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Articles Posted in Trade Secrets

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Corporations typically rely on employees to handle and safeguard confidential business information, including trade secrets.  Under Florida law, a business can seek protection contractually, most often a non-compete agreement, to restrict an employee or former employee from competing by joining a competitor’s business, starting a competing business, or facilitating competition by using confidential or trade secret information.  Such contracts typically include an obligation to keep trade secrets and other confidential information a secret.  Florida law also affords protection to businesses via the employee “duty of loyalty,” which is a judicially created doctrine that imposes a duty on employee to refrain from actions calculated to harm an employer during the period of employment, including competition.  When employees violate any of these legal protections, employers have various remedies against their former employees.   Employers also have remedies against businesses that benefit from the employee passing trade secrets or other confidential information to competing businesses, via claims for trade secret misappropriation against the former employee and the competing business.  Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.
In a lawsuit for misappropriation of a trade secret, “[d]amages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.”  Florida Statutes section 688.004(1). Florida’s Second District Court of Appeal in Perdue Farms Inc. v. Hook, 777 So.2d 1047 (Fla. 2d DCA 2001), stated in pertinent part that, in such litigation, “when some damage is proven and ‘the uncertainty lies only in the amount of damages, recovery may be had if there is proof of a reasonable basis from which the amount can be inferred or approximated.'”  The Perdue Farms decision explained that the plaintiff’s burden of proof as to damages caused by the misappropriation is “liberal” and is satisfied “by showing the misappropriation, the subsequent commercial use, and … evidence by which the jury can value the rights the defendant has obtained.”
Competing businesses who have unlawfully obtained trade secrets from a current or departing employees of competitors have sometimes tried to limit damages for their misappropriation.  They have argued that damages be limited only to the “head-start period.”  The United States District Court for the Southern District of Florida in Sensormatic Elec. Corp. v. TAG Co. US, 632 F.Supp.2d 1147 (S.D. Fla. 2008), defined the term “head-start period” as meaning “the amount of time it would have taken … [the trade secret misappropriator] to independently develop its product without the benefit of … [the trade secret owner’s] trade secrets.” In RRK Holding Co. v. Sears, Roebuck & Co., 563 F.Supp.2d 832 (N.D. Ill. 2008), the defendant business that benefited from the misappropriated trade secret argued that the plaintiff “failed to limit its damages claims to the time necessary to reverse engineer its trade secret product, i.e., the ‘head start’ period.”  The jury instruction at issue read, “damages can include  Plaintiff’s actual loss caused by Defendant’s misappropriation and the unjust enrichment caused by the misappropriation that is not taken into account in computing Plaintiff’s actual loss.”  The court stated that “[w]hile Illinois case law requires damages be limited to a head start period for injunctive relief, it has not made such a requirement for monetary damages.  The law does not support Defendant’s contention.” Similarly, CardioVention, Inc. v Medtronic, Inc., 483 F.Supp.2d 830 (D.Minn. 2007), explained that courts “have recognized that a plaintiff’s actual damages can be measured by the value of the loss of the secret to the plaintiff under the circumstances.”
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To prove a claim under the Florida Uniform Trade Secrets, the plaintiff “must demonstrate that (1) it possessed a trade secret and (2) the secret was misappropriated.” Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018).    Florida law defines a trade secret (at Florida Statutes § 688.002(4)) as information that: (a) derives independent economic value 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 (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.   Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.
Under Florida’s trade secret statute, a party can misappropriate another’s trade secret by either acquisition, disclosure, or use.  A person misappropriates a secret by use if he uses it “without express or implied consent” and either:
  1. Used improper means to acquire knowledge of the trade secret; or
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Florida law contains an explicit privilege against disclosure of alleged trade secrets.  This trade secret privilege is set forth in Florida Statutes Section 90.506, which states in pertinent part: “A person has a privilege to refuse to disclose, and to prevent other persons from disclosing, a trade secret owned by that person if the allowance of the privilege will not conceal fraud or otherwise work injustice.  When the court directs disclosure, it shall take protective measures that the interests holder of the privilege, the interests of the parties, and the furtherance of justice require.”  To ensure that this privilege is properly protected, courts have set forth a three-step analysis for trial courts to undertake when faced with a claim that a discovery request seeks production of protected trade secret information.   Trade secrets often are asserted in lawsuits, including lawsuits involving non-compete agreements, claims of unfair competition, and employment law.  Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

The first step requires the trial court determine whether the information requested constitutes or contains trade secret information.  This step will usually, but not always, require the trial court to conduct an “in camera review” of the documents to determine whether, in fact, they contain trade secret information.  The legal term “in camera review” means that the Judge reviews documents outside of the view of the public, to retain confidentiality of the information the Judge is reviewing.  Generally, if the parties agree that the documents contain trade secret information, then no in camera review would be needed.  Where the parties disagree on whether the requested documents contain trade secret information, an in camera review or evidentiary hearing will be needed.  Florida’s Third District Court of Appeal explained in Coast Fire, Inc. v. Triangle Fire, Inc., 170 So.3d 804 (3d DCA 2014), that “[s]uch a hearing may include expert testimony … Expert testimony may be particularly useful in cases where the trial court does not have requisite experience in examining the subject information.”   Revello Med. Mgmt., Inc. v. Med-Data Infotech USA, Inc., 50 So.3d 678 (Fla. 2d DCA 2010), also explained that “if the circuit judge does not have the requisite experience in examining [computer source] code, he may wish to appoint a neutral computer expert to review [the party’s] program.”

If the Judge determines in this first step that the discovery request seeks information subject to the trade secret privilege, the second step of the analysis requires the Judge to determine “whether the party seeking production can show reasonable necessity for the requested information.”  Ameritrust Ins. Corp. v. O’Donnell Landscapes, Inc., 899 So.2d 1205 (2d DCA 2005).  This step usually requires the trial court to decide whether the need for producing the documents outweighs the interest in maintaining their confidentiality.  This is a fact-intensive analysis.

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The Defend Trade Secret Act of 2016 (DTSA) provides civil remedies in federal courts for trade secret misappropriation. 18 U.S.C. §§ 1836 et. seq. Before the DTSA was enacted, trade secret holders were required to protect against and remedy trade secret misappropriation in state court. Most states have adopted some version of the Uniform Trade Secrets Act (UTSA). While the DTSA is similar to the UTSA, some substantial differences exist between the DTSA and a state law UTSA claim. There are also advantages to asserting one claim over the other. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

A trade secret holder may choose to assert a DTSA claim because it ensures the case will be subject to federal court jurisdiction. In federal court, a state law UTSA claim could be asserted in addition to a DTSA claim. However, a DTSA claim can never be asserted in a state court. Another difference between DTSA and a state law UTSA claim. Another difference between the DTSA and UTSA is that the DTSA generally does not preempt state trade secret laws. Trade secret holders therefore can seek civil remedies for trade secret misappropriation under either state or federal law, or both. For example, a trade secret holder can assert both a DSTA and Florida UTSA (FUSTA) claim. A Florida trade secret holder, however, may decide not to assert both because the FUTSA contains a preemption clause preempting common law claims based on trade secret misappropriation.

The FUTSA provides that it displaces “conflicting tort, restitutory, and other law of this state providing civil remedies for misappropriation of a trade secret.” § 688.008, Fla. Stat. The FUTSA specifies that this preemption does not apply to “[o]ther civil remedies that are not based upon misappropriation of a trade secret.” § 688.008, Fla. Stat. “In determining whether common law claims are preempted by FUTSA, courts consider whether the allegations supporting the common law claims are distinguishable from the allegations of trade secret misappropriation.” Coihue, LLC v. PayAnyBiz, LLC, 2018 WL 7376908 (S.D. Fla. Feb. 6, 2018). The court “must evaluate whether allegations of trade secret misappropriation alone comprise the underlying wrong; if so, the cause of action is barred by § 688.008.” Sentry Data Sys., Inc. v. CVS Health, 361 F. Supp. 3d 1279 (S.D. Fla. 2018). Thus, where misappropriation of trade secrets forms the basis of the common law claims, the FUTSA preempts the common law claims. Coihue, LLC v. PayAnyBiz, LLC, 2018 WL 7376908 (S.D. Fla. Feb. 6, 2018).

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In business litigation, a commonly litigated issue is whether a business took reasonable measures to maintain the secrecy of its alleged trade secret information. If such measures are not taken, then Florida courts routinely find that the subject information is not a protectable trade secret. Under Florida law, businesses must therefore adequately protect its trade secret information by maintaining its confidentiality and limiting third-party or outside access to such information. Peter Mavrick is a Miami business litigation attorney, and 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, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Under the Florida Uniform Trade Secrets Act (“FUTSA”), “trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process that:

  • derives 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
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In business litigation, a business’ customer information can qualify as a trade secret under Florida and Federal law. This trade secret protection extends further than just a business’ list of customers. A business’ cognizable trade secrets can include a different elements of customer information that are compiled in the aggregate and protected by business. The business must adequately protect this compiled customer information and maintain its confidentiality to protect this information under federal and Florida trade secret laws. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Trade secrets are broadly defined under the Florida Uniform Trade Secrets Act (“FUTSA”) and the federal Defend Trade Secrets Act (“DTSA”) define trade secrets as information that: (a) is subject to reasonable measures for maintaining the information’s secrecy; and (b) derives independent economic value from not being generally known or readily ascertained through proper means by, another person. 18 U.S.C. § 1839(3); Fla Stat. § 688.002(4). Under FUTSA and DTSA, trade secrets include information that “derive[s] economic value from not being readily ascertainable by others and must be the subject of reasonable efforts to protect its secrecy.” Del Monte Fresh Produce Co. v. Dole Food Co., Inc., 136 F. Supp. 2d 1271 (S.D. Fla. 2001). FUTSA also expressly defines trade secrets to include a “list of customers,” so long as the “owner thereof takes measures to prevent it from becoming available to persons other than those selected by the owner . . . .” Fla. Stat. § 812.081. “Regardless of who compiled the customer list, however, it is clearly protected under [Florida law].” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Hagerty, 808 F. Supp. 1555 (S.D. Fla. 1992).

Generally, Florida law considers a business’ customer lists and the information contained therein to be trade secrets subject to protection if that information is compiled from non-public information and is kept confidential by the business. Marine Turbo Eng’g, Ltd. v. Turbocharger Servs. Worldwide, LLC, 2011 WL 6754058 (S.D. Fla. Dec. 22, 2011). “Customer lists can constitute trade secrets where the lists are acquired or compiled through the industry of the owner of the lists and are not just a compilation of information commonly available to the public. Kavanaugh v. Stump, 592 So. 2d 1231 (Fla. 5th DCA 1992). The unique compilation of customer information typically adds value to a business when it allows the information’s possessor to diminish substantial barriers impeding the exodus of its customers in-mass. “Even if all of the information is publicly available, a unique compilation of that information, which adds value to the information, also may qualify as a trade secret.” Cap. Asset Research Corp. v. Finnegan, 160 F.3d 683 (11th Cir. 1998). “Customer lists are trade secrets if they are compiled from non-public information, and thus derive independent economic value.” Fortiline, Inc. v. Moody, 2013 WL 12101142 (S.D. Fla. Jan. 7, 2013).

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Trade secret misappropriation claims are commonly filed in business litigation by employers against former employees. An employee is precluded from using for his or her own advantage, and to the detriment of a former employer, any trade secrets obtained in the course of prior employment. East v. Aqua Gaming, Inc., 805 So. 2d 932 (Fla. 2d DCA 2001). Where an employee acquires, during the course of his or her employment, a special technique or process developed by his or her employer, the employer is under a duty, even in the absence of an express contractual provision, not to disclose such skills, techniques, or processes for the employee’s own benefit or another’s benefit to the detriment of the former employer. Premier Lab Supply, Inc. v. Chemplex Industries, Inc., 10 So. 3d 202 (Fla. 4th DCA 2009). Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In cases where there is no restrictive covenant between an employer and its employees, employers can sometimes prohibit former employees from disclosing confidential information under the Florida Uniform Trade Secrets Act (“FUTSA”). The lack of a confidentiality agreement does not necessarily defeat an employer’s argument that particular information is trade secret. Premier Lab Supply, Inc. v. Chemplex Industries, Inc., 10 So. 3d 202 (Fla. 4th DCA 2009). FUTSA mirrors the federal Uniform Trade Secrets Act, which also prohibits misappropriation of trade secrets and provides certain remedies. To obtain relief under FUTSA, the employer must prove: “(1) that it possessed a trade secret and took reasonable steps to protect its secrecy; and (2) the trade secret was misappropriated, either by one who knew or had reason to know the trade secret was improperly obtained or who used improper means to obtain it.” Mapei Corp. v. J.M. Field Marketing, Inc., 295 So. 3d 1193 (Fla. 4th DCA 2020).

Under FUTSA, “trade secret” is defined as “information, including a formula, pattern, compilation, program, device, method, technique, or process that: (a) Derives 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 (b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” § 688.002, Fla. Stat. To be a trade secret under FUTSA, the information sought to be protected must be secret, and information that is generally known, or is necessarily disclosed upon use by a third party, cannot qualify as a trade secret. In re Maxxim Med. Group, Inc., 434 B.R. 660 (Bankr. M.D. Fla. 2010).

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Business litigation in Florida often involves claims for trade secret misappropriation under Florida’s Uniform Trade Secret Act (“FUTSA”) or the Defend Trade Secrets Act (“DTSA”). In business litigation, a business’ customer list may qualify for trade secret protection if the list is misappropriated through improper means. may occur during the employment or after an employees’ employment terminates. For liability to attach under DTSA or FUTSA, the trade secret information must be the fruit of a wrongful acquisition or misappropriation. Misappropriation of a trade secret occurs where a person who knows or has reason to know that the trade secret was acquired by improper means acquires the trade secret of another or where a person who has obtained the trade secret by improper means discloses or uses the trade secret of another without express or implied consent.” ACR Elecs., Inc. v. DME Corp., 2012 WL 13005955 (S.D. Fla. Oct. 31, 2012). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

A plaintiff bringing a claim under the DTSA must plausibly allege that it (i) “possessed information of independent economic value” that (a) “was lawfully owned by” the plaintiff and (b) for which the plaintiff “took reasonable measures to keep secret,” and (ii) the defendant “used and/or disclosed that information,” despite (iii) “a duty to maintain its secrecy.” Trinity Graphic, USA, Inc. v. Tervis Tumbler Co., 320 F.Supp.3d 1285 (M.D. Fla. 2018).

Similarly, FUTSA provides a cause of action for the misappropriation of trade secrets. Fla. Stat. § 688.001-09. “To prevail on a FUTSA claim, a plaintiff must demonstrate that (1) it possessed a ‘trade secret’ and (2) the secret was misappropriated.” Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018). Under FUTSA, a “trade secret” is:

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A prevalent issue arising in business litigation throughout Florida is whether the customer list of a business or employer is a protected trade secret under Fl as a trade secret Florida’s Uniform Trade Secret Act (FUTSA). Trade secrets are broadly defined under FUTSA and include information that “derive[s] economic value from not being readily ascertainable by others and must be the subject of reasonable efforts to protect its secrecy.” Del Monte Fresh Produce Co. v. Dole Foods Co., Inc., 136 F. Supp. 2d 1271 (S.D. Fla. 2001). Florida law considers a business’s customer lists and the information contained therein to be trade secrets subject to protection. Variable Annuity Life Ins. Co. v. Dull, No. 09-80113, 2009 WL 3180498 (S.D. Fla. Sept. 25, 2009). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

FUTSA provides that “a complainant is entitled to recover damages for misappropriation.” Fla. Stat. § 688.004(1). In turn, “misappropriation” is defined as either the “(a) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means, or (b) Disclosure or use of a trade secret of another . . .” Fla. Stat. § 688.002(2) (emphasis added). Thus, a plain reading of the statute makes clear that the wrongful acquisition of a trade secret, even without its actual use, constitutes a violation of FUTSA. See H2Ocean v. Schmitt, 2006 WL 1835974 (N.D. Fla. June 30, 2006). A trade secret is misappropriated if it is either acquired via improper means, or if it is disclosed or used by someone without proper consent.

FUTSA permits injunctive relief to redress any actual or threatened misappropriation of trade secrets. Se. Mech. Servs., Inc. v. Brody, 2008 WL 4613046 (M.D. Fla. Oct. 15, 2008). Florida law protects customer lists from misappropriation through injunctive relief. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Silcox, No. 01- 8800, 2001 WL 1200656 (S.D. Fla. Oct. 4, 2001). To prove a violation of FUTSA, a plaintiff must show that it: (1) possessed secret information and took reasonable steps to protect its secrecy and (2) the secret it possessed was misappropriated, either by one who knew or had reason to know that the secret was improperly obtained or by one who used improper means to obtain it. Del Monte Fresh Produce Co. v. Dole Foods Co., Inc., 136 F. Supp. 2d 1271 (S.D. Fla. 2001). Florida courts have held that “documents containing strategic marketing plans and pricing information have been held to constitute trade secrets under Florida law.” VAES Aero Servs. v. Arroyo, 860 F. Supp. 2d 1349, 1359 (S.D. Fla. 2012).

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In business litigation, claims for trade secret misappropriation often arise under Florida’s Uniform Trade Secret Act (“FUTSA”) or the Defend Trade Secrets Act (“DTSA”). For liability to attach under the DTSA and FUTSA, the information must be the fruit of wrongful acquisition, or misappropriation. The DTSA defines “misappropriation” to include “acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means” or “disclosure or use of a trade secret of another without express or implied consent” in specified circumstances. 18 U.S.C. § 1839(5). “Improper means” under the DTSA includes “theft, bribery, misrepresentation, [and] breach or inducement of a breach of a duty to maintain secrecy,” but excludes “reverse engineering, independent derivation, or any other lawful means of acquisition.” Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Florida courts routinely find that trade secrets are acquired through improper means when a business’ employee copies or extracts electronic information before their employment ends. For example, in Pharmerica, Inc. v. Arledge, the United States District Court for the Middle District of Florida held that the defendant “misappropriated those trade secrets by duplicating and copying them and/or sending them to his home computer or personal email account and deleting them from the [plaintiff’s] computers.” 2007 WL 865510 (M.D. Fla. Mar. 21, 2007). Pharmerica considered the fact that the defendant “copied almost all of his electronic files from his work computer” just two days before he resigned from his position with his former employer. The trade secrets and proprietary information involved the former employer’s distribution and operational plans, quality control programs, and—most importantly—the former employer’s pricing details for major corporate clients that represented at one-third of the company’s total revenues.

Under the DTSA, federal courts across the United States have held that misappropriation by acquisition via download or password protected database requires evidence that an employee took affirmative action to ensure they retained access to the information after he or she was terminated, such as copying the information to his or her hard drive. For example, in Samick Music Corp. v. Gordon, the Court held it was reasonable to suspect that defendants obtained the customer’s information from the former employer’s database through improper means because: (a) many of the purchases were made by individuals who had previously purchased products from the former employer, and (b) the plaintiff identified two instances after the employee’s termination where defendants contacted former customers to sell them purported former employer’s replacement parts.  The district court found that Plaintiff had demonstrated a likelihood of success on its DTSA and CUTSA trade secret misappropriation claims. 2020 WL 3210613 (C.D. Cal. Mar. 26, 2020).

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