Practitioners of trade secrets law will want to take note of a decision that came down last week from the Arizona Court of Appeals. The opinion, ArborCraft v. Arizona Urban Arborist, 1 CA-CV 23-0384, 2023 WL 6439844 (Ariz. App. Oct. 3, 2023), shines a little light on what it takes to protect a customer list under the AUTSA.
The lawsuit was between ArborCraft, a Phoenix company that specializes in tree removal, pruning, and storm damage response, and a Scottsdale competitor named Arizona Urban Arborist. The Phoenix company alleged that two of its independent contractors split to form the Scottsdale company, taking a customer list with them. It sued the Scottsdale company for several claims, including one under the Arizona Uniform Trade Secrets Act. The superior court entered a preliminary injunction in the Phoenix company’s favor—and last Thursday, the court of appeals affirmed.
The court wrestled with a number of issues in its opinion, but the central one was whether the customer list qualified—at least on the record so far—as a trade secret. The court agreed that it did. The list derived independent economic value from its secrecy because the Phoenix company invested “substantial efforts”— five years and nearly $400,000 on marketing—to develop it. (It did not matter that the information in the list was publicly available, the court observed; the value came from the amount of time the company spent pulling it together.) And the Phoenix company kept the list confidential, the court noted, by keeping it in a password-protected database.
Notably, the court acknowledged, the company did not make its contractors sign confidentiality agreements before accessing the list. That certainly “would have been wise,” the court noted, but “nothing in Arizona law makes [it] necessary for the client list to qualify as a trade secret.” The trial court was therefore right to issue the injunction.
Our counsel Matt Hersh covered this decision for the IP Law Daily. You can find his full writeup here.