Articles Posted in Trade Secrets

Published on: May 21, 2023

MIAMI BUSINESS LITIGATION: DEFEATING TRADE SECRETS AND NON-COMPETE CLAIMS BASED ON CUSTOMER LISTS

Many non-compete agreements contain covenants asserting that the employer business has protectible trade secrets. A contractual provision where the parties agree, ex ante, that the employer will have (or actually has) a “trade secret” does not thereby mean the employer will have (or has) a trade secret in the future. As Florida’ Fourth District Court of Appeal explained in Zodiac Records Inc. v. Choice Environmental Services, 112 So.3d 587 (Fla. 4th DCA 2013), “[w]e note that a former employer’s customer relationships do not automatically qualify as trade secrets, even if a party’s restrictive covenant attempts to characterize them as such.” Peter Mavrick a Miami business litigation attorney, and represents clients 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 Statutes Section 688.002(4), states in pertinent part: “‘Trade secret’ means 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.” Precedent from Florida’s Second District Court of Appeal in East v. Aqua Gaming, 805 So.2d 932 (Fla. 2d DCA 2001), states that to qualify as a trade secret, there must be evidence that a customer list “was the product of great expense and effort, that it included information that was confidential and not available from public sources, and that it was distilled from larger lists of potential customers into a list of viable customers for [a] unique business.”

Employers often seek to premise restrictive covenants on the existence of trade secrets because Florida’s restrictive covenant statute thereby extends the allowable duration of a non-compete covenant. Under § 542.335(1)(d)(1), an employment agreement that is not based on trade secrets is presumed reasonable for only six months or less and presumed unreasonable when it extends beyond two years. By contrast, Florida’s restrictive covenant statute, at § 542.335(1)(e), extends the presumption of reasonableness to up to five years when actual trade secrets underlie the non-compete agreement and presumes a duration in excess of ten years as unreasonable.

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Published on: May 10, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS AND MISAPPROPRIATION OF TRADE SECRETS

By Mavrick Law Firm

Businesses sometimes suffer from disloyal employees who misappropriate trade secrets and confidential information, diverting them to competitors. Such unfair competition can be addressed through contractual claims based on non-compete agreements as well as claims for trade secret misappropriation. Because Florida’s restrictive covenant statute, Florida Statutes Section 542.335, provides strong remedies for businesses, including obtaining a temporary injunction, a non-compete agreement is often the most effective enforcement tool. However, when a disloyal employee transfers trade secrets to a competitor, a claim for trade secret misappropriation is an essential tool for both injunctive relief and recovery of damages. 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 restrictive covenant statute, Section 542.335(1)(b)(1), a “trade secret” is deemed to be a legitimate business interest to enforce a non-compete covenant. A non-compete agreement that is predicated on protection of a trade secret is accorded a lengthy period of enforcement. The statute provides in pertinent part, at Section 542.335(1)(e): “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 of 5 years or less and shall presume unreasonable in time any restraint of more than 10 years. All such presumptions shall be rebuttable presumptions.” Obtaining a temporary injunction against a former employee is usually the most effective way to prevent further harm to the business. Problems, arise, however, when employees have given third parties the trade secrets the business needs to protect. In such cases, a trade secret misappropriation claim would be essential to protect the value of the trade secret. A trade secret must retain its secrecy either through protective measures or court action.

The Defend Trade Secrets Act is a federal law allowing a business owner to sue for trade secret misappropriation. The trade secret owner must prove that (1) the plaintiff-business owns the trade secret, (2) the defendant misappropriated the trade secret, and (3) the plaintiff-business suffered damages. As the United States Court of Appeals for the Ninth Circuit explained in InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653 (9th Cir. 2020), “the definition of trade secret consists of three elements: (1) information, (2) that is valuable because it is unknown to others, and (3) that the owner has attempted to keep secret.” In business litigation concerning misappropriation of trade secrets, the plaintiff must identify the trade secrets and prove they exist. In Autodesk, Inc. v. ZWCAD Software Co., 2015 WL 2265479 (N.D. Cal. May 13, 2015), the United States District Court for the Northern District of California explained that a plaintiff “need not ‘spell out the details of the trade secret.'” However, the InteliClear appellate decision makes clear that the plaintiff must at least “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons…skilled in the trade.” A plaintiff must describe the trade secret with sufficient particularity to permit the defendant “to ascertain at least the boundaries within which the secret lies.” Vendavo, Inc. v. Price f(x) AG, 2018 WL 1456697 (N.D. Cal. March 23, 2018). Identifying trade secrets with sufficient particularity is important because defendants need concrete identification to prepare a rebuttal.

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Published on: April 19, 2023

FORT LAUDERDALE BUSINESS LITIGATION: TRADE SECRETS PROTECTED AS A COMPILATION

By Mavrick Law Firm

Under Florida’s version of the Uniform Trade Secrets Act, Florida Statutes Section 688.002(b)(4), a “trade secret” means information, including a formula, pattern, 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.” Trade secret litigation sometimes involves situations where parts of a trade secret are not individually protectable because each of the parts is available to the public. That, however, does not dispose of the entire issue because the trade secret can constitute a “compilation” that is protectable despite the fact that aspects of the trade secret, considered in isolation, fail to qualify as a trade secret. 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.

For example, important precedent from Florida’s Third District Court of Appeal in Unistar v. Child, 415 So. 2d 733 (Fla. 3d DCA 1982), decided that a “distillation of” publicly available information was a protectable trade secret. This distillation can include a compilation of publicly available information that, as a compilation, has independent economic value and is maintained as a secret for business purposes. In Penalty Kick Management Ltd. v. Coca Cola Co., 318 F.3d 1284 (11th Cir. 2003), the United States Court of Appeals for the Eleventh Circuit considered the Georgia version of the Uniform Trade Secrets Act, and explained that “[t]he unauthorized use need not extend to every aspect or feature of the trade secret; use of any substantial portion of the secret is sufficient to subject the actor to liability.” The Eleventh Circuit’s Penalty Kick decision substantially relied on the Restatement (Third) of Unfair Competition § 40 cmt. c (1995), a scholarly compendium that distills the state of the law. Courts often find the Restatement to be persuasive authority. The Restatement explains that a defendant is liable for the misappropriation of a trade secret only if the plaintiff can show that the defendant (1) disclosed information that enabled a third party to learn the trade secret or (2) used a “substantial portion” of the plaintiff’s trade secret to create an improvement or modification that is “substantially derived” from the plaintiff’s trade secret. In this regard, the Restatement explains in pertinent part: “There are no technical limitations on the nature of the conduct that constitutes “use” of a trade secret…. As a general matter, any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant is a ‘use’…. Thus, marketing goods that embody the trade secret, employing the trade secret in manufacturing or production, [and] relying on the trade secret to assist or accelerate research or development … all constitute “use.” The unauthorized use need not extend to every aspect or feature of the trade secret; use of any substantial portion of the secret is sufficient to subject the actor to liability. Similarly, the actor need not use the trade secret in its original form. Thus, an actor is liable for using the trade secret with independently created improvements or modifications if the result is substantially derived from the trade secret…. However, if the contribution made by the trade secret is so slight that the actor’s product or process can be said to derive from other sources of information or from independent creation, the trade secret has not been “used” for purposes of imposing liability under the rules….” The owner of a trade secret may be injured by unauthorized disclosure of a trade secret as well as by unauthorized use…. Any conduct by the actor that enables another to learn the trade secret … is ‘disclosure’ of the secret.”

Parties in trade secret litigation have to carefully assess what is the trade secret, because often the “whole” can be of greater value than the “sum of the parts.” A Advocacy in litigation over a compilation should emphasize the value of the compilation as distinct from each of its parts. Trade secret can be valuable precisely because it uses publicly available information in a manner where nobody before thought about it in that way.

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Published on: April 8, 2023

MIAMI BUSINESS LITIGATION: NON-COMPETE AGREEMENTS BASED ON CONFIDENTIAL OR TRADE SECRET INFORMATION

By Mavrick Law Firm

Under Florida’s non-compete statute, Florida Statutes Section 542.335(1)(b), “[t]he person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” The term “legitimate business interest” includes trade secrets (as defined in Florida Statutes Section 688.002(4)) and “valuable confidential business or professional information.” Florida and federal courts scrutinize the facts to assess whether the employer has satisfactorily proven the existence of “trade secrets” and “valuable confidential information.” In many cases, businesses seek to enforce non-compete agreements based on alleged trade secret or confidential information that do not qualify as such under the statute. Peter Mavrick a Miami business litigation attorney, and represents clients 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.

To sufficiently plead and prove a legitimate business interest in confidential or proprietary information, an employer must articulate the information it deems confidential or proprietary. Florida’s Fourth District Court of Appeal in Passalacqua v. Navient, Inc., 844 So.2d 792 (Fla. 4th DCA 2003), determined there was no legitimate business interest where the employer failed to “articulate how any activity, method or technique utilized by [the company] was unique or proprietary in any way.” Similarly, the United States District Court for the Middle District of Florida in Lucky Cousins Trucking, Inc. v. QC Energy Res. Texas, LLC, 223 F.Supp.3d 1221 (M.D. Fla. 2016), explained that “[g]eneric allegations do not establish a legitimate business interest.” An employer must prove that the employees could use the information to gain an unfair advantage. As the Passalacqua decision explained, “[g]eneralized statements of concern cannot substitute as proof.” As it relates to alleged trade secrets on which the non-compete agreement is bsed, information commonly known in the industry and not unique to the former employer is not “confidential” and thus not entitled to protection. Keel v. Quality Medical Systems, Inc., 515 So.2d 337 (Fla. 3d DCA 1987).

Under Florida Statutes § 542.335(b)(2), the employer must prove that the employee could use the information to gain an unfair advantage. A great deal of non-compete litigation centers on whether the former employee took advantage of “substantial relationships” with specific customers. In Anich Indus. Inc. v. Raney, 751 So.2d 767 (Fla. 5th DCA 2000), Florida’s Fifth District Court of Appeal explained that, under Florida law, “information commonly known in the industry and not unique to [the] allegedly injured party [is] not ‘confidential’ and thus not entitled to protection.” The appellate court explained in pertinent part: “Anich’s contention that it proved that Raney sought to take advantage of substantial relationships with specific customers also is unsupported by the record from the hearing. Anich asserts that the ‘substantial relationships’ are those developed between the employee and the customer; Raney, on the other hand, submits that the ‘substantial relationships’ are those developed between the employee and the customer…Under either interpretation, however, ‘substantial relationships’ have not been shown. The customers who testified on Anich’s behalf all acknowledged that they made their industrial tool and equipment purchases based primarily on cost and the supplier’s ability to provide the goods quickly. There was little evidence of any exclusive or other kind of relationship that could be construed as ‘substantial’ with the meaning of the statute. Alternatively, under Raney’s interpretation [i.e., the employee’s interpretation], it is obvious that in less than three months with Anich she did not have the opportunity to develop a ‘substantial relationship’ with any of her customers.”

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Published on: April 2, 2023

MIAMI BUSINESS LITIGATION: DEFENSE AGAINST TRADE SECRET MISAPPROPRIATION BASED ON “MODIFICATION OR IMPROVEMENT”

By Mavrick Law Firm

Under the Federal Defend Trade Secrets Act as well as the Uniform Trade Secret Act adopted by many states, unauthorized use of trade secret information and unauthorized acquisition or disclosure of trade secret information may constitute misappropriation. The legal concept of “misappropriation” includes not only the wholesale pirating of an idea, but also the unauthorized utilization of an idea as a starting point or guide in developing a process, or as a means to understand what pitfalls to avoid. The United States Court of Appeals for the Seventh Circuit in Mangren Research & Dev. Corp. v. Nat’l Chemical Co., Inc., 87 F.3d 937 (7th Cir. 1996), explained that “the use of another’s trade secret is liable even if he uses it with modifications or improvements upon it effected by his own efforts, so long as the substance of the process used by the actor is derived from the other’s secret.” Peter Mavrick a Miami business litigation attorney, and represents clients 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 business litigation seeking to prove trade secret misappropriation, a plaintiff will usually need to rely on circumstantial evidence. In SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244 (3d Cir. 1985), the federal appellate court explained that “[m]isappropriation and misuse can rarely be proved by convincing direct evidence. In most cases plaintiffs must construct a web of perhaps ambiguous circumstantial evidence from which the trier of fact may draw inferences which convince him that it is more probable than not that what plaintiffs allege happened did in fact take place. Against this often delicate construct of circumstantial evidence there frequently must be balanced defendants and defendants’ witnesses who directly deny everything.” For this reason, “[r]arely will the plaintiff in a misappropriation of trade secrets case discovery the ‘needle’ in his opponent’s ‘haystack” of documents. Nor is it likely that plaintiff’s counsel will enjoy the ‘Perry Mason moment’ when the defendant’s chef executive officer buckles under the weight of cross examination and admits that his company has misappropriated the plaintiff’s trade secret.” Savor , Inc. v. FMR Corp., 2004 WL 1965869 (Sup. Ct. Del. 2004) (interpreting Delaware version of Uniform Trade Secret Act).

Particularly when they rely on circumstantial evidence to prove their cases, plaintiffs sometimes make strategic mistakes in how they present trade secret misappropriation cases. Plaintiffs have confronted problems where they insist a trade secret is comprised of all elements of its alleged secret, and that none of the elements can be separated from the whole. In such cases, plaintiffs must establish misappropriation of the entire trade secret to prevail. In this regard, the United States District Court in New Jersey explained in Vital State Canada, Ltd. v. Dreampak, LLC, 303 F.Supp.2d 516 (D.N.J. 2003), that an “assertion that the trade secret is a combination of the elements is crucial…since it means that to prove use of the trade secret, [plaintifF] must prove use of each and every element in combination.”

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Published on: March 19, 2023

MIAMI BUSINESS LITIGATION: PROVING TRADE SECRETS AND MEASURES TO RETAIN SECRECY

By Mavrick Law Firm

Under Florida law, a “trade secret” must be a “secret” to the extent it is not generally know, and where the owner has taken reasonable efforts to maintain its secrecy. Florida law (at Section 688.002(4), Florida Statutes) defines a “trade secret” to mean “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.” Florida, as with most states, operates under the Uniform Trade Secrets Act, which sets forth the elements of trade secret protection and legal remedies for misappropriation. Therefore, the body of law from courts outside of Florida which operate under the Uniform Trade Secrets Act are often persuasive to Florida courts. Peter Mavrick a Miami business litigation attorney, and represents clients 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 burden of proof is on the plaintiff to establish that a trade secret exists and that it is not known in the industry. Eaton Corp. v. Appliance Valves Corp., 526 F.Supp. 1172 (N.D. Ind. 1981). The The Fifth Circuit United States Court of Appeals in Cataphote Corp. v. Hudson, 444 F.2d 1313 (5th Cir. 1971), explained that although a trade secret does not require the uniqueness or novelty of a patent, “it must possess at least that modicum of originality which will separate it from everyday knowledge.” Information which is too generally known to derive value from secrecy is unable to obtain trade secret protection even without disclosure. For example, the United States District Court for the Southern District of California in Designs Art v. NFL Props., Inc., 2000 WL 1919787 (S.D. Cal. Nov. 27, 2000), held that the idea of a tiger for a logo for the Cincinnati Bengals does not merit trade secret protection because the idea of using the subject of a corporate name as a logo for that entity is generally known. By contrast, the Fifth Circuit in FMC Corp. v. Varco Int’l, Inc., 677 F.2d 500 (5th Cir. 1982), explained that a process used in manufacturing or developing a product may rise to the level of a trade secret, even if similar products are on the market, as long as the precise method used in the process is not known in the industry. Whether information is a secret “is a relative concept and requires a fact-intensive analysis.” Premier Displays & Exhibits v. Cogswell, 2009 WL 8623588 (C.D. Cal. Dec. 23, 2009).

Courts have held that reasonable efforts to maintain secrecy include “advising employees of the existence of a trade secret, limiting access to a trade secret on ‘need to know basis,’ and controlling plant access.” Courtney Temp. Serv., Inc. v. Leonel Camacho, 222 Cal.App.3d 1278 (1990). A trade secret will be protected from disclosure to the owner’s competitor even in the absence of a written agreement. Salisbury II, 735 F.Supp. 1545 (M.D. Ga. 1988). The critical issue to secrecy is that reasonable measures are in place that will retain secrecy within the organization, including measures to avoid public disclosure, inadvertent disclosure, and intentional disclosure, as well as efforts to limit who in the organization has access to the trade secrets and on what terms.

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Published on: March 8, 2023

FORT LAUDERDALE BUSINESS LITIGATION: THE COMPUTER FRAUD AND ABUSE ACT

By Mavrick Law Firm

The Computer Fraud and Abuse Act (sometimes referred to as the “CFAA”), 18 U.S.C. § 1030, is a federal law that prohibits access a computer and obtaining information without authorization or by exceeding authorized access. The statute (at section 1030(a)(2)(C)) states that whoever “intentionally accesses a computer without authorization or exceeds authorization and thereby obtains … information from any protected computer[,] if the conduct involved an interstate or foreign communication … shall be punished.” Although the CFAA is mainly a criminal statute, it also has a civil remedies applicable to business and employment litigation. The statute (at 18 U.S.C. § 1030(g)) states that “any person who suffers damage or loss [as a result of a violation] … may maintain a civil action … for compensatory damages and injunctive relief or equitable relief.” 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.

A great deal of court litigation has been fought over whether the CFAA applies to situations where an employee was fully authorized to access and obtain certain information over a computer network, and then uses that network access for an illicit purpose such as for a competitor’s benefit. Employers have argued that its employees are authorized to use their work computers only conducting company business, not for the benefit of a competitive business venture. A problem with the CFAA is that the statute does not define the ambiguous wording “without authorization.” Federal courts have a split in authority concerning whether an employee with an improper purpose may be held civilly liable under the CFAA for acquiring computer information that is otherwise permitted to the employee in the course of his employment.

One line of authority has relied on the Restatement (Second) of Agency § 112, which explains that “[t]he authority of an agent terminates if, without knowledge of the principal, he acquires [an] adverse interest or if he is otherwise guilty of a serious breach of loyalty to the principal.” Courts following this line of authority have concluded there is a CFAA violation when an employee misuses his authority to access information on the employer’s computer network to to benefit someone other than the employer. For example, in Int’l Airport Centers, L.L.C. v. Citrin, 440 F.3d 418 (7th Cir. 2006), the United States Court of Appeals For The Seventh Circuit held that “Citrin violated [the CFAA because] his authorization to access the laptop terminated when, having already engaged in misconduct and decided to quit IAC in violation of his employment contract, he resolved to destroy files that incriminated himself and other files that were also the property of his employer, in violation of the duty of loyalty that agency law imposes on an employee.” Similarly, in a trade secret misappropriation lawsuit, the federal district court in Shurgard Storage Centers, Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121 (W.D. Wash. 2000), concluded the employer properly stated a claim under the CFAA against an employee who had “full access” to the employer’s computers, but who used that access to misappropriate trade secrets to benefit a competitor.

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Published on: February 25, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS BASED ON TRADE SECRETS AND CONFIDENTIAL INFORMATION

By Mavrick Law Firm

The State of Florida enacted Florida Statutes Section 542.335 to allow non-compete agreements where there is a “legitimate business interest.” Two frequently cited “legitimate business interests” are confidential information and trade secrets. In an employment context, a non-compete agreement based on “[v]aluable confidential business or professional information” (referenced in Florida Statutes Section 542.335(1)(b)(2)), Florida law presumes as “reasonable” a post-employment restriction of six months or less and presumes as “unreasonable” a restriction of more than two years. For trade secrets, however, Florida law is far more generous. Florida Statutes Section 542.335(1)(3) vastly expands the presumption of reasonable duration as being up to five years and presumes an unreasonable duration to be more than ten years. 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 some cases, restrictive covenants on allegedly “confidential” or “trade secret” information that does not qualify as such. Fundamentally, Florida and federal law require that confidential and trade secret information be subject to efforts that are reasonable under the circumstances to maintain secrecy. To ensure information is treated in a confidential manner, courts expect, at a minimum, that there are limits on employee access to the information as well as password protecting the computer network on which the information resides. VAS Aero Servs., LLC v. Arroyo, 860 F.Supp.2d 1349 (S.D. Fla. 2012) (explaining that these measures are influential in reasonably securing trade secrets). The employer, however, must ensure that the allegedly confidential or trade secret information is handled in a confidential or secret manner. This includes preventing employees from storing putative confidential or trade secret information on their personal cellphone or laptop computers. For example, the federal district court in Diamond Power Int’l, Inc. v. Davidson, 540 F.Supp.2d 1322 (N.D. Ga. 2007), found it significant that the plaintiff business failed to prevent its employees from transferring a file, allegedly constituting a trade secret, to their personal computers. Similarly, the United States Court of Appeals for the Eleventh Circuit in Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018), held there was no viable trade secret under the Florida Uniform Trade Secrets Act because the employer (i.e., Yellowfin) did not deploy reasonable measures to ensure its information was kept secret. The appellate court explained in pertinent part that: “Indeed, Barker refused to sign an employment agreement which stated that he would, among other things, keep all Yellowfin trade secrets in confidence. Further, Yellowfin neither marked the Customer Information as confidential nor instructed Barker to secure information on his personal devices. And when Barker left Yellowfin, the company did not request that Barker return or delete any of the information.”

Where employers are unable to prove they had an explicit understanding with their employees that certain information is confidential, Florida law sometimes allow protection based on an implied confidential relationship between the employer and employees. However, the U.S. Court of Appeals for the Eleventh Circuit in Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996), explained that “[a]lthough Florida law recognizes implied confidential relationships sufficient to trigger trade secret liability” the appellate court expressed it is “wary of any trade secret claim predicated on the existence of” such a relationship. The Yellowfin Yachts decision rejected the employer/plaintiff’s contention that its “general verbal statements warning employees not to share its Confidential Information with third parties” was adequate to establish that company information was truly kept confidential. The appellate court explained that: “In sum, with mere verbal statements that the Customer Information should not be given to outsiders, Yellowfin relinquished the information to Barker, who refused to sign a confidentiality agreement, with no instruction to him as to how to secure the information on his cellphone or personal laptop. In doing so, Yellowfin effectively abandoned all oversight in the security of the Customer Information. Accordingly, the District Court did not err in determining that no reasonable jury could find that Yellowfin employed reasonable measures to secure the information.”

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Published on: January 25, 2023

FORT LAUDERDALE BUSINESS LITIGATION: RECOVERY OF DAMAGES FOR TRADE SECRET MISAPPROPRIATION

By Mavrick Law Firm

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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Published on: January 11, 2023

FORT LAUDERDALE BUSINESS LITIGATION: TRADE SECRET MISAPPROPRIATION VIA UNLAWFUL “USE”

By Mavrick Law Firm

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:

Used improper means to acquire knowledge of the trade secret; or

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