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Protection of Agency Confidential Information Mary M. Luria Craig M. Mersky e-mail this article URL The relationship between the advertising agency and its clients is a close and collaborative one, as it should be. However, sometimes there is no agency/client contract - or it is still being negotiated (months to years later) when the client terminates the agency's services. Even if there is an agency/client contract, that contract is too often aimed at protecting the client rather than the agency; while most such contracts have confidentiality clauses protecting the client's confidential business information disclosed to the agency to permit it to perform its services, these clauses often lack the mutuality needed to protect the agency's confidential information to which the client may be exposed in the course of the relationship. Starting with new business pitches to prospective clients where non-disclosure agreements usually focus on client information only, the agency may be failing to identify and protect its own confidential information in an adequate way. One new decision is particularly helpful in refocusing attention on how a company must protect itself against actual and prospective clients. Zemco Manufacturing, Inc. v. Navistar International Transportation Corp., a case decided by the Indiana Court of Appeals in November 2001, cited Flotec, Inc. v. Southern Research, Inc., another Indiana case, as its most important precedent. Just as Flotec put its trade secrets in jeopardy in its dealings with a prospective supplier, Zemco lost its attempt to protect its trade secrets relating to its specially designed equipment because it made little or no attempt to protect them when dealing with its customer who purchased products manufactured by such machinery or from visitors touring its premises, presumably including customers and prospective customers. As a result, after taking pains to protect its confidential information with its employees, contractors and total strangers, Zemco's trade secrets became unprotectible due to the customer relationship. The court held that Zemco's failure to inform Navistar in any way that it regarded the machinery design information as confidential was fatal to Zemco's secrecy claims and no "custom of the industry" could be relied on to fill the gap by creating a presumption that vendor and customers would both protect one another's confidential information when it was disclosed in the course of that relationship. This problem is far more severe in the advertising industry where the client's information may be protected even in the absence of an agency/client contract on general agency principles but the agency's information may well not be protected unless it requires that prospective and actual clients sign visitor confidentiality forms when they call on the agency and unless it otherwise communicates clearly what it considers "agency confidential" by legending documents and/or requiring mutual NDAs prior to specific disclosures, particularly to prospective clients, as well as mutual confidentiality clauses in agency/client contracts. It is a myth that the agency has no confidential and proprietary information of its own to protect against any client and all clients. Too often, the agency is only focused on protecting Client A's information from Client B. However, agencies today have significant and valuable trade secrets of their own, not the least being the agency software and electronic tools used to service client accounts. These are built with agency money, not billed to the client (although agency profit from client billings does go into the development process, as is true in all industries). Too often the agency "shares" these agency tools with the client in support of the relationship without making it clear to the client that they constitute trade secrets belonging to the agency. Clients are allowed to access agency software and data - even worse, sometimes the software and data are actually delivered to the clients without any confidentiality legends or licenses in place - nothing to prevent reverse engineering or out-and-out copying of noncopyrightable and unpatented elements. The risk to the agency is that, when the client leaves, what the agency considered its trade secrets may leave with the client and even be handed off to the competing agency to use to support the new agency relationship. Is it really too adversarial for an agency to protect itself in its visitor procedures and to label its software and databases "Confidential and Proprietary" before giving a client access and/or possession or to ask the client to sign a license as an end user of agency software tools? Without ending the collaborative nature of the relationship, the agency must protect its own interests if it plans to invest millions of its own dollars in agency tools such as software and databases. Employees at agencies are asked to sign contracts and acknowledgements of their agency's policies concerning trade secrets. Independent contractors who perform services for agencies sign NDAs and confidentiality clauses in contracts. But the client is rarely even informed by the agency that the agency has trade secrets of its own, to say nothing of what the agency claims to be its trade secrets, although the client does have access to the information. The result may be that there are no trade secrets left to protect, putting the agency in a situation where it must rely on statutory intellectual property rights such as copyrights and patents because it does little or nothing to give even elementary protection to its trade secrets in the context of client relationships. Clients are important, but not to the exclusion of protection of valuable trade secrets. Asserting trade secret claims does not drive customers away in other industries nor will it do so in the advertising sector if thoughtfully done on the same model as other sectors. © 2002 Davis & Gilbert LLP       Davis & Gilbert LLP • 1740 Broadway • New York, NY 10019 tel: 212.468.4800 • fax: 212.468.4888   Privacy Policy • Terms & Conditions