In today’s competitive business environment, protecting proprietary information is more critical than ever. Trade secrets—ranging from customer lists and pricing strategies to manufacturing processes and software algorithms—often represent a company’s most valuable assets. Understanding the legal framework that protects these assets is essential for businesses operating in Nebraska and throughout the United States. This comprehensive guide examines both the federal Defend Trade Secrets Act and the Nebraska Trade Secrets Act, explores how employment agreements and restrictive covenants interface with trade secret protection, and analyzes landmark cases that have shaped this area of law.

The Dual Framework: Federal and State Trade Secret Protection

Trade secret owners now benefit from a robust dual-track system of protection under both federal and state law. This framework emerged in 2016 when Congress enacted the Defend Trade Secrets Act, which for the first time created a federal civil cause of action for trade secret misappropriation. Prior to the DTSA, trade secret protection existed exclusively under state law, with most states having adopted some version of the Uniform Trade Secrets Act.

The Defend Trade Secrets Act: Federal Protection

The DTSA fundamentally transformed trade secrets litigation by providing access to federal courts for misappropriation claims involving trade secrets related to products or services used in, or intended for use in, interstate or foreign commerce. This federalization of trade secrets law was designed to provide greater uniformity and predictability for litigants who previously faced inconsistent treatment across different state jurisdictions. The DTSA employs a broad definition of trade secret, encompassing financial, business, scientific, technical, economic, and engineering information in virtually any form—including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes—provided the owner has taken reasonable measures to keep such information secret and the information derives independent economic value from not being generally known or readily ascertainable.

One of the DTSA’s most distinctive features is its ex parte seizure provision, which allows courts in extraordinary circumstances to issue orders for the seizure of property necessary to prevent the propagation or dissemination of trade secrets. This remedy, enforceable by federal law enforcement officials, provides trade secret owners with a powerful tool unavailable under any state trade secrets statute. The seized materials are deposited into court custody, and the DTSA even permits requesting parties to have seized information encrypted to prevent further disclosure.

Importantly, the DTSA does not preempt state trade secret law. As courts have recognized, trade secret owners may bring parallel state and federal claims for misappropriation in federal court. This dual-track approach allows litigants to take advantage of favorable provisions in either statutory scheme while consolidating their claims in a single forum.

The Nebraska Trade Secrets Act: State-Level Protection

Nebraska enacted its Trade Secrets Act in 1988, codifying and strengthening trade secret protection within the state. The NTSA defines a trade secret as information—including drawings, formulas, patterns, compilations, programs, devices, methods, techniques, codes, or processes—that derives independent economic value from not being ascertainable by proper means and is the subject of reasonable efforts to maintain its secrecy. Nebraska courts have applied this definition to protect diverse types of information, from family recipes and customer lists to freight company pricing information and delivery systems.

A critical distinction between Nebraska and federal law concerns the standard for protectable information. Under Nebraska law, if an alleged trade secret is ascertainable by any means that are not improper, the information is categorically excluded from protection. This standard, articulated by the Nebraska Supreme Court in First Express Service Group, Inc. v. Easter, is more stringent than the federal approach. To prevail on the defense that an alleged trade secret is reasonably ascertainable, one must demonstrate that the knowledge or information can be readily gained by observation or other proper means. If a trade secret’s information can be obtained from public sources, it loses protection under Nebraska law.

The NTSA provides for damages including actual loss caused by misappropriation and unjust enrichment not otherwise captured in the damages award. Additionally, damages may be measured by the imposition of a reasonable royalty for unauthorized use. Courts may also grant injunctive relief to prevent ongoing or threatened misappropriation, restraining an entity from taking specified actions or compelling performance of specific obligations. The statute of limitations for NTSA claims is four years from the date of discovery or when the misappropriation should have been discovered.

Employment Agreements and Trade Secret Protection

Employment agreements serve as the first line of defense in protecting trade secrets. A comprehensive approach typically involves layering multiple types of restrictive covenants—confidentiality agreements, covenants not to compete, and non-solicitation provisions—to create overlapping zones of protection. Understanding how Nebraska courts treat each type of restriction is essential for crafting enforceable agreements.

Confidentiality and Non-Disclosure Agreements

Confidentiality agreements, also known as non-disclosure agreements or NDAs, require employees to maintain the secrecy of proprietary information both during and after employment. These agreements are generally enforceable in Nebraska when properly drafted. Courts have recognized that requiring employees with access to valuable company data to sign NDAs constitutes a legitimate business practice. Employers should present confidentiality agreements at the commencement of employment when they possess greater leverage; presenting an NDA after an employee has already accepted a position may raise consideration issues.

However, overly broad confidentiality provisions may be subject to challenge. Courts have questioned the enforceability of confidentiality agreements that reach too far beyond trade secrecy, particularly those that generate sweeping confidentiality obligations making it virtually impossible to work in the same field without breaching them. Such provisions may function as de facto noncompete agreements, raising concerns about restraint of trade. Best practices counsel drafting confidentiality provisions that clearly define protected information, distinguish between trade secrets and ordinary confidential information, and include reasonable duration limits tied to the continued secrecy of the information.

The DTSA includes an important whistleblower immunity provision that employers must address in their confidentiality agreements. The statute provides civil and criminal immunity to individuals who disclose trade secrets in confidence to government officials or attorneys for the purpose of reporting suspected violations of law, or in court filings made under seal. Employers are required to provide notice of this immunity in any contract or agreement with an employee that governs the use of trade secrets or other confidential information, and failure to do so may limit the employer’s ability to recover exemplary damages or attorney fees in a subsequent misappropriation action.

Covenants Not to Compete in Nebraska

Nebraska takes a strict approach to post-employment noncompetition agreements. Unlike many jurisdictions that evaluate reasonableness based on geographic scope, duration, and scope of restricted activities, Nebraska courts will generally not enforce traditional noncompete clauses with geographic restrictions against employees. The Nebraska Supreme Court has concluded that such restrictions constitute impermissible restraints on trade. This approach reflects the state’s public policy favoring employee mobility and the free flow of labor.

Nebraska courts recognize only a narrow form of post-employment restriction: customer non-solicitation agreements. Even these provisions face stringent requirements. A non-solicitation agreement is enforceable only if it restricts the former employee from working for or soliciting the former employer’s clients or accounts with whom the employee actually did business and had personal contact during employment. Provisions that purport to restrict solicitation of customers with whom the employee had no direct relationship exceed permissible scope and are unenforceable.

Critically, Nebraska courts will not modify or “blue pencil” overbroad restrictions. If a noncompete or non-solicitation agreement is deemed unreasonable, it will not be enforced in any form. This all-or-nothing approach places a premium on careful drafting. Employers must ensure that restrictions are properly and narrowly tailored from the outset, as courts will not salvage defective agreements by excising problematic provisions.

The context of the restriction matters significantly. Covenants not to compete ancillary to the sale of a business receive more favorable treatment than employment-based restrictions. In sale-of-business transactions, Nebraska courts will enforce noncompete agreements if they are reasonably limited in time, space, and extent and do not otherwise constitute an unreasonable restraint of trade. The geographic scope is reasonable if it covers only the area in which the business operates or has customers, and the duration is generally reasonable if it represents the useful life of the goodwill purchased.

Landmark Cases Shaping Trade Secrets Law

PepsiCo, Inc. v. Redmond and the Inevitable Disclosure Doctrine

Perhaps no case has had greater influence on modern trade secrets litigation than the Seventh Circuit’s 1995 decision in PepsiCo, Inc. v. Redmond. The case established the “inevitable disclosure” doctrine as a viable theory for obtaining injunctive relief, even absent direct evidence of actual misappropriation. William Redmond had served as a high-level general manager at PepsiCo with access to detailed strategic plans, annual operating plans, pricing architecture, and market attack plans. He had signed a confidentiality agreement but not a noncompete. When Redmond accepted a similar position at Quaker Oats, which manufactured competing products Gatorade and Snapple, PepsiCo sought an injunction.

The Seventh Circuit affirmed the preliminary injunction, holding that a plaintiff may prove trade secret misappropriation by demonstrating that the defendant’s new employment will inevitably lead to disclosure of the former employer’s trade secrets. The court reasoned that unless Redmond possessed “an uncanny ability to compartmentalize information,” he would necessarily make decisions in his new role by relying on his knowledge of PepsiCo’s trade secrets. The court emphasized the fierce competition between the companies and Redmond’s demonstrated lack of candor during his departure, which undermined confidence that he would refrain from using confidential information.

The inevitable disclosure doctrine has generated significant debate. Critics argue it effectively creates a judicial noncompete in the absence of a contractual one, restricting employee mobility based on mere possession of knowledge rather than wrongful conduct. Supporters contend the doctrine appropriately addresses the reality that employees in certain positions cannot avoid drawing upon specialized knowledge in performing similar duties for competitors. Nebraska courts have not definitively addressed whether they will apply the inevitable disclosure doctrine, leaving uncertainty for employers relying on this theory in the state.

Customer Lists as Trade Secrets: Nebraska’s Approach

Whether customer lists qualify as trade secrets has been a recurring issue in Nebraska litigation, with courts reaching different conclusions based on the specific facts presented. In Home Pride Foods, Inc. v. Johnson, the Nebraska Supreme Court determined that the customer lists at issue qualified as trade secrets. The court emphasized the effort and resources the company had invested in developing the lists and the competitive advantage they provided.

By contrast, in First Express Service Group, Inc. v. Easter, the Nebraska Supreme Court distinguished Home Pride and concluded that the customer lists at issue were not trade secrets. The critical distinction was that the customers’ contact information was ascertainable from public sources, and other information on the list was ascertainable through proper means. This case illustrates Nebraska’s stringent approach: if information can be obtained legitimately, it loses its protected status regardless of the effort the owner invested in compiling it.

Extraterritorial Reach: Motorola v. Hytera

The Seventh Circuit’s 2024 decision in Motorola Solutions, Inc. v. Hytera Communications Corp. Ltd. confirmed that the DTSA can reach all of a defendant’s worldwide sales caused by misappropriation, so long as an act in furtherance of the misappropriation was committed in the United States. The case arose after Hytera recruited three Motorola engineers, offering them high-paying positions in exchange for Motorola’s proprietary information. Hytera then used stolen materials to develop a competing product line.

The court held that while the DTSA is subject to the presumption against extraterritoriality, it rebuts that presumption through the statutory language providing that the chapter applies to conduct occurring outside the United States if an act in furtherance of the offense was committed domestically. This decision confirms that federal courthouse doors are open to trade secret plaintiffs even when wrongful conduct occurs primarily abroad, and damages may be recovered on infringing sales made outside the United States.

Best Practices for Protecting Trade Secrets

Effective trade secret protection requires a comprehensive approach combining legal instruments with operational security measures. The following practices can help businesses establish and maintain protectable trade secrets while positioning themselves favorably should litigation become necessary.

Identifying and Cataloging Trade Secrets

Businesses should maintain a clear inventory of information they consider trade secrets. This catalog should describe the information with sufficient specificity to establish its nature and value, document the measures taken to protect it, and identify employees or third parties with access. Courts in trade secret cases often require plaintiffs to identify the allegedly misappropriated secrets with particularity, and a well-maintained inventory facilitates compliance with this requirement while demonstrating the company’s ongoing commitment to secrecy.

Implementing Reasonable Security Measures

Both the DTSA and NTSA require that protected information be subject to reasonable efforts or measures to maintain secrecy. What constitutes reasonable measures varies based on the nature of the information and the circumstances. Common protective measures include physical security controls such as locked files and restricted access areas; electronic security including password protection, encryption, and access logs; confidentiality markings on sensitive documents; need-to-know restrictions limiting access to employees requiring the information; confidentiality agreements with employees and third parties; and exit interviews and return-of-materials protocols for departing employees.

Drafting Enforceable Employment Agreements

Given Nebraska’s strict approach to restrictive covenants, employers should work with experienced counsel to draft agreements that will withstand judicial scrutiny. Confidentiality provisions should clearly define protected information and distinguish between trade secrets warranting indefinite protection and ordinary confidential information subject to time-limited restrictions. Non-solicitation provisions should be narrowly tailored to restrict contact only with customers with whom the employee had actual business dealings and personal contact. Agreements should include the DTSA-required whistleblower immunity notice. Finally, employers should present agreements at the commencement of employment and ensure adequate consideration supports any restrictions added during the employment relationship.

Remedies for Trade Secret Misappropriation

When trade secret misappropriation occurs, both federal and state law provide a range of remedies designed to compensate the injured party and deter future violations. Understanding the available relief is essential for evaluating litigation options and making informed business decisions about how aggressively to pursue claims.

Injunctive Relief

Injunctive relief is often the most critical remedy in trade secret cases because it addresses the ongoing harm from continued use or disclosure. Courts may enjoin actual or threatened misappropriation, prohibiting defendants from using or disclosing the protected information. The duration of an injunction may extend for the period necessary to eliminate any commercial advantage that otherwise would be derived from the misappropriation. However, courts balance the need for protection against the public interest in free competition and employee mobility, potentially limiting injunctions to specific uses or time periods. In exceptional circumstances involving actual or threatened misappropriation, courts may condition future use of the trade secret upon payment of a reasonable royalty for a limited period, effectively creating a compulsory license.

Monetary Damages

Both the DTSA and NTSA authorize recovery of damages for actual loss caused by misappropriation as well as unjust enrichment caused by the misappropriation to the extent not captured in the actual loss calculation. Actual loss may include lost profits, the cost of developing alternative products or processes, and expenditures to restore confidentiality. Unjust enrichment encompasses the profits the defendant derived from using the trade secret, including sales revenue and cost savings from not having to develop the information independently.

The Second Circuit’s decision in Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Group, Inc. illustrates important limitations on unjust enrichment recovery. The court vacated a $285 million avoided-costs award where the record showed no diminution in value to the trade secrets and a permanent injunction already prevented future use. The court reasoned that the avoided costs award functioned more as a penalty than compensable damages under the DTSA. This decision highlights the importance of proving actual harm rather than relying solely on theoretical measures of the defendant’s benefit.

Where actual loss or unjust enrichment cannot be established with reasonable certainty, courts may award a reasonable royalty for the unauthorized use of the trade secret. This alternative measure provides a floor for damages even when the plaintiff cannot quantify specific losses. The royalty is typically calculated based on what a willing buyer would pay a willing seller for a license to use the information, considering factors such as the value of the trade secret, the scope of use, and prevailing rates for comparable technology.

Enhanced Damages and Attorney Fees

For willful and malicious misappropriation, courts may award exemplary damages. Under the DTSA, exemplary damages may not exceed two times the compensatory damages award, while the NTSA permits up to double the damages otherwise awarded. This enhanced recovery provides additional deterrence against egregious conduct. Courts consider factors such as the defendant’s knowledge of the wrongfulness of their conduct, the degree of planning involved, and whether the defendant persisted in misappropriation after becoming aware of the plaintiff’s rights.

Attorney fees may be awarded to the prevailing party if a claim of misappropriation was made in bad faith, a motion to terminate an injunction was made or resisted in bad faith, or willful and malicious misappropriation exists. This fee-shifting provision can significantly impact litigation economics, particularly in cases where the defendant’s conduct was particularly culpable or where claims lack merit. However, employers must ensure they have provided the required DTSA whistleblower immunity notice in their employment agreements, as failure to do so may preclude recovery of exemplary damages and attorney fees even in otherwise meritorious cases.

Practical Considerations for Nebraska Employers

The interplay between Nebraska’s restrictive approach to noncompete agreements and the broader federal trade secrets framework creates unique strategic considerations for employers operating in the state. Understanding these dynamics can help businesses develop effective protection programs while avoiding unenforceable agreements that may provide false assurance.

Forum Selection and Choice of Law

The availability of federal court jurisdiction under the DTSA provides strategic options unavailable before 2016. Federal courts often move more quickly, apply uniform procedural rules, and may be perceived as more sophisticated in handling complex commercial disputes. However, including a DTSA claim can be a double-edged sword: it may make a case that an employer wishes to keep in state court removable to federal court by the defendant. Employers should think strategically about forum preferences before including DTSA claims, particularly where state court procedures or substantive law may be more favorable to their position.

Choice of law provisions in employment agreements may attempt to apply the law of a state more favorable to noncompete enforcement. However, Nebraska courts generally apply Nebraska law to determine the enforceability of restrictive covenants when the employee lives and works in Nebraska, regardless of contractual choice of law provisions. This approach reflects Nebraska’s strong public policy against unreasonable restraints on employment. Employers should not assume that selecting a different state’s law in their agreements will circumvent Nebraska’s restrictions on noncompete enforcement.

Protecting Information Without Noncompetes

Given Nebraska’s hostility to traditional noncompete agreements, employers must rely more heavily on alternative protective mechanisms. Robust confidentiality agreements that clearly define protected information and impose ongoing obligations remain enforceable and should be a cornerstone of any protection program. Non-solicitation provisions limited to customers with whom the employee had actual contact provide another layer of protection, preventing the employee from leveraging personal relationships developed during employment while preserving their ability to compete generally.

The inevitable disclosure doctrine potentially offers protection even without contractual restrictions, though Nebraska courts have not definitively embraced this theory. Employers facing departures to direct competitors should document the specific trade secrets to which the employee had access, the overlap between the employee’s former and prospective responsibilities, and any concerning conduct during the departure process. This documentation positions the employer to seek injunctive relief based on threatened misappropriation if circumstances warrant.

Conclusion

The legal landscape for trade secret protection continues to evolve, with federal and state law providing complementary avenues for enforcement. Businesses operating in Nebraska must navigate the state’s distinctive approach to restrictive covenants while leveraging the broader protections available under federal law. By implementing comprehensive confidentiality programs, drafting enforceable employment agreements, and maintaining robust security measures, companies can protect their most valuable information assets while positioning themselves to respond effectively when misappropriation occurs. Legal counsel experienced in trade secrets litigation can help businesses develop protection strategies tailored to their specific needs and the current state of the law.

This article is for informational purposes only and does not constitute legal advice. The legal landscape regarding trade secrets and restrictive covenants continues to evolve. Businesses should consult with qualified legal counsel to address their specific circumstances.

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