Can Customer Lists Be Considered Trade Secrets?

For business owners, protecting valuable information is more important than ever. One question that often arises in the realm of intellectual property law is whether customer lists can be considered trade secrets. Businesses invest significant time and resources in developing these lists, but are they protected under the law? Read this article and reach out to a seasoned New Orleans, Louisiana trade secret lawyer from Lemler IP to learn what qualifies as a trade secret, how customer lists can fall under this category, and what steps businesses should take to protect them.

What Is a Trade Secret Under Louisiana Law?

In Louisiana, trade secrets are protected under the Louisiana Uniform Trade Secrets Act (LUTSA), which mirrors many aspects of federal law, including the Defend Trade Secrets Act (DTSA). A trade secret is defined as information that derives independent economic value from not being generally known or readily ascertainable by others who can obtain value from its disclosure or use. This information must also be subject to reasonable efforts to maintain its secrecy. Trade secrets can take many forms—such as formulas, practices, processes, or compilations of information. But how does this apply to something like a customer list?

For a customer list to qualify as a trade secret, it must meet these criteria. If the list includes more than just publicly available names, such as detailed preferences, purchasing history, or exclusive contacts that competitors would find valuable, it has a stronger chance of being protected as a trade secret. However, simply having a list of publicly known client names or addresses would not likely be considered a trade secret.

How Do Courts Determine When Customer Lists Are Trade Secrets?

Courts use several factors to determine whether a customer list qualifies as a trade secret. The most important factor is whether the list contains information that provides a business with a competitive advantage. The more detailed and curated the list is, the more likely it will be considered a protected trade secret. For example, if the customer list includes contact details that competitors would have to work hard to compile, or if it reveals key insights about customer preferences that are not easily discoverable, it is more likely to be protected.

Another critical factor is the effort a business takes to keep the list confidential. Courts will look at whether the company has made reasonable efforts to protect the list, such as limiting access to the information, using nondisclosure agreements (NDAs) with employees, and/or employing cybersecurity measures. If a business fails to adequately protect the customer list, it may lose the ability to claim trade secret protection.

What Steps Can Business Owners Take to Protect Their Customer Lists?

For business owners, the best way to ensure that customer lists are protected as trade secrets is to take proactive steps. One of the most important measures is to implement strong internal policies that emphasize confidentiality. Employees who have access to the customer list should be required to sign NDAs that outline the confidential nature of the information and the consequences of sharing it. Additionally, businesses should limit access to these lists to only those employees who need it to perform their job duties.

Cybersecurity is another crucial aspect of protecting customer lists. Businesses should ensure that their customer databases are encrypted and that access is restricted through passwords or other secure methods. Physical security measures, such as locking files or using secure servers, can also help bolster a company’s claim that it took reasonable steps to protect its trade secrets.

Finally, businesses should stay informed about relevant intellectual property laws and consult with experienced intellectual property attorneys to ensure they are fully compliant with state and federal regulations. An attorney can help craft agreements and policies that protect the business’s valuable assets, including customer lists, and can represent the business in the event of a trade secret dispute.