Articles Posted in Trade Secrets

Protection of trade secrets and proprietary information from a business’ competitors can be a critical part of owning a company. An injunction may become necessary to stop a competing company from possessing or using those trade secrets for their own benefit. The injunction, however, must be specific enough for the enjoined party to understand what they are no longer allowed to do. Peter Mavrick is a Fort Lauderdale trade secret attorney who represents businesses in trade secret litigation and other business litigation.

In American Red Cross v. Palm Beach Blood Bank, Inc., 143 F. 3d 1407 (11^th Cir. 1998), Palm Beach Blood Bank, Inc. (“Palm Beach”) opened a branch in Miami. Palm Beach hired a person for the Miami Branch, who previously worked for the American Red Cross (“Red Cross”). Palm Beach and Red Cross competed for sponsors and donors. The former employee took a donor list from Red Cross and provided it to Palm Beach.  Palm Beach then contacted the persons on Red Cross’ list to recruit its blood donors.

Red Cross filed a lawsuit against Palm Beach and alleged that its donor lists were trade secrets that Palm Beach illegally misappropriated.  The district court granted Red Cross’ motion for a temporary restraining order (“TRO”) against Palm Beach. The TRO prohibited Palm Beach from, among other things, “soliciting donations from any Red Cross donor” or “in any way adversely affecting Red Cross’s reputation or goodwill.” The district court held evidentiary hearings on Red Cross’s motion to convert the TRO into a preliminary injunction. Palm Beach moved to modify the TRO to allow Palm Beach to accept donations from persons whom it had not solicited from any Red Cross list. The district court denied the motion to modify the TRO, without explanation. The district court entered a broad preliminary injunction against Palm Beach.

Plaintiffs in litigation often allege as many types of claims as are applicable to the facts of their case. This practice essentially allows a party to plead alternative claims for different types of relief based on the same nucleus of facts. Under Florida law, a trade secret claim may preempt, i.e. supersede or displace, pleading alternative claims that are not materially different from a plaintiff’s claims for misappropriation of trade secrets.  Lawsuits that include such alternative claims may be subject to dismissal. Peter Mavrick is a Fort Lauderdale trade secret lawyer who represents businesses in trade secret litigation and other business litigation.

In Sentry Data Systems, Inc. v. CVS Health, 361 F.Supp.3d 1279 (S.D. Fla. 2018), Sentry Data Systems, Inc. (“Sentry”) was a developer and provider of information technology systems that assisted certain hospitals and hospital-like entities—which the parties refer to as “covered entities”—in monitoring compliance with a federal drug pricing program, the 340B Program. Sentry developed tracking software to assist covered entities in managing their prescription inventory, tracking reimbursements and rebates, and maintaining records of eligible drugs and patients. A covered entity may contract with several “contract pharmacies” to dispense its 340B Program-eligible drugs. Sentry and 340B administrators like it, provided tracking software to their covered entity customers and serve as a conduit of information between the covered entity and the contract pharmacy.

CVS Pharmacy, Inc. (“CVS”) is one of these contract pharmacies. Sentry worked directly with CVS to develop contracts between CVS and covered entities, improve CVS’s operational procedures, and develop proprietary software programs for CVS.  During this process, CVS was given a “front-row seat to Sentry’s core business model and internal business methods …,” and signed several confidentiality, non-disclosure, and non-compete agreements. As part of this arrangement with CVS, Sentry also worked with Wellpartner, Inc. (“Wellpartner”), a competitor 340B administrator, to provide CVS with operational and software support for administering CVS’s side of the 340B Program where Wellpartner served as the 340B administrator. Wellpartner and Sentry also entered into several non-disclosure and confidentiality agreements.

Many businesses create new business concepts. A business concept, however, does not automatically evolve from an interesting idea to a legally protected trade secret.  A concept doesn’t need to be built to be protected, but the concept needs enough substance to be economically valuable and for a court to know what it’s protecting. Peter Mavrick is a Fort Lauderdale trade secret lawyer who represents businesses in trade secret litigation and other business litigation.

In the recent federal court case of ActivEngage, Inc. v. Smith, Middle District Court Case No: 6:19-cv-1638-ORL-37LRH, (M.D. Fla. Nov. 5, 2019), Ted Rubin (“Rubin”) and Defendant Todd L. Smith (“Smith”) co-founded ActivEngage, Inc. (“ActivEngage”), a company which provided messaging services, including live call, email, chat, texting, and advertisement services, to car dealerships throughout North America.  Rubin was the President and Smith was the CEO and later worked for ActivEngage in another capacity. Smith also created his own company, 360Converge, as a holding company for new technological ideas. Smith contended that he always presented ideas of value to ActivEngage first.

In 2018, Smith worked on a new product, ActivProspect, a “lead enhancement” product for dealerships.  Rubin and Smith’s relationship collapsed because of disagreements over the direction of ActivEngage. ActivEngage terminated Smith’s employment. Smith also resigned from the Board of Directors but continued to hold a third of ActivEngage’s stock. After Smith’s termination, he began developing new technology in form of a customer relationship management platform (“CRM”) for his company, 360Converge. Rubin discovered that Smith was planning to release a product similar to ActivProspect in December 2018.

Florida law can protect companies when their trade secrets are stolen.  For such protections to apply, the confidential information at issue must qualify as a “trade secret” as defined by the Florida Uniform Trade Secrets Act (“FUTSA”).  Fla. Stat. 688.001, et seq.  Generally, something can be a trade secret if derives “independent economic value from not being generally known” and the company makes a reasonable attempt to maintain the secrecy of the information.  Florida case law has helped define what kinds of confidential information qualifies for the statutory requirement of “independent economic value.”  Peter Mavrick is a Fort Lauderdale business litigation attorney and an experienced trade secret attorney.

Trade secrets can exist in many forms.  For example, trade secrets can include confidential business process relating to the production of goods, such as a machine or formula.  Trade secrets can also “relate to the sale of goods or to other operations in the business, such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.”  Summitbridge Nat. Investments LLC v. 1221 Palm Harbor, L.L.C., 67 So. 3d 448, 450 (Fla. 2d DCA 2011).   “Trade secret” is defined by FUTSA as:

Information, including a formula, pattern, compilation, program, device, method, technique, or process that:

Protection of trade secrets and proprietary information is critical when a business receives a subpoena for its business information and documents. Even when a business is not a party to a lawsuit, it can be compelled to produce sensitive information that can cause irreparable harm. It is often necessary to seek an order of protection and confidentiality from the court. The court, however, must first determine whether the disputed information is in fact a trade secret or proprietary information. Summitbridge Nat’l Invs. LLC v. 1221 Palm Harbor, L.L.C., 67 So.3d 448 (Fla. 2d DCA 2011). Peter Mavrick is an experienced trade secret attorney and business litigation attorney.

In Lake Worth Surgical Center, Inc. v. Gates, 266 So.3d 198 (Fla. 4th DCA 2019), the plaintiff filed a lawsuit against defendants for damages arising from a car accident. The plaintiff treated at Lake Worth Surgical Center, Inc. (“Center”), a non-party, and was billed for the Center’s services. Defendants served the Center with a subpoena that requested billing information that included, among other things, examples of reimbursement rates from unnamed insurers for the Center’s patients. The Center immediately moved for a protective order to prohibit disclosure of confidential financial information. The Center argued that insurance reimbursement rates and the makeup of the center’s patients are trade secret. The trial court denied the Center’s motion for protective and confidentiality order. The Center immediately filed a petition for certiorari review.

The Center contended that the trial court departed from the essential requirements of law by denying the request for a confidentiality of its proprietary and trade secret information. The appellate court granted the petition in part and denied it in part.

Businesses submitting licensing applications with state or local government agencies are often required to file confidential documents and financial records. The State of Florida has a broad public records policy requiring that “all state, county, and municipal records…[shall be]…open for personal inspection and copying by any person.” Florida Statute § 119.01(1). Businesses are often confronted with the challenge of protecting its trade secrets while complying with the obligation to disclose confidential information to a municipality.  Peter Mavrick is a business litigation lawyer who has extensive experience with trade secret protection.

The Florida legislature created an exemption to the public records law for trade secrets. Pursuant to Florida Statute § 815.045, businesses may identify which confidential information furnished to a state agency should be excluded from public disclosure. However, failure to identify information as putatively exempt from public disclosure effectively destroys any confidential character it might otherwise have enjoyed as a trade secret. Sepro Corporation v. Florida Department of Environmental Protection, 839 So. 2d 781 (Fla. 1st DCA 2003) (a company must label a trade secret or specify in writing as such upon delivery to a state agency to invoke the exemption from disclosure).

Even when a trade secret owner has taken the necessary precautions to label its confidential information, the risk of disclosure remains because Florida courts liberally construe the Public Records Act and favor disclosure. Christy v. Palm Beach County Sheriff’s Office, 698 So.2d 1365 (Fla. 4th DCA 1997). Designating information furnished to a government agency as confidential does not automatically render the record exempt from disclosure. Instead the information must qualify as a trade secret pursuant to Florida law. The trade secret owner also must undertake reasonable measures to protect the information from disclosure.