MIAMI BUSINESS LITIGATION: PROVING A TRADE SECRET

Florida and federal statutes generally define a “trade secret” to be information that the owner takes reasonable measures to keep secret and the information derives “independent economic value” from not being generally known to others. Courts ordinarily view the existence of a trade secret as a question of fact. The United States Court of Appeals for the Fifth Circuit, in Lear Siegler, Inc. v. Ark-Ell Springs, Inc., 569 F.2d 286 (5th Cir. 1978), appropriately observed that a trade secret “is one of the most elusive and difficult concepts in the law to define.” In many cases, the existence of a trade secret is not obvious. It requires an ad hoc evaluation of all the surrounding circumstances. Accordingly, the Lear Siegler decision explained that the question of whether certain information constitutes a trade secret typically is best “resolved by a fact finder after full presentation of evidence from each side.” Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. 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 litigation, and other legal disputes in federal and state courts and in arbitration.

The Defend Trade Secrets Act is a federal law that, at 18 U.S.C. section 1893(3), defines trade secret to mean “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patters, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if…(A) the owner thereof has taken reasonable measures to keep such information secret…and (B) the information derives independent economic value, actual or potential, from not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.” State trade secret law, called the Uniform Trade Secret Act, has a similar definition of trade secret. In addition, federal and state courts sometimes use six common law factors from the Restatement of Torts to evaluate whether a trade secret exists:

(1) the extent to which the information is known outside of the plaintiff’s business;

(2) the extent to which the information is known by employees and others involved in the plaintiff’s business;

(3) the extent of the measures taken by the plaintiff to guard the secrecy of the information;

(4) the value of the information to the plaintiff’s business and to its competitors;

(5) the amount of time, effort, and money expended by the plaintiff in developing the information; and

(6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Courts generally do not construe the foregoing factors as a six-part test, and instead interpret the common law factors as instructive guidelines for ascertaining whether a trade secret exists. As one state court decision in the State of Illinois explained, “[a]n exact definition of trade secret, applicable to all situations, is not possible. Some factors to be considered in determining whether given information is one’s trade secret are [the six factors enumerated in the Restatement].” ILG Indus., Inc. v. Scott, 273 N.E.2d 393 (1971).

Unlike a “patentable invention, a trade secret need not be novel or unobvious.” 2 Rudolf Callmann, The Law of Unfair Competition, Trademarks and Monopolies, § 14.15 (4th ed. 2003). However, it is commonly understood that “[i]f an invention has sufficient novelty to be entitled to patent protection, it may be said a fortiori to be entitled to protection as a trade secret.” 1 Roger M. Milgram, Milgram on Trade Secrets. The United States Court of Appeals for the Seventh Circuit, in Forest Labs, Inc. v. Pillsbury Co., 452 F.2d 621 (7th Cir. 1971), explained that “[t]he idea need not be complicated; it may be intrinsically simple and nevertheless qualify as a trade secret, unless it is common knowledge and, therefore, within the public domain.”

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.