The Supreme Court of Nevada ruled that the Nevada trade secret law does not preclude a defendant from demonstrating that information is readily ascertainable and therefore not a trade secret even when the defendant acquired the information by improper means. MEI-GSR Holdings, LLC v. Peppermill Casinos, Inc., Case No. 70319 (Supr. Ct. Nev., May 3, 2018) (en banc) (Cherry, J).
The issue arose when Ryan Tor, a Peppermill employee, went to the Grand Sierra Resort owned by MEI-GSR Holdings and was caught using a slot machine key to access several of GSR’s slot machines. The Nevada Gaming Control Board investigated the matter and found that Tor had accessed the machines to obtain their “par value.” A par value is a gaming industry term for the theoretical percentage that the casino should retain. The information for a single machine at any point in time is essentially worthless, but the par value of an entire casino floor can be very useful to a competitor.
After the investigation, the Gaming Board found no evidence that Peppermill used the information to adjust its own machines. GSR then sued Tor and Peppermill for violating the Nevada Trade Secret Act. The Nevada statute defines a trade secret as information that “[d]erives 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.”
Peppermill admitted to improperly obtaining GSR’s par values. Prior to the commencement of the jury trial, GSR proposed a jury instruction that under the Nevada statute, a trade secret is not “readily ascertainable” under the statute when the means of acquiring the information falls below the generally accepted standards of commercial morality and reasonable conduct, even if means of obtaining the information violated no government standard, did not breach any confidential relation, and did not involve any fraudulent or illegal conduct. Even if the information that is asserted to be a trade secret could have been duplicated by other proper means, the information is not “readily ascertainable” if in fact it was acquired by improper means.
The district court disagreed and instead instructed the jury that (1) if information is obtained through reverse engineering, the actor is not liable because the information has not been acquired improperly, and (2) a trade secret may not be readily ascertainable by proper means, including by reverse engineering. Ultimately the jury was not convinced that par values were trade secrets. GSR appealed.
The Nevada Supreme Court affirmed the jury instruction, finding that Nevada’s trade secret law does not preclude a defendant in a misappropriation of trade secrets lawsuit from showing that certain information is readily ascertainable and thus not a trade secret, even though the defendant “acquired the information through improper means.” The Court reasoned that although a defendant’s acquisition of information by proper means is a relevant consideration in determining whether information is a trade secret, a defendant’s acquisition of information by improper means does not preclude a defendant from demonstrating that the information is readily ascertainable by others and thus not a trade secret.
