Monday, November 06, 2006, 11/06/2006 07:37:00 AM

Trade Secrets and Former Dealers (Pacer Req’d)

One area of particular trade secrets vulnerability for manufacturers is their own dealers and, especially, former dealers.

The US District Court for the Middle District of Tennessee, recently dealt with that issue in Xerox Corp. v. O’Dowd, 2006 WL 3053408 (M.D.Tenn. Oct. 26, 2006). O’Dowd was a former Xerox employee and his company, DDS, was a long-time Xerox distributor. The relationship started to sour in 2005 and DDS thereafter became a dealer for Xerox competitor, Sharp.

Xerox brought a case against O’Dowd, DDS and others claiming misappropriation of trade secrets. The secrets in question were basically customer data maintained on a proprietary Xerox system, MarketSmart, made available, under a confidentiality agreement, to Xerox distributors like DDS.

The court found first that the MarketSmart database contained trade secrets. In the words of the court:

Information specific to Xerox's customers, such as contact information, models and serial numbers of Xerox equipment purchased, notes entered by Xerox or its sales representatives concerning contacts with the customers, Dunn & Bradstreet reports relative to specific Xerox customers, UCC-1 filings of competitive equipment, lease status, pricing information, usage, and service histories, is not generally known outside of Xerox, and such information is divulged to Xerox employees and agents under strict conditions. The information is not shared with Xerox dealers. O' Dowd and DDS executed Xerox agreements in which they acknowledged the confidential and proprietary nature of the information and agreed to return such information at the conclusion of the business relationship. Xerox takes numerous security measures to guard the secrecy of the information and prevent its replication because the information is very valuable to Xerox and its competitors.

The court also found that suspicious downloading activity on the part of DDS just prior to the switchover from Xerox to Sharp. The court found irreparable harm based on the fact that the information was trade secrets.

The list above of customer-related trade secrets is one of the more comprehensive one is likely to encounter.

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