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Articles Posted in Trade Secrets

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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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It is a common mistake in trade secret litigation for the company seeking protection for its trade secrets to fail to explain what trade secrets it wishes to protect.  Courts require that plaintiffs describe their trade secret with a certain degree of particularity.  Failing to do that can be fatal to trade secret claims. 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, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

In business litigation alleging trade secret misappropriation, plaintiffs often focus on how a trade secret was misappropriated rather than what was misappropriated.  A trade secret  case is not like a regular civil theft or other misappropriation case.  How a party lost its trade secret is less important than what was taken.  Unlike other theft-related torts, “misappropriation” under the Florida Uniform Trade Secret Act also includes circumstances when a party simply possesses the trade secret material.  § 688.002(2) (defining trade secrets misappropriation to include possession of the material in certain circumstances).  A plaintiff does not merely have to prove that confidential information was stolen, it must also prove that what was stolen qualifies as a trade secret under Florida or federal law.  Particularly, trade secret is defined under Florida law 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 Statutes.

Plaintiffs in business litigation asserting theft of a trade secret must be able to show that what was taken is valuable because it is secret.  The plaintiff must also show acted reasonably in trying to keep its information secret.  A litigant that fails to adequately explain what its trade secret is will inherently fail to prove that what was misappropriated qualifies as a trade secret.  “In order to ascertain whether trade secrets exist, the information at issue must be disclosed.”  Lovell Farms, Inc. v. Levy, 641 So. 2d 103 (Fla. 3d DCA 1994); Revello Med. Mgmt., Inc. v. Med-Data Infotech USA, Inc., 50 So. 3d 678 (Fla. 2d DCA 2010) (“The plaintiff must, as a threshold matter, establish that the trade secret exists. To do so, it must disclose the information at issue”).  “[I]t is insufficient to describe the trade secrets by generic category, such as the components of the night vision devices to which the alleged trade secrets relate. Rather, [plaintiff] must identify the specific characteristics of each trade secret, such as a particular drawing, process, procedure or cost/pricing data. It must also describe with reasonable particularity all of its trade secrets, including those involving “business methods, know-how, machines, manufacturing process and procedure, marketing information, pricing data, product designs and manufacturing information […].”  Knights Armament Co. v. Optical Sys. Tech., Inc., 254 F.R.D. 463, (M.D. Fla. 2008).

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Plaintiffs may be tempted to bring as many causes of action into a legal complaint that the facts may allow.  Diversity of causes of action in business litigation can provide the plaintiff with different types of remedies and help a suit endure should a legal defect arise concerning any particular cause of action.  However, cases involving the Florida Uniform Trade Secrets Act (FUTSA) can preempt many other related causes of action, including those made under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA).  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.

FUTSA provides a way for owners of trade secrets to sue parties who misappropriate those trade secrets or use those trade secrets.  § 688.002, Fla. Stat.  Depending upon the defendant’s conduct and culpability, a business litigation plaintiff suing under FUTSA can be awarded damages, exemplary damages, an injunction against use or disclosure of trade secrets, and/or attorneys’ fees.

FDUTPA permits parties to sue for “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.”  § 501.204(1), Fla. Stat.  A plaintiff suing under FDUTPA can claim damages, an injunction, and attorneys’ fees.  § 501.211, Fla. Stat.

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A previous article discussed how it is unlawful under the Florida Uniform Trade Secrets Act (FUTSA) to take a trade secret using “improper means.”  As technology has developed, new methods of commercial reconnaissance can make it difficult to determine whether method was lawful acquisition or unlawful espionage.  Peter Mavrick is a Fort Lauderdale business litigation lawyer, representing 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.

Under FUTSA, it is unlawful for a business to misappropriate, use, or disclose another’s trade secrets when the business knew or had reason to know that it was acquired through “improper means.”  § 688.002(2).  While it is clear that “improper means” includes theft and other crimes, it is less obvious when the reconnaissance crosses the line and becomes unlawful.  This line is further blurred as technology continues to develop to allow information to be acquired remotely.

In E. I. duPont deNemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir. 1970), the United States Court of Appeals for the Fifth Circuit addressed whether the use of a plane to fly over the construction of a factory was an “improper means” to discover trade secrets.  In this important federal court precedent, DuPont held that the use of spy planes was an improper means and explained the legal analysis of trade secret misappropriation:

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The Florida Uniform Trade Secrets Act (FUTSA) allows Florida businesses who have had their trade secrets misappropriated to seek damages or an injunction against the perpetrator of the misappropriation.  For the acquisition to be an unlawful misappropriation, the confidential information must usually have been acquired through “improper means.”  It is lawful for a Florida business to acquire and use another company’s trade secret for itself if it acquired that confidential information through proper means, such as through independent discovery of the trade secret, reverse engineering of the product which uses the trade secret, or through the voluntary disclosure by an owner of the trade secret.  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, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

Pursuant to FUTSA, the misappropriation of a trade secret through improper means is unlawful.  The manner of acquisition of trade secret is a critical question in determining whether there has been unlawful misappropriation.  Generally, if one knows or has reason to know that information was acquired through improper means, the use or disclosure of that information is unlawful.  FUTSA defines misappropriation to mean:

(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

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Trade secrets and confidential information can lose protection under the Florida Uniform Trade Secrets Act (FUTSA) when they are disclosed to third parties. One way to maintain protection of this information under FUTSA, is by entering into a confidentiality agreement with the third parties that will receive the information.  When trade secrets or confidential information is disclosed to employees without a confidentiality agreement, the information does not necessarily lose trade secret protection.  Peter Mavrick is a Miami business litigation lawyer who represents clients in trade secret litigation in Miami, Fort Lauderdale, Boca Raton, and Palm Beach.

A company seeking to protect its confidential information under FUTSA must show that the confidential information at issue was “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”  See § 688.002(4)(b), Florida Statutes.  Disclosing information to third parties can defeat the requisite element of secrecy under either FUTSA when the party given the confidential information is not informed of the confidential nature of the information or otherwise has no obligation to keep the information confidential. “Disclosing the ‘information to others who are under no obligation to protect the confidentiality of the information defeats any claim that the information is a trade secret.’” M.C. Dean, Inc. v. City of Miami Beach, Florida, 199 F. Supp. 3d 1349 (S.D. Fla. 2016).  The underlying principle behind this rule is that something cannot be a trade secret if it is freely shared with outsiders.

“This necessary element of secrecy is not lost, however, if the holder of the trade secret reveals the trade secret to another ‘in confidence, and under an implied obligation not to use or disclose it.’”  Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974); see Advantor Sys. Corp. v. DRS Tech. Services, Inc., 678 Fed. Appx. 839 (11th Cir. 2017) (“[T]rade secret protection is not lost when a company shares its trade secrets with an entity that has a duty to maintain the secrecy or limit access to the disclosed document”).

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For a trade secret to be protectable under Florida law, a business must protect that information as confidential.  Disclosure of trade secret information to parties without an understanding that the information must be protected as confidential can cause that information to no longer be a protectable trade secret.  In the absence of an express confidentiality agreement, that information may still be protected if the business has an implied confidential relationship with the receiving party by making clear the intention to keep that information protected.  However, that implied confidential relationship may have to be shown by something more than a mere oral understanding, such as a stamp or watermark placed on the documents indicating they are confidential.  Peter Mavrick is a Fort Lauderdale trade secret attorney who represents businesses in trade secret litigation, non-competition agreement litigation, and other business litigation.

Whether information constitutes a trade secret can also make a material difference to the scope of a non-compete agreement.  Under Florida Statute section 542.335(b)2), a trade secret can be a “legitimate business interest” allowing a non-compete covenant and can justify a legal presumption for a more lengthy non-compete obligation.  Under Florida statute section 542.335(e), where trade secrets are proven, “a court shall presume reasonable in time any restraint 5 years or less and shall presume unreasonable in time any restraint of more than 10 years.  All such presumptions shall be rebuttable presumptions.”

It is well established that a business must protect the secrecy of business information for that information to be protected as a trade secret under the Florida Uniform Trade Secret Act (“FUTSA”).  Section 688.002(4)(b), Florida Statutes, describes that a trade secret, by definition, must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

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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 restrictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint 5 years or less and shall presume unreasonable in time any restraint of more than 10 years.  All such presumptions 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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