John Mark Goodman and Jeffrey D. Dyess | BuildSmart
The construction industry is full of valuable business information including customer lists, pricing information, project budgets, and more. The value of such information may be lost if it becomes known to a competitor or the public at large. That is why it is important to take steps to protect confidential information from disclosure. Such steps may include confidentiality agreements, limiting access on a need-to-know basis, labeling, and other basic security measures. If you fail to take reasonable steps to protect confidential information, then you may not be able to get it back if it falls into the wrong hands.
A federal court in New Jersey explored these issues last week in JRM Construction Management, LLC v. Plescia, 2023 WL 2770479 (April 4, 2023). In that case, two former employees of JRM allegedly kept confidential information and shared it with their new employer, JRM’s competitor. The information at issue included client presentations, estimating procedures, and templates used to prepare final budgets for project bids. JRM sought an injunction to prevent further disclosure and to require immediate return of the information. The court refused to grant an injunction noting that discovery was needed to resolve several key issues of fact.
One of those key issues was whether JRM took reasonable steps to protect the information. While trade secret protection was once the domain of a patchwork of state common law decisions, 48 states (including New Jersey) and the District of Columbia have now adopted a version of the Uniform Trade Secrets Act (UTSA Enactment History), and a federal civil cause of action for trade secret protection was created with the 2016 enactment of the Defend Trade Secrets Act. 18 U.S. Code § 1836(b). Under either regime, the business trying to prevent the unwanted disclosure of its trade secrets will in every instance have to prove that the subject information meets the definition of a trade secret, including that the information was the subject of reasonable efforts or measures (tailored to the circumstances) to maintain the secrecy of the information. See 18 U.S.C. § 1839(3)(A); N.J.S.A. 56:15-2
The employees argued that JRM transmitted budget estimates to clients without any understanding or agreement that the information was confidential while knowing that such estimates were often shared with JRM’s competitors. The employees also claimed that JRM sent Excel file formats instead of .pdfs, so recipients had access to the underlying formulas and calculations. They argued that because JRM failed to protect its information, the information was not confidential or trade secret. As such, they were free to share it with their new employer and could not be required to return it. The court did not rule on whether JRM took adequate measures to protects its information but noted the factual dispute over that issue prevented it from issuing a preliminary injunction.
Whether JRM ultimately succeeds in retrieving its valuable business information remains to be seen. Regardless, the case stands as a good reminder to take steps to protect your confidential information and trade secrets. If you don’t, it could be stolen, and you may not be able to get it back.
Advancing technology and connectivity combined with high employee mobility make it easier than ever to transmit proprietary data.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.