FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS AND MISAPPROPRIATION OF TRADE SECRETS

Businesses sometimes suffer from disloyal employees who misappropriate trade secrets and confidential information, diverting them to competitors. Such unfair competition can be addressed through contractual claims based on non-compete agreements as well as claims for trade secret misappropriation. Because Florida’s restrictive covenant statute, Florida Statutes Section 542.335, provides strong remedies for businesses, including obtaining a temporary injunction, a non-compete agreement is often the most effective enforcement tool. However, when a disloyal employee transfers trade secrets to a competitor, a claim for trade secret misappropriation is an essential tool for both injunctive relief and recovery of damages. 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.

Under Florida’s restrictive covenant statute, Section 542.335(1)(b)(1), a “trade secret” is deemed to be a legitimate business interest to enforce a non-compete covenant. A non-compete agreement that is predicated on protection of a trade secret is accorded a lengthy period of enforcement. The statute provides in pertinent part, at Section 542.335(1)(e): “In determining the reasonableness in time of a postterm restrictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint of 5 years or less and shall presume unreasonable in time any restraint of more than 10 years. All such presumptions shall be rebuttable presumptions.” Obtaining a temporary injunction against a former employee is usually the most effective way to prevent further harm to the business. Problems, arise, however, when employees have given third parties the trade secrets the business needs to protect. In such cases, a trade secret misappropriation claim would be essential to protect the value of the trade secret. A trade secret must retain its secrecy either through protective measures or court action.

The Defend Trade Secrets Act is a federal law allowing a business owner to sue for trade secret misappropriation. The trade secret owner must prove that (1) the plaintiff-business owns the trade secret, (2) the defendant misappropriated the trade secret, and (3) the plaintiff-business suffered damages. As the United States Court of Appeals for the Ninth Circuit explained in InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653 (9th Cir. 2020), “the definition of trade secret consists of three elements: (1) information, (2) that is valuable because it is unknown to others, and (3) that the owner has attempted to keep secret.” In business litigation concerning misappropriation of trade secrets, the plaintiff must identify the trade secrets and prove they exist. In Autodesk, Inc. v. ZWCAD Software Co., 2015 WL 2265479 (N.D. Cal. May 13, 2015), the United States District Court for the Northern District of California explained that a plaintiff “need not ‘spell out the details of the trade secret.'” However, the InteliClear appellate decision makes clear that the plaintiff must at least “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons…skilled in the trade.” A plaintiff must describe the trade secret with sufficient particularity to permit the defendant “to ascertain at least the boundaries within which the secret lies.” Vendavo, Inc. v. Price f(x) AG, 2018 WL 1456697 (N.D. Cal. March 23, 2018). Identifying trade secrets with sufficient particularity is important because defendants need concrete identification to prepare a rebuttal.

Frequently, plaintiffs in trade secret litigation (and in non-compete litigation premised on a legitimate business interest consisting of an alleged trade secret) make vague claims of trade secrets that fail the test of particularity. Well-reasoned precedent in the case of Cisco Sys., Inc. v. Chung, 462 F.Supp.3d 1024 (N.D. Cal. 2020), explained that “allegations that set out purported trade secrets in broad, categorical terms that are merely descriptive of the types of information that generally may qualify as protectable trade secrets are insufficient to state a claim.” For example, Five Star Gourmet Foods, Inc. v. Fresh Express, Inc., 2020 WL 513287 (N.D. Cal. Jan. 31, 2020), determined that allegations of “marketing strategy, product composition, packaging and manufacturing logistics” are insufficient. As another example, the Vendavo decision held that allegations of “source code, customer lists and customer related information, pricing information, vendor lists and related information, marketing plans and strategic business development initiatives, ‘negative knowhow’ learned through the course of research and development, and other information related to the development of its price-optimization software, including ideas and plans for product enhancements” lacked adequate particularity to assert a trade secrets claim. This sort of vague pleading can delay critical relief to a business that is the victim of trade secret misappropriation.

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.