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FORT LAUDERDALE TRADE SECRET LAW: PROTECTING CUSTOMER LISTS AS TRADE SECRETS

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 litigationtrademark 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”).

A business that compiles its customer list by a costly analysis or through the operation of the business over time may have added sufficient value to that information for it to qualify as a trade secret.  Public information may qualify as a trade secret if a business created the list through a costly process.  Cap. 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”).  The benefit gained from the compilation can show its value as it relates Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284 (11th Cir. 2003) (The plaintiff possessed trade secrets because it “accomplished an effective, successful and valuable integration of the public domain elements” disclosed in a patent).

A customer list must also be kept secret by the business for it to be protectable as a trade secret pursuant to DTSA and FUTSA.  There is no specific measure that must be taken for information to qualify as a trade secret.  Instead, courts look to whether the business seeking to protect the secret information was “reasonable” in its protective measures.  Password-protecting a customer list could help show that reasonable security measures were undertaken.  Coihue, LLC v. PayAnyBiz, LLC, 2018 WL 7376908 (S.D. Fla. Feb. 6, 2018) (finding that the allegations that the company had confidentiality policies and “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”); Se. Mech. Servs., Inc. v. Brody, 2008 WL 4613046 (M.D. Fla. Oct. 15, 2008) (finding that the plaintiff adequately showed that it had protected its confidential information by having confidentiality policies and protecting that information with passwords).

Requiring all employees that have access to the information can also help show that reasonable measures were taken to protect that information.  Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Silcox, 2001 WL 1200656 (S.D. Fla. Oct. 4, 2001) (plaintiff took reasonable measures to protect the secrecy of its customer list under the circumstances by “requiring [the employee] to sign agreements which ‘demonstrate the importance that [the plaintiff] places on the information’”).  However, information may be protected as a trade secret even if employees that have not executed a confidentiality contract had access to the information.  Courts in business litigation have determined that a duty of confidentiality can be implied from the circumstances.  Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996) (allowing an implied confidential relationship to protect trade secrets so long as the obligation of confidentiality was clearly expressed).  Courts may find that a business has effectively used reasonable measures to keep information secure by maintaining confidentiality policies requiring protection of confidential information.  Fortiline, Inc. v. Moody, 12-CV-81271 (S.D. Fla. Jan. 7, 2013) (granting plaintiff’s motion for temporary injunction where the trade secrets were protected by a handbook); Coihue, LLC v. PayAnyBiz, LLC, 2018 WL 7376908 (S.D. Fla. Feb. 6, 2018) (confidentiality policies and password restrictions “are sufficient for the Court to draw a reasonable inference that the Plaintiffs took reasonable steps to protect the secrecy of their trade secrets”).

Customer lists may qualify as trade secrets and be protectable under FUTSA and DTSA if the information has independent economic value and the business undertakes reasonable measures to  protect that information.  Peter Mavrick is a Fort Lauderdale trade secret lawyer who also practices business litigation in Palm Beach, Boca Raton, and Miami-Dade.  This article does not serve as a substitute for legal advice tailored to a particular situation.

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