TRADE SECRET LITIGATION: INVOKING THE TRADE SECRET PRIVILEGE TO RESIST PRODUCTION DURING DISCOVERY

During discovery opposing parties request the production of relevant evidence and documents to encourage fair judicial proceedings and case settlements. Although the rules of both state and federal civil procedure are broad enough to encompass most discovery requests, not everything that a party requests is discoverable. There are certain objections and privileges that exist to protect against intrusive discovery requests. A key example of this is the trade secret privilege, which enables a party to refuse production during discovery because the evidence being sought is allegedly a trade secret. Peter Mavrick is a Fort Lauderdale trade secret litigation lawyer who has extensive experience dealing with discovery issues and disputes, including the trade secret privilege.

The trade secret privilege is addressed by Section 90.506, Florida Statutes, which states “a person has a privilege to refuse to disclose, and to prevent other persons from disclosing, a trade secret owned by that person if the allowance of the privilege will not conceal fraud or otherwise work injustice. When the court directs disclosure, it shall take the protective measures that the interests of the holder of the privilege, the interests of the parties, and the furtherance of justice require. The privilege may be claimed by the person or the person’s agent or employee.” The Fourth District Court of Appeal was confronted with the issue of a party invoking the trade secret privilege in Am. Exp. Travel Related Services, Inc. v. Cruz, 761 So. 2d 1206, 1208 (Fla. 4th DCA 2000).

In Cruz, the plaintiff was a credit card company that sought the recovery of unpaid account charges from a former cardholder and employee. The defendant counterclaimed for damages and alleged that the credit card company had issued a supplemental credit card to a third party on her account and breached the terms of their agreement by authorizing the third party’s charges, even though she had closed her account. During discovery, the defendant requested production of the credit card company’s Internal Credit Authorizations Manual (“Manual”), the personnel files for herself and the other employees alleged to be involved in the unauthorized charges, and a report pertaining to the company’s investigation of these employees for similar misconduct. The plaintiff objected to the production of these items, and claimed the Manual was a protected “trade secret” under Section 688.002(4), Florida Statutes, otherwise known as Florida’s Uniform Trade Secrets Act. The plaintiff further objected to the production of the personnel files and investigative reports and alleged they were confidential and privileged commercial records.

The trial court was reluctant to grant the plaintiff’s request to conduct an in-camera inspection of the materials sought for production to determine whether the manual constituted a trade secret and if the files and reports were privileged records. Instead, the trial court ordered the plaintiff to (1) produce its files and investigative materials for an in-camera inspection by the court, and (2) produce its Manual for the defendant. The Fourth District Court of Appeal cited directly to Section 90.506, Florida Statutes, and noted that when a court directs disclosure, it shall take the protective measures that the interests of the holder of the privilege, the interests of the parties, and the furtherance of justice require. When a trade secret privilege is asserted as the basis for resisting production, the trial court must determine whether the requested materials constitute a trade secret. The party seeking production must also be required to show reasonable necessity for the requested materials. The party resisting discovery bears the burden to demonstrate “good cause” for protecting or limiting discovery by demonstrating that the information sought is a trade secret or confidential business information and that the disclosure of such may be harmful. For a trial court to properly determine if the materials in question constitute trade secrets, there must be an in-camera inspection to see if the party resisting discovery is validly asserting a trade secret privilege.

The appellate court quashed the trial court’s ruling and granted the plaintiff’s request for an in-camera inspection. Even though a protective order or confidential agreement was endorsed by the trial court because it could be used to safeguard the sophisticated materials requested, the threat of harm from the release of such information could cause irreparable injury that cannot be remedied on appeal. The appellate court stressed the importance of allowing the plaintiff to pursue its appellate remedy prior to the release of the personnel files and investigative report, because if wrongfully released, the harm could be irreparable. For a more in-depth explanation of Florida’s Uniform Trade Secrets Act, please reference the linked article which explains more thoroughly trade secrets and the effect they have on non-compete agreements. https://www.mavricklaw.com/trade-secret-litigation.html.

Protecting a company’s trade secrets is essential to maintaining a viable business. If you have any questions regarding whether your company’s information can qualify as a trade secret, or if you have any general questions regarding trade secrets, please feel free to contact Fort Lauderdale business litigation attorney Peter Mavrick.

The Fort Lauderdale trade secret litigation attorneys at the Mavrick Law Firm have successfully represented many businesses in trade secret litigation in the Miami-Dade, Broward, and Palm Beach County areas encompassed by the Third and Fourth District Courts of Appeal, as well as Hillsborough, Sarasota, and other counties encompassed by the Second Circuit Court of Appeal. 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.