By Anthony Marchese
A Massachusetts lower-court ruling from earlier this year in the area of trade secrets law has drawn a good deal of attention and is worth noting here.
In this case, C.R.T.R., Inc. v. Lao, a recycling company called C.R.T.R. hired Kenneth Lao as an independent contractor to help run the business. Lao resigned, and C.R.T.R. filed a complaint against Kenneth Lao and his uncle, Jimmy Lao, who was also working for the company. C.R.T.R. alleged that both Laos had misappropriated confidential company information, including customer names, prices, accounting records, and information about C.R.T.R.’s relationship with another company.
The defendants moved for summary judgment against C.R.T.R., on the grounds that the company had not taken sufficient measures to protect its trade secrets. Among other things, they noted that the company was aware that Kenneth Lao worked as an independent contractor both for C.R.T.R. and for another company, yet the company had never required him or Jimmy to sign a confidentiality agreement.
In fact, it was undisputed that neither Lao had been asked to sign such an agreement. In addition, a company employee testified that the customer lists were available on a company computer and that information about the company’s contracts could be found on company websites.
Accordingly, a lower-court judge in Massachusetts granted summary judgment against C.R.T.R., finding that the company had not taken “reasonable precautions” to protect its trade secrets and thus could not sue for misappropriation of them.
This case has important ramifications for any company that hires independent contractors and entrust them with trade secrets. We will discuss them in the next post.
