USA – ILLINOIS Trends and Developments Contributed by: Matthew Prewitt, Michael Molzberger, Trevor Jorgensen and James Cromley, ArentFox Schiff LLP
Illinois trade secrets law has long been shaped by Chicago’s economic prominence. Compared with the other leading US business centres, Chicago’s econ - omy for many decades has been unusually balanced across multiple sectors – heavy industry, consumer products, banking, insurance, financial markets, phar - maceuticals, retail and e-commerce, publishing and advertising, agricultural products, hospitality, and transportation, providing a cross-section of the US economy. Of course, southern Illinois remains heav - ily reliant on agriculture, and many Illinois judges and legislators were elected by farming communities far removed from the commerce of Chicago. Illinois case law reflects this unusual mix. The leading Illinois prec - edents include both high-stakes disputes for leading global companies and mom-and-pop retail shops suing over typewritten customer lists. The resulting body of law is both unusually well-developed com - pared with most other US jurisdictions and unusually well balanced between the interests of innovators and incumbents and between employers and employees. Summary and Overview Trade secrets in Illinois are governed by the Illinois Trade Secrets Act (ITSA), which adopted the Uniform Trade Secrets Act (UTSA) with some revisions, most notably a longer five-year statute of limitations. Illinois law was the first to recognise the inevitable disclo - sure doctrine in the landmark case PepsiCo, Inc. v Redmond , in which the Seventh Circuit, applying Illi - nois law, affirmed an injunction barring an executive’s employment with a competitor based on the “inevita - ble” risk of trade secret misappropriation. In Chicago, both the Chancery Division of the Cook County Cir - cuit Court and the United States District Court for the Northern District of Illinois are two of the most active courts in the United States for trade secrets litiga - tion, and the judges of both courts have extensive experience managing expedited preliminary injunction proceedings. Although, in theory, Illinois state courts impose a more rigorous fact-pleading standard, as contrasted with notice pleading in the federal courts, in practice both state and federal court judges apply similar scrutiny, and the distinction is rarely outcome- dispositive in trade secrets cases. Illinois has implemented reforms to protect employees against potentially oppressive non-compete agree -
ments but still allows non-compete covenants of rea - sonable scope when supported by adequate consid - eration. As a result, employee restrictive covenants remain an important part of trade secret protection under Illinois law. The Illinois Freedom to Work Act (IFWA) sets compensation thresholds for employees who can be bound by restrictive covenants, codifies certain common law reasonableness requirements for enforcement, and provides one-way fee-shifting for the employee in some cases. Like many jurisdictions, Illinois distinguishes between employee restrictive covenants and covenants ancillary to the sale of a business, with employee restrictive covenants subject to stricter scrutiny. Illinois permits courts to re-write, and enforce as reformed, covenants that otherwise would be unenforceable as overbroad, but the courts will refuse to reform or blue pencil covenants that appear patently oppressive. The current trend is for judges applying Illinois law to show heightened sen - sitivity to the rights of employees, and older prece - dents must be considered with due regard for the trial court’s broad discretion to apply the judge’s assess - ment of fairness when balancing the equities between employer and employee. Differences Between the Illinois Trade Secrets Act and the Uniform Trade Secrets Act Although modelled on the Uniform Trade Secrets Act (UTSA), the Illinois Trade Secrets Act (ITSA) differs in several respects. First, the ITSA expands the definition of a trade secret expressly to include drawings, finan - cial data, technical or non-technical data, and lists of actual or potential customers or suppliers. Although most states interpret the UTSA definition broadly enough to include these categories, the express lan - guage in the ITSA resolves any doubt. Second, the ITSA has a five-year statute of limitations, compared with the UTSA’s three years, running from discovery or when misappropriation should have been discovered with reasonable diligence. A continuing misappropria - tion is generally treated as a single claim for purposes of the statute of limitations. Like the UTSA, the ITSA expressly preserves con - tractual remedies, whether or not based on misap - propriation of a trade secret. The ten-year statute of limitations for written contracts under Illinois law (735 ILCS 5/13-206) governs claims for breach of a writ -
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