FORT LAUDERDALE NON-COMPETE AGREEMENTS: COMPILATIONS MAY QUALIFY AS A TRADE SECRET

Florida employers who seek to protect their client lists from misappropriation by former employees will often need to show that the client list was a trade secret. This is important even when the former employee is subject to a non-compete agreement. This is because non-compete agreements cannot be enforced without a “legitimate business interest,” and the existence of a trade secret qualifies as a “legitimate business interest.” Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

A non-compete agreement cannot be enforced without a court finding that the agreement is supported by a “legitimate business interest” in the non-compete agreement. Importantly, the existence of a trade secret can qualify as a legitimate business interest pursuant to Florida’s noncompete law. Trade secrets are specifically delineated as legitimate business interests in Section 542.335(1)(b)(1), Florida Statutes.

The term “trade secret” is often associated with secret formulas like the ingredients of Coca-Cola or WD-40. However, nearly any type of information can qualify as a trade secret as long as it qualifies as one under either the Florida Uniform Trade Secrets Act (FUTSA) or the federal Defend Trade Secrets Act (DTSA). Particularly, FUTSA defines trade secrets as:

information, including a formula, pattern, compilation, program, device, method, technique, or process that:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Section 688.002(4), Florida Statutes.

While a non-compete agreement can help a company protect its trade secrets, a non-compete agreement is not required for a company to take legal action to protect trade secrets. A company that can show that its trade secrets were taken can sue for an injunction for the return of that information or damages. “To prevail on a FUTSA claim, a plaintiff must demonstrate that (1) it possessed a ‘trade secret’ and (2) the secret was misappropriated.” Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018). “Florida law provides for injunctive relief to enjoin a party from misappropriating trade and commercial secrets.” PSC, S.A. v. PriceSmart, Inc., 07-21383-CIV, 2007 WL 2781021 (S.D. Fla. Sept. 19, 2007).

“Examples of trade secrets include confidential business information such as a customer list, when the list is not just a compilation of information readily available to the public, but rather acquired or compiled through the owner’s industry.” Sea Coast Fire, Inc. v. Triangle Fire, Inc., 170 So. 3d 804 (Fla. 3d DCA 2014). “Information that is generally known or readily accessible to third parties cannot qualify for trade secret protection.” Am. Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir. 1998). In Templeton v. Creative Loafing Tampa, Inc., 552 So. 2d 288 (Fla. 2d DCA 1989), the Court was evaluating whether to reverse a trial court’s injunction concerning a customer list. There, the appellate court determined that the list of the plaintiff’s advertisers could be clearly discovered from a simple review of plaintiff’s magazine. Because that information cannot be kept secret, the customer list would not receive trade secret protection.

In the case of PSC, S.A. v. PriceSmart, Inc., 07-21383-CIV, 2007 WL 2781021 (S.D. Fla. Sept. 19, 2007), the plaintiff alleged that its trade secrets were misappropriated by transmittal of a data tape which included the identification of some of its customers and their credit limits. The defendant contended that the information should not be considered a trade secret because it was possible for defendant to determine the names of plaintiff’s customers from information plaintiff’s employees’ input into a shared data system. The court found that the fact that defendant was able to input credit card numbers which identified members as plaintiff’s customers did not necessarily defeat trade secret protection because that information was “readily ascertainable.” The court held that, “[t]his evidence supports [plaintiff’s] position that its creation of a subset of members who it believes are credit-worthy qualifies as a trade secret.” PSC, S.A. v. PriceSmart, Inc., 07-21383-CIV, 2007 WL 2781021 (S.D. Fla. Sept. 19, 2007). Florida businesses may take advantage of trade secret protection concerning compilations of public information as long as the compilation is kept secret and the compilation has independent value in being secret.

The importance of protecting trade secrets is evident in the non-compete statute. When the non-compete agreement intended to protect a trade secret, a non-compete period of 5 years or less is presumed reasonable and a non-compete period over 10 years is presumed unreasonable. Section 542.335 (1)(e). In other words, non-compete agreements premised on protecting trade secrets have the longest duration, i.e. up to 10 years before they are presumed unreasonable. If the non-compete period is over ten years, the party enforcing the agreement must rebut the presumption that the period is unreasonable.

Peter Mavrick is a Fort Lauderdale non-compete lawyer who also practices in Palm Beach, Boca Raton, and Miami-Dade. This article does not serve as a substitute for legal advice tailored to a particular situation.