Gillis Associated Industries, Inc. v. Cari-All, Inc.
564 N.E.2d 881, 151 Ill. Dec. 426, 206 Ill. App. 3d 184 (1990)
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Rule of Law:
Under the Illinois Trade Secrets Act, a customer list does not constitute a protectable trade secret if the owner fails to take reasonable efforts under the circumstances to maintain its secrecy, regardless of the list's economic value or the difficulty in compiling it.
Facts:
- Gillis Associated Industries, Inc. (Gillis) was the exclusive U.S. distributor for wire shelving manufactured by Cari-All, Inc. (Cari-All) under a formal agreement signed in 1984.
- As the distributor, Gillis developed and maintained a list of over 3,000 customers who had purchased Cari-All's products or other goods sold by Gillis.
- Gillis marketed the products through approximately 30 independent sales representatives assigned to various regions across the United States.
- In June 1989, the business relationship began to deteriorate after Cari-All proposed reducing Gillis's national territory and the parties could not reach an agreement.
- In late September 1989, Mark Oleska, Gillis's national sales manager, resigned from Gillis and began working for Cari-All.
- Gillis alleged that upon his departure, Oleska misappropriated its customer and sales representative lists and provided them to Cari-All.
- On November 6, 1989, Cari-All terminated its distribution agreement with Gillis effective immediately.
Procedural Posture:
- Gillis Associated Industries, Inc. (plaintiff) filed a suit against Cari-All, Inc. (defendant) in the Circuit Court of Cook County, Illinois (trial court), seeking a preliminary injunction.
- On December 18, 1989, the trial court granted the preliminary injunction, ordering Cari-All to return Gillis's lists and cease using the information contained within them.
- Cari-All, Inc. (appellant) appealed the trial court's order granting the preliminary injunction to the Appellate Court of Illinois, First District. Gillis Associated Industries, Inc. is the appellee.
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Issue:
Does a customer list qualify as a trade secret under the Illinois Trade Secrets Act when the owner fails to implement reasonable measures to maintain its confidentiality, such as using confidentiality agreements, marking documents as confidential, or restricting access to physical copies?
Opinions:
Majority - Presiding Justice Buckley
No. A customer list does not qualify as a trade secret under the Illinois Trade Secrets Act if its owner fails to take reasonable measures to maintain its confidentiality. The Act codifies a two-part test for trade secret protection: (1) the information must be sufficiently secret to derive economic value from not being generally known, and (2) it must be the subject of reasonable efforts to maintain its secrecy. While the court found Gillis's list met the first prong because it was not readily ascertainable and required significant time, effort, and expense to compile, it failed the second prong. Gillis did not take reasonable affirmative measures to protect the list's secrecy. There were no restrictions on hard copies of the list, which were not kept under lock and key or marked as 'confidential.' The employee manual's confidentiality clause was vague, and there was no evidence that employees signed confidentiality agreements. Furthermore, detailed customer information was shared with external sales representatives without any nondisclosure covenants or instructions to keep the information confidential. The absence of these internal and external security measures demonstrated a failure to make reasonable efforts to maintain secrecy, thus disqualifying the list from trade secret protection.
Analysis:
This decision provides a crucial interpretation of the 'reasonable efforts' requirement under the Illinois Trade Secrets Act, establishing that passive value is insufficient for legal protection. It serves as a practical guide for businesses, illustrating that affirmative steps—such as confidentiality agreements, document labeling, and access restrictions—are necessary to legally safeguard proprietary information like customer lists. The case emphasizes that a company's own conduct in protecting its information is paramount; a failure to treat information as a secret internally will likely prevent a court from treating it as one externally. This holding reinforces the principle that trade secret protection is not automatic and requires diligent, demonstrable efforts by the information's owner.
