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Articles Posted in Trade Secrets

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The Florida Uniform Trade Secrets Act (“FUTSA”) requires courts to take reasonable steps to preserve the secrecy of trade secrets. Fla. Stat. § 688.006. Injunctive relief may be ordered to preserve trade secrets based on actual or threatened misappropriation, as well as, compelling parties to perform specific acts. Fla. Stat. § 688.003.  FUTSA, however, may not be used as a vehicle to restrict competition. In Hatfield v. AutoNation, Inc., 939 So.2d 155 (Fla. 4th DCA 2006), the Florida’s Fourth District Court of Appeal held that FUTSA deals with misappropriation, but not with alleged violations of non-competion agreements. Peter Mavrick is a Fort Lauderdale non-compete lawyer and trade secret lawyer who has extensive experience in trade secret litigation.

An example of this circumstance is the case of Norton v. American LED Technology, Inc., 245 So.3d 968 (Fla. 1st DCA 2018), where American LED Technology, Inc. (“American”) filed a lawsuit against Steve Norton (“Norton”), its former employee.  American filed a motion for a temporary injunction based on an alleged violations of FUTSA and of a non-compete agreement. After a hearing on the motion for temporary injunction, the trial court entered an order granting American’s motion based only on the alleged FUTSA violation. The trial court’s order stated that its findings were “separate and independent from any breach of contract claim” and did not make any other reference to the non-compete agreement. The temporary injunction required, among other things, that Norton could not compete with American. Norton immediately appealed.

American contended that Hatfield v. AutoNation, Inc. demonstrated that courts have discretion to restrain competition when granting injunctive relief under FUTSA. In Hatfield, the appellate court affirmed an order granting a temporary injunction that “included a brief respite from employment as part of the court’s fashioning a remedy that would aid [the plaintiff] in minimizing the potential damage by disclosure of time sensitive trade secrets.”

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For a business to be to protect its confidential information as a protectable trade secrets under the Florida Uniform Trade Secret Act, the business must preserve the secrecy of its confidential information.  There are no hard and fast rules that must be followed for a business to protect its confidential information as a trade secret.  “No single ‘step’ taken to maintain the secrecy of the information secrecy will be determinative; but if the claimant can establish a consistent approach to keeping the information ‘secret’ it will go along way to satisfying this element of the statutory definition.” Gary S. Gaffney and Maria E. Ellison, A Primer on Florida Trade Secret Law: Unlocking the “Secrets” to “Trade Secret” Litigation, 11 U. Miami Bus. L. Rev. 1 (2003). Peter Mavrick is a Fort Lauderdale trade secret attorney, non-compete attorney, and business litigation attorney who represents businesses in trade secret litigation, non-compete agreement litigation, and other business litigation.

A recurring issue in non-compete covenant litigation is whether a trade secret exists and justifies the restrictive covenant.  Under Florida Statutes § 542.335(b)2), a non-compete can be based on a legitimate business interest of a trade secret.  If a trade secret is a proven legitimate business interest under Florida’s non-compete statute, the consequences are severe for the opposing party due to the expanded time-frame the statute allows to enforce a non-compete.  Section 542.335(e), Florida Statutes, provides that “In determining the reasonableness in time of a postterm restictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint 5 years or less and shall presume unreasonsble in time any restraint of more than 10 years.  All such presumtions shall be rebuttable presumptions.”  Because Florida law accords protection to genuine trade secrets and because of the potentially lengthy period of a non-compete based on trade secrets, parties in litigation will often scrutinize whether the alleged trade secrets were closely guarded to ensure and maintain their status as protectible trade secrets.

Trade secrets are defined under § 688.002(4), Florida Statutes, as:

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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 (11th 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.

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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.

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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.

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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:

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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.

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Protection of trade secrets and proprietary information is critical, when a business receives a subpoena for their 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 litigation attorney who has successfully represented clients in cases involving motions for emergency relief, preliminary or temporary injunction, arbitration, and trial.

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.

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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.

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To protect their trade secrets and other valuable confidential information, former employers have sued former employees for breach of their non-compete agreements, along with additional causes of action.  The factual basis for these additional causes of action and damages therefrom, are typically based on the same factual allegations that form the action for breach of the non-compete agreement. When the former employer fails to provide competent evidence to prove damages arising from the acts alleged in the primary cause of action, then these additional causes of action may not survive a former employee’s motion for summary judgment to obtain dismissal of the lawsuit.  Peter Mavrick has extensive experience with litigation regarding non-compete agreements and misappropriation of trade secrets and other confidential information.

In the case of Crom, LLC v. Preload, LLC, 2019 WL 1440907 (N.D. Fla. Mar. 31, 2019), Plaintiff Crom, LLC (“Crom”) filed a lawsuit against its former employee, Phuong Bacon (“Bacon”), to enforce a non-compete agreement and for damages caused by Bacon’s alleged breach of an employment contract. Crom also sued Bacon for breach of her common law duty of loyalty.  Crom sued Bacon’s subsequent employer, Preload, LLC (“Preload”), for alleged tortious interference with Crom’s business relationship with Bacon, civil conspiracy, and unfair competition. All of Crom’s claims stemmed from allegations that Bacon misappropriated trade secrets and confidential information when she went to work for Preload, Crom’s competitor. Defendants filed a motion for summary judgment to obtain dismissal of Crom’s lawsuit.

Crom built prestressed concrete tanks (“PCT”) to store liquids, most often water or wastewater. Crom’s corporate representative testified that Crom’s “internal design procedures” and expertise from a design standpoint are what distinguish Crom from other companies. Preload, the competitor involved in this lawsuit, commonly would bid against Crom for PCT design and construction projects in the Southeastern United States.  It was undisputed that there were few companies that bid for these projects. In addition to its PCT work, Preload was developing another tank design, a Liquefied Natural Gas (“LNG”) storage tank. It was undisputed that Crom did not build or design LNG tanks, and that LNG tanks are subject to a separate industry design code. Crom argued, however, that an LNG tank can be built with a PCT option, and in that instance, the code requires the LNG tank to be designed in accordance with the same specifications, which are also used in PCTs.

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