When you hear the term “trade secrets,” you might think of the recipe for Coca Cola or the formula for WD-40. And these are certainly two of the most famous trade secrets in the world.

But the concept of “trade secret” encompasses much more than secret recipes and formulas. Did you know that even things like customer lists, payroll information, and marketing strategies can be considered trade secrets?

The broader definition is important because trade secrets are protected under state and federal law, and a company can take legal action against a party that misappropriates or misuses its trade secrets.

That’s what happened in a 2024 South Carolina Court of Appeals case, Jennings-Dill, Inc. v. Eric Israel (read the case here). The company took legal action against Israel, a former employee, alleging that he harmed the company by taking and misusing confidential personnel information. We’ll look at that case a little more closely later.

But first, what exactly is a “trade secret”?

What is a Trade Secret? State and Federal Definitions

South Carolina Code Section 39-8-20(5) defines “trade secret” as:

• information including, but not limited to, a formula, pattern, compilation, program, device, method, technique, product, system, or process, design, prototype, procedure, or code that:

  (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by the public or any other person who can obtain economic value from its disclosure or use, and

  (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

This definition is almost word-for-word the same as the definition in the United Trade Secrets Act (UTSA; link to PDF), a model law created by the Uniform Law Commission. The UTSA has been adopted in some form by nearly every state (with the notable exception of New York, whose courts rely on a similar definition).

The statute continues:

• A trade secret may consist of a simple fact, item, or procedure, or a series or sequence of items or procedures which, although individually could be perceived as relatively minor or simple, collectively can make a substantial difference in the efficiency of a process or the production of a product, or may be the basis of a marketing or commercial strategy. The collective effect of the items and procedures must be considered in any analysis of whether a trade secret exists and not the general knowledge of each individual item or procedure.

At the federal level, trade secrets are also similarly defined. Under the Defense of Trade Secrets Act (18 U.S. Code Chapter 90):

• (3) the term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—
  • (A) the owner thereof has taken reasonable measures to keep such information secret; and
  • (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information

“Compilations” as Trade Secrets: Customer Lists, Financial Analyses, Manuals, and More

Under the definitions above, it’s easy to see how something like a special formula, recipe, piece of code, product design, or manufacturing process could be a trade secret.

But things like financial analyses, training manuals, marketing strategies, customer lists, and personnel information can also be considered trade secrets, falling under the “compilation” part of the definition. As long as the information derives economic value due to its confidential nature, and the company takes reasonable steps to maintain secrecy, it may be considered a trade secret.

What to Do When Trade Secrets Are Stolen

When trade secrets are misappropriated, the owner of the intellectual property (usually a company) can bring a civil suit against the suspected thief. In some circumstances, criminal charges may be brought by the government; this is more common at the federal rather than the state level, and typically only in situations involving economic espionage or significant financial harm.

In civil suits, plaintiffs often seek injunctive relief to prevent the trade secrets from being further disseminated. This is important because once a trade secret is widely known, it ceases to be a trade secret and is not protected under trade secrets laws. Plaintiffs may seek monetary damages as well, usually as lost profits or unjust enrichment of the defendant.

Jennings-Dill, Inc. v. Eric Israel: Personnel Information as Trade Secrets

That’s what happened in Jennings-Dill, Inc. v. Eric Israel. The appeals court case mainly focuses on when it’s appropriate to grant injunctive relief, which we won’t go into here, but the background facts center on company personnel information as trade secrets.

Eric Israel worked for Jennings-Dill, Inc. (JDI), a commercial plumbing and gas piping company in Greenville, SC, for eleven years before resigning in the summer of 2021. In his role as superintendent, Israel was given a company iPad with access to confidential information. He was subject to company policy which, among other things, forbids employees with a company iPad from copying sensitive data.

Around the time of his resignation, Israel downloaded files from the company iPad with confidential information including personal contact details and pay rates for all JDI employees.

JDI alleges that Israel used that information to solicit JDI employees to leave JDI and come work for Israel’s new employer. One JDI employee testified that within three weeks of Israel’s resignation, twelve of the 29 employees in the plumbing division left the company. This adversely affected JDI, it said, as it had to withdraw from projects worth over $2.5 million and would need a long time to recruit and train new plumbers.

JDI took legal action, seeking a preliminary injunction preventing Israel from using or disclosing confidential information and trade secrets from the documents he downloaded. JDI stated it considers the compilation of employee names, contact information, and pay rates to be a trade secret because it has economic value, is not readily available to the public, and gives JDI a competitive advantage.

The circuit court granted JDI’s request for injunctive relief, which the South Carolina Court of Appeals upheld after Israel appealed. The case did not go to trial – the parties ended up agreeing on a five-year-long permanent injunction preventing Israel from using JDI’s confidential information (PDF here) –  but the fact that the preliminary injunction was granted before the full facts of the case were heard shows how South Carolina courts view the importance of protecting trade secrets.

Contact Business Attorney Gem McDowell

If you believe your company’s trade secrets have been misappropriated, speak to an intellectual property attorney in your state, preferably one with experience handling trade secrets cases.

For help with other legal business matters in South Carolina, including starting, running, buying, or selling a business, contact Gem McDowell of the Gem McDowell Law Group. He and his team help business owners avoid costly mistakes and make smart decisions in order to grow their businesses and thrive. Call Gem and his team at the Myrtle Beach or Mount Pleasant, SC office today to schedule a free consultation at 843-284-1021.