USA Trends and Developments Contributed by: Dawn Mertineit, Seyfarth Shaw LLP
The law surrounding trade secrets and restrictive covenants continued to evolve greatly in 2024, and it is anticipated that several legislative and judicial attempts (as well as, potentially, agency- driven priorities) to limit restrictive covenants will continue to be seen in 2025. Given this anticipat - ed trend, protection of intellectual property such as trade secrets will be more critical than ever. That said, given the new Trump administration, the trend of federal agencies tightening the screws on restrictive covenants may be com - ing to an end. Regardless, trade secret protec - tion should remain a key priority for businesses, particularly given evolving technologies and leg - islative and judicial hostility towards restrictive covenants (especially, but not limited to, non- competes). Federal Restrictions on Non-Competes The big news in 2024 was the attempt of the Federal Trade Commission (FTC) to ban non- competes, implementing a rule that had been set to go into effect in September 2024. This pre - cipitated a handful of lawsuits by businesses or associated groups attacking the FTC’s authority to implement the rule. Those legal challenges will continue into 2025, as the FTC appealed two cases in which a district court determined that the FTC lacked the authority to issue the ban. It is expected that these appeals will not be successful, as the FTC faces tough audiences in the Fifth and Eleventh Circuits. Moreover, President Trump has replaced former chair Lina Khan (widely viewed as the primary driver and champion of the proposed non-compete ban) with Republican FTC member Andrew Ferguson – who had vociferously dissented from the FTC’s rule, calling it “unlawful” and “forbid[den]” by the United States Constitution. President Trump also intends to fill the fifth, currently vacant agency
seat with Mark Meador, who will be the third Republican member of the agency – assuming he is confirmed. While there is some bipartisan support for a federal non-compete ban, it is doubtful that Ferguson (or another Republican FTC commissioner) will continue to press the ban, particularly given the bruising losses the FTC has already faced at the district court level. It is unclear whether a reconstituted FTC would withdraw the appeals (which seems unlikely at this point) or simply wait for a presumed loss at the Fifth or Eleventh Circuit and use the loss as a statement regarding the bounds of the FTC’s authority. The path that the FTC takes will also presumably depend on how quickly (and wheth - er) Meador is confirmed, which would give the agency a Republican majority. Despite the fact that the non-compete rule is unlikely to survive appellate scrutiny, the firm anticipates that the widespread media coverage of the (currently ineffective) rule could result in an increase in non-compete litigation, as cer - tain employees may be unaware of the court decisions putting the rule on hold and thus may erroneously believe that their non-competes (or other restrictive covenants) are now unenforce - able. If such individuals ignore their contractual obligations and join competitors in roles that vio - late their agreements, it is likely that an uptick in lawsuits seeking to enforce non-competes would be seen. Additionally, regardless of the FTC’s view on the proposed non-compete ban, even after the shakeup in leadership, the FTC under the Trump Administration has expressed a prior - ity of attacking the abuse of non-compete by certain businesses. In fact, Ferguson recently announced the launch of a joint labour task force to focus on enforcing federal antitrust laws to protect competition in labour markets, including
272 CHAMBERS.COM
Powered by FlippingBook