Manner in which Information (Such as Customer Lists) Compiled can Constitute Trade Secret
A summary judgment on a misappropriation of trade secrets claim is reversed on appeal because “a genuine issue of material fact remains as to whether the compilation of the information, even that which was within the public domain, constituted information protected as a trade secret.” Patient Depot, LLC v. Acadia Enterprises, Inc., 48 Fla.L.Weekly D871a (Fla. 4th DCA 2023).
In this case, the plaintiff operated as a broker of personal protection equipment (PPE) and matched PPE suppliers with consumers. The plaintiff maintained a website platform that plaintiff considered to be a trade secret.
This platform contained a list of viable suppliers, including contact information, pricing, contract terms including commission rate to [plaintiff] and its sales representatives, and supply availability. The platform also contained customer contacts and purchase history. All of this platform information allowed [plaintiff] to quicky obtain and fill customer orders. [Plaintiff] created sales strategies and sales pitches to assure high volume customers that their suppliers could meet high value PPE orders. The information collected on [the platform] boosted [plaintiff’s] speed in processing purchase orders from its customers to its suppliers, which provided [plaintiff] a competitive advantage in the marketplace.
Patient Depot, supra.
Plaintiff’s principal hired his neighbor as an independent contractor under a sales representative agreement. (The neighbor had no prior experience but was out of work.). The neighbor ultimately terminated the sales representative agreement months later and began competing with the plaintiff. The sales representative agreement did not contain a non-competition or non-solicitation clause. However, this was not the issue. The issue was the agreement contained a confidentiality provision (such as trade secrets) and provided that the neighbor would not disclose confidential information.
Plaintiff contended his neighbor retained confidential information prior to terminating the sales representative agreement and used this confidential information to compete with plaintiff. Hence, the lawsuit claimed the neighbor misappropriated trade secrets.
The trial court granted summary judgment for the neighbor because the information the plaintiff claimed was confidential was already in the public domain. The appellate court reversed. In reversing, there is a notable discussion on trade secrets applicable to customer lists (which I include with the statutory and case law citations) since the compilation of this information can constitute trade secret protection:
Importantly, the trial court did not sufficiently dispose of the claim that the [website] platform constituted a trade secret within the confidentiality provision of the agreements and thereby supporting [plaintiff’s] claim of misappropriation of trade secrets. Florida’s Uniform Trade Secret Act defines “trade secret” as follows:
[I]nformation, including a formula, pattern, compilation, program, device, method, technique, or process that:
(a) Derives 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
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
s. 688.002(4), Fla. Stat. (2020) (emphasis supplied). “[I]t is well settled that a former employee may not use for her [or his] own advantage customer lists obtained in confidence or containing trade secrets.” Mittenzwei v. Indus. Waste Serv., Inc., 618 So. 2d 328, 329 (Fla. 3d DCA 1993).
Even if information is available to the public, the information may be compiled in a manner which warrants trade secret protection. In Digiport, Inc. v. Foram Development BFC, LLC, 314 So. 3d 550 (Fla. 3d DCA 2020), the court discussed how public information may still become part of a protected trade secret under the statute:
Ordinarily, “whether a particular type of information constitutes a trade secret is a question of fact.” This is because “a trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which in unique combination, affords a competitive advantage and is a protectable secret.” Accordingly, “[e]ven if all of the information is publicly available, a unique compilation of that information, which adds value to the information, also may qualify as a trade secret.”
Id. at 553 (alteration in original) (internal citations omitted).
We held similarly in Bridge Financial, Inc. v. J. Fischer & Associates, Inc., 310 So. 3d 45 (Fla. 4th DCA 2020), when we explained, “[a] customer list can constitute a ‘trade secret’ where the list is acquired or compiled through the industry of the owner of the list and is not just a compilation of information commonly available to the public.” Id. at 48 (quoting E. Colonial Refuse Serv., Inc. v. Velocci, 416 So. 2d 1276, 1278 (Fla. 5th DCA 1982)). Further:
To qualify as a trade secret, there must be evidence that a customer list “was the product of great expense and effort, that it included information that was confidential and not available from public sources, and that it was distilled from larger lists of potential customers into a list of viable customers for [a] unique business.”
Id. (alteration in original) (quoting Zodiac Records Inc. v. Choice Env’t Servs., 112 So. 3d 587, 590 (Fla. 4th DCA 2013)). We held that the list of clients in Bridge was confidential because it contained not only the names and addresses of clients, but also personal information about each client. Id. at 49. Additionally, the plaintiff showed that it had spent a significant amount of time, money, and effort to develop the list which was kept on a password protected server not available to the public. Id
Please contact David Adelstein at [email protected] or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.