Nevada Trade Secret Law

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

As a business owner in Nevada, you may be familiar with games of chance. But you do not want to take any chances with your company's intellectual property, including any copyright, trademark, or patent rights. Another important form of intellectual property is trade secrets. What laws protect your business's trade secrets in Nevada?

What Are Trade Secrets?

Trade secrets are a common and important form of intellectual property for businesses of all sizes. Trade secrets commonly include customer lists, sensitive marketing information, non-patented inventions, software, formulas and recipes, techniques, processes, and other business information that provides a company with a competitive edge. In legal terms, information is more likely to be considered a trade secret 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

Perhaps the most common way for Nevada businesses to protect their trade secrets is by having employees sign nondisclosure agreements (NDAs), which are enforceable in this state (but not in all states). 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 computer chip manufacturing plant in Las Vegas, an NDA with an employee could prevent that person from disclosing your methods of production to a future employer for a certain period of time. The employee knows that if he or she discloses your proprietary chip manufacturing process, or misappropriates it in some fashion, your business will be able to sue for breach of the NDA.

Laws on Misappropriation of Trade Secrets in Nevada

Nevada is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Nevada’s trade secret law can be found at Nev. Rev. Stat. Secs. 600A.010 et seq.

Nevada's statute defines trade secrets as "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."

Nevada’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Nevada law, "misappropriation" means 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, or breach of 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.

Nevada's "Reason to Know" Standard

Nevada 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 Nevada company was unaware it possessed purloined trade secrets, it can still be prosecuted under Nevada law if it should have known.

Penalties for Misappropriation in Nevada

Under Nevada 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.

A court may terminate an injunction when the trade secret has ceased to exist, but the injunction can continue for as long as necessary to eliminate any commercial advantage that otherwise would be derived from the misappropriation. In some circumstances, an injunction may be conditioned on payment of a reasonable royalty to the trade secret owner.

A victim of trade secret theft can also seek financial compensation that measures the actual loss attributed to the theft or the profits (or “unjust enrichment”) acquired by the trade secret thief. Under NRS 600A.050, a plaintiff's financial damages "include both loss caused by misappropriation and unjust enrichment caused by misappropriation that is not taken into account in computing the loss."

In egregious situations, a Nevada court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded in egregious (willful and malicious) situations or if a claim is brought in bad faith.

Statute of Limitations on When One Can Sue in Nevada

Pursuant to NRS 600A.080, a lawsuit for trade secret misappropriation "must be brought within 3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." Thus, you should act quickly to hire an attorney and initiate a lawsuit if you believe that your company's trade secrets have been stolen.

Federal Law Regarding Trade Secrets

In addition to Nevada’s rules regarding trade secrets, certain federal rules also apply in Nevada. 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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