United States: Don't Rock The Boat: Eleventh Circuit Sinks Boatmaker's Trade Secrets Claims Against Rival

Last Updated: October 15 2018
Article by Roland Chang and Daniel J. Corbett

On August 7, 2018, the Eleventh Circuit affirmed summary judgment in favor of defendant in Yellowfin Yachts v. Barker Boatworks, LLC. Sending the rival high-end boatmakers back to shore after a two-year dispute, the Eleventh Circuit concluded, among other things, that plaintiff had not done enough to maintain the secrecy of its alleged trade secret information.

Yellowfin Yachts manufactures center-consoled, open-fisherman styled boats. In 2006, Yellowfin hired Kevin Barker as a vice president of sales. Barker never signed an employment agreement with confidentiality clauses. He eventually left the company in 2014 and founded a competitor, Barker Boatworks. On his last day at Yellowfin, Barker allegedly downloaded hundreds of Yellowfin files, including "detailed purchasing history and specifications for all of Yellowfin's customers," as well as "drawings" and "style images" for Yellowfin boats and "related manufacturing information."

Shortly thereafter, Yellowfin filed suit against Barker, alleging claims for trade dress infringement and violation of Florida's Trade Secret Act. The district court granted Barker's summary judgment motion on all claims. With respect to the trade secrets claims, it held that Yellowfin failed to identify a protectable trade secret and had not made "reasonable efforts" to protect its purported trade secrets.

On appeal, the Eleventh Circuit affirmed the district court's rulings. First, on the trade dress infringement claim, the court rejected Yellowfin's argument that the "swept" sheer line (a gently sloped "s"-shaped line that runs upward from the point at which a boat's hull intersects with the deck to the boat's lofted bow) on its boats was not unique, concluding that many boats in the relevant market had the sweeping sheer lines in Yellowfin boats. Further, it reasoned that it was not probable that sophisticated customers in the market would confuse these two boats.

On its trade secrets claim, Yellowfin asserted that its trade secrets included "source information" (identity of and contracts with various sources) and "customer information" (information about past customers, including contact information and previous order specifications). The Florida Uniform Trade Secrets Act defines a trade secret as information that derives independent economic value from not being generally known to, and not being readily ascertainable through proper means by, other persons who can obtain economic value from its disclosure or use and is subject to reasonable efforts to maintain its secrecy.

The court concluded that information about Yellowfin's suppliers was publicly available. It also held that the prices negotiated between Yellowfin and its suppliers were not trade secrets for several reasons. The prices lacked independent economic value to a smaller company like Barker because they were negotiated based on volume and partly on relationships. Barker had apparently learned about production costs during the ordinary course of working at Yellowfin.

The court similarly rejected arguments on the "customer information," as Yellowfin did not take reasonable steps to protect its alleged trade secrets. Though Yellowfin limited employee access to the information on a password-protected system, it encouraged Barker to keep the information on his cellphone and personal laptop. The company also failed to request that Barker delete or return any of the information upon his departure, and did not mark the information as confidential

This case provides a valuable lesson to businesses that want to protect their trade secrets. Not only must they implement reasonable security measures to protect trade secrets on company time and company equipment, but they must also ensure adequate protections for when employees access trade secrets outside of the office or on personal devices.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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