FLORIDA TRADE SECRET LITIGATION: THE MEANING OF THE TERM “INDEPENDENT ECONOMIC VALUE”

Florida law can protect companies when their trade secrets are stolen. For such protections to apply, the confidential information at issue must qualify as a “trade secret” as defined by the Florida Uniform Trade Secrets Act (“FUTSA”). Fla. Stat. 688.001, et seq. Generally, something can be a trade secret if derives “independent economic value from not being generally known” and the company makes a reasonable attempt to maintain the secrecy of the information. Florida case law has helped define what kinds of confidential information qualifies for the statutory requirement of “independent economic value.” Peter Mavrick is a Fort Lauderdale business litigation attorney and an experienced trade secret attorney.

Trade secrets can exist in many forms. For example, trade secrets can include confidential business process relating to the production of goods, such as a machine or formula. Trade secrets can also “relate to the sale of goods or to other operations in the business, such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.” Summitbridge Nat. Investments LLC v. 1221 Palm Harbor, L.L.C., 67 So. 3d 448, 450 (Fla. 2d DCA 2011). “Trade secret” is defined by FUTSA as:

Information, including a formula, pattern, compilation, program, device, method, technique, or process that:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Fla. Stat. § 688.002(4). Generally, if the disclosure of a company’s valuable information to the public would cause the information to lose its value, that information may have independent economic value sufficient to qualify as a trade secret. “[C]ourts will generally conclude that the necessary independent economic value requirement is met if the trade secret would be useful to a competitor and would require cost, time, and effort to duplicate.” Milgrim on Trade Secrets, §1.07A at 1-468.83 (2018), citing e.g. Iowa Film Prod. Servs. V. Iowa Dep’t of Econ. Dev., 498 N.W. 2d 711 (Iowa 1993).

Florida businesses often seek protect their confidential customer lists from there competitors. These customer lists can sometimes qualify as having sufficient independent economic value from not being generally known to be a trade secret. Accordingly, “[a] customer list that is not readily ascertainable by the public can be a trade secret.” Bright House Networks, LLC v. Cassidy, 129 So. 3d 501, 506 (Fla. 2d DCA 2014).

When a customer list is derived from easily ascertainable sources or public records, such as the phone book or property records, then such a customer list probably does not qualify as a trade secret. Harry G. Blackstone, D.O., P.A. v. Dade City Osteopathic Clinic, 511 So. 2d 1050 (Fla. 2d DCA 1987) (finding that a company’s customer list did not have an independent economic value when the customer list could be recreated from a former employee’s memory coupled with records from other publicly available sources, such as the phonebook). In Templeton v. Creative Loafing Tampa, Inc., 552 So. 2d 288 (Fla. 2d DCA 1989), a business sued a former employee for using its list of advertisers for a music magazine. The court found that the customer list was not protected as a trade secret because the list could be recreated by simply reviewing the advertisements from past editions of the magazine. This is because information procured from publicly available sources does not lose value if it is disclosed – the public already has access to those sources.

Alternatively, if the customer list at issue was derived from public sources, but has been curated or otherwise modified from the original sources with great expense or effort, was created from the distillations of larger lists, or includes information not available from public sources, then said information may qualify as a trade secret. See East v. Aqua Gaming, Inc., 805 So. 2d 932 (Fla. 2d DCA 2001) (Finding a customer list qualified as a trade secret when the “list was the product of great expense and effort, that it included information that was confidential and not available from public sources, and that it was distilled from larger lists of potential customers into a list of viable customers for its unique business”); Sethscot Collection, Inc. v. Drbul, 669 So. 2d 1076 (Fla. 3d DCA 1996) (finding that a list of college fraternal organizations was not a trade secret because it could be derived from public sources, but finding that a similar list that contained the order history of those same fraternal organizations was a protectable trade secret).

Businesses often seek to protect internal operational business methods, such as the method by which a company determines pricing for goods and services. Internal business processes too can be protected as a trade secret when the information derives some value from not being generally known and is kept confidential. “[I]nternal cost structure information, including methodologies or formulas used to compute pricing and insurance reimbursement rates, constitutes trade secret information,” but, “not all business information falls within this privilege; namely, the price for a single transaction, such as the amount received for a previous service to a litigant, is not information subject to protection as a trade secret.” Lake Worth Surgical Ctr., Inc. v. Gates, 266 So. 3d 198 (Fla. 4th DCA 2019). Documents containing strategic marketing plans and pricing information have been held to constitute trade secrets under Florida law. See, e.g., Sethscot Collection, Inc. v. Drbul, 669 So.2d 1076 (Fla. 3d DCA 1996) (confidential active customer list that contained a detailed purchasing history for each entity qualified as a trade secret entitled to injunctive protection); Thomas v. Alloy Fasteners, Inc., 664 So.2d 59 (Fla. 5th DCA 1995) (holding that confidential order edit lists are trade secrets because they reveal appellee’s pricing and profit structure).

Confidential information does not have to be known only by the company trying to protect it. “[T]he fact that several competitors each independently use a process that each has independently discovered would not necessarily mean this undisclosed information is no longer a trade secret.” Bestechnologies, Inc. v. Trident Envtl. Sys., Inc., 681 So. 2d 1175 (Fla. 2d DCA 1996), citing Restatement (First) of Torts § 757 cmt. b (1939). However, the fact that such information is being used by various competitors might mean that the information was “generally known” or “readily ascertainable,” which would mean that it did not have independent economic value. Id. at 1177.

Florida businesses desiring to protect confidential information should be aware that not all confidential information qualifies as a trade secret. Companies also may have confidential information protected through confidentiality agreements, even if that information does not qualify for protection under FUTSA.

Peter Mavrick is a trade secret lawyer who represents businesses in Broward, Miami-Dade, and Palm Beach Counties. This article does not serve as a substitute for legal advice tailored to a particular situation.