PROTECTION OF TRADE SECRETS FROM LITIGATION DISCOVERY

Businesses often envision that litigation over trade secrets will generally involve a direct lawsuit by or against a person or company that steals or divulges such information in violation of a position of trust. However, trade secrets can come under attack by way of a discovery requests in litigation where the owner of the trade secret may not even be involved in the lawsuit. The following two recent appellate decisions are examples of the diligence required to safeguard trade secrets in litigation. Peter Mavrick is a Fort Lauderdale trade secret lawyer who represents businesses in trade secret litigation.

In Kelley v. Healthcare-IQ, Inc., 230 So. 3d 955 (Fla. 2d DCA 2017), former employees sued their former employer for breach of an employment contract. The former employer filed counterclaims against them alleging disclosure of its trade secrets. During discovery, the former employer served subpoenas for documents relating to the business practices of its competitor, who was the former employees’ current employer. The employees asserted the trade secret privilege on its current employer’s behalf. At the court hearing on the privilege, there was no evidence taken and no findings were made by the judge. Nevertheless, the trial court allowed the discovery of the trade secret information.

The employees immediately appealed to prevent the irreparable harm that the disclosure of their employer’s trade secret information would cause to their employer. On certiorari review, the Appeals Court reversed the decision because the trial court failed to follow the proper procedure, which required it to examine evidence and determine the answers to the following two prongs: 1) whether the information requested is in fact a trade secret and 2) if it is trade secret information, whether there is a reasonable necessity for the requesting party to have the information.

In Niagra Industries, Inc. v. Giaquinto Electric LLC, 42 Fla. L. Weekly D2576 (Fla. 4^th DCA Dec. 6, 2017), Niagra was a Defendant in a lawsuit relating to a serviceman’s injury that occurred while repairing a tankless water heater that they designed. During the lawsuit, Niagra was ordered to disclose trade secret information pursuant to a protective order that limited who could view the documents. At trial, the parties stipulated to a dismissal before any of the confidential information was disclosed to the jury. However, the Plaintiff from that lawsuit filed a second lawsuit for that same injury, but against other plumbing companies. In the second lawsuit those other plumbing companies subpoenaed Niagra’s trade secret information that was made available to the Plaintiff in the original lawsuit.

At the evidentiary hearing, Niagra provided testimony to support its position that its information was trade secret and that disclosure would have a devastating effect on its company. However, the other parties failed provide any evidence whatsoever. Instead, they argued that the information was necessary because the tank in question it was destroyed and thus it could not be examined and since the Plaintiff already viewed Niagra’s trade secret information in the first lawsuit, he would have an unfair advantage in the second lawsuit. The trial court then ordered Niagra to produce its trade secret information to the other plumbing companies.

Niagra immediately appealed to prevent the disclosure of its trade secret information and to prevent the harm that it would cause to its business. On certiorari review, the Appeals Court quashed the lower court’s order because the party seeking the documents had failed to present any evidence showing that it was reasonable and necessary for them to have the trade secret information. The Appeals Court held that if the destruction of a product were sufficient to justify breaching the trade secret privilege, then it could be breached any time a lawsuit involves a destroyed product. Also, that the mere existence of the first lawsuit was not sufficient to invade the trade-secret privilege. Peter Mavrick is a Fort Lauderdale trade secret attorney. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone:954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.