MIAMI BUSINESS LITIGATION: REASONABLE MEASURES TO PROTECT TRADE SECRETS

According to the Florida Uniform Trade Secrets Act (FUTSA), business information must be secret to qualify as a trade secret. FUTSA defines trade secrets as “information . . . that [d]erives independent economic value 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.” Fla. Stat. § 688.002. A trade secret must also be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” But what qualifies as reasonable efforts to maintain the secrecy of a trade secret? In this article, we explore the answer. The Miami business litigation attorneys of the Mavrick Law Firm represent 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.

There is no precise definition of what constitutes reasonable efforts to maintain the secrecy of a trade secret. WWMAP, LLC v. Birth Your Way Midwifery, 711 F. Supp. 3d 1313 (N.D. Fla., Jan. 10, 2024). Whether the efforts to protect the secrecy of the trade secret qualify as reasonable requires a fact-intensive inquiry that construes certain factors. The factors include, the value of the secret relative to the costs of employing various security measures, the likelihood of misappropriation, the magnitude of the harm that would result from misappropriation, and the extent of the business’ need to disseminate the secret to exploit its value. The measures taken to protect a trade secret do not have to be perfect to qualify as reasonable. In fact, the secrecy measures can fail and still be considered reasonable secrecy measures under the circumstances.

Some examples of reasonable secrecy efforts a business may take to protect its trade secrets are limiting informational access to trusted employees, requiring employees to sign a non-disclosure agreement, instructing employees not to disclose confidential information to third parties, implementing access control policies such as passwords, using alarm systems and camera systems, using cybersecurity measures like encryption, hiring security guards to protect information storage locations, and marking the trade secret information as confidential. Treco Intern. S.A. v. Kromka, 706 F. Supp. 2d 1283 (S.D. Fla., April 7, 2010); ABB Turbo Systems AG v. Turbousa, Inc., 774 F.3d 979 (Fed. Cir. 2014) (interpreting Florida law).

Providing trade secret information to employees without requiring those employees to sign non-disclosure agreements or otherwise informing them about the requirements of maintaining the trade secret information as confidential can destroy the trade secret. Trade secret status can also be lost when an employer does maintain control over accessibility to the trade secret. In Hennegan Co. v. Arriola, 855 F. Supp. 2d 1354 (S.D. Fla., March 30, 2012), a company alleged its pricing information was a trade secret. However, the company allowed a former employee to share its pricing information with potential customers and did not require those potential customers to refrain from disclosing that information. The employee was also not required to sign a confidentiality agreement. As a result, the court determined the company’s pricing information was not trade secret because the company did not take reasonable measures to protect its trade secret. Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018) is another example of a company that lost trade secret projections because it allowed its confidential information to be distributed by an employee without sufficient protections. The company allowed an employee to keep customer information on his personal cellphone and personal laptop without requiring the employee to sign a non-disclosure agreement. The company also did not mark the information as confidential, and, therefore, the recipient of the information did not know it was confidential. Both of these missteps caused the court to reject the company’s claim for trade secret protections.

It is very important for businesses owning trade secrets to take reasonable efforts to protect those trade secrets from disclosure. Although those efforts do not have to be perfect, they must be reasonable under the circumstances. A lackadaisical approach to trade secret protections could jeopardize a company’s trade secrets and risk the business’s success by extension. At the very least, businesses should ensure their employees sign non-disclosure agreements and are aware trade secret disclosure to anyone not bound by confidentiality to the company is strictly prohibited.

The Miami business litigation lawyers of the Mavrick Law Firm also represent 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.