Client Alert
No Longer a "Secret": Member Lists Can Be Trade Secrets

April 7, 2020

By: Richard B. Bar

Non-profit organizations everywhere should be made aware of a little known “secret” — their member lists may constitute a trade secret protectible under the Defend Trade Secrets Act (DTSA). To state a claim under the DTSA, a plaintiff must allege the existence and ownership of a trade secret, and misappropriation of the trade secret. In a recent federal district court case, Brain Injury Association of California v. Yari, 2019 WL 4544419, the United States District Court for the Central District of California ruled that, based on the facts alleged by Brain Injury Association of California (BIACAL), BIACAL’s master list of 100,000 members could constitute a protectible trade secret that may have been misappropriated.

To demonstrate existence of a trade secret, the purported trade secret must meet the following two criteria:

• the information must derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information;
• the owner must have taken reasonable measures to keep the information secret.

BIACAL alleged that it spent significant time and effort amassing a master list that not only contained contact information of 100,000 members, but also contained data such as members’ interests in certain traumatic brain injury topics and speakers (as indicated by “click through” rates in BIACAL emails); historical attendance at traumatic brain injury events; involvement in other community groups; and relationships with other members of the community. BIACAL claimed that this data helped drive a large increase in its 2019 conference attendance and fundraising, which ended up attracting more than 2,000 attendees and raised approximately $500,000. The court found these facts sufficient to demonstrate that the information on the master list was not readily ascertainable and had independent economic value. The court also found that, even though there was a factual dispute as to whether BIACAL limited the defendant’s access to the master list for limited specific purposes, BIACAL still took reasonable measures to keep the information secret by storing the information on a secure database and restricting access to the database to only two BIACAL members, including the defendant.

Misappropriation of a trade secret is defined as the “disclosure or use of a trade secret of another without express or implied consent by a person who … at the time of disclosure or use, knew or had reason to know the knowledge of the trade secret was … acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret.” The court found the alleged facts could meet the requirement of misappropriation of a trade secret because the defendant used a list nearly identical to the master list to attempt to put on a similar competing conference, even though the defendant was given access to the master list specifically for purposes of migrating the information to a new database.

For non-profit organizations, this case provides helpful insights into when a member list could constitute a protectible trade secret. Information that goes beyond mere contact information can help show that a trade secret is not readily ascertainable and has economic value. Non-profit organizations would be well served by keeping data on any events or products that make use of the list, to help show the economic value of the information. Finally, limiting access to the list, having security protections for the list, and instructing those with access as to the information’s confidentiality and specific scope of allowed use of the information are all efforts that should be taken to ensure that reasonable measures are taken to keep the information secret.

It is important to note that this case does not mean that every member list is a trade secret. However, the more your organization can show that the members lists are not readily ascertainable, have economic value, and are treated as confidential, the likelier a court is to find the existence of a protectible trade secret.

For more information, feel free to contact GKG Law Trade & Professional Associations practice group leader Richard Bar at rbar@gkglaw.com or (202) 342-6787.