Nebraska Trade Secret Law

Nebraska is one of many states that have adopted the Uniform Trade Secrets Act.

As a business owner in the Cornhusker State, you probably rely on many forms of intellectual property law to protect your company. These might include laws concerning copyright, trademark, and patent. Another important form of intellectual property is trade secrets. In Nebraska, what laws protect your business's trade secrets?

Defining Trade Secrets

Trade secrets often comprise customer lists, sensitive marketing information, non-patented inventions, software, formulas and recipes, techniques, processes, and other business information that provides a company with a business edge.

Information is more likely to be considered a trade secret under Nebraska law if it is:

  • not known outside of the particular business entity
  • known only by employees and others involved in the business
  • subject to reasonable measures to guard the secrecy of the information
  • valuable, and
  • difficult for others to properly acquire or independently duplicate.

Protecting Trade Secrets Using Nondisclosure Agreements

A common way for Nebraska businesses to protect their trade secrets is by having employees sign nondisclosure agreements (NDAs). These are written contracts between employers and employees that attempt to prevent the employee from disclosing confidential information after leaving the company.

For example, if you own a software company in Lincoln, an NDA with an employee could prevent that person from disclosing your proprietary code to a future employer for a certain period of time. The employee knows that if he or she discloses the code, or misappropriates it in some fashion, your business will be able to sue for breach of the NDA.

Misappropriation of Trade Secrets in Nebraska

Nebraska is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Nebraska’s trade secret law can be found at Neb. Rev. Stat. Secs. 87-501 et seq.

The statute defines a trade secret as "information, including, but not limited to, a drawing, formula, pattern, compilation, program, device, method, technique, code, or process that: (a) Derives independent economic value, actual or potential, from not being known to, and not being 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."

Nebraska’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Nebraska law, "misappropriation" refers to the acquisition of a trade secret by someone who knows or has reason to know that the trade secret was acquired by improper means, such as theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy. It also includes the disclosure or use of a trade secret without consent by someone who used improper means to acquire knowledge of the trade secret, for example, an ex-employee who spills company secrets to a rival.

Nebraska's "Reason to Know" Standard

Nebraska prohibits use of trade secrets by a company that has “has reason to know” that the material constitutes a trade secret. This is known as constructive knowledge (versus actual knowledge). In other words, even if a Nebraska company was unaware it possessed purloined trade secrets, it can still be prosecuted under Nebraska law if it should have known.

Penalties for Misappropriation of Trade Secrets in Nebraska

Under Nebraska law, a trade secret thief can be prevented from disclosure by court order, known as an injunction. This is true for both actual or threatened misappropriation. The injunction may be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate any commercial advantage that otherwise would be derived from the misappropriation. Under Neb. Rev. Stat. Sec. 87-503, a court may, in exceptional circumstances, condition its injunction on payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances might be, for example, a trade secret theft that is so significant that any court order would be rendered meaningless.

A victim of trade secret theft can also seek financial compensation. The amount would be based on measuring the actual loss attributed to the theft or the profits (or “unjust enrichment”) acquired by the trade secret thief. In particularly egregious situations, a Nebraska court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded where the theft of the trade secrets is willful and malicious.

Nebraska's Statute of Limitations for Claiming Trade Secret Theft

Under Neb. Rev. Stat. Sec. 87-506, an action for trade secret misappropriation must be brought "within four years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." Although Nebraska gives plaintiffs a bit longer than most states to file a claim, you should still act relatively quickly upon discovering trade secret misappropriation to retain an attorney.

Federal Law on Trade Secrets

In addition to Nebraska’s rules regarding trade secrets, certain federal rules also apply in Nebraska. The Economic Espionage Act of 1996 makes the theft of trade secrets a federal crime. The Act prohibits the theft of a trade secret by a person intending or knowing that the offense will injure a trade secret owner.

The Act also makes it a federal crime to receive, buy, or possess trade secret information knowing it to have been stolen. The Act’s definition of “trade secret” is similar to that of the Uniform Trade Secrets Act.

The penalties for a violation of this statute include a potential prison term of 15 years and fines up to $5 million, depending on whether the defendant is an individual or a corporation. A private party can still sue for trade secret theft even if the federal government files a criminal case under the Economic Espionage Act.

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