The first rule of the law of trade secrets is that they must be secret. Obviously, the word “secret” is contained within the term “trade secret.” And the definition of trade secret dictates that it must be information that “derives independent economic value… from not being generally known to… other persons.” Fla. Stat. 688.002(4)(a); see also 18 U.S.C.A. § 1839 (same). The holder of the trade secret must take reasonable measures to protect the secrecy of his information. Id. at (4)(b). But is one-hundred percent secrecy always required? Can some or all portions of a trade secret be public and still derive trade secret status? The answers to both questions are examined below. 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.
Florida’s Third District Court of Appeal, in Digiport, Inc. v. Foram Development BFC, LLC, 314 So. 3d 550 (Fla. 3d DCA 2020), explained that a unique compilation of public information can qualify as a trade secret so long as the compilation adds value. The unique compilation warrants trade secret protections because it provides a competitive advantage in the marketplace (and corresponding value). The Digiport decision stated in pertinent part that, “‘A trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which in unique combination, affords a competitive advantage and is a protectable secret.’” (citing In re TXCO Res., Inc., 475 B.R. 781 (Bankr. W.D. Tex. 2012) (quoting Metallurgical Indus. Inc. v. Fourtek, Inc., 790 F.2d 1195 (5th Cir. 1986)). Therefore, amalgamated information can qualify as a trade secret even if its individual parts do not qualify as trade secrets. Similarly, the United States Court of Appeals for the Eleventh Circuit, in Compulife Software Inc. v. Newman, 959 F.3d 1288 (11th Cir. 2020), discussed trade secrets based on compilations, and explained that, “[e]ven if [insurance] quotes aren’t trade secrets, taking enough of them must amount to misappropriation of the underlying secret at some point. Otherwise, there would be no substance to trade-secret protections for ‘compilations,’ which the law clearly provides”).
Establishing a trade secret customer list usually presents a question of fact as to whether the list is a unique compilation justifying trade secret protections. Poet Theatricals Marine, LLC v. Celebrity Cruises, Inc., 307 So. 3d 927, 929 (Fla. 3d DCA 2020), stated that “[w]hether a particular type of information constitutes a trade secret is a question of fact.” “Under Florida law, customer lists are generally considered trade secrets [if] (1) the list was acquired or compiled through the industry of the owner of the list and is not just a compilation of information commonly available to the public; and (2) the owner shows that it has taken reasonable efforts to maintain the secrecy of the information.” Digital Assurance Certification, LLC v. Pendolino, 2017 WL 320830 (M.D. Fla. Jan. 23, 2017). The trade secret proponent must demonstrate it spent significant time, effort, and expense compiling the list. In Sentry Data Sys., Inc. v. CVS Health, 361 F. Supp. 3d 1279, 1294 (S.D. Fla. 2018), the United States District Court for the Southern District of Florida allowed the plaintiff’s trade secret claim to proceed because the plaintiff alleged it took considerable effort, knowledge, time, and expense to identify clients interested in participating in the program along with understanding the clients’ capabilities and needs. For example, in Bridge Fin., Inc. v. J. Fischer & Associates, Inc., 310 So. 3d 45 (Fla. 4th DCA 2020), the appellate court determined a client list was a trade secret even though the trade secret proponent purchased its list from another company. The appellate court concluded that the trade secret proponent “spent a significant amount of time, effort, and money developing the client list, which was kept on [the proponent]’s password protected server.” Therefore, the possessor of a client list must be prepared to demonstrate the substantial efforts taken to create that list if he wants to protect it as a trade secret.
Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.