Publicly Available Information Is a Trade Secret

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Patricia Tsipras

September 28, 2023

Did that title get your attention?

The United States Court of Appeals for the First Circuit recently held that a compilation of customer information – many of the individual components of which were publicly available – was a trade secret.  Allstate Insurance Co. v. Fougere, No. 22-1258 (1st Cir. [Mass.] Aug. 29, 2023).

In the case, Allstate employed two agents to sell auto and casualty insurance products.  Both agents signed employment agreements that contained exclusivity (the agents were to exclusively represent Allstate), confidentiality, nondisclosure, and return-of-records obligations.  After Allstate terminated the agreements with the agents, Allstate learned that the agents had retained Allstate spreadsheets that contained the names of thousands of Allstate customers, as well as their addresses, telephone numbers, email addresses, driver’s license numbers, policy numbers, premiums, types of insurance coverage, and policy renewal dates.

Allstate sued the agents, asserting claims under Massachusetts law and the federal Defend Trade Secrets Act.  The trial court ruled in favor of Allstate, finding that the agents misappropriated Allstate’s trade secrets.  The agents appealed.

The agents first argued that the customer information was available from various publicly available sources and, therefore, was not a trade secret.  The First Circuit disagreed, holding that a compilation of customer information could constitute a trade secret “when it would have been immensely difficult to collect and compile it in the form in which it appeared in the compilation.”  The First Circuit also found that not all of the customer information that the agents retained was publicly available and, to the extent that it was, “it would be difficult, if not impossible, to develop the spreadsheets – which listed thousands of Allstate customers, along with their personal and policy information – solely through those means.”

The agents next argued that the customer information had no economic value.  Again, the First Circuit disagreed.  In their employment agreements, the agents agreed that misuse of Allstate’s confidential information would cause “irreparable damages” to Allstate.  The agreements also addressed a way in which agents could sell their “economic interest” back to Allstate upon termination.  The First Circuit also found that the information that the agents retained would be valuable to Allstate’s competitors.

The agents also argued that Allstate had not protected the customer information sufficiently (to prevail on a trade secret claim, Allstate had to show that it took reasonable steps to preserve the secrecy of the information).  Once again, the First Circuit disagreed.  It found that the agents’ employment agreements with Allstate specified which information was confidential and how it was to be handled.  Allstate also required passwords to access such information, restricted access to it, and revoked that access upon the termination of agents.

Ultimately, the First Circuit affirmed the trial court’s decision in favor of Allstate.

Employer Takeaways
Employers often rely on trade secret arguments when they do not have a contract to which they can point.  However, as shown by the Allstate case, a contract can provide further support for your trade secret claim.  In addition, this case demonstrates how compilations of publicly available information can constitute a trade secret.

Furthermore, though not addressed in this case, consistent enforcement of the restrictions in your agreements with employees also is a good way to show that you reasonably protect confidential information.

This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice.  Always consult an attorney with specific legal issues.