Ohio Supreme Court Holds that Retained Memory Can Constitute a Trade Secret

In the past courts have drawn a distinction between trade secrets that were tangible or written and those that were retained in memory, offering protection for the former. That is, if employees held in their memory certain secret information from a previous job, they were able to disseminate or use said information with impunity in subsequent jobs.

           

The current climate, however, has changed. In the case of Al Minor and Assoc. Inc. V. Martin the Ohio Supreme Court ruled that this previous distinction is no longer tenable. The Court’s reasoning derives from the language of the Uniform Trade Secrets Act (USTA), which does not in any way differentiate between physical information and information which is retained in memory. 

 

The majority of states that use the USTA hold the same position as the Ohio Supreme Court. The changing attitude of the courts seems to reflect the notion that it is better to err on the side of innovation rather than competition. Employers rely on trade secrets to ensure that their investments in time and capital are not wasted; excusing retained memory from trade secret violations creates a disproportionate advantage for employees. It allows them to circumnavigate the law by memorizing confidential information for use in subsequent jobs where they can become a competitor or be hired by one. Consider the case of the employee with a photographic memory: What is the difference between this person recalling memorized information and someone reading from a document? If the distinction between memory and protected information holds, employers will be reticent to share information with employees, and will receive less incentive to invest in innovation.

 

On the other hand, including memory as protected information creates certain issues for employees, who cannot expunge all knowledge gained from previous employment. In Al Minor the issue was whether a customer list that was reproduced from memory could be considered a violation of trade secret law. The court did not consider the scenario where the information was acquired by a means (the Internet, a phone book, etc.) that is available to the public. In this situation the employee would still be using at least some retained memory of the clients’ names.

 

Another ambiguity arises when regular knowledge and skills cannot be easily divorced from trade secrets. The court reasons that not every “casual” memory obtained during employment can be considered a trade secret; however, “casual” memory is not clearly defined. The result is a situation where it is harder for the employee to prove they weren’t using their retained memory. Regardless, the burden of proof rests with the employer to show that the employee used their memory to violate trade secret legislation. Therefore their advantage is significantly mitigated.

 

By being forced to address the complexities of memory, the process of developing a concrete and comprehensible law will be a difficult one. Although the Ohio Supreme Court has left some questions unanswered, I think they are headed in the right direction.

One Comment
  1. English law has long recognized that memorized information can constitute a protectable trade secret. See for example Re Keene [1922] 2 Ch. 275 (C.A.), where a bankrupt was compelled to disclose to the trustee in bankruptcy the trade secrets of the business, so they could be realized for the benefit of creditors. The question whether or not such secrets are things an employee can carry off with him is a different question. Deliberately memorized information taken just before leaving is treated differently from information that has become part of the employee, and that he or she learned on the job as part of his general skill. He or she might still be prevented from using that information in new employment if the old employer made the trade secrecy of the information clear & if a reasonable employee would realize that post-employment use would break the trust the employer put in him or her. NAFTA art. 1711.2 allows the parties to make fixation in material form a precondition of protection, but I am not aware of either the US or Canada going this route. Significantly, TRIPs art. 39 lacks this facility, so it may be that no TRIPs member can make fixation a prerequisite of trade secret protection.

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