MIAMI BUSINESS LITIGATION: TRADE SECRET DOES NOT NECESSARILY REQUIRE A CONFIDENTIALITY AGREEMENT

Trade secrets and confidential information can lose protection under the Florida Uniform Trade Secrets Act (FUTSA) when they are disclosed to third parties. One way to maintain protection of this information under FUTSA, is by entering into a confidentiality agreement with the third parties that will receive the information. When trade secrets or confidential information is disclosed to employees without a confidentiality agreement, the information does not necessarily lose trade secret protection. Peter Mavrick is a Miami business litigation lawyer who represents clients in trade secret litigation in Miami, Fort Lauderdale, Boca Raton, and Palm Beach.

A company seeking to protect its confidential information under FUTSA must show that the confidential information at issue was “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” See § 688.002(4)(b), Florida Statutes. Disclosing information to third parties can defeat the requisite element of secrecy under either FUTSA when the party given the confidential information is not informed of the confidential nature of the information or otherwise has no obligation to keep the information confidential. “Disclosing the ‘information to others who are under no obligation to protect the confidentiality of the information defeats any claim that the information is a trade secret.’” M.C. Dean, Inc. v. City of Miami Beach, Florida, 199 F. Supp. 3d 1349 (S.D. Fla. 2016). The underlying principle behind this rule is that something cannot be a trade secret if it is freely shared with outsiders.

“This necessary element of secrecy is not lost, however, if the holder of the trade secret reveals the trade secret to another ‘in confidence, and under an implied obligation not to use or disclose it.’” Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974); see Advantor Sys. Corp. v. DRS Tech. Services, Inc., 678 Fed. Appx. 839 (11th Cir. 2017) (“[T]rade secret protection is not lost when a company shares its trade secrets with an entity that has a duty to maintain the secrecy or limit access to the disclosed document”).

Confidentiality agreements may be used to create the requisite confidential relationships necessary to preserve trade secret protection; however, a confidentiality agreement is merely a method by which a confidential relationship may be established. There are many other ways that this confidential relationship can be created. For example, Dotolo describes a circumstance where a person disclosed confidential information to a potential business partner. Dotolo v. Schouten, 426 So. 2d 1013 (Fla. 2d DCA 1983). Dotolo found:

The [recipients] were instructed that the formula was a trade secret and that the [disclosing party] wished to protect it. The lack of any express agreement on the part of the appellees not to use or disclose [the disclosing party’s] trade secret is not significant. The existence of a confidential relationship such as that in this case gives rise to an implied obligation not to use or disclose.

Dotolo v. Schouten, 426 So. 2d 1013 (Fla. 2d DCA 1983).

The relationship between employer and employee can qualify as the requisite confidential relationship necessary to maintain trade secret protections, as long the company seeking to maintain trade secret protection has undertaken reasonable methods to secure the confidential information. The employment relationship automatically places additional duties upon employees simply by virtue of the employment relationship itself.

The lack of any express agreement on the part of the employee not to disclose a trade secret is not significant. The law will import into every contract of employment a prohibition against the use of a trade secret by the employee for his employee in the course of his employment.

Unistar Corp. v. Child, 415 So. 2d 733 (Fla. 3d DCA 1982). This issue was further explained by Florida’s Fourth District Court of Appeal in Lee v. Cercoa, which found:

The initial question for determination is whether a valid cause of action exists to protect an employer’s trade secrets from disclosure or use by an employee (or former employee) absent an express contract restraining the employee from disclosing or using such secrets. We answer this in the affirmative. Where an employee acquires, during the course of his employment, a special technique or process developed by his employer, the employee is under a duty, even in the absence of an express contractual provision, not to disclose such skills, techniques or processes in his new employment for his own or another’s benefit to the detriment of his previous employer.

Lee v. Cercoa, Inc., 433 So. 2d 1 (Fla. 4th DCA 1983); see Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dunn, 191 F. Supp. 2d 1346 (M.D. Fla. 2002) (enjoining a former employee that did “not sign an employment agreement containing non-solicitation and non-disclosure provisions” but nevertheless found that, “such is not dispositive on the issue of the Court’s authority to issue an injunction”). The disclosure of confidential information to employees who had not signed a confidentiality agreement does not necessarily cause that information to lose trade secret protection. The typical employee has inherent obligations to maintain the secrecy of confidential information. Provided the measures taken to protect the information is reasonable under the circumstance, then trade secret protection may not be lost.

Peter Mavrick is a Miami business litigation attorney. This article is not a substitute for legal advice tailored to a particular situation.