MIAMI BUSINESS LITIGATION: TRADE SECRET OBTAINED BY IMPROPER MEANS

Misappropriation of a trade secret can occur when there is an acquisition of another’s trade secret by improper means or through disclosure or use of a trade secret without consent by a person who used improper means to acquire the trade secret or knew that the trade secret was improperly acquired. Section 688.002, Florida Statutes. Improper means occurs not only when a person breaches a duty of confidentiality but also by inducing someone else to breach a duty of confidentiality. 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, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

An example of both of these circumstances occurred in the case of Sensormatic Elecs. Corp. v. TAG Co. US, LLC, 632 F. Supp. 2d 1147 (S.D. Fla. 2008). Mark Krom (Krom) worked for Sensormatic Electronics Corp. (Sensormatic) and entered an employment agreement which, among other things, obliged him to return all documents to Sensormatic upon leaving the company; and (2) prevented him from disclosing or using Sensormatic’s confidential and proprietary information. To protect a trade secret, parties in business litigation must show that they took reasonable steps to secure the confidential information. Krom later terminated his employment with Sensormatic and founded TAG Company U.S. LLC (TAG). Krom hired other former Sensormatic employees. Krom investigated opportunities for TAG to develop its own security label, similar to Sensormatic’s security label. Its goal was to create a label that “met the performance of the Sensormatic label.”

Sensormatic filed a lawsuit against Krom and other defendants for, among other things, misappropriation of trade secrets. Krom testified at his deposition that he did not know where he obtained the Sensormatic specifications that he gave to his employee. Another witness testified that while he worked at Sensormatic’s manufacturer, he received a request from Krom for the Sensormatic specifications and faxed them to Krom at TAG. Krom gave conflicting testimony but essentially testified that he had no personal knowledge of where he got the specifications he gave to his employee. Krom’s employee substantially copied Sensormatic’s specifications into a new document with TAG’s logo on it. Many of the numbers in the TAG specification were identical to those in the Sensormatic. Krom admitted that many of the “numbers for key characteristics are the same in the Sensormatic specification and the TAG specification.” TAG then disclosed the TAG specifications to multiple prospective materials suppliers.

The Florida Uniform Trade Secrets Act (“FUTSA”), Fla. Stat. § 688.001 et seq., defines a trade secret as information that (1) 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 (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Fla. Stat. § 688.002. The federal district court decided that Sensormatic’s specifications were trade secrets because the specifications provided a detailed formula of mechanical and magnetic characteristics that enables manufacturers to process components for labels that perform like Sensormatic’s. The specifications were a valuable component of Sensormatic’s success in that market and were also valuable to competitors, like TAG, who wanted to make and sell these labels that would perform as well as Sensormatic’s. The district court further found that Sensormatic made a reasonable effort to maintain the secrecy of its specifications. The specifications were not publicly available. Sensormatic required its employees to sign confidentiality agreements when they began working at Sensormatic and reaffirmed those confidentiality obligations when they left. Confidentiality agreements are commonly admitted into evidence in business litigation to demonstrate that the party protected its proprietary information. TAG’s own executives acknowledged that Sensormatic’s specifications were confidential. Sensormatic did not disclose the specifications to third parties without obtaining a signed agreement from the third party containing a confidentiality provision. These efforts were reasonable under the circumstances.

FUTSA defines “misappropriation” of a trade secret to mean: (1) acquisition of another’s trade secret by a person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of a trade secret without consent by a person who used improper means to acquire the trade secret or knew that the trade secret was improperly acquired. Section 688.002, Florida Statutes. TAG committed acts of misappropriation that fall into both classifications. Under FUTSA, “improper means” includes “breach or inducement of a breach of a duty to maintain secrecy.” Section 688.002(1), Florida Statutes. The district court held that Krom acquired Sensormatic’s specifications through a breach of a duty to maintain secrecy, either his own or someone else’s. If Krom requested and received the Sensormatic specifications from Sensormatic’s manufacturer, Krom was aware that such a disclosure was a violation of the manufacturer’s license agreement with Sensormatic. If Krom brought the specifications from Sensormatic himself, that was a breach of his own employment agreement with Sensormatic. Krom’s employment agreement with Sensormatic (1) obliged him to return all documents to Sensormatic upon leaving the company; and (2) prevented him from disclosing or using Sensormatic’s confidential and proprietary information. Krom knew that Sensormatic’s specifications were considered confidential. The federal district court found that “[r]egardless of how Mr. Krom obtained the Sensormatic specifications, TAG’s acquisition of Sensormatic’s specifications was through improper means, in violation of FUTSA.”

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.