Internal Website Can Be a Trade Secret

Allegations that a customer database and an inter-office call center website were trade secrets survived a Rule 12(b)(6) motion to dismiss in Capital Meats, Inc. v. The Meat Shoppe, LLC, Civil No. JFM-15-212 (D. Md. July 9, 2015). The court ruled that the plaintiff had stated a plausible claim under the Maryland Uniform Trade Secrets Act (“MUTSA”), thus providing a useful illustration of how even information widely shared within a company can be protected as a trade secret.

The plaintiff, Capital Meats, Inc. (“CMI”), maintains a customer data base and call center website, both of which are used to track inventory, sales, customer payment processing, and outstanding balances owed by the retailers purchasing CMI’s frozen meat. CMI’s auditor resigned and, with as dozens of retail dealers, formed The Meat Shoppe, a door-to-door seller of frozen meat.

CMI’s complaint alleged that the defendants “directly obtained the information contained in the Database and Call Center Website through ‘improper means,’” and then distributed “that information to former Retail Dealers who joined The Meat Shoppe.” CMI further alleged that it lost significant business due to the defendants using the information to their competitive advantage.

The defendants moved to dismiss the count of violating the MUTSA, i.e., trade secret misappropriation, on two grounds: (1) the CMI database and call center website information were not “trade secrets,” and (2) CMI had not alleged that any defendant “misappropriated” that information.  The court rejected these arguments.

The court found, first, that CMI sufficiently alleged facts sufficient to establish that its database and call center website were considered trade secrets. CMI demonstrated that it derived economic value not only by the substantial amount of money spent to create its database and website, but by how this value “continued to increase as more sales were made and additional information was gathered and entered.” Furthermore, the defendants did not “adequately” contest the fact that the information contained within the database and website were not public knowledge, and were known only to CMI and its individual retail dealers. Moreover, CMI alleged that access to the database and call center website required “authorization credentials” for a limited number of authorized users. The court was satisfied that this allegation demonstrated “reasonable efforts” to maintain the secrecy of the information contained in the database and website.

Furthermore, the court found that CMI sufficiently alleged that the defendants misappropriated its trade secrets. According to CMI, its former auditor used “improper means” by engaging in “misrepresentation and deception” to have the database installed on her personal computer while employed at CMI. CMI further alleged that this information was distributed to the former retail dealers who joined The Meat Shoppe to their competitive advantage. CMI also alleged that those individuals who continued using “CMI's customer and product information while working for The Meat Shoppe knew or had reason to know that the information was obtained and continued to be utilized improperly.”

A “website” sounds like an awfully public thing. However, as this case demonstrates, trade secret protection is available to all sorts of electronic information, as long as that information is maintained in a manner consistent with trade secret protection.

Upcoming Webinar

We are delighted to kick off the first B2 IP Webinar of 2019 with David Hannon, Of Counsel at Bejin Bieneman, who will provide an outline of issues for decision by a US brand owner in its pursuit of trademark protection in China. Mr. Hannon will dis…Register

Subscribe