South Carolina Trade Secrets

The South Carolina Supreme Court has ruled that a company's customer list that is available to the public through other sources is not a "trade secret" protected under the South Carolina Trade Secrets Act, S.C. Code Ann. § 39-8-10, et seq.

In The Atwood Agency v. Black, et al., 646 S.E.2d 882 (S.C. 2007), the Supreme Court considered whether the customer list of a vacation home rental agency should be protected as a trade secret. Elaine Shaw worked for Atwood for fifteen years before leaving to work for a competitor, Edisto Sales and Rental Realty (Edisto). As a property manager at Atwood, Shaw had access to certain proprietary information, including lists of homeowners who rented their vacation homes through Atwood and lists of renters who obtained vacation homes through Atwood. After Shaw began work at Edisto, Atwood claimed that she had misappropriated Atwood's lists of homeowners and renters. It initiated legal action against Shaw, Edisto, and other principals in Edisto, alleging, among other causes of action, a violation of the South Carolina Trade Secrets Act.

Under the Act, a "trade secret" is defined as information that "derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by the public or any other person who can obtain economic value from its disclosure or use." S.C. Code Ann. § 39-8-20(5).

The trial court found that both the homeowners' list and renters' list constituted trade secrets under South Carolina law and enjoined Shaw and Edisto from "contacting and contracting with" any homeowner or renter on those lists. The South Carolina Supreme Court, however, found that the homeowners' list was not a trade secret, because the Town of Edisto Beach maintained the names and contact information for all homeowners in the Town as a matter of public record. Likewise, the Court found that the renters' list was not a trade secret because many homeowners maintained contact information for their renters. Therefore, since the lists were available through other proper means, they could not be protected as "trade secrets" under the Act.

Employers seeking to protect proprietary information as trade secrets can take two important points from Atwood. First, employers should consider entering into independently-negotiated confidentiality agreements, supported by valid consideration. Such agreements should be narrowly drawn and specifically define the "confidential information" that the employer wishes to protect.

Second, although not at issue in the Atwood case, employers must make reasonable efforts to maintain the secrecy of "trade secrets." Information that an employer desires to protect should be maintained in a manner such that it is available only to those employees with a true "need to know". Where such information is kept in electronic form, as opposed to hard copy, it should be appropriately password-protected and company policies regarding protection of computer systems and passwords should be enforced consistently. To the extent that proprietary information is maintained in hard copy, the employer should implement reasonable security measures designed to limit access and take steps to clearly mark documents as "confidential."