UNFAIR COMPETITION, RESTRICTIVE COVENANT AND TRADE SECRET LITIGATION
With over 35 years of business litigation experience and as a board-certified civil trial attorney, David H. Charlip, B.C.S. and the lawyers and staff at Charlip Law Group, LC are extremely knowledgeable and experienced in litigating all aspects of unfair competition and trade secret litigation. Such cases are extremely challenging because often the stakes are high, the cases often involve injunction hearings with limited time to prepare and marshal the evidence and, depending upon the case, the subject matter may be highly technical.
Whether certain business interests exist or are protected, whether certain facts qualify as “trade secrets”, whether hiring a competitor’s employee constitutes an “intentional and unjustified interference” or whether an employee had extraordinary or specialized training, are all issues that are heavily litigated and very fact specific, varying from one case to another. For that reason, for a party to be successful (whether as a plaintiff or defendant), such cases should be managed by experienced business litigators and trial experts. Charlip Law Group, LC. Has the skills and experience to make the difference in litigating any unfair competition, trade secret or restrictive covenant actions.
UNFAIR COMPETITION LITIGATION
Unfair competition litigation is a broad term encompassing both state and federal common law and statutory claims that seek to redress business practices which illegitimately take advantage of another company’s intellectual property or other intangible assets. Such claims can include unfair business practices such as trademark infringement, false advertising, deceptive and unfair trade practices, cybersquatting and antitrust.
Some common activities which have prompted unfair competition litigation are:
- Unlicensed use of a company’s trademarks
- Tortious interference with contractual relations
- Tortious interference with business advantage
- Unauthorized use of a company’s trade secrets
- Price fixing or other antitrust violations
- Fraud, false advertising and other misrepresentative practices
- Business defamation
If you have questions about unfair competition litigation, we can help. If you have been threatened by a competitor or sued for one of the above-listed activities, it is important you take action to defend yourself immediately. Lack of action can result in a judgment against you. Likewise, if you or your company is the victim of unfair competition and want to examine what recourse exists to fairly level the playing field, we can help. Contact Charlip Law Group, LC to schedule a consultation and discuss your questions about unfair competition litigation.
RESTRICTIVE COVENANT/NON-COMPETE LITIGATION
Florida Statute 542.335(b) governs an action to enforce a restrictive covenant, and sets forth:
The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant. The term “legitimate business interest” includes, but is not limited to:
- Trade secrets, as defined ins. 688.002(4).
- Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
- Substantial relationships with specific prospective or existing customers, patients, or clients.
- Customer, patient, or client goodwill associated with:
- An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”;
- A specific geographic location; or
- A specific marketing or trade area
- Extraordinary or specialized training.
Often the battle over restrictive covenants involves whether or not the plaintiff had a legitimate business interest justifying the restrictive covenant. Many companies have everyone of their employees sign non-compete agreements regardless of their positions, training, knowledge and business interests. Because free trade and employment is valued in our society, contracts in restraint of trade or employment are looked at by the courts narrowly and strictly construe same. In addition, courts may also consider whether the restrictions contained in the agreement are reasonable in time, area and line of business. If unreasonable, the court may refuse to enforce the agreement.
Typically, non-compete agreement issues are brought to legal counsel when an employee resigns or is terminated from his or her employment and then becomes employed by a competitor. Defenses to the enforcement of a non-compete agreement may include the failure of the Employer to uphold its financial obligations to the Employee as well as employment-related defenses of discrimination, sexual harassment or whistleblower retaliation.
If you have questions about non-compete agreements and legitimate business interests, negotiating your non-compete, or enforceability of the agreement, we can help. If you have been threatened by an employer about your non-compete, non-solicit, or confidentiality agreement or sued for allegedly violating the agreement, it is important you take action to defend yourself immediately. Lack of action can result in a judgment against you. Contact Charlip Law Group, LC to schedule a consultation and discuss your questions about non-competes, non-solicits, and confidentiality agreements.
TRADE SECRET LITIGATION
Florida’s Uniform Trade Secrets Act, Section 688.001, et seq., Florida Statutes (“FUTSA”) governs trade secret cases brought in Florida’s state or federal courts. Typically, the controlling issue in these cases is whether a “trade secret” exists. Often customer or supplier lists are sought to be characterized by certain companies as trade secrets. A company’s mere allegation that it maintains a customer list that it keeps secret is well below the acceptable pleading standard. Much of the information that would exist in a customer list is as readily available from public records ranging from the Yellow Pages to the Internet. Websites like Yelp and governmental licensing websites are publicly available and fully accessible. Simple data-mining can create a customer list. Information particular to certain customers, developed through a course of dealings, may take on a proprietary nature, but it is long-established Florida law that customer lists, per se, do not constitute trade secrets.
In Pure Foods v. Sir Sirloin, Inc., 84 So.2d 51 (Fla. 1955), the Florida Supreme Court reversed the entry of what it deemed be a contradictory order denying any monetary relief for unfair competition because “the methods and products of appellant has been so extensively imitated and used in the area by other firms that an injunction would serve no purpose,” but also enjoining the defendants from “future unfair competition” and restraining them from, among other things, “appropriating any trade lists”. The lower court also did not enjoin the defendants from continuing its present business, merchandising process, or packaging methods. Declaring that “the appellants were actually exonerated from all charges of wrongdoing”, the Pure Foods Court held that the plaintiffs were not entitled to any form of relief, including injunctive, because the Court found inoffensive the use by former employees of the names of food retailers consisting of restaurants and drive-ins to whom their former employer, a wholesaler, sold its merchandise, its rationale being the readily ascertainable character of the customers’ names from “classified telephone directories and like sources.” See also, Blackstone v. Dade City Osteopathic Clinic, 511 So.2d 1050 (Fla. 2d DCA 1987)(holding that former employee did not take trade secrets when he compiled list of potential clients from his memory, the phone book, and the clients themselves).
The case of Thomas v. Alloy Fasteners, Inc., 664 So.2d 59 (Fla. 5th DCA 1995), wherein Plaintiff was proceeding pursuant to the FUTSA, is instructive as to what substance within a list may properly be considered a “trade secret.” The appellate court upheld the lower court’s order granting an injunction as to the use of “order edit lists” because they “contained confidential information not available in the public domain, i.e., the mark-up on the items ordered and the profit margin thereof’ and “the value of the lists lay not so much in the fact that the lists contained the names of the characters, as in the fact that they revealed Alloy’s pricing and profit structure … and [t]his information would obviously be important for a competitor in deciding by how much it could undercut Alloy’s prices.” The Alloy Fasteners Court then reversed the injunction order prohibiting the defendants from contacting or soliciting Alloy’s customers because there “was no evidence that Appellants used trade secrets to lure Alloy’s customers away from Alloy”, as the customer lists were obtained by, in plaintiffs employee’s words, “telemarketing, phones, making calls… you get a list, start making cold calls, and see what the people need for supplies.” Id. The Alloy Fasteners Court thus held that merely compiling a list of customer names after using readily-available sources and common sense does not per se create a “trade secret”, as there was “nothing magical or secret about this method,” and “[t]he names are available from public sources and there was no secret as to the class of likely customers”. Id.
Where a plaintiff brings a claim under the FUTSA, the existence of a “trade secret” is the ultimate issue to be decided by the court. By bringing such claim, the plaintiff has waived its right to assert the “trade secret privilege,” and the trade secret must be described with particularity. Del Monte Fresh Produce Co. v. Dole Food Co., Inc., 148 F. Supp. 2d 1322 (S.D. Fla. 2001). (citing to Becker Metals Corp. v. West Florida Scrap Metals, 407 So.2d 380 (Fla. 1st DCA 1981) and Lovell Farms, Inc. v. Levy, 641 So.2d 103, (Fla. 3rd DCA 1994)). In Lovell, the lower court denied the plaintiff’s motion for a temporary injunction, which asserted that a former employee violated a non-compete agreement by using the plaintiff’s alleged “trade secrets” at his new job, without making any factual findings. Id. The Lovell court reversed the order denying the injunction and directed the lower court to determine the threshold issue of whether or not the employer’s flower growing technique was in fact a trade secret, in doing so giving the instruction that “[a]n injunction cannot be granted upon mere allegation of the employee’s ‘use’ of ‘specific trade secrets”‘ and “[ e]mployers now alleging violations of specific trade secrets must be held to their burden to plead and prove the ‘use’ of ‘specific trade secrets”‘. Id.
In New Lenox Industries, Inc. v. Fenton, 510 F. Supp. 2d 893 (M.D. Fla. 2007), the defendant moved to dismiss the plaintiff’s count for misappropriation of trade secrets under the FUTSA, arguing that the plaintiff failed to identify what part of the alleged trade secret it was accused of using or disclosing, or how this was done. The New Lenox Court, acknowledging that “disclosure of the actual trade secret in the pleading is crucial to stating a claim,” upheld the plaintiff’s complaint, concluding that the plaintiff had more than adequately identified the trade secrets it alleged were stolen with its highly-technical and detailed description of its proprietary airbag inflation system. New Lenox Industries, Inc. v. Fenton, 510 F. Supp. 2d 893 (M.D. Fla. 2007)(citing to Del Monte Fresh Produce Co. and Lovell Farms for this proposition). See also Revello Medical Management, Inc. v. Med-Data Infotech USA, Inc,. 50 S.3d 678, 679 (Fla. 2d DCA 20I0) (stating that prior to proceeding with discovery in trade secret cases, “[t]he plaintiff must, as a threshold matter, establish that the trade secret exists”). Accord, Becker Metals Corp. v. West Florida Scrap Metals, 407 So.2 380 (Fla. 1st DCA 1981)(construing the assertion of a “trade secret privilege” pursuant to Fla. Stat. 90.506, the appellate court reversed the lower court’s order compelling production because there was not a review of the documents claimed to be “trade secrets,” stating “[w]ithout examination of the items claimed to be a trade secret, how can a determination be reached?”).
In Lee v. Cercoa, Inc., 433 So.2d l(Fla. 4th DCA 1983), the court set forth some criteria for determining whether a trade secret, in fact, exists:
- [T]he plaintiff must establish … (a) [that] the process is a secret; (b) the extent to which the information is known outside of the owner’s business; (c) the extent to which it is known by employees and others involved in the owner’s business; (d) the extent of measures taken by the owner to guard the secrecy of the information; (e) the value of the information to the owner and to his competitors; (f) the amount of effort or money expended by the owner in developing the information, and (g) the ease or difficulty with which the information could be properly acquired or duplicated by others.
These threshold considerations are due to the specific statutory requirements of the FUTSA, which requires that the “information” sought to be protected also “[ d]erives independent economic value, actual or potential, 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; and “[i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Accordingly, a FUTSA cause of action thus necessarily requires that the following prima facie ultimate facts be plead supporting the Plaintiffs characterization of what it contends is a “trade secret”:
- [that] the process is a secret
- the extent to which the information is known outside of the owner’s business
- the extent to which it is known by employees and others involved in the owner’s business
- the extent of measures taken by the owner to guard the secrecy of the information
- the value of the information to the owner and to his competitors
- the amount of effort or money expended by the owner in developing the information, and
- the ease or difficulty with which the information could be properly acquired or duplicated by others.
Trade secret litigation can be extremely complicated, technical and often may turn on very close factual questions. If you have questions about trade secret litigation, we can help. If you have been threatened by a competitor or sued for theft of a trade secret, it is important you take action to defend yourself immediately. Lack of action can result in a judgment against you. Likewise, if you or your company is the victim of trade secret theft or misappropriation and want to examine what recourse you might have against the individual or company involved in the trade secret theft, we can help. Contact Charlip Law Group, LC to schedule a consultation and discuss your questions about trade secret litigation.