REMBERING WHAT YOU ARE SUPPOSED TO FORGET:
Trade Secrets, Casual Memory, and Non-Compete Agreements
Introduction: As originally proposed in England, as early as 1414, non-compete agreements were disfavored as against the public interest, regardless of how reasonable their terms. These agreements remained unenforceable until 1711, and by the beginning of the 20th century were common-place. In addition to agreements between the parties which restrict future employment, Ohio, like most states, has a Trade Secrets Act (“TSA”). (Ohio Revised Code, Ch. 1333). It is only natural that there is a relationship between non-compete agreements and the TSA since non-compete agreements were first recognized as a way to protect employers' rights in knowledge and information possessed by former employees. However, the TSA, while affording protections to employers, raises a host of questions for former employees.
Issue Before the Court: The TSA makes it unlawful for an employee to take a customer list in paper or electronic form. Such conduct is seen as a breach of loyalty to the soon to be former employer. Likewise, studying or memorizing customer names is likewise violative of the TSA. But is it a breach of loyalty or violative of the TSA if an ex-employee compiles a customer list strictly from casual memory? The courts in Ohio are divided in their response to this question. To resolve the split among the Courts of Appeal, the Ohio Supreme Court has agreed to hear argument in the case of Al Minor v. Robert Martin. The question the Court will answer is: “Are customer lists compiled by former employees strictly from memory a basis for a statutory trade secret violation”?
Relationship of Non-Compete Agreement: A critical element in establishing TSA protection by an employer is to prove it took reasonable steps to keep its claimed secrets secret. Thus, the existence of a confidentially or non-compete agreement will be of value to an employer by helping to maintain a competitive edge and proving entitlement to TSA protection. Although non-compete agreements are not valid in New York, California, or Massachusetts, they are enforceable in Ohio if they are no broader than is needed to protect an employer’s legitimate interests. How do courts view casual memory in light of these principles?
Two Lines of Authority In Ohio: In Ohio, appellate courts in Hamilton and Franklin counties prohibit the use of information learned by casual memory, provided there were sufficient efforts to maintain the confidential nature of the information. In Cuyahoga County, the court realized that former employees cannot be required to turn a blind eye to everything they may have learned or acquired during their working life.
Forcing former employees to “forget” basic information acquired while employed is not realistic and precludes employment until the employee’s memory fades. As a practical matter, this imposes a non-competition agreement benefiting the employer with nothing in return for the employee. Because memory may take years to fade, sufficiently prohibiting the use of casual memory may give life to an agreement in perpetuity. It is highly unlikely that the courts intended that former employees carry secretly to their graves the identity of their former employer's customers.
What Should Employees Do? Take stock of the terms and conditions by which you are bound. These can be contracts and agreements, imposed by operation of law, or both. Remember, unless the agreement provides otherwise, you are bound by its terms regardless of whether you resign, are laid off, or are terminated. Do not remove any physical information from the premises or e mail files with information which could be protected as a trade secret. Studying the information so you can re-create the list “from memory” is also prohibited. For now in Cuyahoga county, unless the Supreme Court rules otherwise, you may use your experience, skill, acumen, memory and general knowledge in your own business or the business of another. There are no restrictions on using memory gained through experience on the job in Cuyahoga county.