Protecting customer lists ranks highly in importance for many businesses, including creative businesses. Most businesses will have a list of customers that includes their sales history, their preferences, contact information, and other useful information; these lists are valuable and have certain legal protections. This protection for customer lists comes from an area of law called “trade secrets” and this article helps to introduce you to how it works.
Protecting Customer Lists As Trade Secrets
First off, understand that trade secrets law varies from state to state. That means that the methods of protecting customer lists varies from state to state. However, there are a few general principles to keep in mind.
- Keep the lists secret. For anything to qualify as a trade secret, it must be kept secret. That means that things like customer lists should be kept on a password-protected computer or in a locked drawer so that their status as a trade secret can be established. If such a list is freely disseminated to the world at large, or available to anybody who wants it, the likelihood of that list being considered a trade secret is diminished.
- Use a non-disclosure agreement. A non-disclosure agreement signals to the signer (this will typically be an employee or business partner) that they are receiving confidential information. Such a non-disclosure agreement (also known as an NDA) should make it clear that things like customer lists are considered confidential. Such an agreement can be used in court to further protect trade secrets.
- Know the limitations. Customer lists – and customers – are valuable. But they have limitations. Most crucially, in many states, the laws protecting customer lists don’t always prohibit someone from working for people on the customer list. Generally, the laws just prevent someone from using that list to solicit customers from that list.
As you can expect, things can get pretty detailed from there. As I said, the law varies from state to state, so if you have a list of customers that you wish to protect, the best move would be to hire an attorney in your state and have them advise you on what steps you need to take if you need help protecting your customer lists.
