Articles Posted in Trade Secrets

Published on: March 19, 2022

MIAMI BUSINESS LITIGATION: FLORIDA’S “PRIOR BREACH” DEFENSE TO NON-COMPETE AGREEMENTS

The “first to breach” or “prior breach” doctrine is a commonly raised defense by employees in actions brought by their former employers to enforce restrictive covenants. Under Florida law, an employer’s prior breach of its employment contract may prohibit the employer from enforcing restrictive covenants under the same agreement. Employees typically raise the “prior breach” defense based on allegations that the former employer failed to pay wages due under their employment contract. This alleged failure to pay could constitute a material breach of the entire employment agreement and render the non-compete unenforceable. In the non-compete and trade-secret context, employers seek injunctions to stop their former employees from unlawfully competing and/or exposing confidential, trade secret information. In these situations, employers are generally barred from enforcing covenants (such as non-compete agreements or confidentiality provisions) against the employee if the material breach was based on a “dependent” covenant in the contract and the non-compete covenants are not “independent” covenants. 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.

When the “prior breach” doctrine is raised as a defense, Florida courts are tasked with reviewing the subject non-compete agreements to determine whether the relevant contract provisions are dependent or independent covenants. Florida courts must construe the subject contract according to its plain language and “consider the provisions at issue in the context of the entire agreement in order to achieve ‘a reasonable construction to accomplish the intent and purpose of the parties.’” Hand v. Grow Constr., Inc., 983 So. 2d 684 (Fla. 1st DCA 2008). Whether the payment obligations under the employment agreements were dependent or independent covenants is an issue of law that turns on the proper interpretation of the contracts. Morgan v. Herff Jones, Inc., 883 So. 2d 309 (Fla. 2d DCA 2004). “Florida law limits [the] defense [of a prior breach] to ‘dependent covenants.” Reliance Wholesale, Inc. v. Godfrey, 51 So. 3d 561 (Fla. 3d DCA 2010).

The general rule in Florida is that a “material breach of [a contract] allows the non-breaching party to treat the breach as a discharge of his contractual liability.” In re Walter M. Thomas, Debtor, 51 B.R. 653 (M.D. Fla. 1985). Indeed, the Supreme Court of Florida explained that “the nonbreaching party is relieved of its duty to tender performance and has an immediate cause of action against the breaching party.” Hospital Mortg. Grp. v. First Prudential Dev. Corp., 411 So. 2d 181 (Fla. 1982). “Whether contractual provisions are considered dependent or independent is generally determined by the intent of the parties based on a reading of their entire contract.” Richland Towers, Inc. v. Denton, 139 So. 3d 318 (Fla. 2d DCA 2014). In Florida, covenants are generally considered dependent unless contrary language appears in the contract.

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Published on: February 26, 2022

FORT LAUDERDALE TRADE SECRET LITIGATION: EMPLOYERS MUST ADEQUATELY PROTECT THEIR CONFIDENTIAL TRADE SECRETS

By Mavrick Law Firm

A prevalent issue in Florida trade secret litigation is whether an employer adequately protected its trade secrets and confidential information. To qualify for protection under Florida Uniform Trade Secrets Act (“FUTSA”) and the federal Defend Trade Secrets Act (“DTSA”), an employer must show that it adequately maintained the secrecy of its trade secrets and confidential information. One way an employer can demonstrate these protective measures in trade secret litigation is by showing “had rules governing disclosure and confidentiality in its employee handbook.” Se. Mech. Services, Inc. v. Brody, 2008 WL 4613046 (M.D. Fla. Oct. 15, 2008). Courts also routinely find that evidence of an employer’s “password restricted” computer systems “are sufficient for the Court to draw a reasonable inference that the Plaintiffs took reasonable steps to protect the secrecy of their trade secrets.” Fortiline, Inc. v. Moody, 2013 WL 12101142 (S.D. Fla. Jan. 7, 2013). Florida courts will afford trade secret protection to an employer’s confidential information even if the employer does not require its employees to sign confidentiality agreements. 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.

A confidentiality agreement is merely a method by which a confidential relationship may be established. There are many other ways that this confidential relationship can be created. For example, Dotolo v. Schouten held a confidential relationship was formed where a person disclosed confidential information to a potential business partner. 426 So. 2d 1013 (Fla. 2d DCA 1983). Dotolo found:

The [recipients] were instructed that the formula was a trade secret and that the [disclosing party] wished to protect it. The lack of any express agreement on the part of the appellees not to use or disclose [the disclosing party’s] trade secret is not significant. The existence of a confidential relationship such as that in this case gives rise to an implied obligation not to use or disclose.

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Published on: February 16, 2022

FORT LAUDERDALE TRADE SECRET LAW: CUSTOMER INFORMATION CAN QUALIFY AS A TRADE SECRET

By Mavrick Law Firm

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).

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Published on: December 28, 2021

FORT LAUDERDALE TRADE SECRET LAW: COURTS REQUIRE THAT TRADE SECRET BE DISCLOSED WITH “REASONABLE PARTICULARITY”

By Mavrick Law Firm

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.

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Published on: December 14, 2021

FORT LAUDERDALE TRADE SECRET LAW: CUSTOMER LISTS AS TRADE SECRETS

By Mavrick Law Firm

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”).

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Published on: February 24, 2021

MIAMI NON-COMPETE AGREEMENTS: DIVERGENT LEGAL STANDARDS FOR INJUNCTIONS IN STATE AND FEDERAL COURTS

By Mavrick Law Firm

The decision whether to bring a case in federal court or Florida state court can have significant consequences to the disposition of non-compete litigation. While both federal and Florida will usually apply the same substantive law, the procedure applied differs. This is particularly pertinent in non-compete litigation. Florida courts, when considering whether to enjoin a former employee from competing, will not consider particular categories of evidence because of a Florida statute (§ 542.335(g)(1-3). Federal courts are free of this limitation, and may consider nearly any admissible and relevant evidence. This distinction can ultimately mean the difference between whether an employee or an employer will prevail in non-compete litigation. Peter Mavrick is a Miami non-compete attorney, and also advocates for clients in Fort Lauderdale, Boca Raton, and Palm Beach, Florida. The Mavrick Law Firm represents clients in business litigation, trade secret litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

Non-compete litigation can be heard in both federal courts and state courts. While a Florida court almost always has jurisdiction to hear a Florida non-compete case, there are certain requirements before a matter may be heard in federal court. The primary method by which a federal court would have jurisdiction is that a “federal question” is raised. This can happen when a non-compete claim is brought along with a trade secret claim under the federal Defend Trade Secrets Act. 18 U.S.C. § 1836, et seq. While it is technically possible that a federal court can have jurisdiction over the parties because a “diversity of citizenship” between the plaintiff and defendant, this would rarely happen because both a company attempting to enforce a non-compete and the employee will usually qualify as a citizens of Florida.

Federal courts and Florida courts have their own rules of civil procedure. While the Florida Rules of Civil Procedure were derived in significant part from the federal rules, the differences between them are substantial, and include different pleading and discovery requirements. There are also differences between federal and Florida courts which do not arise from the differences in procedural rules. Generally, federal courts have a greater budget and fewer cases, and so may have more time and staff to address complex and nuanced issues. Federal courts also tend to place more time constraints which are less flexible than their Florida counterpart.

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Published on: December 3, 2020

FORT LAUDERDALE NON-COMPETE AGREEMENTS: COMPILATIONS MAY QUALIFY AS A TRADE SECRET

By Mavrick Law Firm

Florida employers who seek to protect their client lists from misappropriation by former employees will often need to show that the client list was a trade secret. This is important even when the former employee is subject to a non-compete agreement. This is because non-compete agreements cannot be enforced without a “legitimate business interest,” and the existence of a trade secret qualifies as a “legitimate business interest.” Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

A non-compete agreement cannot be enforced without a court finding that the agreement is supported by a “legitimate business interest” in the non-compete agreement. Importantly, the existence of a trade secret can qualify as a legitimate business interest pursuant to Florida’s noncompete law. Trade secrets are specifically delineated as legitimate business interests in Section 542.335(1)(b)(1), Florida Statutes.

The term “trade secret” is often associated with secret formulas like the ingredients of Coca-Cola or WD-40. However, nearly any type of information can qualify as a trade secret as long as it qualifies as one under either the Florida Uniform Trade Secrets Act (FUTSA) or the federal Defend Trade Secrets Act (DTSA). Particularly, FUTSA defines trade secrets as:

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Published on: November 30, 2020

MIAMI BUSINESS LITIGATION: TRADE SECRET OBTAINED BY IMPROPER MEANS

By Mavrick Law Firm

Misappropriation of a trade secret can occur when there is an acquisition of another’s trade secret by improper means or through disclosure or use of a trade secret without consent by a person who used improper means to acquire the trade secret or knew that the trade secret was improperly acquired. Section 688.002, Florida Statutes. Improper means occurs not only when a person breaches a duty of confidentiality but also by inducing someone else to breach a duty of confidentiality. 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, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

An example of both of these circumstances occurred in the case of Sensormatic Elecs. Corp. v. TAG Co. US, LLC, 632 F. Supp. 2d 1147 (S.D. Fla. 2008). Mark Krom (Krom) worked for Sensormatic Electronics Corp. (Sensormatic) and entered an employment agreement which, among other things, obliged him to return all documents to Sensormatic upon leaving the company; and (2) prevented him from disclosing or using Sensormatic’s confidential and proprietary information. To protect a trade secret, parties in business litigation must show that they took reasonable steps to secure the confidential information. Krom later terminated his employment with Sensormatic and founded TAG Company U.S. LLC (TAG). Krom hired other former Sensormatic employees. Krom investigated opportunities for TAG to develop its own security label, similar to Sensormatic’s security label. Its goal was to create a label that “met the performance of the Sensormatic label.”

Sensormatic filed a lawsuit against Krom and other defendants for, among other things, misappropriation of trade secrets. Krom testified at his deposition that he did not know where he obtained the Sensormatic specifications that he gave to his employee. Another witness testified that while he worked at Sensormatic’s manufacturer, he received a request from Krom for the Sensormatic specifications and faxed them to Krom at TAG. Krom gave conflicting testimony but essentially testified that he had no personal knowledge of where he got the specifications he gave to his employee. Krom’s employee substantially copied Sensormatic’s specifications into a new document with TAG’s logo on it. Many of the numbers in the TAG specification were identical to those in the Sensormatic. Krom admitted that many of the “numbers for key characteristics are the same in the Sensormatic specification and the TAG specification.” TAG then disclosed the TAG specifications to multiple prospective materials suppliers.

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Published on: November 22, 2020

FORT LAUDERDALE NON-COMPETE AGREEMENTS: EMPLOYEE’S PERSONAL CUSTOMER RELATIONSHIPS MAY NOT EXCUSE SOLICITATION

By Mavrick Law Firm

Companies often hire experienced sales and business development professionals to expand their business. A non-solicitation provision in an employment contract is intended to prevent post-termination solicitation of clients with whom the business has substantial relationships. When an employee brings clients to a company, it is important to distinguish whether the employee had a prior business or personal relationship with the client, and whether it is part of the employee’s job to develop and maintain client relationships. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

In the case of Hilb Rogal & Hobbs of Florida, Inc. v. Grimmel, 48 So. 3d 957 (Fla. 4th DCA 2010), Hilb Rogal & Hobbs of Florida, Inc. (HRH) was an insurance broker who hired Mark Grimmel (Grimmel) as a producer to service its existing customers and to generate new customers. Grimmel signed an employment agreement with HRH, which included a non-piracy clause that prohibited Grimmel from soliciting HRH’s customers following termination of his employment. Four years after Grimmel resigned to operate his own competing insurance brokerage firm, Egis Insurance Advisors (Egis).

HRH filed a lawsuit for injunctive relief and damages against Grimmel and Egis. HRH alleged that Grimmel violated the non-piracy covenant in his employment agreement with HRH by misappropriating business from HRH to Egis. HRH also filed an emergency motion for a temporary injunction, requesting that the court prohibit Grimmel from soliciting, accepting business from, and continuing to do business with HRH’s customers. Also, HRH sought to enjoin Grimmel from using confidential or trade secret information. HRH obtained an ex-parte order (made without the other party’s awareness) granting a temporary injunction against Grimmel and posted a bond. Grimmel moved to dissolve the injunction and a hearing was held before a magistrate. The magistrate issued a Report and Recommendation proposing that the temporary injunction be dissolved. HRH filed its exceptions to the general magistrate’s report and requested a hearing. The trial court held a hearing and entered an order denying HRH’s exceptions, granting the motion to dissolve the temporary injunction, and ratifying and approving the general magistrate’s Report and Recommendation. HRH immediately appealed.

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Published on: November 1, 2020

FORT LAUDERDALE TRADE SECRET LAW: DISCOVERY ORDERS MUST PROTECT BUSINESS TRADE SECRETS

By Mavrick Law Firm

There are circumstances when a business, who is not a party to a lawsuit, will be required to disclose its trade secret information to respond to a subpoena. Florida law provides safeguards for that disclosure to be made in a manner that still protects the business’ trade secrets. However, a business may need to vigorously defend those rights when the trial court refuses to do so. 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 also 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.

An example of this occurred in the case of Columbia Hosp. (Palm Beaches) Limited Partnership v. Hasson, 33 So. 3d 148 (Fla. 4th DCA 2010), where the plaintiff filed a motor vehicle negligence lawsuit and claimed to have incurred injuries and expenses for a procedure performed at Columbia Hosp. (Palm Beaches) Limited Partnership (Columbia). Defendants served Columbia, a non-party to the lawsuit, with a subpoena requesting documents relating to the particular medical procedure performed on plaintiff. The documents requested by the subpoena included the amounts Columbia charged patients with and without insurance, those with letters of protection, and differences in billing for litigation patients versus non-litigation patients.

Columbia filed a motion for protective order and contended that the information requested by defendants’ subpoena was confidential and amounted to protected trade secrets under Florida law. Defendants conceded that the information sought was protected as trade secrets, however they explained why the information they sought was relevant to, among other things, to the reasonableness of the hospital’s bills. At the hearing on the motion for protective order, defendants contended that the discovery of a hospital’s charges, discounts to different classes of patients, and its internal cost structure was relevant information. Defendants further contended that the amounts a health care provider accepts as payment from private non-litigation payors was relevant for a jury to determine what amount was a reasonable charge for the procedure.

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