FORT LAUDERDALE BUSINESS LITIGATION: RECOVERY OF DAMAGES FOR TRADE SECRET MISAPPROPRIATION

Corporations typically rely on employees to handle and safeguard confidential business information, including trade secrets. Under Florida law, a business can seek protection contractually, most often a non-compete agreement, to restrict an employee or former employee from competing by joining a competitor’s business, starting a competing business, or facilitating competition by using confidential or trade secret information. Such contracts typically include an obligation to keep trade secrets and other confidential information a secret. Florida law also affords protection to businesses via the employee “duty of loyalty,” which is a judicially created doctrine that imposes a duty on employee to refrain from actions calculated to harm an employer during the period of employment, including competition. When employees violate any of these legal protections, employers have various remedies against their former employees. Employers also have remedies against businesses that benefit from the employee passing trade secrets or other confidential information to competing businesses, via claims for trade secret misappropriation against the former employee and the competing business. 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 a lawsuit for misappropriation of a trade secret, “[d]amages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.” Florida Statutes section 688.004(1). Florida’s Second District Court of Appeal in Perdue Farms Inc. v. Hook, 777 So.2d 1047 (Fla. 2d DCA 2001), stated in pertinent part that, in such litigation, “when some damage is proven and ‘the uncertainty lies only in the amount of damages, recovery may be had if there is proof of a reasonable basis from which the amount can be inferred or approximated.'” The Perdue Farms decision explained that the plaintiff’s burden of proof as to damages caused by the misappropriation is “liberal” and is satisfied “by showing the misappropriation, the subsequent commercial use, and … evidence by which the jury can value the rights the defendant has obtained.” Competing businesses who have unlawfully obtained trade secrets from a current or departing employees of competitors have sometimes tried to limit damages for their misappropriation. They have argued that damages be limited only to the “head-start period.” The United States District Court for the Southern District of Florida in Sensormatic Elec. Corp. v. TAG Co. US, 632 F.Supp.2d 1147 (S.D. Fla. 2008), defined the term “head-start period” as meaning “the amount of time it would have taken … [the trade secret misappropriator] to independently develop its product without the benefit of … [the trade secret owner’s] trade secrets.” In RRK Holding Co. v. Sears, Roebuck & Co., 563 F.Supp.2d 832 (N.D. Ill. 2008), the defendant business that benefited from the misappropriated trade secret argued that the plaintiff “failed to limit its damages claims to the time necessary to reverse engineer its trade secret product, i.e., the ‘head start’ period.” The jury instruction at issue read, “damages can include Plaintiff’s actual loss caused by Defendant’s misappropriation and the unjust enrichment caused by the misappropriation that is not taken into account in computing Plaintiff’s actual loss.” The court stated that “[w]hile Illinois case law requires damages be limited to a head start period for injunctive relief, it has not made such a requirement for monetary damages. The law does not support Defendant’s contention.” Similarly, CardioVention, Inc. v Medtronic, Inc., 483 F.Supp.2d 830 (D.Minn. 2007), explained that courts “have recognized that a plaintiff’s actual damages can be measured by the value of the loss of the secret to the plaintiff under the circumstances.” Following this line of authority, Florida’s Fourth District Court of Appeal in Premier Lab Supply, Inc. v. Chemplex Industries, Inc., 94 So.3d 640 (Fla. 4th DCA 2012), rejected a “head-start period” damage limitation for trade secret misappropriation damages. Premier Lab explained that trade secret damages under Florida’s trade secret statute, section 688.004, Florida Statutes, requires only “causation between the actual losses and the misappropriation.”

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.