ThreeBeersIf you work in a creative, competitive and/or highly specialized industry, you have confidential business information worthy of protecting from your competition.  Brewery operations require quite a bit of information (often shared with employees) that should be protected from misuse or misappropriation.  This information may include the obvious, such as your unique recipes and brewing process, and other business information such as sales and marketing tools and practices and customer lists.

Eventually, as your brewery or small business grows, you will have employees with access to recipes, processes and methods.  These issues should be addressed in employment agreements with non-compete and non-disclosure clauses.

In Florida, a non-compete agreement/covenant must be in writing and signed by the employee.  This is most simply accomplished by including it in the employment agreement. The existence of such a provision works to create barriers to competitors coming in and poaching your employee(s) as a means of gaining access to valuable company information.  Given this purpose, the employer seeking to enforce a non-compete agreement must establish the existence of one or more legitimate business interests justifying the provision.  Legitimate business interests include trade secrets which, in turn, are defined 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.

This means that reasonable safeguards should be put in place to protect the misappropriation of the information.  Steps must be taken to ensure the protection of the information, as a mere expectation that employees will not disclose confidential information will not suffice.  Ensure that only those within the company that need to know the information have access to it.  This will show the intention to maintain the secrecy of the information.

Additionally, non-compete agreements must be reasonable in time and area.  A restriction of less than 6 months is generally presumed reasonable while a restriction of more than 2 years will draw strict analysis from the court.  Any restriction longer than 6 months or less than 2 years will be analyzed by the court, taking into account other factors surrounding the agreement.  However, when trade secrets are involved, a restraint of 5 years or less will be presumed reasonable while a restraint of more than 10 years will be presumed unreasonable.

The contract should also define the type of information and processes that are considered by the company to be a trade secret (recipes, formulas, pricing programs, etc.).  The employee must acknowledge that those categories of information are to be confidential and possess great value to the employer.

Florida’s Uniform Trade Secrets Act definition of misappropriation includes disclosure or use of a trade secret of another without express or implied consent by a person who, at the time of disclosure or use, knew or had reason to know that her or his knowledge of the trade secret was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.  The Act adds that “[a]ctual or threatened misappropriation may be enjoined.”

This could implicate the Inevitable Disclosure Doctrine, which is based upon the concept that even if a former employee has completely innocent intentions, human nature makes it impossible to compartmentalize the knowledge gained and confidential information learned from prior employment.  As a result, the former employee will inevitably use the information in his/her new position.  For example, while a former employee may not immediately disclose confidential information upon arriving at a new job, the employee will almost definitely use that information when it comes to deciding how to properly compete with the former employer.

Florida has mixed case law regarding this doctrine.  In one case in which a former employee resigned and went to work for a competitor, the court issued a temporary injunction enjoining the former employee from working with the competitor and from disclosing any trade secrets. (See Fountain v. Hudson Cush-N-Foam Corp., 122 So. 2d 232, 234 (Fla. Dist. Ct. App. 1960)).  The Third District Court of Appeal upheld the decision, noting that the former employee’s “knowledge of trade secrets would be ‘so intertwined’ with his employment as to render ineffective an injunction directed only toward a prevention of disclosure.”  Id.  The court cited logic, explaining that the employee’s employment by a competitor would eventually result in disclosure of the confidential information.  Id.  More recently, however, the U.S. District Court for the Southern District of Florida held that Florida’s Uniform Trade Secrets Act does not prohibit a former employee with knowledge of trade secrets from working for a competitor.  Del Monte Fresh Produce Co. v. Dole Food Co., 148 F. Supp. 2d 1326, 1338 (S.D. Fla. 2001).  The court added that the Uniform Trade Secrets Act “prohibits only ‘misappropriation’ of trade secrets, which means the acquisition, disclosure, and/or use of the information to the disadvantage of the owner of the trade secret.”  Id.

The issue made waves a couple years ago when Boston Beer sued its former employee and his new employer, Anchor Brewing.  The suit sought to enjoin the former employee from working for Anchor and from disclosing Boston Beer’s confidential business information.  The former employee was transferred to California in 2008, promoted in 2010 and then left for California-based anchor in 2011.  Boston Beer alleged that the former employee received unique sales and marketing training at the company and learned all he knows of the industry from Boston Beer.  Boston Beer sought to prevent the use of that information from making its way to a direct competitor.  Boston Beer’s employment agreement with the former employee included a non-disclosure and non-compete agreement. The parties made some public comments back and forth, with Anchor claiming the contract provisions were unenforceable because they were signed long ago when the former employee was in college and added that even if the former employee had any trade secrets, Anchor would neither want them nor could they use them.  The lawsuit was ultimately settled privately.

In conclusion, it is imperative that employers take the necessary steps to protect their confidential business information.  These steps must be taken in the preparation of employment contracts and also in actual practice, by means of taking legitimate steps to ensure that the information is safeguarded from misuse and misappropriation.