Enjoining Employment Based on "Inevitable" Misappropriation: Yes, No, Maybe So!

• Author: Schneider, Jerold I.

A key employee resigns and joins a competitor. A confidentiality agreement may have been signed. A noncompete agreement may have been signed. But are they enough? What if misappropriation of the former employer's trade secrets is "inevitable?" What is misappropriation anyhow?

Broadly speaking, misappropriation is acquiring by improper means, disclosing or using someone else's trade secret. If a former employee acquired the trade secrets properly, use of those trade secrets for a competitor would constitute misappropriation. (1)

The Background: Noncompete Agreements Are Not Limited to Trade Secrets

Florida statutes provide a multi-tiered guide for the duration of covenants not to compete based on the former role of the person against whom enforcement is sought. (2) For completeness, the rebuttable presumptions are illustrated in Figure 1.

What if an employee signs and then violates a covenant not to compete? A court may have difficulty extending injunctive relief beyond the number of years in the covenant. What if the former employee waits until the covenant expires and then uses "valuable information" and "trade secrets" to compete with the former employer or to obtain a commercial advantage over third parties? Does the former employer have any remedies?

Florida's Uniform Trade Secrets Act May Not Provide Enough Relief

In 1988, Florida adopted its version of the Uniform Trade Secrets Act, F.S. [section]688.001, et seq. (FUTSA). FUTSA permits injunctive relief against actual or threatened misappropriation for at least as long as the trade secret remains a secret, and the injunction may be continued for an additional reasonable period of time in order to eliminate any commercial advantage from the misappropriation. (3) Extending injunctive relief to eliminate commercial advantage complements the covenant not to compete. FUTSA defines a "trade secret" as

information 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. (4) What about valuable information that does not rise to the level of a trade secret? Absent FUTSA, the valuable information is protectable only by an employee's covenant not to compete.

Threatened But Not Actual Misappropriation--Is Injunctive Relief Available?

If an employee leaves with a treasure trove of documents, or in this day and age, a flash drive or has uploaded documents to a private cloud account, then if the information constitutes a trade secret, or if there is a written noncompete, injunctive relief against competitive employment may be justified based on actual misappropriation. But what if all the "valuable information" and "trade secrets" are in the ex-employee's head and, therefore, misappropriation is threatened rather an actual? What options are available to the former employer? Can the former employer argue that misappropriation is inevitable and, therefore, competing employment should be enjoined? Does Florida recognize the "inevitable disclosure" doctrine?

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