Maryland Appellate Court Confirms Trade Secret Protections for Customer Lists

Maryland’s second-highest court, the Maryland Appellate Court, has reiterated that confidential customer lists, vendor pricing, profit margins and other pricing information may constitute trade secrets under the Maryland Uniform Trade Secrets Act (MUTSA).

In Ingram v. Cantwell-Cleary Co., a group of key employees left their employer to form a competing company, taking many clients with them. Their former employer sued for theft of trade secrets under MUTSA, among other things. In order to constitute a trade secret under MUTSA, the information must (1) Derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (2) Be the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

In this case, the Court held that the customer lists and other pricing information in question met the definition under the specific circumstances of the case. The information included account-specific pricing information that was adjusted for each customer by the sales people, which established a pattern on how to price the account. Such information would be valuable to competitors, if they understood how the pricing was determined, so that they could undercut the pricing in each circumstance. This information was developed over time and was not generally known to competitors in a highly-competitive industry.

Moreover, the employer took several reasonable steps to protect the information on its internal database, by restricting access, assigning numeric levels of access clearance, and requiring salespeople to have a high clearance level, which still required managerial approval to print off account-specific information. The company also had policies that prohibited the removal of confidential information that included pricing, sales and customer information, and required its return upon termination. In addition, all sales people were required to sign a non-compete agreement that acknowledged their duty to keep the company’s customer, vendor and pricing information confidential.

This case provides a good reminder to employers that, particularly in a competitive industry, specialized and individualized customer lists and pricing information can constitute a trade secret – but it is important, if so, that the employer take clear and effective steps to protect that information.