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How Does a Party Prosecute an Action for Misappropriation of Trade Secrets?

NRS 600A.030(2) defines “misappropriation” as:

(a) Acquisition of the trade secret of another by a person by improper means;

(b) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(c) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(1)  Used improper means to acquire knowledge of the trade secret;

(2)  At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:

(I) Derived from or through a person who had used improper means to acquire it;

(II)  Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III)  Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(3)  Before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

NRS 600A.040 provides injunctive relief for the actual or threatened misappropriation of trade secrets, stating;

  1. Actual or threatened misappropriation may be enjoined. Upon application to the court, an injunction must be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time to eliminate commercial or other advantage that otherwise would be derived from the misappropriation.

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  1. In appropriate circumstances, the court may order affirmative acts to protect a trade secret. As used in this subsection, “affirmative acts” includes, without limitation, issuing an injunction or order requiring that a trade secret which has been misappropriated and posted, displayed or otherwise disseminated on the Internet be removed from the Internet immediately.

In Frantz, the Nevada Supreme Court found misappropriation of trade secrets based on the fact that: (l) lists containing information were missing after the former employee left the job; (2) the former employee contacted the plaintiff’s customers to offer “more competitive pricing;” and (3) the former employee’s phone records and other evidence indicated calls to plaintiff’s customers.  As a result, the former employee was liable for misappropriation of trade secrets.   The Court further found that the competitor had misappropriated trade secrets when the competitor hired the former employee, announced that competitor intended to compete against plaintiff by taking all of plaintiff’s customers, and the competitor hired employees from other competitive companies and asked them to use their knowledge about their former employers’ pricing structure and customer base.  Id.

To prove misappropriation under NUTSA, a plaintiff must plead and prove: (1) the existence of a valuable trade secret as defined by the statute; (2) misappropriation through use, disclosure, or nondisclosure of use of the trade secret; and (3) the misappropriation was wrongful because it was made in breach of an express or implied contract or by a party with a duty not to disclose.  Frantz, 116 Nev. at 466, 999 P.2d at 358.  The Court has wide discretion in calculating damages, subject only to a review for abuse of discretion.  Id. (citing Diamond Enters., Inc. v. Lau, 113 Nev. 1376, 1379, 951 P.2d 73, 74 (1997) (citations omitted)).

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.

Mr. Young can be reached at 702.667.4868 or at jay@h2law.com.