FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS BASED ON TRADE SECRETS AND CONFIDENTIAL INFORMATION

The State of Florida enacted Florida Statutes Section 542.335 to allow non-compete agreements where there is a “legitimate business interest.” Two frequently cited “legitimate business interests” are confidential information and trade secrets. In an employment context, a non-compete agreement based on “[v]aluable confidential business or professional information” (referenced in Florida Statutes Section 542.335(1)(b)(2)), Florida law presumes as “reasonable” a post-employment restriction of six months or less and presumes as “unreasonable” a restriction of more than two years. For trade secrets, however, Florida law is far more generous. Florida Statutes Section 542.335(1)(3) vastly expands the presumption of reasonable duration as being up to five years and presumes an unreasonable duration to be more than ten years. 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.

In some cases, restrictive covenants on allegedly “confidential” or “trade secret” information that does not qualify as such. Fundamentally, Florida and federal law require that confidential and trade secret information be subject to efforts that are reasonable under the circumstances to maintain secrecy. To ensure information is treated in a confidential manner, courts expect, at a minimum, that there are limits on employee access to the information as well as password protecting the computer network on which the information resides. VAS Aero Servs., LLC v. Arroyo, 860 F.Supp.2d 1349 (S.D. Fla. 2012) (explaining that these measures are influential in reasonably securing trade secrets). The employer, however, must ensure that the allegedly confidential or trade secret information is handled in a confidential or secret manner. This includes preventing employees from storing putative confidential or trade secret information on their personal cellphone or laptop computers. For example, the federal district court in Diamond Power Int’l, Inc. v. Davidson, 540 F.Supp.2d 1322 (N.D. Ga. 2007), found it significant that the plaintiff business failed to prevent its employees from transferring a file, allegedly constituting a trade secret, to their personal computers. Similarly, the United States Court of Appeals for the Eleventh Circuit in Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018), held there was no viable trade secret under the Florida Uniform Trade Secrets Act because the employer (i.e., Yellowfin) did not deploy reasonable measures to ensure its information was kept secret. The appellate court explained in pertinent part that: “Indeed, Barker refused to sign an employment agreement which stated that he would, among other things, keep all Yellowfin trade secrets in confidence. Further, Yellowfin neither marked the Customer Information as confidential nor instructed Barker to secure information on his personal devices. And when Barker left Yellowfin, the company did not request that Barker return or delete any of the information.”

Where employers are unable to prove they had an explicit understanding with their employees that certain information is confidential, Florida law sometimes allow protection based on an implied confidential relationship between the employer and employees. However, the U.S. Court of Appeals for the Eleventh Circuit in Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996), explained that “[a]lthough Florida law recognizes implied confidential relationships sufficient to trigger trade secret liability” the appellate court expressed it is “wary of any trade secret claim predicated on the existence of” such a relationship. The Yellowfin Yachts decision rejected the employer/plaintiff’s contention that its “general verbal statements warning employees not to share its Confidential Information with third parties” was adequate to establish that company information was truly kept confidential. The appellate court explained that: “In sum, with mere verbal statements that the Customer Information should not be given to outsiders, Yellowfin relinquished the information to Barker, who refused to sign a confidentiality agreement, with no instruction to him as to how to secure the information on his cellphone or personal laptop. In doing so, Yellowfin effectively abandoned all oversight in the security of the Customer Information. Accordingly, the District Court did not err in determining that no reasonable jury could find that Yellowfin employed reasonable measures to secure the information.”

In the context of non-compete agreements based on confidential or trade secret information, it is essential that the employer deploy reasonable measures to ensure the proprietary information is truly kept confidential or secret. Failure to do so may result in the court’s decision to invalidate the restrictive covenant.

Peter Mavrick is a Fort Lauderdale business litigation lawyer. The Mavrick Law Firm 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.