Strata Marketing, Inc. v. Murphy

• Decision Date: 06 December 2000
• Docket Number: No. 1-99-2749.,1-99-2749.
• Citation: 251 Ill.Dec. 595,317 Ill. App.3d 1054,740 N.E.2d 1166
• Parties: STRATA MARKETING, INC., a Delaware corporation, Plaintiff-Appellant, v. Gail M. MURPHY and VNU Marketing Information Services, Inc., a Delaware corporation, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

740 N.E.2d 1166

317 Ill. App.3d 1054

251 Ill.Dec. 595

STRATA MARKETING, INC., a Delaware corporation, Plaintiff-Appellant, v. Gail M. MURPHY and VNU Marketing Information Services, Inc., a Delaware corporation, Defendants-Appellees.

No. 1-99-2749.

Appellate Court of Illinois, First District, Third Division.

December 6, 2000.

Gordon, Glickman, Flesch & Woody (James S. Gordon, Don E. Glickman, of counsel), Chicago, for Appellant.

Vedder, Price, Kaufman & Kammholz (Diane M. Jehl, Thomas R. Dee, of counsel), Chicago, for Appellees. Justice BURKE delivered the opinion of the court:

Plaintiff Strata Marketing Inc. (Strata) appeals from an order of the circuit court granting defendants' Gail Murphy (Murphy) and VNU Marketing Information Services, Inc.'s (VNU) (collectively defendants) section 2-615 motion to dismiss (735 ILCS 5/2-615 (West 1998)) Strata's amended complaint seeking injunctive relief for breach of an employment agreement and violation of the Illinois Trade Secrets Act (the Act) (765 ILCS 1065/1 et seq. (West 1998)) based on breach of a covenant not to compete and disclosure of confidential information. On appeal, Strata contends that the trial court erred in dismissing its amended complaint because it set forth sufficient facts to state a cause of action for breach of the employment agreement and sufficient facts to state a cause of action under the Act. For the reasons set forth below, we affirm in part, reverse in part, and remand in part.

Murphy was employed by Strata as a sales representative for its Midwest and North Atlantic regions. Strata develops software programs that analyze and enhance market data provided by radio and television rating programs—a very unique and small niche of the software market. Strata then leases its software to customers throughout the United States. The software allows Strata's customers to tailor their marketing programs to meet the needs of their own advertising customers. Strata's principal customers are advertising agencies and corporate in-house advertising departments. The names of advertising agencies and in-house corporate departments who actually use such software are not readily available and are quite difficult to identify. In this respect, Strata employs three full-time sales coordinators to develop leads for sales representatives. The coordinators compile lists of software users and prospective customers by extensive market research and at great expense. Strata services its customers through its sales representatives.

Marketing Resources Plus (MRP), which is a division of VNU and successor to MMP, which VNU had purchased and changed its name from MMP to MRP, is Strata's principal competitor. MRP develops the same type of software and leases it to its customers just as Strata does. The competition between the two companies is "fierce."

Murphy's duties with Strata required her to service existing customers and solicit new customers. She worked with the sales coordinators who provided her with appointments, prospective customers, sales leads, and lists of existing customers to call. As a condition of employment, Murphy signed both an employment agreement and an "Employee Confidentiality Agreement" (confidentiality agreement), which was made a part of the employment agreement. Pursuant to paragraph 1 of the confidentiality agreement, Murphy agreed not to disclose any of Strata's confidential information, including "all information not generally known in the relevant trade or industry which was obtained from Strata, or which was learned, discovered, developed, conceived, originated, or prepared by [Murphy] in the scope of her employment." The alleged confidential information fell within the following categories: existing products and products under development; business plans; product development plans, including progress, targeted marketing dates, and anticipated cost; sales or marketing methods; internal business procedures, including Strata's techniques for servicing customers, formulas for computing the reach and frequency of radio and television stations, methods used to compute ratings, and strategies and techniques to sell against competitors; customer lists, existing and prospective; customer contracts, including dates, terms, prices, and discounts; specific requirements of Strata's customers; form contracts; supply services; contracts with suppliers; various price structures for different locations and different customers; range of prices within which the sales representatives could negotiate; plans for upgrades and enhancements based on customer-identified problems and requests; and any other information Strata advised was to be kept confidential.

Pursuant to paragraph 6 of the confidentiality agreement, Murphy agreed that:

"During the period of her employment with Strata and for a year following her termination from Strata, * * * she will not render, directly or indirectly[,] any services of an advisory or consulting nature or as an employee or otherwise to any business which is a competitor of Strata, including but not limited to * * * MMP [subsequently known as MRP]."

Strata used the following methods to maintain the confidentiality of its information: limited computer network access and use; provided its employees with information on a "need to know" basis; kept records of who logged on to the computer network and when; kept customer contracts under lock and key and only provided each sales representative with access to his or her own customers' contracts; shredded drafts of contracts; and required each sales representative to sign a confidentiality agreement.

Murphy resigned from Strata, effective May 28, 1999. She accepted employment with MRP as a sales representative, and was to begin her employment on July 19.

On July 12, Strata filed a verified complaint for injunctive relief and damages against defendants based on a breach of the employment agreement (count I) and violation of the Act (count II). Strata also filed a motion for a temporary restraining order (TRO), seeking to prohibit Murphy from beginning employment with MRP on July 19. On July 16, defendants filed a motion to dismiss Strata's complaint. In response to this motion, Strata sought and was granted leave to file an amended complaint. On July 19, Strata filed its amended complaint (complaint) and amended motion for a TRO.

With respect to count I, Strata alleged that Murphy had breached paragraph 1 of the confidentially agreement because, on information and belief, she had retained lists of its existing customers, lists of companies that utilized media buying software, and other aspects of its confidential information. Strata also alleged that Murphy was in direct violation of paragraph 6 of the confidentiality agreement because she agreed not to provide services to any business that was a competitor of Strata's for one year following her termination, yet, she accepted employment with MRP. MMP was included in the agreement's list of competitors, of which MRP was a successor. In its prayer for relief on count I, Strata sought a preliminary and permanent injunction prohibiting Murphy from accepting or continuing employment with MRP, from disclosing confidential information to MRP, and prohibiting MRP from employing Murphy. Strata further requested damages and such other relief as the court deemed appropriate.

With respect to count II, Strata alleged that the following confidential information constituted "trade secrets" as defined by the Act: new software development; progress of such development; target date for marketing new software; anticipated charges for licensing new software; the cost structure for existing software; Strata's analysis of market conditions; Strata's analysis of competition for licensing; range of prices in which representatives were authorized to negotiate; existing customer lists; contract terms; contract expiration dates; different price structures for different locations for different customers; plans for product upgrades and enhancements that were based on customer-identified problems and customer-requested changes; lists of prospective customers compiled by Strata's coordinators; Strata's techniques for servicing customers; Strata's formulas for computing reach and frequency of radio and television stations; Strata's procedures for handling raw data; Strata's formulas to compute station ratings; and Strata's strategies and techniques to sell its products. Strata alleged that the above-identified information was sufficiently secret to derive economic value. According to Strata, if MRP secured this information, it would derive a significant competitive advantage over Strata. Strata also alleged that it had made reasonable efforts to maintain the secrecy of this information.

Strata further alleged that Murphy had already disclosed confidential information, that there was a threat of disclosure, and that confidential information would inevitably be disclosed. With respect to actual disclosure, Strata alleged that since terminating her employment, Murphy had disclosed confidential information to MRP. Specifically, Strata alleged: "A prospective customer of Strata's stated to a Strata representative that she was told of `problems' in Strata's software by an MRP sales representative. The MRP sales representative told the prospective customer that she obtained the information from `a former Strata representative.' On information and belief, the former representative is Murphy."

With respect to threatened and inevitable disclosure, Strata alleged that virtually all of the information Murphy had obtained while working for it would assist her in targeting new customers for MRP. The information would enable her to claim that MRP's products were better because they did not suffer from the same problems as Strata's products, that enhancements and upgrades would be superior, that enhancements and upgrades would be available sooner, and that MRP's...