Earlier this year, the Court of Chancery of Delaware denied a company’s preliminary injunction because it had shared its alleged “trade secrets” with potential franchisees on unsecured Zoom calls, thus destroying any claim that such information qualified for trade secret protection.
Under both, the federal Defend Trade Secrets Act and the various state Uniform Trade Secrets Acts, an owner of trade secrets must take “reasonable measures” or reasonable steps to protect the trade secrets from being disclosed.
In this case, the franchisor freely gave out the Zoom log in information for various franchisee calls to anyone who had expressed interest in a franchise and completed the introductory call. The company used the same Zoom meeting code for all of its meetings, did not require the participants to enter a password and did not use the waiting room feature to screen participants. Thus, anyone who had expressed interest and received the code could join the calls, and participants could readily share the code with others. Furthermore, no one took attendance roll to remove anyone who did not belong, and the records from such calls produced at the injunction hearing showed that there were at least twenty participants who attended the calls but could not be identified. Nor was there any evidence that these individuals signed the non-disclosure agreements.
Conclusion: The pandemic has disrupted many corporate routines, but companies should make sure that any new processes for communication and information sharing incorporate security measures to ensure that trade secrets are not disclosed to the public or competitors. This includes basic things like protecting conference calls with passwords, taking roll calls on Zoom conference calls, keeping record of attendance, making sure that everyone on the call has signed a non-disclosure agreement , and removing anyone who is not supposed to be on a call.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. Her practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.