USA Trends and Developments Contributed by: Dawn Mertineit, Seyfarth Shaw LLP
5, 2024) (similarly refusing to judicially modify an overbroad-as-drafted covenant, and opining that blue-penciling “supports a regime of ‘sprawling restrictive covenants’” ) (citing Kodiak and Sun - der Energy, LLC v Jackson, 305 A.3d 723, 746 (Del. Ch. 2023)). Other courts have recently held that non-competes that prohibit an individual from joining a competitor in any capacity likely violate the so-called janitor rule and are gener - ally overbroad and unenforceable – eg, Med-1 Sols., LLC v Taylor, 2024 WL 4876906, *8 (Ind. Ct. App. Nov. 25, 2024) (non-competes prohibit - ing work for a competitor “in any capacity” , even as a security officer or custodian, are unreason - able and unenforceable “because they extend beyond the scope” of any legitimate interests). In sum, whether to comply with federal agency priorities, new legislation or evolving judicial atti - tudes towards restrictive covenants, it is more important than ever for employers to ensure that the scope of their restrictive covenants agree - ments is reasonably limited and calculated to protect legitimate business interests. Trade Secret Trends As the enforceable scope of restrictive covenants becomes more limited, trade secret protection will become more important – and trade secret litigation more prevalent. Indeed, given that non-competes are often a business’s first line of defence against trade secret theft, employ - ers with personnel in jurisdictions that limit non- compete enforceability in particular will need to embrace technology tools and robust policies to protect critical intellectual property assets. Even where restrictive covenants are permissi - ble, given the judicial trend away from enforcing broadly drafted covenants, it behoves employ - ers to redouble their efforts to properly train their workforce about the importance of confidential - ity, implement strong policies to protect critical
assets and prepare critical teams (including but not limited to human resources, legal and IT) to spring into action when there is a risk of trade secret misappropriation. The firm expects that courts will continue to place high burdens of proof on plaintiffs assert - ing trade secret misappropriation claims, emphasising the need to clearly establish the impacted trade secret’s unique value and the specific harm caused by misappropriation of the trade secret. It will be more important than ever for companies to maintain documentation showing the distinct competitive advantage pro - vided by their trade secrets to support claims of misappropriation – and not just the collec - tive competitive advantage of the trade secret portfolio, but ideally the advantage conferred by individual assets. Additionally, keeping thorough records of trade secret identification, protection measures, and employee access can strengthen businesses’ position in potential disputes. This is all the more important with continued global competition, and it is also particularly notable given the rise of artificial intelligence (AI), which is rapidly transforming workplaces and posing new challenges for trade secret security. As companies leverage AI tools for data analysis, innovation and operational efficiency, they must be vigilant about safeguarding their proprietary algorithms, data sets and analytical methods classified as trade secrets (or risk los - ing them entirely). AI’s potential misuse could also make it easier for nefarious actors (whether company insiders or competitors) to extract sen - sitive information from complex data systems. To mitigate these risks, companies should develop specific, robust protocols regarding the use of AI and ensure that proprietary AI-related informa - tion is shielded with comprehensive digital and legal safeguards.
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