FORT LAUDERDALE BUSINESS LITIGATION: EMPLOYEE THEFT OF TRADE SECRETS

Some employers have confronted the situation where employees have taken corporate trade secrets to use in competition against their former employer, but the employees had not signed a non-compete agreement. Under Florida law, however, the fact that the former employees did not sign a non-compete agreement is not dispositive concerning whether the business may enforce its trade secrets in court against the former employees and the competing business. Important precedent from Florida’s Third District Court of Appeal in Unistar Corp. v. Child, 415 So.2d 733 (Fla. 3d DCA 1982), held that “[t]he law will import into every contract of employment a prohibition against the use of a trade secret by the employee for his own benefit, to the detriment of his employer, if the secret was acquired by the employee in the course of his employment.” Florida’s Uniform Trade Secrets Act, at Florida Statutes Section 688.003(1), states in pertinent part that, “[a]ctual or threatened misappropriation may be enjoined.” In this vein, All Leisure Holidays Ltd. v. Novello, 202 WL 5832365 (S.D. Fla. Nov. 27, 2012), the United States District Court for the Southern District of Florida held that a non-compete agreement was not necessary to enter a temporary restraining order against a former employee for misappropriation of trade secrets. 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 law defines the terms “trade secret” to mean information that “derive[s] economic value from not being readily ascertainable by others and [is] the subject of reasonable efforts to protect its secrecy.” American Red Cross v. Palm Beach Blood Bank, 143 F.3d 1407 (11th Cir. 1998). This definition includes as trade secrets 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….” Florida Statutes Section 812.081. The U.S. District Court for the Southern District of Florida in Merrill Lynch, Pierce, Fenner & Smith v. Hagerty, 808 F.Supp. 1555 (S.D. Fla. 1992, explained that “[r]egardless of who compiled the customer list, however, it is clearly protected under [Florida law].”

In unfair competition cases, one significant source of litigation has emanated from employee theft of pricing information to use in competition against the former employer. Documents containing pricing information have been held to constitute trade secrets under Florida law. For example, in Sethcot Collection, Inc. v. Drbul, 669 So.2d 1076 (Fla. 3d DCA 1996), the appellate court determined that a confidential active customer list, containing a detailed purchasing history for each entity, qualified as a trade secret entitled to protection by means of an injunction.

Employees sometimes misappropriate customer lists to engage in competition against the business that formerly employed them. Florida law protects customers lists as trade secrets when they are compiled from non-public information, and thus derive independent economic value, and are kept confidential by the business. For example, in the Haggerty decision, the federal District Judge held that: “Considering the measures Plaintiff took to ensure the list’s confidentiality … the Court finds that the list is a trade secret as defined in [Florida Statutes Section 812.081].” Similarly, Florida’s Second District Court of Appeal in East v. Aqua Gaming, Inc., 805 So.2d 932 (Fla. 2d DCA 2001), determined that a customer list was compiled, in part, from confidential and non-public information, and therefore qualified as a trade secret. It is crucial that the alleged “trade secret” be significantly more than a mere restatement of publicly available information. In the American Red Cross decision, the federal court held that the plaintiff’s donor lists were not trade secrets because they were freely accessible to the company’s competitors online and its donor groups publicly revealed their sponsorship. By contrast, Florida’s Fifth District Court of Appeal in Kavanaugh v. Stump, 592 So.2d 1231 (Fla. 5th DCA 1992), explained that “[c]ustomer 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.”

Peter Mavrick is a Fort Lauderdale business litigation attorney, 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.