System Development Services, Inc. v. Haarmann
907 N.E.2d 63, 389 Ill. App. 3d 561 (2009)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Information does not qualify as a protectable trade secret if it is generally known or readily ascertainable through public sources, nor does knowledge that constitutes an employee's general skills and experience acquired during the course of employment.
Facts:
- System Development Services, Inc. (SDS) was a computer network services company in Effingham County, Illinois.
- Timothy Haarmann, Jason Repking, Rick Hoene, and Terry Oldham (the defendants) were computer technicians employed by SDS.
- During their employment, the defendants had access to SDS's password-protected customer database and gained intimate knowledge of their clients' computer systems and networks.
- Haarmann, Repking, and Hoene signed confidentiality agreements stating that customer lists and other company information were confidential, but none of the defendants signed a non-compete agreement.
- Haarmann resigned in January 2004, and the other three defendants resigned on April 9, 2004.
- The four defendants immediately formed a new, competing business called Technical Partners.
- Technical Partners created a mailing list from public sources like telephone books and the internet and sent brochures to potential customers.
- Many of SDS's former customers, several of whom had personal and family relationships with the defendants, switched their business to Technical Partners.
Procedural Posture:
- System Development Services, Inc. (SDS) filed a complaint in the circuit court of Effingham County, Illinois, against its former employees (the defendants), alleging violations of the Illinois Trade Secrets Act.
- SDS sought injunctive relief and damages.
- The circuit court denied SDS's motion for an emergency temporary restraining order.
- Following a bench trial, the circuit court found in favor of SDS, ruling that its customer list and knowledge of customer networks were protectable trade secrets.
- The circuit court awarded SDS an injunction, damages of $481,892, attorney fees of $260,695.99, and exemplary damages of $20,000.
- The defendants (as appellants) filed a timely appeal of the circuit court's judgment to the Illinois Appellate Court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a company's customer list and its knowledge of customer computer networks qualify as protectable trade secrets when potential customers are easily identifiable through public sources and the network information represents general skills acquired by technicians in the course of their employment?
Opinions:
Majority - Justice Stewart
No, a company's customer list and knowledge of customer networks do not qualify as trade secrets under these circumstances. To be a trade secret, information must be sufficiently secret to derive economic value from not being generally known. First, SDS’s customer list is not a trade secret because the identity of potential customers for computer network services—namely, local businesses—is not secret information. This information is readily ascertainable from public sources such as telephone directories, chamber of commerce lists, and the Internet, especially in a small market. A list of publicly known businesses does not become a trade secret merely through compilation. Second, the defendants’ knowledge of customer computer networks is not SDS’s trade secret. This information is the property of the customers themselves, not SDS. Furthermore, the knowledge and familiarity the defendants gained by servicing these networks constitutes general skill and experience acquired in their profession, which they are entitled to use in future employment. An employee cannot be compelled to erase from their mind the knowledge gained through the ordinary course of their work.
Analysis:
This decision significantly clarifies the boundary between protectable trade secrets and general business information or employee skill. It establishes that in non-niche markets where customers are easily identifiable, a simple customer list is unlikely to receive trade secret protection, regardless of internal security measures. The ruling reinforces the principle that knowledge and skills an employee gains through experience belong to the employee and cannot be claimed as an employer's proprietary asset under trade secret law. This case serves as a caution to employers, indicating that if they wish to prevent former employees from servicing old clients, they must use a restrictive covenant, such as a non-compete agreement, rather than relying on trade secret law to protect information that isn't truly secret.
