FORT LAUDERDALE BUSINESS LITIGATION: COMPANY TRADE SECRETS ACCESSED VIA EMPLOYEES’ SMARTPHONES

Employers beware: it is possible to invalidate trade secret protections if employees access your trade secrets using personal smartphones and other similar devices. The erosion of trade secret protections can occur even if the employer undertakes other, reasonable measures to protect those very same trade secrets. Most, if not all, trade secret statutes require the trade secret proponent to take reasonable measures to protect its trade secrets. See, e.g., 18 U.S.C.A. § 1839 (defining trade secret as information “the owner thereof has taken reasonable measures to keep such information secret”); Fla. Stat. § 688.002 (2) (requiring that a trade secret be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy”); Cal. Civ. Code § 3426.1 (mandating that trade secrets be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”). Employers commonly protect trade secrets by limiting access to essential employees and storing the secrets in password protected computer systems. See, e.g., Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018). These safeguards are usually sufficient to protect the information’s secrecy and preserve the trade secret. See Bridge Fin., Inc. v. J. Fischer & Associates, Inc., 310 So. 3d 45, 49 (Fla. 4th DCA 2020) (storing trade secrets on password protected server constituted reasonable protections); but see Physiotherapy Associates, Inc. v. ATI Holdings, LLC, 592 F. Supp. 3d 1032, 1042 (N.D. Ala. 2022) (holding that the utilization of password protections alone does not sufficiently protect trade secrets).Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, 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 law, and other legal disputes in federal and state courts and in arbitration.

However, employers can nullify trade secret protections by allowing employees to access trade secrets on their personal smartphones. For example, in Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018), the former employer took normal precautionary measures to protect the secrecy of its trade secrets. The former employer limited employee access to trade secrets and maintained the trade secrets on a password-protected computer system. However, the federal appellate court refused to find the existence of a trade secret because the employer “encouraged [the former employee] to store the information on a personal laptop and phone.” As a result, the court determined that the former employer “compromised the efficacy of these [security] measures by encouraging [the former employee] to keep the Customer Information on his cellphone and personal laptop.”

It is important to point out that employees do not automatically destroy trade secret protections by accessing information using personal devices. As a general matter, trade secrets protections are vitiated when the employer approves or knowingly permits the employee to access the trade secret using a personal device. Therefore, unauthorized access or access unbeknownst to the employer may not terminate trade secret protections concerning the information. For example, the United States District Court for the Northern District of California, in WeRide Corp. v. Kun Huang, 379 F.Supp.3d 834, 848 (N.D. Cal. 2019), determined the employer was likely to succeed on the merits under the federal Defend Trade Secrets Act where the employee copied company files to his personal devices during the same period when he was actively seeking alternative employment.

To prevent elimination or erosion of a valid trade secret, businesses should prohibit employees from using their personal devices to access company information. Employers also should require employees with access to trade secret information to a sign non-disclosure agreement, commonly referred to as “NDA.” An NDA can include provisions barring employees from disclosing trade secrets regardless of the medium they are stored. A business may therefore be able to protect its trade secrets even if an employee uses a personal device to access the information. See Yellowfin Yachts, Inc., 898 F.3d 1279 (noting that the former employee refused to sign an employment agreement stating he would keep all employer trade secrets in confidence). Businesses should further institute policies, in writing, requiring employees to return all company information upon severance from the company.

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