MIAMI BUSINESS LITIGATION: DISCLOSING TRADE SECRETS TO THIRD PARTIES

Trade secret claims in business litigation require courts to determine whether a business adequately protects its alleged trade secrets by preventing disclosure to unauthorized third parties. To qualify for protection under Florida Uniform Trade Secrets Act (“FUTSA”) and the federal Defend Trade Secrets Act (“DTSA”), a business therefore must show that it adequately maintained the secrecy of its trade secrets and confidential information. For this reason, courts often will not protect an alleged trade secret if the subject information is disclosed to other parties who do not have an obligation to keep the information confidential. Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents clients in breach of contract litigation, 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 trade secret action, the plaintiff bears the burden of demonstrating both that the specific information it seeks to protect is secret and that it has taken reasonable steps to protect this secrecy.” Am. Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir.1998). Disclosing the “information to others who are under no obligation to protect the confidentiality of the information defeats any claim that the information is a trade secret.” In re Maxxim Med. Grp., Inc., 434 B.R. 660 (Bankr. M.D. Fla. 2010).

If the party receiving confidential, trade secret information has a legal obligation to maintain secrecy of the information, then disclosure to such parties does not automatically destroy the secrecy element required under FUTSA or DTSA. This remains true even if the disclosing party and the receiving party do not have a confidentiality agreement between them. For example, in XTec, Inc. v. Hembree Consulting Services, Inc., the United States District Court for the Southern District of Florida found that disclosure of confidential information to the government did not necessarily defeat the requirement of secrecy for trade secret protection, because 48 C.F.R. § 27.402 “obligates the government to maintain the secrecy of proprietary data; thus, in this case, there was an accompanying mechanism to maintain [plaintiff’s] secrecy.” 183 F. Supp. 3d 1245 (S.D. Fla. 2016).

However, “[d]isclosing the information to others who are under no obligation to protect the confidentiality of the information defeats any claim that the information is a trade secret.” M.C. Dean, Inc. v. City of Miami Beach, Florida, 199 F. Supp. 3d 1349 (S.D. Fla. 2016). “A disclosure of a trade secret to others who have no obligation of confidentiality extinguishes the property right in the trade secret” when no efforts taken to maintain secrecy during a third-party demonstration. Lifecell IP Holdings, LLC v. Cosmedique, LLC, 2020 WL 9607038, (S.D. Fla. July 16, 2020). Moreover, in the context of delivering information to a state agency, “trade secret owner who fails to label a trade secret as such, or otherwise to specify in writing . . . that information which it contends is confidential . . . [and] is not to be disclosed, has not taken measures or made efforts that are reasonable under the circumstances to maintain the information’s secrecy.” Sepro Corp. v. Fla. Dept. of Envtl. Prot., 839 So.2d 781 (Fla. 1st DCA 2003)

In Lifecell IP Holdings, LLC v. Cosmedique, LLC, the United States District Court for the Southern District of Florida held that the filing of certain customer relationship files “in the public record destroyed the trade secret claim.” 2020 WL 9607038 (S.D. Fla. July 16, 2020). Lifecell therefore dismissed the plaintiff’s trade secret claims for this reason. Likewise, in Ruckelshaus v. Monsanto Co., the United States Supreme Court held that if “an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.” 467 U.S. 986 (1984).

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.