Articles Posted in Trade Secrets

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). For liability to attach under DTSA or FUTSA, the trade secret information must be the fruit of a wrongful acquisition or misappropriation. A common issue concerning trade secret claims is whether the alleged trade secret was wrongfully acquired through improper means. Actions may be “improper” for trade-secret purposes even if not independently unlawful. Compulife Software Inc. v. Newman, 959 F.3d 1288 (11th Cir. 2020). 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.

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). 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 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.” 18 U.S.C. § 1839(6). Meanwhile, the definition of “improper means” under FUTSA also includes “breach or inducement of a breach of a duty to maintain secrecy.” Fla. Stat. § 688.002(1). While the general definitions of a trade secret are identical under FUTSA and DTSA, a court’s analysis under each statute is substantially equivalent. Compulife Software Inc. v. Newman, 959 F.3d 1288 (11th Cir. 2020).

Florida courts routinely find that trade secrets may be 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). The Court 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.

Business litigation involving claims under Florida’s Uniform Trade Secrets Act (FUTSA) for trade secret misappropriation often also include similar additional claims for tortious interference, fraud, or violations of Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA). However, these additional claims rarely survive past the pleading stage because FUTSA prohibits parties from maintaining common law and statutory claims arising from facts substantially similar to the alleged trade secret misappropriation. FUTSA “displace[s] conflicting tort, restitutory, and other laws of this state providing civil remedies or misappropriation of a trade secret.” Section 688.008, Florida Statutes. This “provision expressly prohibits a pleader from asserting alternative claims based on trade secret misappropriation because Florida’s Legislature decreed that FUTSA preempts all other causes of action.” Coihue, LLC v. PayAnyBiz, LLC, 2018 WL 7376908 (S.D. Fla. Feb. 6, 2018). Peter Mavrick is a Fort Lauderdale trade secret attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida.  The Mavrick Law Firm represents corporations and their owners in business litigation, non-compete agreement litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Under Florida law, a party’s “separate tort claim is preempted by FUTSA if there is no material distinction between the plaintiff’s FUTSA claim and the other allegation.” Sentry Data Systems, Inc. v. CVS Health, 361 F. Supp. 3d 1279 (S.D. Fla. 2018). “To determine whether allegations of trade-secret misappropriation preempt a plaintiff from sufficiently pleading a separate, but related tort, 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 Systems, Inc. v. CVS Health, 361 F. Supp. 3d 1279 (S.D. Fla. 2018). “In determining if a tort cause of action is preempted by the FUTSA, courts have examined whether there are “material distinctions between the allegations comprising the additional torts and the allegations supporting the FUTSA claim.” Digiport, Inc. v. Foram Dev. BFC, LLC, 314 So. 3d 550 (Fla. 3d DCA 2020). “In other words, the allegations must be separate and distinct.” ThinkLite LLC v. TLG Sols., LLC, 2017 WL 5972888 (S.D. Fla. Jan. 31, 2017). If the trade secret misappropriation alone comprises the underlying wrong, the claim is preempted. Allegiance Healthcare Corp. v. Coleman, 232 F. Supp. 2d 1329 (S.D. Fla. 2002).

Florida courts will dismiss additional tort or statutory claims as preempted under FUTSA where “the underlying wrong in each of those claims [was] limited to trade secret misappropriation and each re-allege[d] all the prior allegations” related to FUTSA. Fla. Beauty Flora Inc. v. Pro Intermodal L.L.C., 2021 WL 1945821, (S.D. Fla. May 14, 2021). In Pelfrey v. Mahaffy, the U.S. District Court for the Southern District of Florida dismissed claims for tortious interference where he alleged a party stole and deleted confidential business information and then used it to divert clients to a competing business. Pelfrey v. Mahaffy, 2018 WL 3110794 (S.D. Fla. Feb. 7, 2018). Similarly, in American Registry, LLC v. Hanaw, the U.S. District Court for the Middle District of Florida dismissed FDUTPA claims as preempted under FUTSA where the plaintiff alleged FDUTPA claims based on allegations that defendant used trade secret information to solicit and steal customers. 2014 WL 12606501 (M.D. Fla. July 16, 2014).

A compilation of 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 trade secret attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida.  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.

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).

In business litigation over alleged misappropriation of trade secrets, parties frequently dispute the legal requirement that the allegedly misappropriated trade secrets be disclosed with “reasonable particularity.”  Florida and federal courts generally hold that when a plaintiff asks the court to find that trade secrets exist and that the defendant misappropriated those trade secrets, the plaintiff must reveal the information it ultimately seeks to protect. Peter Mavrick is a Fort Lauderdale trade secret attorney, and also represents clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in business litigation, non-compete  agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

Because lawsuits alleging trade secret misappropriation are often between business competitors, it is understandable that the plaintiff business does not want the defendant business rival to understand the full scope of the misappropriated trade secret.  However, Florida and Federal courts require disclosure of the relevant trade secrets to the defendant, with “reasonable particularity,” because the defendant will need to know this information to have a fair ability to defend against the lawsuit.  For example, in Bestechnologies, Inc. v. Trident Environmental System, Inc., 681 So.2d 1175 (Fla. 2d DCA 1996), the Florida appellate court in a trade secrets misappropriation case denied a petition to vacate, i.e., overturn, an order compelling deposition testimony.   In the course of the business litigation, the rival business sought to obtain evidence that the plaintiff business’ processes were not trade secrets, but rather, were common processes known throughout the industry.  The Judge in the trial court had ordered the plaintiff business to produce to the defendant discovery related to this issue, but the Judge ordered that the discovery must remain confidential.  The appellate court held that the defendants were allowed to know whether the plaintiff’s competitors were aware of the plaintiff’s processing techniques, so long as the trial court took measures to protect the alleged trade secrets.

Sometimes plaintiffs suing for trade secrets misappropriation resist disclosing trade secrets information on the grounds that the information is privileged as a trade secret Florida has a statutory trade secrets privilege set forth in § 90.506, Florida Statutes.  Florida’s Fourth District Court of Appeal, i.e., the appellate court governing Broward County, Florida, has held that “[w]hen the trade secret privilege is asserted as the basis for resisting production, the trial court must determine whether the requested information constitutes a trade secret; if so, the court must require the party seeking production to show reasonable necessity for the requested materials.”  American Express Travel Related Svcs., Inc. v. Cruz, 761 So.2d 1206 (Fla. 4th DCA 2000).  The appellate court explained that “[t]he burden is on the party resisting discovery to show ‘good cause’ for protecting or limiting discovery by demonstrating that the information sought is a trade secret or confidential business information and that disclosure may be harmful.”  However, a plaintiff who sues for trade secrets misappropriation will generally waive the right to assert the trade secrets privilege.  In Del Monte Fresh Produce Company v. Dole Food Company, Inc., 14 F.Supp.2d 1332 (S.D. Fla.), the United States District Court for the Southern District of Florida explained that “[t]he common factor in all of the trade secret privilege cases is that the parties opposing production have asserted the privilege because they claim that the trade secrets re not at issue in their cases.  In the instant case, the opposite is true … [because] the trade secrets are the ultimate issue to be decided by the court. By bringing a claim under the Uniform Trade Secrets Act, and thereby placing the trade secrets at issue, Del Monte essentially waived its right to assert the trade secrets privilege.”  Fundamentally, the trade secrets privilege does not apply in cases where the primary questions to be resolved are whether a trade secret exists and whether it was misappropriated.

A Florida business’ list of customers can be its most valuable asset.  Often, disgruntled employees try to leave and start a new business with their former employer’s customer list.  These disgruntled employees can often use customer information to undercut their former employer, without spending the money that the former employer took to get that information.  An employer that carefully protects its customer list may be able to sue for damages and to recover its customer list pursuant to the Florida Uniform Trade Secret Act (FUTSA) or the federal Defend Trade Secrets Act (DTSA).  Peter Mavrick is a Fort Lauderdale trade secret attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in business litigation, non-compete  agreement litigation, employment litigation, trademark litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Information, such as a customer list, is protectable as a trade secret if the information meets certain elements.  DTSA and FUTSA have nearly identical definitions of “trade secret.”  Under both statutes, information may be a trade secret if (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.  See 18 U.S.C. § 1839(3) (defining trade secret under DTSA); § 688.002(4), Fla Stat. (defining trade secret under FUTSA).

Customer lists are often comprised of publicly available information, like names, addresses, and phone numbers.  Nevertheless, there is federal court precedent holding that compilations of information may qualify as a trade secret, even though the information compiled would not qualify as a trade secret alone.  Capital Asset Research Corp. v. Finnegan, 160 F.3d 683 (11th Cir. 1998) (“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”); Compulife Software Inc. v. Newman, 959 F.3d 1288 (11th Cir. 2020) (“Even if [the] quotes aren’t trade secrets, taking enough of them must amount to misappropriation of the underlying secret at some point”).