business. Depending on the size and sophistication of a business, a customer list may be kept in one's head, on index cards, in a book or on a computer. Regardless of how that customer list is kept, a business wants to take steps to protect that customer list from being disclosed to people outside of the company, especially its competitors. And by taking those steps, a business may be able to qualify its customer list as a trade secret, which would allow it to take advantage of certain legal protections, such as those offered by the Uniform Trade Secret Act. This Act is an important tool in preventing third parties from obtaining and using a business's customer list.

Though your business may not have "secret recipes" for cola drinks or fried chicken, your business undoubtedly has some process or information that it believes gives it an advantage over its competitors. This confidential information may take many forms such as a customer list that has been created through the years at considerable expense and effort; a product design that a business's competitors do not have; or a pricing formula that generates greater profits. Importantly, if a business takes certain steps to keep this information confidential, the law will help protect it from becoming public information and getting into the hands of competitors. On the other hand, if a business does not take the correct steps your competitors are free to gain access to your information and use that information to their advantage.

Disputes between members of limited liability companies can get messy fast. A recent decision by the Illinois Appellate Court for the First District illustrates the importance of treating the limited liability company as a separate entity in disputes between members. The attorney-client privilege may hang in the balance.