No nondisclosure agreement? Maybe no problem in protecting your trade secrets [H.Q. Milton v. Jessy Webster]

No nondisclosure agreement? A recent California case says that might not stop you from protecting information as trade secrets.

The case is H.Q. Milton v. Jessy Webster, out of the Northern District of California. H.Q. Milton is a specialty watch shop. It’s small, with just four employees. (This matters.)

Of the two defendants, one (Webster) was a former employee who started his own watch shop (Oyster Palace) after leaving H.Q. Milton. The other defendant (Matsuba) was also an H.Q. Milton employee. While Matsuba was at H.Q. Milton, he fed H.Q. Milton’s client and pricing data to Webster, for use at Oyster Palace.

When H.Q. Milton figured out what was happening, it fired Matsuba. And it sought a temporary restraining order, to stop the defendants from using H.Q. Milton’s confidential data.

The former employees’ main defense was that this data wasn’t a trade secret. They never signed nondisclosure agreements, so they argued that H.Q. Milton didn’t make the required reasonable efforts to maintain secrecy.

But the court disagreed. Even without nondisclosure agreements, the court found H.Q. Milton took reasonable efforts based upon two facts. One, H.Q. Milton held a meeting of all employees, where it told those employees that they can’t use company data elsewhere and the employees acknowledged it. Though the court didn’t explicitly say it, the tone of the decision implies a nondisclosure agreement wasn’t required because of H.Q. Milton’s small size. (Contrast with the recent D.P. Dough Franchising, LLC v. Southworth case out of Ohio, where the court found that D.P. Dough’s information wasn’t a trade secret partly because it was “shared . . . with employees who are not subject to any non-disclosure requirements.”)

The court’s ruling also resulted upon H.Q. Milton’s keeping cost, sale, and profit information in an electronic file accessible only via a password.