Who Owns Your Customer or Client List?

Over time, if you’re like many businesses, you have developed a list of prospective and former customers and clients, all of whom you have had some degree of contact with, even if they never actually did business with you.

When an employee leaves your company and takes that information or part of it, you may get angry and want to protect that valuable customer list. But can you do that? Is a list of people you have done business with, a protectable trade secret?

It’s Not the Names That Matter

Because just a list of names or list of business clients may not seem particularly inventive or innovative, it may not seem like something that can be protected. But in fact, lists of customers or clients, or even just people you hope to do business with in the future, can be considered an asset worthy of trade secret protection, thus preventing departing employees from taking and using this information.

What is protectable isn’t in the names themselves, but rather, how you acquired or compiled the list.

As a general rule, anything that could readily be ascertainable or which could be acquired by the general public, cannot be a trade secret. So, for example, if you just bought a list of names from a marketing company, that may not be protectable. All you did is buy something that anybody else could buy.

But if your list of sources or clients is through marketing, promotion, interpersonal relationships, your years in business, going to shows or seminars, or other ways, then yes, your customer lists may in fact be considered a trade secret. That customer list is a product of your time, trial and error, expertise, know-how, and expenditures.

Who Owns Which Client?

In customer based businesses, where there is a lot of marketing and generating leads, you may face the problem of who generated which clients.

If your employees bring customers to your business, and then that employee leaves your company, a legal issue may arise as to whom those customers “belong to.” The same goes for businesses that hire employees that already have an existing book of business, which they are bringing to your business.

Use Agreements

This is why in any business where employees are actively selling, generating leads, or marketing your business, a written agreement spelling out which customers are yours, and which are not, are necessary. Of course, from your business’ standpoint, you will want to make the agreement as broad as possible—that is, you’ll want all customers to be your property, regardless of where they came from-even if the employee brought or generated them.

If you are going to give the employee some ownership of his or her own clients that he or she generates, you should point out which client is theirs and which is yours.

For example, are clients that your marketing brings in, but which the employee actually converts to sale, the employee’s, or yours? If the employee brings in a lifelong friend or family member who would that client belong to?

It’s always hard thinking about these things in the beginning of a business relationship. But doing so can avoid problems and fighting later on down the road, should things go sour between you and the employee.

Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 for help with your trade secret case.

Sources:

jdsupra.com/legalnews/trade-secret-protection-for-customer-29052/

plaintiffmagazine.com/recent-issues/item/when-customer-lists-are-not-trade-secrets