MEMORIZATION IS NOT A DEFENSE TO TRADE SECRET MISAPPROPRIATION
R.MARK HALLIGAN, ESQ.
Copyright 1995 R. Mark Halligan, Esq.
Trade secret cases are often difficult to litigate. The Defendant (ex-employee) typically denies taking his former employer's trade secrets. Instead, the ex-employee argues that he is only using his "general knowledge, skills and experience." This is often a legitimate defense. In fact, the courts have observed, in trade secret cases, that it is impossible to perform a "prefrontal lobotomy" on a former employee. See e.g., Fleming Sales Company v. Bailey, 611 F.Supp. 507, 514 (N.D. Ill. 1985).
The dividing line between "general knowledge, skills and experience" and the alleged "misappropriation of trade secrets" is often a narrow one which requires expertise in trade secrets litigation.
Defendants often assert that tangible evidence of copying must be shown to prevail on a trade secret misappropriation claim. The taking of a former employer's trade secrets, by memorization alone, is not actionable. By definition, this constitutes "general knowledge, skills and experience."
The so-called "memorization" defense was recently rejected by the Illinois Appellate Court in Stampede Tool Warehouse, Inc. v. May, 651 N.E.2d 209 (1st Dist. 1995).
Stampede is a national distributor of automotive tools and equipment. Stampede's customer list consists of tool jobbers who buy automotive tools and equipment for resale to end users. The record established that the identity of tool jobbers is not publicly available information and that Stampede expended substantial time, effort and money to develop its customer list. The record also established that Stampede's customer list was kept confidential. Therefore, the Appellate Court found that Stampede's customer list was a protectable trade secret under the Illinois Trade Secrets Act (ITSA), 765 ILCS 1065/1 et seq.
The Defendants (ex-Stampede salesmen) argued, however, that there could be no finding of "misappropriation" of the customer list because there was no evidence in the record to establish an actual physical taking of the customer list or any other tangible evidence to establish misappropriation of the customer list.
In resolving this issue, the Illinois Appellate Court made it clear that a claim of trade secret misappropriation can be established by either physical copying or by memorization:
"There was substantial evidence that defendants misappropriated the customer list either through copying down names or through memorization. In fact, defendants admitted that they redeveloped their customer lists by remembering the names and locations of at least some of their Stampede customers. Using memorization to rebuild a trade secret does not transform that trade secret from confidential information into non-confidential information. The memorization is one method of misappropriation. Since the trial court's findings were not against the manifest weight of the evidence, we affirm the injunctions. Smith Oil Corporation, 127 Ill. App. 3d at 429, 82 Ill. Dec. 250, 468 N.E.2d 797." [651 N.E.2d at 217. (Emphasis added).]
To be a valuable intellectual property asset, trade secret rights must be protected and enforced by the courts. The rejection of the "memorization" defense in Stampede Tool Warehouse, Inc. v. May makes it clear that "memorization" can be one form of misappropriation and that "memorization" does not constitute a defense to a trade secret misappropriation claim.