Winning trade secrets claims: when and how the preemption provision of Florida's Uniform Trade Secrets Act applies.

• Author: Samuels, Leonard K.

The theft of trade secrets is estimated to have caused more than $300 billion in losses in 2012. Even more alarming, theft of trade secrets will only rise due to, among other things, industry competition, financial incentive, and the susceptibility of trade secrets to computer hacking. As a result, protecting existing trade secrets is crucial--as is taking action when those trade secrets are misappropriated. Florida practitioners must understand how to properly pursue and protect against claims related to the theft of trade secrets.

The Florida Legislature enacted Florida's Uniform Trade Secrets Act (FUTSA) in order to provide rights and remedies related to the misappropriation of trade secrets. It additionally contains a provision whereby it preempts certain common law claims. This article first examines whether any preemption argument may properly be raised on a motion to dismiss or on a motion for summary judgment. Second, it explores the circumstances under which the preemption provision applies. While the act's title suggests that the law related to trade secrets is uniform, in reality it is anything but. Florida courts, like other courts in the United States, are simply not clear on when the preemption argument should be raised and what claims are preempted.

Introduction to UTSA and FUTSA

The Uniform Trade Secrets Act (UTSA) was completed by the uniform law commissioners in 1979 to codify and make uniform the law regarding theft of trade secrets. Prior to UTSA, litigants relied on common law claims to enforce rights and pursue remedies related to the theft of trade secrets. Those common law claims include breach of contract, breach of fiduciary duty, conversion, fraud, unjust enrichment, common law theft of trade secrets, and others. Such claims led to a hodgepodge of legal rights and remedies related to the theft of trade secrets. UTSA was introduced in 1979 to make that law uniform. Indeed, UTSA provides that it "shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this act among states enacting it." (1)

UTSA has been adopted by 46 states. (2) Florida adopted UTSA in its entirety in 1988, including the 1985 amendments to UTSA at F.S. [section]688.001 688.009.

Under FUTSA, a trade secret is defined as 1) information, 2) that derives economic value from not being generally known or ascertainable, and 3) is subject to efforts to maintain its secrecy. (3) FUTSA requires courts to protect the secrecy of trade secrets during litigation through the use of protective orders and other measures. (4)

"Misappropriation" is defined by the act as the "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." (5) "Improper means" is defined to include "theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means." (6) Misappropriation may extend not only to the person who has misappropriated the trade secret, but additionally to anyone who has acquired the trade secret and "who knows or has reason to know that the trade secret was acquired by improper means." (7) Misappropriation may include simply disclosing a trade secret. (8)

The act makes available both damages and injunctive relief as remedies for theft of trade secrets. (9) Damages allowed under FUTSA may include any actual loss caused by the misappropriation. Additionally, FUTSA damages may include any unjust enrichment accruing to the person who misappropriated the trade secret. (10) A court may also award exemplary damages. However, any amount awarded under exemplary damages may not exceed the amount that is awarded by the court in damages under another allowable category. (11) Injunctive relief may also be obtained for, among other things, "actual or threatened misappropriation." (12) Importantly, and as discussed below, at least one court has utilized the FUTSA damages provision to determine whether common law claims are preempted by the act.

The Preemption Provision

Although FUTSA was intended to codify and make uniform the rights and remedies related to the theft of trade secrets, it has not been applied in a uniform manner. One area in which this confusion has manifested is FUTSA's preemption provision.

The preemption provision, F.S. [section]688.008, as amended in 1985, displaces certain common law claims. It provides in whole:

(1) Except as provided in subsection (2), ss. 688.001-688.009 displace conflicting tort, restitutory, and other law of this state providing civil remedies for misappropriation of a trade secret.

(2) This act does not affect:

(a) Contractual remedies, whether or not based upon misappropriation of a trade secret;

(b) Other civil remedies that are not based upon misappropriation of a trade secret; or

(c) Criminal remedies, whether or not based upon misappropriation of a trade secret. (13)

What is immediately clear is that not all civil remedies have been preempted by FUTSA. However, some claims are more plainly excused from the scope of the preemption provision than others. Contractual remedies and criminal remedies are explicitly excluded from the effect of the preemption provision, regardless of whether they are based upon misappropriation of a trade secret. Yet, the remaining claims preempted by the act are not identified. FUTSA merely states that it displaces "conflicting tort, restitutory, and other law of this state providing civil remedies for misappropriation of a trade secret." Additionally, the preemption provision does not apply to "civil remedies that are not based upon misappropriation of a trade secret." Defining the limits of the preemption provision has proven challenging for Florida courts.

When to Assert Preemption Under FUTSA

Courts are split as to the proper time to assert the preemption argument and whether application of the preemption provision must await a determination that the subject information is a trade secret. This issue most frequently arises when preemption is asserted by a motion to dismiss, prior to any judicial determination that the information is a trade secret.

Some courts find that preemption may be decided on a motion to dismiss prior to any determination by the court that the information at issue qualifies as a trade secret. Other courts find that any preemption argument is properly made at the summary judgment stage because any preemption decision must await a determination that the subject of the claims is actually a trade secret, and not some other form of information. FUTSA's plain language supports both views.

The view that the preemption provision is only proper after a determination that the subject is a trade secret under FUTSA relies on a strict interpretation of the...