Florida Case Addresses Enforcing a Noncompete Agreement that Protects Trade Secrets

In Florida, restrictive covenants like noncompete agreements are governed by Section 542.335, Florida Statutes. When determining whether a noncompete’s time period is reasonable, the statute applies different presumptions based on the interest being protected.

For example, a restrictive covenant against a former employee not predicated on trade secrets and not associated with a sale of the business is rebuttably presumed reasonable for a term of six months or less and unreasonable if for two years or more. In contrast, if the restrictive covenant is needed to protect trade secrets, it is rebuttably presumed reasonable if shorter than five years and unreasonable if more than 10 years.

In Zodiac Records Inc. v. Choice Environmental Serv., 2013 WL 1629134 (Fla. 4th DCA April 17, 2013), the plaintiff sought to enforce a noncompete against a company started by its former consultant. The noncompete barred the former consultant from soliciting the plaintiff’s customers or using the plaintiff’s trade secrets for 36 months after the consulting agreement expired in April 2009. The defendant left in June 2011 and admitted soliciting the plaintiff’s clients.

The plaintiff sought a temporary injunction barring the defendants from soliciting its customers or using its trade secrets until April 2012, 36 months after the consulting agreement terminated.

At the hearing, the parties addressed the issue of whether the plaintiff stole trade secrets. Apparently the defendants argued that if they did not actually use trade secrets, the noncompete—which was longer than two years—was presumptively unreasonable. The plaintiff’s counsel argued that he did not need to put on evidence of trade-secrets theft, since the agreement was designed to protect trade secrets and thus was presumptively reasonable.

The lower court did not hear evidence related to trade-secrets theft. It granted the injunction “but it based the injunction on the use of trade secret information, thus the thirty-six month period applied.”

The Fourth District Court of Appeal reversed, in part because the defendants did not have an opportunity to show that they did not misappropriate trade secrets. The court implied that a plaintiff does not get the benefit of the five-year reasonableness presumption unless it establishes that the defendant actually misappropriated trade secrets.

I think this is the wrong result. The statute only requires that the restrictive covenant be “predicated upon the protection of trade secrets.” Sec. 542.335(e), Fla. Stat. Thus, a plaintiff should only have to show that it needed the covenant to protect its trade secrets because, for example, the defendant had access to trade secrets. Requiring that the plaintiff show actual¬†misappropriation¬†renders meaningless the term “predicated upon.”

Regardless, given this decision and several others, attorneys attempting to enforce restrictive covenants in Florida need to carefully consider what evidence they intend to offer in support of an injunction motion, particularly when they need the benefit of the 5-year presumption.

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  2. Pingback: Thursday Wrap-Up (May 2, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web | The Trade Secret Litigator

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