How a Virginia business owner failed to protect his business’s most valuable asset, and how you can prevent the same mistake

In Contract Assocs., Inc. v. Atalay (2015), a Virginia business owner was stunned when two long-time employees resigned to form a competing company. Within three hours of resigning, the employees used inside business financial information and the business contacts list to contact each of their previous clients and solicited their business (at a reduced rate of course). Their actions nearly terminated the business owner’s entire revenue stream. All it took was three hours of betrayal, and this business was gutted and listing.

This Virginia business owner sued the Defendants for using his client list, contacts list, and fee rates to solicit his entire roster of clients… but LOST because he failed to formulate specific policies to keep the client list and contrast list private.

He failed to plan. The business owner could have won. What did he do wrong?

First, he failed to have his employees sign non-compete and non-solicitation agreements. Next, he failed to show efforts that he reasonably maintained the secrecy of his customer list.

So how do you avoid the same mistake and protect YOUR customer information?

  1. Pair your customer list with identity and contact information that is not “readily ascertainable”. A good start would be customer credit history, buying habits, specific pricing information, sales volume, costs, project staffing, or profit margin.
  2. Use confidentiality agreements. A non-compete agreement and a non-solicitation agreement is paramount for businesses—big or small.
  3. Restrict access to this information with physical or software-related barriers, passwords, and encryption and have “need-to-know” rules and procedures.
  4. Mark pertinent documents as confidential.

Taking these steps will be key to later proving your customer list is a trade secret in court. The Stanley Law Group can help you craft legal protections for your customer/client list and other documents. If you need the advice of a qualified attorney, give my office a call at (540) 721-6028.

The article above is not intended as legal advice. We recommend you come to our offices for a proper legal consultation with our excellent attorneys to formulate a strategy which is suitable for your specific case

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