Virginia Trade Secrets Act Analyzed by Fairfax Court

What is a trade secret? In Virginia, trade secrets generally consist of commercial information that (1) derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other businesses which would benefit from its disclosure; and (2) is the subject of reasonable efforts by the business to be kept secret. (The full definition is provided in the Virginia Uniform Trade Secrets Act itself, found at Va. Code ยง 59.1-336). Judge Bellows of Fairfax County Circuit Court recently had the occasion to consider the extent to which vendor and customer lists may qualify as protectible trade secrets.

Tryco, Inc. v. U.S. Medical Source, LLC involved a dispute chiefly between Tryco, a small business authorized to sell medical and dental equipment to the United States government, and former employee Brian Thomas, who had left Tryco to join U.S. Medical Source, LLC (“USMS”), a competing firm founded by his sister-in-law. Prior to leaving, Mr. Thomas cleaned out his desk and copied his personal files onto a flash drive. In the process, however, he also (inadvertently, the court found) copied two Tryco documents, one containing a list of buyer contact information and other providing certain information regarding Tryco’s vendors. When accused by Tryco of stealing confidential information for the purpose of benefiting a competitor, Mr. Thomas promptly returned the entire flash drive, explaining that the copying was inadvertent and stating that he never copied the drive, never showed it to anyone at USMS, and never used it.

Tryco sued both Mr. Thomas and USMS for misappropriation of trade secrets. Tryco also brought claims for civil conspiracy under Virginia’s business conspiracy statute, breach of fiduciary duty, and tortious interference. After four days of trial testimony, the defendants moved to strike Tryco’s evidence as insufficient to state a claim. Judge Bellows agreed with the trade_secret.jpgdefendants the Tryco had failed to prove theft of trade secrets within the meaning of the Virginia Uniform Trade Secrets Act, and found in favor of the defendants on all counts.

In reviewing the trade-secret issue, the first question was whether the lists of contacts and vendors had “independent economic value.” Tryco argued that the lists were extremely valuable as they enabled competitors to identify and contact its customers and suppliers, which otherwise would be difficult to obtain, and because they summarized confidential vendor-account information. While expressly recognizing the facial validity of Tryco’s arguments, the court nevertheless discounted the value of the documents for a couple of reasons.

First, the list of contacts was outdated as it had not been updated since 2006. Only three of the eighteen listed names had continuing relevance. Outdated documents, the court held, provide no independent economic value if the information in them no longer have any value. Second, with respect to the vendor list, the court observed that “courts have repeatedly held that collections of numbers and/or letters, whose only value is to access other potentially valuable information, do not by themselves have independent economic value.”

The next question in the trade secret analysis was to examine whether the documents were “not generally known to the public and not readily ascertainable.” The court found that the documents failed this test as well. Noting that what constitutes “readily ascertainable through proper means” is heavily fact specific, the court found that Tryco failed to prove that the identities of internal contact people was not readily ascertainable. While the information would take some effort to obtain, it appeared that competitors could eventually obtain the information from a thorough search. Because the contact list contained information available in the public domain, the court held that the contact list was not a trade secret. The court specifically rejected the argument that the compilation of the information is what made it a trade secret.

Finally, the court found that the defendants did not misappropriate trade secrets because the copying was inadvertent. Under Section 59.1-336 of the Trade Secrets Act, a plaintiff must show that trade secrets were misappropriated “through improper means.” Improper means include misrepresentation, breach of a duty, and inducement of a breach of a duty. Inadvertent copying does not meet this requirement. While Tryco had argued that the defendants breached fiduciary duties, violated the Computer Trespass Act, and engaged in statutory business conspiracy, the court rejected these theories as well and found no evidence of improper means.

In short, while vendor and customer lists may qualify as trade secrets in some instances, that will not always be the case. The lists must be current to be valuable, and mere compilations of publicly available information may not qualify for protection, despite the amount of work that went into creating the document.

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