Archive for: November, 2015

VIOLATION OF THE UNIFORM TRADE SECRETS ACT NRS CHAPTER 600A

In Nevada, the elements for a claim of misappropriation of trade secrets or violation of the uniform trade secrets act (known as the Nevada Trade Secrets Act or “NUTSA”) are:

  1. Plaintiff possesses a viable trade secret as part of its business, including but not limited to market research, customer lists, customer and product pricing information, formulas, patterns, compilations, programs, devices, methods, techniques, products, systems, processes, designs, prototypes, procedures and computer programming instructions which are extremely confidential and derive independent economic value from not being generally known to, and not being readily ascertainable by proper means by the public or any other persons who can obtain commercial or economic value from their disclosure or use;
  2. Plaintiff took adequate measures and maintained the foregoing information and technology as trade secrets, which secrecy was guarded and not readily available to others;
  3. Defendant intentionally, and with reason to believe that its actions would cause injury to plaintiff, misappropriated and exploited the trade secret information through use, disclosure, or non-disclosure of the use of the trade secret for defendant’s own use and personal gain;
  4. The misappropriation is wrongful because it was made in breach of an expressed or implied contract, or by one with a duty not to disclose the trade secret;
  5. Defendant misappropriated the trade secret information with willful, wanton, or reckless disregard of plaintiff’s rights;
  6. Causation and damages; and
  7. Punitive damages.

NRS Chapter 600A; Kaldi v. Farmers Ins. Exchange, 117 Nev. 273, 283-84, 21 P.3d 16, 23 (2001); Frantz v. Johnson, 116 Nev. 455, 466, 999 P.2d 351, 358 (2000) (a customer list can be a trade secret when extremely confidential and where the list was secret and guarded, where the list was missing after an employee had access to the list which went missing after the employee left his employment, then provided customers with “more competitive pricing”); Whitehead v. Nev. Com’n on Judicial Discipline, 110 Nev. 874, 904 n. 6, 878 P.2d 913, 932 (1994); 12 AMJUR POF 3d 711.

To prevail on a claim for a violation of Nevada’s Uniform Trade Secret Act, NRS 600A.010 et. seq., plaintiff must show that the defendant wrongfully used or disclosed a valuable trade secret.  NRS 600A.030(2); Caesars World, Inc. v. Milanian, 247 F. Supp. 2d 1171, 1203 (D. Nev. 2003); Frantz v. Johnson, 116 Nev. 455, 466, 999 P.2d 351, 358 (2000)(in determining whether information is entitled to trade secret protection, courts will consider “the extent and manner in which the employer guarded the secrecy of the information.”). An employer is the presumptively the sole owner of any patentable invention or trade secret information developed by the employee in his employment.  NRS 600A.500.  An employee’s use or disclosure of the same is wrongful when done in violation of a legal or contractual duty to refrain from such use of disclosure.  Caesars World, Inc. v. Milanian, 247 F. Supp. 2d 1171, 1203 (D. Nev. 2003).  That includes acting as a fiduciary, who owes a fiduciary duty and a duty of loyalty to the company and its owners.  Leavitt v. Leisure Sports, Inc., 103 Nev. 81, 86, 735 P.2d 1221, 1224 (1987).

Courts favorably view non-disclosure and invention assignments because, unlike covenants not to work for a competing business, these covenants do not restrict an employee’s ability to provide for themselves and their families.  See Revere Transducers, Inc. v. Deere & Co., 595 N.W.2d 751, 761 (Iowa 1999) (“Nondisclosure-confidentiality agreements enjoy more favorable treatment in the law than do noncompete agreements” because “noncompete agreements are viewed as restraints of trade which limit an employee’s freedom of movement among employment opportunities.”).  The Revere court announced its standard for whether a nondisclosure-confidential or invention assignment agreement is enforceable as: (1) the restricting prohibiting disclosure is reasonably necessary for the protection of the employer’s business; (2) the restriction doesn’t unreasonably restrict the employee’s rights; and (3) the restriction is not prejudicial to the public interest?  Id.

Irreparable harm is presumed in situations where a confidentiality agreement or restrictive covenant has been breached or trade secrets have been misappropriated.  EchoMail, Inc. v. American Exr. Co., 378 F. Supp. 2d 1, 4 (D. Mass. 2005); Storage Tech. Corp. v. Custom Hardware Eng’g & Consulting, Inc.,  2004 WL 1497688 (D. Mass. 2004); FMC Corp v. Taiwan Tainan Giant Indus. Co., Ltd., 730 F.2d 61, 63 (2nd Cir. 1984) (trade secrets, once lost, is lost forever; its loss cannot be measured in money damages); Ivy Mar Co. v. C.R. Seasons, Ltd., 907 F. Supp. 547, 566 (E.D. N.Y. 1995); Computer Assoc., Inc. v. Bryan, 784 F. Supp. 982, 986 (E.D. N.Y. 1992); Refractory Technology, Inc. v. Koski, 1990 WL 119560, at *3 (N.D. Ill., Aug. 13, 1990) (loss of trade secret would cause plaintiff immediate, irreparable harm); ISC-Bunker Ramo Corp. V. Altech, Inc., 765 F. Supp. 1310, 1338 (N.D. Ill. 1990) (“it is often difficult to …. Determine the monetary damages suffered thereby”); CPG Prod. Corp. v. Mergo Corp., 214 U.S.P.Q. 206, 2145 (S.D. Ohio 1981) (the threat of disclosure, destruction, or dilution of trade secret constitutes irreparable injury justifying injunctive relief); Donald McElroy, Inc. v. Delany, 72 Ill. App. 3d 285, 294-95, 389 N.E.2d 1300, 1308 (1st Dist. 1979)(“Once a protectable interest has been established, injury to plaintiff will presumably follow if that interest is not protected:; threat of irreparable harm sufficient where former employee violated the terms of a non-disclosure agreement and was about to use confidential information against the plaintiff, irreparable injury was shown and preliminary injunction was properly granted).  Loss of goodwill, destruction of trade secrets, loss of client confidentiality and competitive disadvantage constitute irreparable harm for which no adequate remedy at law exists.  IDS Life Ins. O. v. SunAmerica, 136 F.3d 537, 543 (7th Cir. 1998) (irreparable injury presumed for loss of customer goodwill, future business, customer relationships, business reputation and trade secrets).  The law requires that such agreements be “supported by valuable consideration and . . . otherwise reasonable in its scope and duration.” NRS 613.200(4); see generally Camco, Inc. v. Baker, 113 Nev. 512, 936 P.2d 829, 832 (1997) (“[A]n at-will employee’s continued employment is sufficient consideration for enforcing a non-competition agreement.”).

Even without a non-disclosure agreement, confidential information obtained by an employee during employment by reason of his or her position cannot be used or disclosed to the detriment of the employer.  “An employee is obligated not to reveal employer’s confidential information during employment and after termination of employment.”  27 Am. Jur. 2d Employment Relationship § 224.  Nevada codified the Uniform Trade Secret Act (“UTSA” or “NUTSA”) at NRS 600A et. seq.  There is a split of authority whether any confidential information is protected if it is not covered by NUTSA.  These materials will treat all protected confidential commercial information as being contained in NUTSA and all others to be unprotected information.

At termination of employment, an employee who misuses confidential information (customer lists, formulas, etc.), is precluded from using the information and is required to return the materials to the employer.  27 Am. Jur. 2d Employment Relationship § 226 (citing NCH Corp. v. Broyles, 749 F.2d 247 (5th Cir. 1985); Advanced Magnification Instruments, Ltd. v. Minutemen Optical Corp., 522 N.Y.S.2d 287, 135 A.D.2d 889 (3d Dept. 1987); Gonzales v. Zamora, 791 S.W.2d 258 (Tex. App. Corpus Christi 1990)).   An employer, therefore, at common law, has some protection against disclosure of confidential information even without a valid non-disclosure agreement.  “However, an employee can use to his or her own advantage all the skills and knowledge commonly used in the trade that the employee acquired during the employee’s tenure of employment.” Id. (citing Serv. Ctr. of Chicago, Inc. v. Minogue, 180 Ill.App.3d 447, 535 N.E.2d 1132 (1989)).

Trade Secret is Defined by Statute

NUTSA defines exactly what is considered as protected confidential information in NRS 600A.030, which defines it as:

  1.  “Trade secret” means information, including, without limitation, a formula, pattern, compilation, program, device, method, technique, product, system, process, design, prototype, procedure, computer programming instruction or code that:

(a)  Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by the public or any other persons who can obtain commercial or economic value from its disclosure or use; and

(b)  Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

See elements for other claims at the Nevada Law Library

It is an unlawful employment practice for an employer to discriminate against any person with respect to the person’s compensation, terms, conditions or privileges of employment because of race, color, religion, sec, sexual orientation, gender identity or expression, age (40 and older), disability or national origin.

Dennis v. Nevada, 282 F. Supp. 2d 1177, at 1181 (D. Nev. 2003); Switzer v. Rivera, 174 F. Supp. 2d 1097 (D. Nev. 2001); Wolber v. Service Corp. Int’l, 612 F. Supp. 235 (D. Nev. 1985).

Under federal law, companies with 15 or more employees are covered by Title VII of the Civil Rights Act of 1964, the primary law prohibiting employment discrimination, the Americans with Disabilities Act, which prohibits discrimination on the basis of disability, and the Genetic Information Nondiscrimination Act, which prohibits discrimination based on genetic information. Companies with 20 or more employees are subject to the Age Discrimination in Employment Act (ADEA), the federal law that prohibits discrimination against employees 40 years or older. Companies with four or more employees must comply with the employment discrimination provisions of the Immigration Reform and Control Act, which prohibits discrimination on the basis of citizenship status. And all companies of any size must pay men and women equally for doing equal work, by virtue of the Equal Pay Act.  In Nevada, companies with 15 or more employees are subject to the state’s antidiscrimination law.

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of malicious prosecution are:

  1. Filing of criminal action;
  2. Lack of probable cause to commence prior action;
  3. Malice;
  4. Favorable termination of prior the action; and
  5. Causation and damages.

LaMantia v. Redisi, 38 P.3d 877 (2002); Dutt v. Kremp, 111 Nev. 57 (1995); Chapman v. City of Reno, 85 Nev. 365 (1969).

 

See elements for other claims at the Nevada Law Library

KNPR’s State of Nevada program featured Jay Young this week.  Listen here

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A Living Will is different from a Living Trust and is different from a Will. A Living Will is a written statement instructing your family and doctor about what, if any, life-prolonging medical procedures you desire to be performed if your condition is terminal and there is no chance of recovery. In Nevada, it is known as a “Declaration” and allows you to declare your end of life care decisions.

You Have the Right to Refuse Medical Treatment

You have the right to refuse medical treatment. A Living Will gives you the opportunity to express your wishes in advance, since you may not be able to make those desires known when it becomes necessary to do so. Life prolonging procedures include assistance with breathing when you cannot breathe on your own, performing operations or prescribing antibiotics that cannot realistically increase your chance of recovery, starting your heart mechanically when it has stopped beating, or feeding you through a tube, etc.

In Nevada, a physician must follow the terms of your Living Will (Declaration) when:

You have an incurable and irreversible condition that, without the administration of life-sustaining treatment, will result in death within a relatively short time; and

You are not able to communicate your desires, such as if you are in a coma.

A Living Will can be very specific or very general. An example of a statement sometimes found in a Living Will is: “If I suffer an incurable, irreversible illness, disease, or condition and my attending physician determines that my condition is terminal, I direct that life-sustaining measures that would serve only to prolong my dying be withheld or discontinued.”

In Nevada, in order to qualify for the remedy of disgorgement of profits, one must plead and prove:

  1. Defendant owes another a fiduciary duty;
  2. Defendant has breached the fiduciary duty and profited thereby;
  3. Causation and damages; and
  4. Plaintiff is entitled to have Defendant disgorge profits which are the result of his breach.

G.K. Las Vegas Ltd. P’ship v. Simon Prop. Grp., 671 F. Supp. 2d 1203 (D. Nev. 2009); Alley v. Nevada Real Estate Div., 94 Nev. 123, 125; 575 P.2d 1334, 1335 (1978); Women’s Fed. Savings and Loan Assoc. V. Nevada Nat’l Bank, 81 F.2d 1255, 1260 (9th Cir. 1987); Holland Realty Inv. Co. v. State of Nevada, Dept. of Commerce, Real Estate Div., 84 Nev. 91, 97-98; 436 P.2d 422, 425-26 (1968).

 

See elements for other claims at the Nevada Law Library

In Nevada, a Lis Pendens is a document recorded with the recorder’s office giving all the world constructive notice that the plaintiff in a lawsuit claims an interest in certain real property.  The recording of a lis pendens requires the filing of a lawsuit and that the lawsuit involves some claim legal interest in the real property, such as a title dispute, a lien dispute, or a lien foreclosure.  In re Bradshaw, 315 B.R. 875 (Bkrtcy. D. Nev. 2004); see also NRS 14.010 (a party to a civil action “for the foreclosure of a mortgage upon real property or affecting title or possession of real property” may record a lis pendens).

A lis pendens may not properly be used to obtain lien or judgment against the property which can later be used in the eventual collection of a judgment.  Levinson v. Eighth Jud. Dist. Ct., 1109 Nev. 747, 857 P.2d 18, 20-21 (1993).    “As a general proposition, lis pendens are not appropriate instruments for use in promoting recoveries in actions for personal or money judgments; rather, their office is to prevent the transfer or loss of real property which is the subject of dispute in the action that provides the basis for the lis pendens.”  Levinson, 857 P.2d at 20.  NRS 14.015(2), (3); NGA#2, LLC v. Rains, 113 Nev. 151, 163 (1997).

 

See elements for other claims at the Nevada Law Library

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I have seen it many times.  A company grows from the kitchen table to a storefront and builds a successful enterprise.  The owner sweats and toils for years to build brand awareness and goodwill.  Things are finally gaining momentum for the once struggling business and they feel they are about to “make it”.  Then they get a registered letter from a law firm in a different state demanding that they stop using their own business name, tear down their signs, rip up their business cards, and start over.  The law firm claims that another business actually owns the right to the name and demands that the small company cease and desist using their name immediately, and that they might sue for damage!  Can they do that?

Yes, they can in certain circumstances if they have a priority trademark registration.  And you should make sure that you are on the side of the one sending the letter, not the one receiving it.  Read more from this article by one of my partners on how a Federal Trademark Registration may help your business.

Power of Attorney

In Nevada, a “Durable Power of Attorney for Health Care” is a signed, dated, and witnessed written instruction naming another person as your “agent” or “health care proxy” to make medical decisions for you if you should become unable to make them for yourself.  The instrument may include instructions regarding any treatment you would desire or those you wish to avoid, such as surgery or artificial feeding. The Durable Power of Attorney for Health Care will be in effect whenever you are unable to make decisions and, unlike the Living Will, is not limited to situations where you are terminal or have an incurable condition. The agent’s authority begins only when a physician determines that you have lost the capacity to decide about treatment.