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Articles Posted in Trade Secrets

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Florida employers who seek to protect their client lists from misappropriation by former employees will often need to show that the client list was a trade secret.  This is important even when the former employee is subject to a non-compete agreement.  This is because non-compete agreements cannot be enforced without a “legitimate business interest,” and the existence of a trade secret qualifies as a “legitimate business interest.”  Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

A non-compete agreement cannot be enforced without a court finding that the agreement is supported by a “legitimate business interest” in the non-compete agreement.  Importantly, the existence of a trade secret can qualify as a legitimate business interest pursuant to Florida’s noncompete law.  Trade secrets are specifically delineated as legitimate business interests in Section 542.335(1)(b)(1), Florida Statutes.

The term “trade secret” is often associated with secret formulas like the ingredients of Coca-Cola or WD-40.  However, nearly any type of information can qualify as a trade secret as long as it qualifies as one under either the Florida Uniform Trade Secrets Act (FUTSA) or the federal Defend Trade Secrets Act (DTSA).  Particularly, FUTSA defines trade secrets as:

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Misappropriation of a trade secret can occur when there is an acquisition of another’s trade secret by improper means or through disclosure or use of a trade secret without consent by a person who used improper means to acquire the trade secret or knew that the trade secret was improperly acquired. Section 688.002, Florida Statutes. Improper means occurs not only when a person breaches a duty of confidentiality but also by inducing someone else to breach a duty of confidentiality. Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

An example of both of these circumstances occurred in the case of Sensormatic Elecs. Corp. v. TAG Co. US, LLC, 632 F. Supp. 2d 1147 (S.D. Fla. 2008). Mark Krom (Krom) worked for Sensormatic Electronics Corp. (Sensormatic) and entered an employment agreement which, among other things, obliged him to return all documents to Sensormatic upon leaving the company; and (2) prevented him from disclosing or using Sensormatic’s confidential and proprietary information. To protect a trade secret, parties in business litigation must show that they took reasonable steps to secure the confidential information. Krom later terminated his employment with Sensormatic and founded TAG Company U.S. LLC (TAG). Krom hired other former Sensormatic employees. Krom investigated opportunities for TAG to develop its own security label, similar to Sensormatic’s security label. Its goal was to create a label that “met the performance of the Sensormatic label.”

Sensormatic filed a lawsuit against Krom and other defendants for, among other things, misappropriation of trade secrets. Krom testified at his deposition that he did not know where he obtained the Sensormatic specifications that he gave to his employee. Another witness testified that while he worked at Sensormatic’s manufacturer, he received a request from Krom for the Sensormatic specifications and faxed them to Krom at TAG.  Krom gave conflicting testimony but essentially testified that he had no personal knowledge of where he got the specifications he gave to his employee. Krom’s employee substantially copied Sensormatic’s specifications into a new document with TAG’s logo on it. Many of the numbers in the TAG specification were identical to those in the Sensormatic. Krom admitted that many of the “numbers for key characteristics are the same in the Sensormatic specification and the TAG specification.” TAG then disclosed the TAG specifications to multiple prospective materials suppliers.

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Companies often hire experienced sales and business development professionals to expand their business. A non-solicitation provision in an employment contract is intended to prevent post-termination solicitation of clients with whom the business has substantial relationships. When an employee brings clients to a company, it is important to distinguish whether the employee had a prior business or personal relationship with the client, and whether it is part of the employee’s job to develop and maintain client relationships. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation,  employment litigationtrademark litigation, and other legal disputes in federal and state courts and in arbitration.

In the case of Hilb Rogal & Hobbs of Florida, Inc. v. Grimmel, 48 So. 3d 957 (Fla. 4th DCA 2010), Hilb Rogal & Hobbs of Florida, Inc. (HRH) was an insurance broker who hired Mark Grimmel (Grimmel) as a producer to service its existing customers and to generate new customers. Grimmel signed an employment agreement with HRH, which included a non-piracy clause that prohibited Grimmel from soliciting HRH’s customers following termination of his employment. Four years after Grimmel resigned to operate his own competing insurance brokerage firm, Egis Insurance Advisors (Egis).

HRH filed a lawsuit for injunctive relief and damages against Grimmel and Egis. HRH alleged that Grimmel violated the non-piracy covenant in his employment agreement with HRH by misappropriating business from HRH to Egis. HRH also filed an emergency motion for a temporary injunction, requesting that the court prohibit Grimmel from soliciting, accepting business from, and continuing to do business with HRH’s customers. Also, HRH sought to enjoin Grimmel from using confidential or trade secret information. HRH obtained an ex-parte order (made without the other party’s awareness) granting a temporary injunction against Grimmel and posted a bond. Grimmel moved to dissolve the injunction and a hearing was held before a magistrate. The magistrate issued a Report and Recommendation proposing that the temporary injunction be dissolved. HRH filed its exceptions to the general magistrate’s report and requested a hearing. The trial court held a hearing and entered an order denying HRH’s exceptions, granting the motion to dissolve the temporary injunction, and ratifying and approving the general magistrate’s Report and Recommendation. HRH immediately appealed.

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There are circumstances when a business, who is not a party to a lawsuit, will be required to disclose its trade secret information to respond to a subpoena. Florida law provides safeguards for that disclosure to be made in a manner that still protects the business’ trade secrets. However, a business may need to vigorously defend those rights when the trial court refuses to do so. Peter Mavrick is a Fort Lauderdale trade secret attorney, and also advocates for clients in Miami, Boca Raton, and Palm Beach, Florida.  Mavrick Law Firm also represents clients in breach of contract litigation, non-compete agreement litigation and injunction proceedings,  business litigation , trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this occurred in the case of Columbia Hosp. (Palm Beaches) Limited Partnership v. Hasson, 33 So. 3d 148 (Fla. 4th DCA 2010), where the plaintiff filed a motor vehicle negligence lawsuit and claimed to have incurred injuries and expenses for a procedure performed at Columbia Hosp. (Palm Beaches) Limited Partnership (Columbia). Defendants served Columbia, a non-party to the lawsuit, with a subpoena requesting documents relating to the particular medical procedure performed on plaintiff. The documents requested by the subpoena included the amounts Columbia charged patients with and without insurance, those with letters of protection, and differences in billing for litigation patients versus non-litigation patients.

Columbia filed a motion for protective order and contended that the information requested by defendants’ subpoena was confidential and amounted to protected trade secrets under Florida law. Defendants conceded that the information sought was protected as trade secrets, however they explained why the information they sought was relevant to, among other things, to the reasonableness of the hospital’s bills. At the hearing on the motion for protective order, defendants contended that the discovery of a hospital’s charges, discounts to different classes of patients, and its internal cost structure was relevant information. Defendants further contended that the amounts a health care provider accepts as payment from private non-litigation payors was relevant for a jury to determine what amount was a reasonable charge for the procedure.

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Congress enacted the Defend Trade Secrets Act (DTSA) to supplement the state law trade secret protection available to aggrieved businesses.  While the Florida Uniform Trade Secrets Act (FUTSA) and DTSA cover essentially identical conduct, the DTSA provides unique opportunities for plaintiffs to pursue their case in a federal forum and allows plaintiffs to seek an order of seizure.  Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

Trade secret law is generally uniform between the states.  Florida codified trade secret law when it enacted the Uniform Trade Secrets Act in 1988.  FUTSA is substantially the same as Uniform Trade Secret Act (UTSA), which was enacted in 47 other states.  FUTSA specifically recognizes that it should be interpreted in conformity with the other states’ versions of the UTSA.   § 688.009, Florida Statutes (“Sections 688.001-688.009 shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this act among states enacting it”).

The DTSA, 18 U.S.C. 1831, et seq., was enacted on May 11, 2016 to supplement the trade secret rights already provided under state law.  DTSA makes unlawful the same conduct which is already unlawful under UTSA/FUTSA.  18 U.S.C. § 1839(3) (defining “trade secret” as information which “the owner thereof has taken reasonable measures to keep such information secret; and 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”); § 688.002 (4), Florida Statutes (defining “trade secret” as information which [d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy”).

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Companies in business litigation often want to sue persons who make slanderous statements or outright lies about them during legal proceedings. Under Florida’s absolute litigation privilege, a defendant may slander and lie and still be absolutely immune from a later lawsuit for defamation, tortious interference with a business relationship, and some other causes of action, so long as the slander and lies were made in the courtroom or during the formal discovery process and had some relation to the litigation.  Some litigants have tested the limits of what could be considered an act done in the course of or in relation to litigation to avoid liability for such statements. Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, employment litigationtrademark litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this occurred in the case of Arko Plumbing Corp. v. Rudd, 230 So. 3d 520 (Fla. 3d DCA 2017), Arko Plumbing Corporation (Arko) identified cracks in pipes, assisted homeowners in filing claims under their insurance policies, and replaced the damaged cast-iron pipes. Arko used a MotoMon Global Positioning System, an internet-based computer program, that recorded historical and real-time access to the location of Arko’s service vans. John Collucci (Collucci), a former Arko employee possessed a, still-active password to the MotoMon program. Michael Rudd (Rudd) and his law firm, Rudd & Diamond, P.A., represented insurance companies on claims that they breached homeowner’s insurance policies by not covering Arko’s repairs to the homeowners’ damaged pipes. Colluci assisted Rudd and his firm by providing access to the historical location information for eighteen Arko clients. Rudd and his firm issued subpoenas to Arko for its MotoMon information, including information related to location of Arko service vans at specific residences. Rudd and his firm conducted examinations under oath required by the insurance policy and asked questions based information they obtained through the Motomon system concerning Arko’s historical location information of its service vans.

Arko filed a lawsuit against Rudd and his firm, and various other defendants, including Collucci. Arko’s claims against Rudd and his firm were based on: (a) their unauthorized access to the MotoMon account, and (b) the questions asked during the examination under oath, which were based on information from the MotoMon system. Rudd and his firm moved for summary judgment based on, among other things, the litigation immunity privilege and because the information on the MotoMon program was not a trade secret under Florida law. The trial court granted the motion for summary judgment. Arko moved for rehearing, but it was denied. Arko immediately appealed.

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Employees sometimes raid their employer’s trade secrets prior to quitting so that they may have an advantage starting up their own business or in their employment with a competitor.  An aggrieved employer may sue under the Florida Uniform Trade Secrets Act (FUTSA) to recover those trade secrets and for any damages arising from the theft of trade secrets.  However, FUTSA has many requirements that must be met before an employer can prevail on a misappropriation of trade secrets claim.  An important, but easily missed requirement, is that business litigation concerning theft of trade secrets must specify in the complaint what exactly are the trade secrets.  This article is a continuation of a prior article discussing the requirement for the identification of a trade secret.  Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

The Florida Uniform Trade Secret Act (FUTSA) is nearly identical to the Uniform Trade Secret Act (UTSA) enacted by most states.  To prevail in business litigation concerning trade secret misappropriation, a plaintiff must sufficiently identify its trade secrets.  “The plaintiff must, as a threshold matter, establish that the trade secret exists. To do so, it must disclose the information at issue.”  Revello Med. Mgmt., Inc. v. Med-Data Infotech USA, Inc., 50 So. 3d 678 (Fla. 2d DCA 2010).  The requirement that a plaintiff identify the particular basis for a trade secret is not explicitly found in the Uniform Trade Secret Act.  Nevertheless, the UTSA necessarily requires that a plaintiff identify a trade secret with particularity, because it is impossible to evaluate whether information fulfills the basic requisite elements of trade secret law without the trade secret being identified.   Altavion, Inc. v. Konica Minolta Sys. Lab., Inc., 171 Cal. Rptr. 3d 714 (Ct. App. 2014) (“‘[U]ntil the content and nature of the claimed secret is ascertained, it will likely be impossible to intelligibly analyze the remaining’ elements that constitute the cause of action”).  Without identifying with particularity the trade secret at issue, it is impossible for the court to make to determine that each of the elements of a trade secret are met: (1) “information”; (2) “derives independent economic value” “from not being generally known”; (3) is “not readily ascertainable by proper means”; and (4) “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”  See §688.02 (4)(a)-(b).

Failing to adequately identify a trade secret can be a fatal error for an employer in a trade secret misappropriation case.  At the pleadings stage of litigation, “[a] party proceeding under Florida’s Uniform Trade Secrets Act need only describe the misappropriated trade secrets with ‘reasonable particularity.’” Textile USA, Inc. v. Diageo N. Am., Inc., 15-24309-CIV, 2017 WL 10187642 (S.D. Fla. July 31, 2017).  “[A plaintiff] cannot state a claim for trade secret protection under UTSA by simply ‘producing long lists of general areas of information which contain unidentified trade secrets.’ Instead he must articulate protectable trade secrets with specificity or suffer dismissal of his claim.”  Nilssen v. Motorola, Inc., 963 F. Supp. 664 (N.D. Ill. 1997); GlobalTap LLC v. Elkay Mfg. Co., 13 C 632, 2015 WL 94235 (N.D. Ill. Jan. 5, 2015) (“[T]o sustain a trade secrets claim a party must do more than simply persist in the blunderbuss statement that ‘[e]verything you got from us was a trade secret’ … That view is wrong as a matter of law”).

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Business litigation between competitors often involves discovery of information that may be subject to trade secret protection. Parties will often enter stipulations for confidentiality orders to protect the information from third-party disclosure, however that may not protect a business from the damage caused by their competitor’s access to that information. Businesses must ensure that trial courts follow proper procedure for trade secret discovery in business litigation. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigationtrademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

A recent example of this occurred in the case of Lewis Tree Serv., Inc. v. Asplundh Tree Expert, LLC, 2D20-493, 2020 WL 5739751 (Fla. 2d DCA Sept. 25, 2020).  Lewis Tree Service, Inc. (Lewis Tree) and Asplundh Tree Expert, LLC (Asplundh) were competitors in vegetation management, which generally included tree pruning and removal, right-of-way clearing and maintenance, and emergency storm removals for cities, counties, and utility companies. Both Lewis Tree and Asplundh had contracts with Duke Energy in the north central region of Florida, covering different portions of the larger region. Their contracts were set to expire at the end of 2017, and both Lewis Tree and Asplundh intended to bid for new contracts. Asplundh fired one of its supervisors, Juan Angel Garza (Garza), for reasons unrelated to the current dispute. While employed with Asplundh, Garza had a signed noncompete agreement. Shortly after Garza was fired, he allegedly started working with Lewis Tree as a “consultant” in violation of the terms of this noncompete agreement, and he allegedly began recruiting Asplundh’s foremen and skilled workers on behalf of Lewis Tree. The alleged result of Garza’s efforts and those of the foremen he recruited was that more than sixty Asplundh employees—primarily the higher-skilled climbers—quit in late September and early October 2017. The majority of these workers were hired by Lewis Tree and left Asplundh’s north central region severely understaffed.

Asplundh filed a lawsuit against Lewis Tree, among others, for tortious interference with Garza’s noncompete agreement and alleged that Lewis Tree, Garza, and the foremen conspired to convince the skilled workers to breach their duty of loyalty to Asplundh. The trial court granted summary judgment in favor of Lewis Tree on the tortious interference claim, which left the conspiracy to steal skilled workers count as the only claim left against Lewis Tree. Asplundh served Lewis Tree with a request for production of the complete set of bid documents that Lewis Tree submitted for the Duke Energy contract in late 2017. Lewis Tree refused to disclose the requested documents because they contained trade secret information. Asplundh filed a motion to compel.

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Florida law permits a business to seek an injunction when its trade secrets have been misappropriated.  This can be a deceptively complex process for companies that are not familiar with trade secret law.  To prevail on a motion for a temporary injunction, a plaintiff must not only show that what was taken qualifies as a trade secret, but that the circumstances meets all of the elements necessary to prevail on a temporary injunction.  The failure to prove one element of trade secret misappropriation or the failure to justify an injunction can result in the denial of a temporary injunction.  A recent case before Florida’s Fourth District Court of Appeal explored the necessary elements that must be met before a business is entitled to a temporary injunction.  Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in trade secret litigation, non-compete agreement litigation, breach of contract litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

A plaintiff seeking a temporary injunction to protect its trade secrets must show that there is an actual or likely misappropriation of trade secrets and that the circumstances justify the entry of a temporary injunction.  To show a misappropriation of a trade secret under the Florida Uniform Trade Secrets Act (FUTSA), a business litigation plaintiff must show that another party acquired or disclosed a “trade secret” and that the party “knew or had reason to know” that the it was taken under improper means.  § 688.002(2), Florida Statutes. The legal term “trade secret” is defined as “information, including a formula, pattern, compilation, program, device, method, technique, or process that [d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”  § 688.002(4), Florida Statues.  To justify a temporary injunction, a plaintiff must show that “(1) irreparable harm will result if the temporary injunction is not entered; (2) an adequate remedy at law is unavailable; (3) there is a substantial likelihood of success on the merits; and (4) entry of the temporary injunction will serve the public interest.”  Donoho v. Allen-Rosner, 254 So. 3d 472 (Fla. 4th DCA 2018).

In Mapei Corp. v. J.M. Field Mktg., Inc, 295 So. 3d 1193 (Fla. 4th DCA 2020), Florida’s Fourth District Court of Appeal evaluated whether a temporary injunction was properly entered in business litigation concerning alleged trade secrets involving a business method.  The plaintiff was a full-service fulfillment and marketing firm.  The defendant was a chemical company that entered into an agreement with the plaintiff which involved access to a web-based inventory management software program.  Included in this agreement were confidentiality provisions concerning disclosure of the plaintiff’s software.  The defendant became unsatisfied with the plaintiff and requested that another vendor provide similar services.  To make sure that the services provided were the same, the defendant accessed and “scraped” the data from the plaintiff.  The vendor thereafter emulated plaintiff’s services for defendant.

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Businesses in highly competitive industries often create and maintain highly confidential business information and trade secrets. Businesses spend substantial amounts of money curating this confidential information. To protect this investment, businesses must take steps to ensure the continued secrecy of its confidential information, such as limiting access and requiring employees with access to sign confidentiality and non-compete agreements. Peter Mavrick is a Fort Lauderdale trade secret attorney, and also advocates for clients in Miami, Boca Raton, and Palm Beach, Florida.  Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation and injunction proceedings,  business litigation , trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

In the case of Freedom Med., Inc. v. Sewpersaud, 620CV771ORL37GJK, 2020 WL 3443837 (M.D. Fla. June 23, 2020), Freedom Medical, Inc. (“Freedom Medical”) rented and sold medical equipment to hospitals, nursing homes, and other healthcare providers. Freedom Medical created and maintained highly confidential business information, including marketing strategies, contact lists, pricing and customer lists, and relationships with purchasers and suppliers (collectively, “Confidential Information”). Freedom Medical spent thousands of dollars curating this Confidential Information and took steps to ensure its continued secrecy, such as limiting access and requiring Freedom Medical employees with access to sign agreements which protects that information. Maheshwar Sewpersaud (“Sewpersaud”) was a branch manager of Freedom Medical’s Orlando Office. Sewpersaud also assisted in sales outside his territory, including servicing national accounts. Freedom Medical and Sewpersuad entered an employment agreement which contained a with non-compete, non-solicitation, and confidentiality clauses.

Sewpersaud had access to Freedom Medical’s confidential information, including information on the specialty beds offered by Freedom Medical and the company’s strategy for selling them. Freedom Medical rented and sold specialty beds including Versatech-branded beds (“Versatech Beds”) and Rotec-branded beds (“Rotec Beds”). Rotec International (“Rotec”) manufactured both Versatech and Rotec Beds.

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