Wednesday, March 01, 2006, 3/01/2006 10:56:00 AM

Customer Information Isn't Always Confidential Information

By Todd
Customers of any business often have established purchasing patterns and often have described their purchasing preferences to a salesperson. When that salesperson leaves the employ of the current employer, can the former employer claim that the departing salesperson's knowledge of the purchasing patterns and purchasing preferences is the former employer's intellectual property?

The United States District Court for the District of Minnesota suggests not, absent special circumstances. In the case of Benfield, Inc. v. Moline et al., 2006 WL 452903 (February 26, 2006, D. Minn.), the court examined cross-motions for summary judgment as to whether some former employees in the reinsurance brokerage business had breached confidentiality agreements or misappropriated trade secrets in using information about customers they had learned while employed with their former employer.

The court looked to the definition of confidential information derived from other cases and learned that "the employee is entitled to fair notice of the confidential nature of the relationship and what material is to be kept confidential." The court also noted that it had previously held that "information as to customers, including knowledge of contact persons, prior purchasing history, and product and service requirements do not constitute trade secrets." The court went on to note the former employees did not take any physical files and that this is information likely to reside in the memories of the former employees.

We think the analytical work of this court was a bit soft - in the hierarchy of protectable information there are (a) trade secrets, commonly protected and defined statutorily, and then there is the lower form of information (b) confidential information. Often stumping courts is the issue of why a private business should be able to claim information provided by a customer can become a protectable interest of the employer who receives it. WELL, it makes sense that one who learns of information that is not known to the rest of the world - and compiles and tracks it for purposes of their employer who pays them - is in a position of knowing things they otherwise wouldn't know but for their employment. That information was provided by the customer for their employer's purposes, not theirs in the individual capacity. It was compiled for purposes of servicing and maintaining a relationship with that customer. It took time and money to do this. It was the employer's time and money. Seems to us that it is just a little too easy to say "you get to keep and use whatever you can remember in your head."

But we were not the judge in this case or any other. That said, one wonders if Benfield had a better confidentiality agreement whether they could've prevailed in this action. One can only wonder. We know this - this litigation surely cost a hundred times or more what Benfield spent drafting its employment agreements.

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