Is it a trade secret if I already knew of it before I began working for the company?

Asked over 1 year ago - Riverside, CA

Until recently , I worked for a company with which I had signed an employment agreement . That agreement said that I couldn't solicit its customers for a year after I left , and that I couldn't ever use its customer information for my own purposes . One of the company's customers was a firm called , let's say , XYLIA . I knew of XYLIA before I ever came to work for the company I just left , and I had contacts within XYLIA that I developed way beforehand . I now work for a new company that competes with my old one . XYLIA wants to leave my old company and become a customer of my new employer . Can I get sued if XYLIA follows through with this ? Isn't it okay for me to share what I know about XYLIA with my new employer , since I didn't learn it while on the job with my old employer ?

Attorney answers (4)

  1. Michael Robert Kirschbaum

    Contributor Level 20

    14

    Lawyers agree

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    Answered . Many companies seem to think that anything and everything an employee uses during their employment is a trade secret. Most of the time they are incorrect. Sometimes employees come to a company with their own contacts or book of business. In some industries, customer information is available to all competitors. Just because a company does business with a customer, that does not give the company exclusive access to the customer, nor can it prevent an employee from continuing their relationship with the customer after they leave, unless the employee is truly using information that is unique and only available through their employer.

    Trade secret law is a bit complicated, so it would be very difficult to give you a specific answer to your question. You would best be served by consulting with an attorney who could read your contract, and listen to the circumstances of your situation. Even if it appears you are not violating any trade secrets, it does not necessarily follow that your former employer will not sue you and your new employer anyway. For this reason, it would be wise to explain your dilemma to your new employer and get a legal opinion from their legal counsel, as well. If a lawsuit is filed, it would be against both you and the new employer.

    They say you get what you pay for, and this response is free, so take it for what it is worth. This is my opinion... more
  2. Craig Trent Byrnes

    Pro

    Contributor Level 15

    12

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    Answered . The analysis of your question requires us to understand two things. The first is: What information can a former employer prevent you from using at a new employer, and what acts can it prevent you from taking?

    A former employer can prevent you from using its trade secret information for a new employer. Older cases say that it can also prevent you from using confidential or proprietary information (whatever that is; the cases never really say), but the recent trend limits the former employer to restricting use of its trade secrets only. Any contract that tries to go beyond that is void and illegal.

    The second thing we need to know is: What is a trade secret?

    A trade secret is information that (a) has value, at least in part, because it is a secret, and (b) is subject to reasonable efforts to maintain its secrecy.

    Clearly, any contacts that you had with XYLIA prior to coming to work for your previous employer couldn't be their trade secrets. Therefore, you couldn't be restricted from using them.

    Moreover, you're on even safer ground if XYLIA contacted you (or your new employer) and asked to become a customer. That would mean you didn't solicit the business, but rather, the business came to you. The fact is that the law even allows you to solicit your old employer's customers (so long as you don't use trade secrets in doing so), but if they made the first contact, you don't even have that worry.

    Having said all that, I agree with Mr. Kirschbaum 100%: just doing the right thing doesn't mean you won't get sued anyway. I've represented many employees who did nothing wrong, but got sued by their former employer regardless.

    If that happens, your new employer should indemnify you (meaning, reimburse you) for any costs you incur in defending yourself. Moreover, at least one case says that it would be illegal for your new employer to fire you just because you got sued for this reason.

    I hope this information is helpful to you. Good luck with your legal issues.

    Sincerely,
    Craig T. Byrnes
    www.ctblawfirm.com
    310-706-4177

    Disclaimer: Please be aware that I am not offering legal advice, nor forming an attorney-client relationship with... more
  3. Marilynn Mika Spencer

    Contributor Level 20

    9

    Lawyers agree

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    Answered . This situation needs an assessment of the specific facts, including a review of the non-solicitation agreement you signed with your former employer. The Avvo board is not set up to handle the kind of detailed analysis needed to offer helpful guidance. Avvo works best for short, specific questions that allow for short, specific answers. Perhaps more importantly, anyone can read the discussions on Avvo so they are not confidential. The employer or whomever is involved in the dispute can read everything written here.

    Your new employer may have dealt with this many times before and may be able to provide guidance. If not, you will need to bring the agreement to an employment law attorney who can review it with you and discuss the facts. It is possible the agreement is ambiguous or silent on your particular situation, in which case it makes sense to negotiate how to handle this, either on your own or by using an attorney. There are a lot of traps and "gotchas" in this kind of negotiation, so you may be better off using an experienced attorney.

    To find a plaintiffs employment attorney in California, please go to the web site of the California Employment Lawyers Association (CELA). CELA is the largest and most influential bar association in the state for attorneys who represent working people. The web site is www.cela.org. Click on "Find a CELA Member" and you can search by location and practice area. Many CELA attorneys represent clients throughout the state.

    I hope you can resolve your situation and wish you the best.

    twitter.com/MikaSpencer *** All legal actions have time limits, called statutes of limitation. If you miss the... more
  4. Michelle A. Perfili

    Contributor Level 13

    3

    Lawyers agree

    Answered . The simple answer is anyone can sue for a perceived infraction of either your employment agreement of California law relating to trade secrets (or related theories such as Intentional Interference with Contract or Unfair competition). The real issue is the potential of you being embroiled in a suit where you may "step over the line" and incur liability. Counsel have all given good sketches of the issues but what may be in your opinion "prior knowledge" may collide with protected information and you should speak with experienced counsel, many who will offer a free initial consultation. I also think you should address these concerns with your current employer before you decide what to disclose. The details in a trade secret and a non compete/solicit are very factually dependant. Good luck.

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