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.
Sewpersuad corresponded with important vendors and clients of Freedom Medical regarding his plans to leave Freedom Medical. He then resigned his position and went to work for Rotec. While employed by Rotec, Sewpersuad prepared a spreadsheet suggesting new design features for Rotec beds—features listed as “must have features” and “key” to marketing strategy on Freedom Medical’s internal training materials about its own beds. Sewpersaud’s Rotec expense reports showed that he solicited at least six current customers of Freedom Medical and two active prospects. Sewpersaud knew they were former clients, writing “[v]isited customers to introduce Rotec[.] These are customers I worked with in the past” on an expense report. Sewpersaud also reached out to some of Freedom Medical’s national accounts.
Freedom Medical filed a lawsuit against Sewpersaud for: (1) violation of the Defend Trade Secrets Act (“DTSA”); (2) trade secret misappropriation under the Florida Uniform Trade Secrets Act (“FUTSA”); (3) breach of contract; (4) breach of fiduciary duty; (5) fraud; and (6) tortious interference. Freedom Medical moved for a temporary restraining order (“TRO”) which was granted. Freedom Medical then requested that the Court convert the TRO into a preliminary injunction.
A preliminary injunction may be issued when the movant shows:
“(1) a substantial likelihood of success on the merits; (2) that irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.”
Four Seasons Hotels & Resorts, B.V. v. Consorcio Barr, S.A., 320 F.3d 1205 (11th Cir. 2003).
The district court found that Freedom Medical established a substantial likelihood of success on its trade secret misappropriation claims under the DTSA and FUTSA. A trade secret is information that “derives independent economic value … from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value” from the information. 18 U.S.C. § 1839(3). Freedom Medical spent thousands of dollars creating and maintaining its confidential information, like customer lists (including customers’ preferences and patient demographics), and other business information and marketing strategies, which helped it maintain its competitive position in the healthcare industry. Freedom Medical also tried to ensure the secrecy of its confidential information. Freedom Medical assigned passwords to those limited employees given access and required them to sign an agreement prohibiting the unauthorized use or disclosure of the information and from working for competitors for one-year following the end of employment. The district court held that Freedom Medical demonstrated that its customer lists and proprietary business information were trade secrets.
The district court also held that Freedom Medical demonstrated that Sewpersaud misappropriated the confidential information.
Misappropriation is the use of a trade secret of another without express or implied consent by a person who … (ii) at the time of the disclosure or use, knew or had reason to know that the knowledge of the trade secrete was … (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret.
18 U.S.C. § 1839(5)(B).
The district court held that there is evidence that Sewpersuad, since leaving Freedom Medical: a) knowingly solicited eight of Freedom Medical’s former clients or active prospects; b) suggested modifications to Rotec’s beds based on Freedom Medical’s market research and experience; and c) accessed Freedom Medical’s top customers and product utilization reports. The district court concluded that Freedom Medical demonstrated that Sewpersaud likely misappropriated its trade secrets.
Additionally, the district court found that Freedom Medical demonstrated a substantial likelihood of success on the breach of the non-compete, non-solicitation and confidentiality provision claims. Sewpersaud contended that he did not breach the non-compete agreement because Rotec only sold beds while Freedom Medical’s business is “99%” rentals. The district court was not persuaded by this argument, because a) Sewpersaud admitted that his only basis for the 99% figure was his general experience working at Freedom Medical and he did not know of Freedom Medical’s revenues, and b) the evidence showed these two companies are in direct competition. In addition, the district court found that Sewpersaud deliberately solicited former Freedom Medical rental customers to sell them Rotec beds. Sewpersaud also admitted that he lied to Freedom Medical about where he was going work next, when he told them he was going to an unrelated job at 3M instead of Rotec. The district court concluded that Sewpersaud was deliberately preventing Freedom Medical from learning of his new job at a forbidden competitor.
Sewpersaud further contended that the scope of his non-compete agreement was unreasonable. Freedom Medical argued, and the district court agreed, the non-compete agreement was necessary to protect Freedom Medical’s confidential information and so protected a legitimate business interest. The district court found that the Agreement reasonably sought to prohibit Sewpersaud from sharing confidential information and trade secrets with a direct competitor.
The district court did find that Freedom Medical presented no evidence the unlimited geographic scope of agreement, i.e. “a global injunction”, that prevented Sewpersaud from working for a similar medical supply company anywhere in the world, was reasonable or appropriate. The district court, therefore, modified the geographic range of the agreement to only enjoin Sewpersaud from working for a competitor, including Rotec, in his former Sales Territory. The district court also found that the public interest was served by protecting trade secrets and enforcing confidentiality agreements. Therefore, the district court converted the TRO into a preliminary injunction, as modified by the district court’s findings.
Peter Mavrick is a Fort Lauderdale trade secret attorney who also practices in Miami-Dade, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.