You have built your business through your creative processes, products or systems (trade secrets). In the development of your business, you have hired employees to implement or sell those processes, products or systems. One of the most devastating things to your business may be, not only the departure of one of your key employees, but that the employee takes those processes, products or systems with her when she goes to work for your primary competitor – or starts her own business based upon the foundation you have laid.
How can you protect your hard work? Under both Nevada and Federal law, you have means to protect yourself from the misappropriation of trade secrets. Additionally, in Nevada (unlike its neighbor, California), you can limit your employee’s ability to compete with you.
No, you can’t work there…
In Nevada, you may enforce on employees a covenant not to compete. A covenant not to compete can be enforceable so long as the limitations contained therein are reasonable. Generally, courts will look to the time and territory limitations contained within the covenant not to compete. The Nevada Supreme Court held that courts may not re-write agreements to make the time and territorial limitations reasonable. So, if they are too broad, a court will not enforce them and your employee can freely compete against you.
You cannot take my secret sauce with you!
Under the Uniform Trade Secrets Act, the owner of a trade secret can bring an action to stop employees from taking trade secrets through improper means and using them for themselves or by another party (think your competitor). Trade Secrets are defined 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 derives economic value; is not readily ascertainable; and is the subject of efforts to maintain its secrecy. Thus, included within protected information may be your client list, your pricing lists and your marketing strategies. In order to protect your information, you should mark the information as “confidential” or “private” and you should disseminate a list of such protected information to your staff.
What relief can you get if someone wrongfully takes your trade secrets?
If you are able to prove that your trade secrets have been wrongfully appropriated, you may be able to sue the former employee as well as your competitor who now has possession of your trade secrets. If you are successful, under the Uniform Trade Secrets Act, you may be entitled to injunctive relief (essentially stopping the other parties from using your trade secrets); the value of the loss caused by the misappropriation; and the value gained by the wrongful parties. If you are able to prove that the former employee and/or your competitor engaged in willful, wanton or reckless misappropriation, the court may award you exemplary damages of up to two times your actual damages. Furthermore, if the former employee and/or competitor engage in bad faith or act willfully or maliciously, you may be entitled to recover your attorneys’ fees.
Beyond the Uniform Trade Secrets Act, in April of this year Congress enacted the Defend Trade Secrets Act (DTSA). Under the DTSA, there is a mechanism where the wrongfully appropriated trade secrets may be sized by a court to protect from further dissemination.