LibGuides: Trade Secrets by Timothy McCan: Trade Secret Misappropriation

Claim for Misappropriation

In Florida, a claim for Trade Secret Misappropriation can be civil (Fla. Stat. §688.001-688.009), criminal (Fla. Stat. §772.101-772.19), or founded on a breach of contract claim (Fla. Stat. §542.33-542.335).

Source: www.ipwatchdog.com

Criminal Misappropriation

CAUSE OF ACTION:

Fla. Stat. §812.081 provides for a criminal cause of action for trade secret misappropiation. The Civil Remedies for Criminal Practices Act (CRCPA), which can be found at Fla. Stat. §772.101 - 772.19, also provides for a civil cuase of action for trade secret misappropriation based upon the criminal statute.

Criminal defintion of a trade secret is slightly different:

The definition of a trade secret in the criminal statute "omits the terms 'method' and 'technique,' but adds the terms 'scientific, technical, or commercial information, including any design, process, procedure, list of suppliers, list of customers, business code or improvement thereof,' explicitly including customer lists as trade secrets, which the Uniform Trade Secrets Act does not" 1-7 LN Practice Guide: FL Business Torts 7.14
Criminal statute requires use;
Must provide a competitive advantage.

Clark v. State, 670 So. 2d 1056, 1058 (Fla. Dist. Ct. App. 2d Dist. 1996)

Court held that under Fla. Stat. §812.081 the materials at issue did not constitute trade secrets and therefore reversed the defendants conviction.

Fla. Stat. §812.081(2) makes it a felony of the third degree to steal, embezzle, copy or otherwise misappropriate a trade secret belonging to another.

Fla. Stat. §772.102(1)(a)(20) establishes that it is a crime to commit, conspire to commit, solicit, coerce, or intimidate another person to commit a crime under Fla. Stat. §812.081.

To pursue a civil cuase of action under the CRCPA the plaintiff must establsh a pattern of criminal activity as described in Fla. Stat. §772.103.

STATUTE OF LIMITATIONS:

Both Fla. Stat.§812.081 and CRCPA( Fla. Stat. §772.17) have a statute of limitations of 5 years.

Civil Misappropriation

According to Fla. Stat. §688.002(2) there are two ways to establish a claim in civil court for trade secret misappropriation:

(A) ACQUISITION:

"Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or" [Fla. Stat. §688.002(2) (2012)]

Del Monte Fresh Produce Co. v. Dole Food Co., 136 F. Supp. 2d 1271, 1291 (S.D. Fla. 2001)

"In order to plead such a claim successfully, a plaintiff must aver that: (1) the plaintiff possessed secret information and took reasonable steps to protect its secrecy and (2) the secret it possessed was misappropriated, either by one who knew or had reason to know that the secret was improperly obtained or by one who used improper means to obtain it."

Fla. Stat. §688.002(1) (2012).

“Improper means” includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.

Sensormatic Elecs. Corp. v. Tag Co. US, LLC, 632 F. Supp. 2d 1147, 1185-1186 (S.D. Fla. 2008)

"TAG CEO Mark Krom acquired Sensormatic's specifications through a breach of a duty to maintain secrecy, either his own or someone else's. If Mr. Krom requested and received the Sensormatic specifications from Mr. Hibshman at Wallace, Mr. Krom was aware that such a disclosure was a violation of Wallace's License [1186] Agreement with Sensormatic. ... Regardless of how Mr. Krom obtained the Sensormatic specifications, TAG's acquisition of Sensormatic's specifications was through improper means, in violation of FUTSA.

Four Seasons Hotels & Resorts B.V. v. Consorcio Barr, S.A., 267 F. Supp. 2d 1268, 1326 (S.D. Fla. 2003)

A licensee was held liable for misappropriation when they acquired "customer information through improper means, namely, by theft and by espionage through electronic means."

Border Collie Rescue, Inc. v. Ryan, 418 F. Supp. 2d 1330, 1338 (M.D. Fla. 2006)

The court, citing Del Monte stated that "[t]o show misappropriation of a trade secret under Florida law, a claimant must prove: (1) the plaintiff possessed secret information and took reasonable steps to protect its secrecy and (2) the secret it possessed was misappropriated."

(B) DISCLOSURE OR USE:

"Disclosure or use of a trade secret of another without express or implied consent by a person who:

1. Used improper means to acquire knowledge of the trade secret; or

2. At the time of disclosure or use, knew or had reason to know that her or his knowledge of the trade secret was:

a. Derived from or through a person who had utilized improper means to acquire it;

b. Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

c. Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

3. Before a material change of her or his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake."

[Fla. Stat. §688.002(2) (2012)]

CAUSES OF ACTION UNDER DISCLOSURE OR USE:

(1) ACTUAL USE OR DISCLOSURE

"The defendant must actually use or disclose the trade secret for liability to arise under this section of the statute."

1-7 LN Practice Guide: FL Business Torts 7.13

Threatened Use or Disclosure:

Fla. Stat. §688.003(1) (2012) "Actual or threatened misappropriation may be enjoined."

Mere Possession Not Enough:

Del Monte Fresh Produce Co. v. Dole Food Co., 148 F. Supp. 2d 1326, 1338 (S.D. Fla. 2001)

"Del Monte must show more than mere possession of a trade secret..."

(2) NO EXPRESS OR IMPLIED CONSENT

Fla. Stat. §688.002(2)(b) expressly requires that a plaintiff show they lacked express or implied consent.

(3) TRADE SECRET WAS OBTAINED THROUGH IMPROPER MEANS OR THAT THE DEFENDANT KNEW/SHOULD HAVE KNOWN IT WAS OBTAINED THROUGH IMPROPER MEANS

Improper means is defined under Fla. Stat. §688.002(2)(a).

(4) DUTY OF SECRECY

Fla. Stat. §688.002(2)(b)(2)(b) & (c) offers another cause of action against defendants who knew or should have known that they owed a duty to maintain the secrecy of the trade secret(s).

This could arise from:

Negotiations: Biodynamic Techs., Inc. v. Chattanooga Corp., 644 F. Supp. 607 (S.D. Fla. 1986)
Court upheld a claim against potential business partner who missappropriated trade secrets after negotiations fell through.
Former Employee: Premier Law Supply, Inc. v. Chemplex Indus., 10 So. 3d 202, 206 (Fla. Dist. Ct. App. 4th Dist. 2009)
"Where an employee acquires, during the course of his employment, a special technique or process developed by his employer, the employee is under a duty ... not to disclose such skells, techniques or processes" Id. at 206.
Implied Confidential Relationships: Bateman v. Mnemonics, 79 F. 3d 1532, 1550 (11th Cir. 1996)
"Florida law recognizes implied confidential relationships sufficient to trigger trade secret liability." Id. at 1550.
Dotolo v. Schouten, 426 So. 2d 1013, 1015 (Fla. 2d DCA 1983): The lack of any express agreement on the part of the appellees not to use or disclose appellants' trade secret is not significant. The existance of a confidential relationship ... gives rise to an implied obligation not to use or disclose." Id. at 1015.

(5) Mistaken Dislcosure

Fla. Stat. §688.002(2)(b)(3) provides for a cuase of action against a defendant that experiences "a material change of her or his position, knew or had reason to know that it was a trade secret, and that knowledge of it had been acquired by accident or mistake."

STATUTE OF LIMITATIONS

Fla. Stat. §688.007 sets the statute of limitations for bringing a trade secret misappropriations claim at 3 years from the date of discovery, or the date discovery should have been made.

Breach of Contract

BREACH OF A NON-COMPETE AGREEMENT

When analyzing a non-compete agreement, Florida law requires that the restraint on trade be shown as valid. First, it must be established whether the agreement was entered into before July 1, 1996 or On or After July 1, 1996.

BEFORE JULY 1, 1996:

According to Fla. Stat. §543.331, Fla. Stat. §542.33 governs non-compete agreements entered into before July 1, 1996. Fla. Stat. §542.33(1) prohibits any restraint on trade unless it falls under subsections (2) and (3). Subsection (2) provides a presumption of irreparable injury for misappropriation of a trade secret (State Chemical Mfg. Co. v. Lopez, 642 So.2d 1127 (Fla. 3d DCA 1994)).

(1) VALIDITY OF THE RESTRAINT

The Court of Appeals of the Fifth District of Florida in Jewett Orthopaedic Clinic, P.A. v. White, 629 So. 2d 922 (Fla. Dist. Ct. App. 5th Dist. 1993) established that the validity of a non-compete agreement is determined by its reasonableness. The Court further applied this validity test in Globe Data Sys. v. Johnson, 745 So. 2d 1101, 1103 (Fla. 5th DCA 1999). The factors to be considered are:

(a) Wheter it was voluntarily entered into;

(b) Reasonableness of the duration;

ON OR AFTER JULY 1, 1996:

According to Fla. Stat. §542.331, and Fla. Stat. §542.335(3), Fla. Stat. §542.335 governs restraints on trade or commerce entered into on or after July 1, 1996.

§543.335 expressly states the requirements for a valid non-compete agreement:

(a) Must be reasonable in time, area, and type of business prohibited;

(b) Must be in writing and signed by Defendant

– Sub-part (b) provides that trade secrets AND valuable confidential information are considered a "legitimate business interest."

Cases applying these factors are:

Advantage Digital Sys., Inc. v. Digital Imaging Servs., Inc., 870 So. 2d 111 (Fla. 2d DCA 2003)

"The party seeking to enforce a non-competition agreement must plead and prove the existence of one or more legitimate business interests" Id. at 114.

Anich Indus. v. Raney, 751 So. 2d 767 (Fla. Dist. Ct. App. 5th Dist. 2000)

"Anich did not demonstrate the existence of any legitimate business interests in need of protection." Id. at 771.

STATUTE OF LIMITATIONS

Fla. Stat. §95.11(2)(b) limits contract actions by creating a 5 year statute of limitations. Specific Performance actions must also be brought within one year of the alleged breach, Fla. Stat. §95.11(5)(a).