It is no secret that business and corporate disputes frequently involve valuable business information that is broadly categorized, often mistakenly, as a “trade secret.” And while the law extends certain protections to trade secrets, the first question that should be addressed in such disputes is whether the information qualifies as a trade secret. So then, what information qualifies as a trade secret and just how secret does the information need to be? Does the information need to be as secret as the famed Coca Cola formula shown in this video:
On November 24, 2011, the Iowa Court of Appeals published its opinion in Monana County Mutual Ins. Assoc. v. Hoffman Agency, Inc (click here for opinion). The Hoffman opinion contains valuable insight on the type of information that may qualify as a trade secret in Iowa. The court began its analysis quoting the Iowa Uniform Trade Secret Act, which defines a trade secret as:
information, including but not limited to a formula, pattern, compilation, program, device, method, technique, or process that is both of the following:
a. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use.
b. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
The Hoffman court then cited a variety of legal sources that identify the following categories of information as items that may qualify as a trade secret:
the identity and requirements of customers;
maintenance of data on customer lists and needs;
sources of supplies;
pricing data and figures;
expiration lists (often used in the insurance industry);
cost books; and
customer books / lists.
While this list appears to provide valuable guidance on the topic, the court then cited a source that states virtually anything may be considered a trade secret, so long as the information remains protected from disclosure:
There is virtually no category of information that cannot, as long as the information is protected from disclosure to the public, constitute a trade secret … We believe that a broad range of business data and facts which, if kept secret, provide the holder with an economic advantage over competitors or others, qualify as trade secrets
Presumably recognizing the breadth of the issue and seeking to provide greater focus, the court identified several different “factors to consider in determining whether information constitutes a trade secret under Iowa law:”
- The extent to which the information is known outside of the business;
- The extent to which it is known by employees and others involved in the business;
- The extent of measures taken to guard the secrecy of the information;
- The value of the information to the business and its competitors;
- The amount of effort or money expended in developing the information;
- The ease or difficulty with which the information could be properly acquired or duplicated by others;
- The method by which an individual obtains information.
While a bright-line rule does not exist, the Hoffman opinion provides insight as to how an Iowa court may analyze the issue. If you are curious about whether certain information qualifies as a trade secret, or if you are concerned about whether someone is misusing your trade secret, an attorney with experience in this area of the law should be able to provide guidance based upon the unique facts of your case.
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