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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

About the Author

Jay Young is a Las Vegas, Nevada attorney. His practice focuses on business law, business litigation, and acting as an Arbitrator and Mediator. Peers have named him an AV-Rated Lawyer, Best Lawyers, a Top 100 Super Lawyers in the Mountain States multiple years, and to the Legal Elite and Top Lawyers lists for many years. Mr. Young has been appointed a part time Judge, a Special Master to the Clark County, Nevada Business Court, as an arbitrator by the Nevada Supreme Court. He has been appointed as an arbitrator or mediator of well over 250 legal disputes from business disputes to personal injury matters. He has been named Best Lawyers for Arbitration. Mr. Young is a respected author of ten books, including A Litigator’s Guide to Federal Evidentiary Objections, A Litigator’s Guide to the Federal Rules of Evidence, and the Federal Court Civil Litigation Checklist.
Mr. Young can be reached at 702.667.4868 or at jay@h2law.com.