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South Carolina Federal Court Finds Compilation of Public Information Protected as Trade Secret

    Client Alerts
  • August 24, 2012

As with most states, the South Carolina Trade Secrets Act  provides businesses with protections against misappropriation of certain proprietary information. Last month, a federal district court in South Carolina upheld a jury verdict awarding $4.3 million to the former employer of an executive who downloaded information used in a competing business venture.

In Uhlig, LLC v. Shirley, the plaintiff claimed that before resigning, the defendant copied and retained customer information used in his new business. The former employee contended that all of the information allegedly taken was readily available to the public, and therefore fell outside the definition of protected trade secrets. The court rejected this argument, concluding that compilations of otherwise public information can rise to the level of trade secrets. The court noted that the plaintiff presented evidence that the customer information had been meticulously collected for purposes of marketing using a specifically developed methodology. The collection and use of public information in this manner constituted a trade secret as defined under South Carolina law.

The court also rejected the defendant's claim that the information was not truly confidential because the plaintiff had not physically marked each page as such. The plaintiff had adopted certain restrictions and password protections for electronic access to the databases, and this was deemed sufficient to place the defendant on notice of the confidential nature of the information.

This decision provides a basis for employers to claim statutory protection of confidential business information, even that derived from public sources. In addition to the Trade Secrets Act, employers concerned about misuse of such information should consider requiring employees to sign confidentiality agreements in order to provide an additional and more direct claim than that provided under the statute. Employers should also take steps to clearly designate proprietary and confidential business information as such, and restrict access to such information to employees with job responsibilities in those areas.