FORT LAUDERDALE BUSINESS LITIGATION: PREEMPTION UNDER THE DEFEND TRADE SECRET ACT VS. THE FLORIDA UNIFORM TRADE SECRET ACT

The Defend Trade Secret Act of 2016 (DTSA) provides civil remedies in federal courts for trade secret misappropriation. 18 U.S.C. §§ 1836 et. seq. Before the DTSA was enacted, trade secret holders were required to protect against and remedy trade secret misappropriation in state court. Most states have adopted some version of the Uniform Trade Secrets Act (UTSA). While the DTSA is similar to the UTSA, some substantial differences exist between the DTSA and a state law UTSA claim. There are also advantages to asserting one claim over the other. 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 litigation, and other legal disputes in federal and state courts and in arbitration.

A trade secret holder may choose to assert a DTSA claim because it ensures the case will be subject to federal court jurisdiction. In federal court, a state law UTSA claim could be asserted in addition to a DTSA claim. However, a DTSA claim can never be asserted in a state court. Another difference between DTSA and a state law UTSA claim. Another difference between the DTSA and UTSA is that the DTSA generally does not preempt state trade secret laws. Trade secret holders therefore can seek civil remedies for trade secret misappropriation under either state or federal law, or both. For example, a trade secret holder can assert both a DSTA and Florida UTSA (FUSTA) claim. A Florida trade secret holder, however, may decide not to assert both because the FUTSA contains a preemption clause preempting common law claims based on trade secret misappropriation.

The FUTSA provides that it displaces “conflicting tort, restitutory, and other law of this state providing civil remedies for misappropriation of a trade secret.” § 688.008, Fla. Stat. The FUTSA specifies that this preemption does not apply to “[o]ther civil remedies that are not based upon misappropriation of a trade secret.” § 688.008, Fla. Stat. “In determining whether common law claims are preempted by FUTSA, courts consider whether the allegations supporting the common law claims are distinguishable from the allegations of trade secret misappropriation.” Coihue, LLC v. PayAnyBiz, LLC, 2018 WL 7376908 (S.D. Fla. Feb. 6, 2018). The court “must evaluate whether allegations of trade secret misappropriation alone comprise the underlying wrong; if so, the cause of action is barred by § 688.008.” Sentry Data Sys., Inc. v. CVS Health, 361 F. Supp. 3d 1279 (S.D. Fla. 2018). Thus, where misappropriation of trade secrets forms the basis of the common law claims, the FUTSA preempts the common law claims. Coihue, LLC v. PayAnyBiz, LLC, 2018 WL 7376908 (S.D. Fla. Feb. 6, 2018).

For example, in Pelfrey v. Mahaffy, 2018 WL 3110794 (S.D. Fla. Feb. 7, 2018), the court dismissed a claim for tortious interference with business relationships as preempted by FUTSA where the tortious interference claim, like the FUTSA claim, was based on allegations of stealing confidential information from the other party then using it to divert the other party’s clients to a competing business. Similarly, in Selectica, Inc. v. Novatus, Inc., 2015 WL 12843841 (M.D. Fla. Sept. 30, 2015), the court found that FUTSA preempted claims alleging tortious interference with business relationships through the use of trade secret information to solicit current and prospective customers. On the other hand, in Chetu, Inc. v. Salihu, 2009 WL 1916609 (S.D. Fla. July 3, 2009), the court declined to dismiss the unjust enrichment claim with respect to any confidential information that did not qualify as trade secret under the FUTSA.

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.