JPMorgan Chase Says Former Adviser Stole Clients Using Trade Secrets

A recent high-profile dispute between JPMorgan Chase and a former financial advisor highlights the serious legal and ethical issues surrounding trade secrets in the business world. According to public court filings, JPMorgan has accused the advisor of misappropriating confidential client information and using it to solicit clients for a new employer.

Translation: the adviser utilized JPMorgan trade secrets in a quest to lure clients away from them. For business owners, this case serves as a valuable reminder of how trade secrets work, why they deserve strong protection, and how misappropriation claims can arise.

Trade secret law is a foundational part of intellectual property law, protecting information that gives a company a competitive advantage. Every business owner must understand how trade secrets differ from other forms of IP, such as patents and trademarks, and what steps are necessary to secure those rights.

What Exactly Are Trade Secrets?

Essentially, they're a type of intellectual property that includes formulas, practices, processes, designs, instruments, or compilations of information that derive economic value from being not generally known or readily ascertainable. Examples include customer lists, recipes, marketing strategies, pricing models, manufacturing processes, and proprietary algorithms.

Unlike patents, trade secrets are not registered with a government agency. Instead, trade secret protection arises from secrecy itself. A company must take reasonable steps to safeguard the information in order for it to receive legal protection.

In the JPMorgan case, the alleged trade secrets reportedly included confidential client lists and contact information. JPMorgan claims that the former adviser downloaded this information shortly before leaving the company and later used it to solicit clients at his new firm. The lawsuit asserts that this conduct constitutes misappropriation of trade secrets and breaches of contractual and fiduciary obligations.

Why Trade Secret Protection Matters

Trade secrets matter because they often represent years of effort, investment, and customer relationships. A competitor or departing employee who takes this information can undermine a company's competitive position and cause significant financial harm.

Trade secret law protects against this type of misappropriation. Under the Uniform Trade Secrets Act (adopted by most states) and the federal Defend Trade Secrets Act, a company can pursue legal remedies if:

• The information qualifies as a trade secret;
• The company took reasonable steps to keep the information secret; and
• Someone improperly acquired, disclosed, or used that information.

Reasonable steps can include confidential agreements, restricted access, encrypted databases, and clear policies governing the use and handling of sensitive information.

Some Key Lessons for Business Owners

Setting up governing policies, confidential agreements and encrypted databases takes time, effort, and planning (which is why so many businesses fail to properly protect their trade secrets), but they are well worth it:

Identify and Classify Your Trade Secrets

Businesses should conduct an inventory of information they possess that gives them a competitive edge. Once identified, this information should be formally classified as proprietary or confidential.

Failure to designate and manage trade secrets can undermine legal claims later. If information is not treated as secret, a court may conclude that it is not legally protectable as a trade secret.

Use Written Agreements and Security Measures

Non-disclosure agreements, confidentiality clauses in employment contracts, and policies restricting access to sensitive data are crucial. These documents reinforce that the information is proprietary and not to be shared outside the company.

Technical safeguards such as firewalls, password protection, and audit trails also demonstrate that the company is serious about maintaining secrecy.

Train Employees and Monitor Compliance

Employers must ensure that employees understand what constitutes confidential information and how it must be handled. Regular training and monitoring helps to minimize risks of accidental or intentional disclosure.

The JPMorgan lawsuit illustrates that trade secret disputes can affect any industry. Protecting confidential information is not just best practice; it is a legal necessity. Business owners should take proactive steps to identify, secure, and enforce rights in their trade secrets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.