MIAMI BUSINESS LITIGATION: TRADE SECRETS ACQUIRED BY IMPROPER MEANS

The Florida Uniform Trade Secrets Act (FUTSA) allows Florida businesses who have had their trade secrets misappropriated to seek damages or an injunction against the perpetrator of the misappropriation. For the acquisition to be an unlawful misappropriation, the confidential information must usually have been acquired through “improper means.” It is lawful for a Florida business to acquire and use another company’s trade secret for itself if it acquired that confidential information through proper means, such as through independent discovery of the trade secret, reverse engineering of the product which uses the trade secret, or through the voluntary disclosure by an owner of the trade secret. Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

Pursuant to FUTSA, the misappropriation of a trade secret through improper means is unlawful. The manner of acquisition of trade secret is a critical question in determining whether there has been unlawful misappropriation. Generally, if one knows or has reason to know that information was acquired through improper means, the use or disclosure of that information is unlawful. FUTSA defines misappropriation to mean:

(a) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(b) Disclosure or use of a trade secret of another without express or implied consent by a person who:

1. Used improper means to acquire knowledge of the trade secret; or
2. At the time of disclosure or use, knew or had reason to know that her or his knowledge of the trade secret was:
3. Derived from or through a person who had utilized improper means to acquire it;
4. Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
5. Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
6. Before a material change of her or his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

• 688.002(2), Florida Statutes. Under FUTSA, a person does not actually have to commit corporate espionage to be liable for misappropriation. FUTSA prevents a business from taking advantage of another person’s misconduct when that business knew or should have known that the trade secret was acquired through improper means. Thus, a business could not avoid liability under FUTSA by hiring an employee with knowledge of the trade secret. Additionally, it is not necessary for a trade secret to be acquired through improper means if it was discovered by accident or mistake. For example, a rival company could probably not use the formula for Coca-Cola even if it was found after it had somehow fallen off of a truck (presuming that the Coca-Cola company used reasonable efforts to prevent such a thing from happening).

What is “improper means” of discovery of a trade secret is only partially defined. FUTSA defines “improper means” to include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” § 688.002(1), Fla. Stat. The drafters of FUTSA recognized that, “[a] complete catalogue of improper means is not possible.” National Conference of Commissioners on Uniform State Laws, Uniform Trade Secrets Act (1985) at Section 1. However, it is proper to discover and use a trade secret which was found through “independent invention” or which was “reverse engineer[ed]” “by starting with the known product and working backward to find the method by which it was developed.” Id.; see Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974) (“A trade secret law, however, does not offer protection against discovery by fair and honest means, such as by independent invention, accidental disclosure, or by so-called reverse engineering, that is by starting with the known product and working backward to divine the process which aided in its development or manufacture”).

Generally, it is not a misappropriation of a trade secret for someone to purchase something lawfully and discover confidential information about it and its manufacturing process through reverse engineering. Proof that confidential information could be derived from a product by a competent engineer can cause show that the confidential information is not actually protected by trade secret law. AMTEC Corp. v. Non-Lethal Def., Inc., 4:15CV450-WS/CAS, 2018 WL 5602905 (N.D. Fla. May 24, 2018) (“if ‘other persons’ can ‘readily ascertain’ information by proper means, the information is not a trade secret”). However, “once any misappropriation is established […] a defendant cannot claim ‘independent development”; “[t]heoretical independent development is not a defense.” ACR Elecs., Inc. v. DME Corp., 11-62591-CIV, 2012 WL 13005955 (S.D. Fla. Oct. 31, 2012). Additionally, it is not misappropriation for a business to use trade secrets which it received pursuant to a contract and is under no duty to protect that information. M.C. Dean, Inc. v. City of Miami Beach, Florida, 199 F. Supp. 3d 1349 (S.D. Fla. 2016) (refusing to extend trade secret protection when information was explicitly referred to in the contract but the contract does not contain restrictions on the use of the information).

A business that acquires, uses, or discloses trade secrets when it knew or should have known that the trade secrets were acquired through improper means may be liable under FUTSA for the misappropriation of trade secrets. A Florida business that can show that it independently developed the trade secret or discovered the trade secret through reverse engineering, however, would likely not be liable. Peter Mavrick is a Miami business litigation attorney who also practices business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.