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Company That Fails to Safeguard Information Cannot Hold Contractor Liable for Stealing It

By February 14, 2014No Comments

15286003-confidential-stampA recent Massachusetts Superior Court decision underscores the importance of being proactive when it comes to protecting trade secrets.  The Plaintiff, C.R.T.R., Inc., filed suit for misappropriation of trade secrets against an independent contractor who took customer lists, accounting records, and other sensitive information with him when his contract ended.  However, the Court granted judgment in favor of the Defendant and dismissed the case.

Although customer lists and financial data are typically considered confidential, Massachusetts Courts will not find a defendant liable for misappropriation unless the plaintiff can show it took sufficient measures to protect the information.  In this case (C.R.T.R., Inc. v. Lao), the Court held that the Plaintiff did not do enough to safeguard its information.  The company did not require the contractor to sign a confidentiality agreement; it had no policies concerning trade secrets or confidential information; and the customer lists were freely available through its computer system.  In addition, some of the company’s customers were publicly identified on its website.

The moral of the story, is that a business cannot hold someone liable for stealing their confidential information if the business did not treat the information like it was confidential before it was stolen or otherwise misappropriated.  There are a variety of methods for safeguarding trade secrets and other confidential information, depending upon the nature of the business and specific information to be protected.  In light of the legal framework, it is prudent to take a proactive approach to shielding sensitive information.