FLORIDA TRADE SECRET AND NON-COMPETE AGREEMENT LITIGATION: TRADE SECRETS MUST BE CLOSELY GUARDED TO BE PROTECTABLE UNDER FLORIDA AND FEDERAL LAW

For a business to be to protect its confidential information as a protectable trade secrets under the Florida Uniform Trade Secret Act, the business must preserve the secrecy of its confidential information. There are no hard and fast rules that must be followed for a business to protect its confidential information as a trade secret. “No single ‘step’ taken to maintain the secrecy of the information secrecy will be determinative; but if the claimant can establish a consistent approach to keeping the information ‘secret’ it will go along way to satisfying this element of the statutory definition.” Gary S. Gaffney and Maria E. Ellison, A Primer on Florida Trade Secret Law: Unlocking the “Secrets” to “Trade Secret” Litigation, 11 U. Miami Bus. L. Rev. 1 (2003). Peter Mavrick is a Fort Lauderdale trade secret attorney, non-compete attorney, and business litigation attorney who represents businesses in trade secret litigation, non-compete agreement litigation, and other business litigation.

A recurring issue in non-compete covenant litigation is whether a trade secret exists and justifies the restrictive covenant. Under Florida Statutes § 542.335(b)2), a non-compete can be based on a legitimate business interest of a trade secret. If a trade secret is a proven legitimate business interest under Florida’s non-compete statute, the consequences are severe for the opposing party due to the expanded time-frame the statute allows to enforce a non-compete. Section 542.335(e), Florida Statutes, provides that “In determining the reasonableness in time of a postterm restrictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint 5 years or less and shall presume unreasonable in time any restraint of more than 10 years. All such presumptions shall be rebuttable presumptions.” Because Florida law accords protection to genuine trade secrets and because of the potentially lengthy period of a non-compete based on trade secrets, parties in litigation will often scrutinize whether the alleged trade secrets were closely guarded to ensure and maintain their status as protectible trade secrets.

Trade secrets are defined under § 688.002(4), Florida Statutes, as:

information, including a formula, pattern, compilation, program, device, method, technique, or process that:

(a) 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

(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

“In a trade secret action, the plaintiff bears the burden of demonstrating both that the specific information it seeks to protect is secret and that it has taken reasonable steps to protect this secrecy.” Am. Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir.1998). Notwithstanding the burden to maintain secrecy, the confidential information must typically be disclosed to the court en camera, for a court find that said confidential information qualifies as protectable trade secrets. See Lovell Farms, Inc. v. Levy, 641 So. 2d 103 (Fla. 3rd DCA 1994) (“[I]n order to ascertain whether a trade secret exists, the information at issue must be disclosed”); Del Monte Fresh Produce Co. v. Dole Food Co., 136 F. Supp.2d 1271 (S.D. Fla. 2001) (motion to dismiss granted, but without prejudice, so that claimant could plead with greater specificity just what information it sought to protect as a trade secret).

In order to prove that a company’s confidential information qualifies as a trade secret, a company needs to show that the confidential information is not already known in the industry. RX Sols., Inc. v. Express Pharmacy Services, Inc., 746 So. 2d 475 (Fla. 2d DCA 1999). It is also critical that a business seeking to protect its confidential information as a trade secret avoid disclosing the confidential information to sources without taking measures to prevent the spread of that confidential information. Disclosure of confidential information to third-parties is a common basis for a court to deny protection of that confidential information as a trade secret. E.g. In re Maxxim Med. Grp., Inc., 434 B.R. 660 (Bankr.M.D.Fla.2010) (“Disclosure of 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”); Cubic Transp. Sys., Inc. v. Miami–Dade County, 899 So.2d 453 (Fla. 3d DCA 2005) (holding that by failing to mark documents provided to the county as “confidential,” the plaintiff failed to protect the secrecy of the documents); Sepro Corp. v. Fla. Dep’t of Envtl. Prot., 839 So.2d 781 (Fla. 1st DCA 2003) (“[T]he failure to identify information furnished to a state agency as putatively exempt from public disclosure effectively destroys any confidential character it might otherwise have enjoyed as a trade secret…. The trade secret owner who fails to label a trade secret as such, or otherwise to specify in writing upon delivery to a state agency that information which it contends is confidential …, has not taken measures or made efforts that are reasonable under the circumstances to maintain the information’s secrecy”); see M.C. Dean, Inc. v. City of Miami Beach, Florida, 199 F. Supp. 3d 1349, 1355–56 (S.D. Fla. 2016).

While businesses that seek to protect their confidential information often protect that information by entering into confidentiality agreements with their employees, this is not a mandatory requirement for that confidential information to be protected. “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, 2 (Fla. 4th DCA 1983).

Generally, something that is protected by a patent cannot be protected by a trade secret. A patent is usually the anathema of a trade secret; to protect a patent one must publicize the method or workings of the patented matter, while a trade secret must be protected from disclosure to be protected. The Supreme Court has explained that “the patenting of a product negates the possibility that the product is also a trade secret.” Premier Lab Supply, Inc. v. Chemplex Indus., Inc., 10 So. 3d 202, 206 (Fla. 4th DCA 2009), citing to Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988). The exception to this general principle is when a company’s confidential information is made up of mix of public information. In the case of Lee v. Cercoa, 433 So.2d 1 (Fla. 4th DCA 1983), the court evaluated whether a company could protect confidential information as a trade secret which had already been published or patented. Lee v. Cercoa found that, “[w]hile the evidence to which appellant points would support an inference that many of the major elements of the appellee’s process are the same as those known to others in this field, it is also sufficient to support the court’s factual findings that the combination of elements into a complicated production process amounted to a trade secret and not merely a variation of a general process.” Id., see also Sun Crete of Florida, Inc. v. Sundeck Products, Inc., 452 So. 2d 973, 975 (Fla. 4th DCA 1984) (finding that a particular formula for creating a product can still be a trade secret even if its components were disclosed in promotional material because a trade secret can include “a unique combination of otherwise known components, if the combination differs materially from other methods known in the trade”).

Peter Mavrick is an experienced Fort Lauderdale trade secret lawyer, non-compete lawyer, and business litigation lawyer who represents businesses in trade secret litigation, non-compete litigation, and other business litigation. This article does not serve as a substitute for legal advice tailored to a particular situation.