Wednesday, January 24, 2007, 1/24/2007 08:55:00 AM

Customer Lists as Trade Secrets? Not Always.

A federal case from the Eastern District of Pennsylvania, McQ's Enterprises, Inc. v. Philadelphia Parking Authority, 2007 WL 127728 (E.D.Pa. Jan. 11, 2007), deals with the issue of when a customer list is a trade secret.

The action arose out of the City of Philadelphia's plan to implement a city-wide cab dispatch service to improve service. The plaintiff cab company, which runs its own large and expensive dispatch system, didn't like the plan to create a coordinated system and sought a TRO.

Plaintiff asserted that under the coordinated system, its proprietary customary list would be appropriated (because when its customers called its dispatchers the company would be required to dispatch the nearest cab, not necessarily one of plaintiff's).

The court balked at plaintiff's claim that the Pennsylvania courts routinely treat customer lists as trade secrets. Instead, the court ruled, "courts focus on the value of the customer list, asking whether the list represents a permanent and exclusive relationship between customers and the company."

Thus, the court held:

Plaintiff's trade secret claim is unlikely to prevail on the merits for several reasons. First, it is unclear from the evidentiary record before the Court that Plaintiff's customer list qualifies as a trade secret. Plaintiff does not support its motion with evidence that Plaintiff uses this list to gain a competitive advantage. Given the nature of the taxicab industry, it seems unlikely that Plaintiff uses its customer list to solicit business. How would Plaintiff know which customers need to hire taxi cabs at any given point in time? The Court also doubts that the customer list has value to Plaintiff and is important in conducting its business because there is no evidence that the list represents a permanent and exclusive relationship between Plaintiff and its customers. Third, there is no evidence in the record that Plaintiff's customer list will be transmitted to its competitors. Although Plaintiff will be required to offer its customers the option of hiring a competing taxi cab in some circumstance, Plaintiff's own dispatcher will arrange for the service. It is not likely that Plaintiff's competitors will therefore learn the customer's identity and use it to their competitive advantage by soliciting that customer in the future.

The motion for the TRO was denied.

By the way, kudos to the clerk's office in the Eastern District for its excellent free opinions site.
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