FLORIDA TRADE SECRET LITIGATION: DISCLOSURE WITHOUT CONFIDENTIALITY AGREEMENT OR CONFIDENTIAL RELATIONSHIP

For a trade secret to be protectable under Florida law, a business must protect that information as confidential. Disclosure of trade secret information to parties without an understanding that the information must be protected as confidential can cause that information to no longer be a protectable trade secret. In the absence of an express confidentiality agreement, that information may still be protected if the business has an implied confidential relationship with the receiving party by making clear the intention to keep that information protected. However, that implied confidential relationship may have to be shown by something more than a mere oral understanding, such as a stamp or watermark placed on the documents indicating they are confidential. Peter Mavrick is a Fort Lauderdale trade secret attorney who represents businesses in trade secret litigation, non-competition agreement litigation, and other business litigation.

Whether information constitutes a trade secret can also make a material difference to the scope of a non-compete agreement. Under Florida Statute section 542.335(b)2), a trade secret can be a “legitimate business interest” allowing a non-compete covenant and can justify a legal presumption for a more lengthy non-compete obligation. Under Florida statute section 542.335(e), where trade secrets are proven, “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.”

It is well established that a business must protect the secrecy of business information for that information to be protected as a trade secret under the Florida Uniform Trade Secret Act (“FUTSA”). Section 688.002(4)(b), Florida Statutes, describes that a trade secret, by definition, must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Florida businesses can show that their confidential information is protectable as a trade secret by having each of its recipients enter into a confidentiality agreement requiring that party to also protect that confidential information. However, “[d]isclosing 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.” Temurian v. Piccolo, 18-CV-62737 (S.D. Fla. Apr. 22, 2019), quoting M.C. Dean, Inc. v. City of Miami Beach, Fla., 199 F. Supp. 3d 1349 (S.D. Fla. 2016).

Disclosure of confidential information without an express confidentiality agreement will not necessarily cause that confidential information to lose its trade secret protection. If a Florida business can show that there was a sufficient “implied confidential relationship” between the disclosing party and the recipient, that trade secret information may nevertheless still be protected. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974) (“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’”).

In Dotolo v. Schouten, 426 So. 2d 1013 (Fla. 2d DCA 1983), Florida’s Second District Court of Appeal explained that a trade secret does not lose its protected status when it is disclosed to a third party when the circumstances of that relationship implies that information should be kept confidential between the parties. “The lack of any express agreement on the part of the appellees not to use or disclose appellants’ 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.” Id.

The cases that find that confidential information disclosed without an express confidentiality agreement “all involve situations in which the party claiming trade secret misappropriation made it clear to the parties involved that there was an expectation and obligation of confidentiality.” Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996). The failure to show evidence of this mutual understanding is fatal to a trade secret claim. Id.

A business that uses a stamp or watermark to indicate that material is to be kept confidential can significantly help ensure that those documents maintain their trade secret protection. Tedder Boat Ramp Sys., Inc. v. Hillsborough County, Fla., 54 F. Supp. 2d 1300, 1305 (M.D. Fla. 1999) (“This express stamp of confidentiality, coupled with the alleged implied agreement, is enough to establish a confidential relationship”). “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 and exempt under the public records law is not to be disclosed, has not taken measures or made efforts that are reasonable under the circumstances to maintain the information’s secrecy.” Sepro Corp. v. Florida Dept. of Envtl. Prot., 839 So. 2d 781, 784 (Fla. 1st DCA 2003); see Cubic Transp. Sys., Inc. v. Miami-Dade County, 899 So. 2d 453, 454 (Fla. 3d DCA 2005) (Finding that confidentiality was not maintained to warrant trade secret protection when “[plaintiff] failed to mark the documents now in question as ‘confidential,’ and continued to supply them, without asserting even a (legally ineffectual) post-delivery claim to confidentiality for some thirty days after it had once attempted to do so by so informing County staff”)

The United States Eleventh Circuit Court of Appeals in Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018), explored the nuances of the implied confidential relationship doctrine. In Yellowfin, a business was seeking to protect its confidential customer information. The business made efforts to keep this customer information a secret by protecting it by keeping it on password protected servers. Of concern to the federal appellate court was that the business encouraged its employees to store this information on their personal laptops and cell phones and failed to expressly state to departing employees that the information must be deleted. Additionally, the company failed to designate the information as confidential.

The business argued that this did not cause the confidential information to lose its protected status as a trade secret. The business contended there was an “implicit understanding” between the business and its employee to keep that information confidential. The business asserted that it had expressly advised the employee orally that the information was confidential and would never be transferred to another company.

Yellowfin recognized that while keeping the information protected by a password was a positive step toward securing the alleged trade secret, oral statements were not enough. Id. Yellowfin found that, while “’Florida law recognizes implied confidential relationships sufficient to trigger trade secret liability,’ this Court is ‘wary of any trade secret claim predicated on the existence of” such a relationship.” Id., quoting Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996). Yellowfin determined that the oral statements were not enough evidence “corroborating the implicit confidential relationship between [the business] and [the employee].” Id.

A Florida business risks losing its trade secret protection when it does not have an express agreement or implied understanding that the information must be kept confidential.

Peter Mavrick is a Fort Lauderdale trade secret lawyer who has successfully represented Florida businesses in claims involving trade secret misappropriation in Miami-Dade, Broward, Palm Beach, and other Florida counties. This article is not a substitute for legal advice tailored to a particular situation.