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Protecting critical trade secrets without worker noncompetes

On Behalf of | Jun 25, 2024 | Intellectual Property

The intellectual property that a business relies on can potentially help it compete even in relatively saturated markets. Companies that function differently than other businesses can offer unique goods or services. They can compete by keeping their prices lower. Often, intellectual property helps companies establish a niche within a specific market.

Trade secrets can be among the most valuable intellectual property resources for modern businesses. Trade secrets consist of any non-public information that gives a business a competitive advantage. Companies in many different sectors may rely on trade secrets to stand out from competitors. Recipes, production processes and even client lists may constitute trade secrets.

Organizations with valuable trade secrets have long sought to protect them from infringement. Employees are one of the leading sources of trade secrets risks for companies. Workers might copy client lists or take information learned at the company to start their own business. One common contractual tool that employers have long used to avoid employee misconduct is no longer a viable option.

The federal government banned non-compete agreements

As of April 2024, non-compete agreements are no longer enforceable anywhere in the United States. The Federal Trade Commission (FTC) has banned them in the hopes of encouraging entrepreneurship. Even non-compete agreements that existed prior to the ban are no longer enforceable. An agreement intended to protect trade secrets by preventing a worker from taking a job with a competitor or starting a competing business no longer protects the company. What can companies do to protect their trade secrets?

They can negotiate new contracts

Employers may need new contracts. Now that non-compete agreements no longer afford any protection for employers, organizations may need to draft new employment contracts. Even existing staff members may need to renegotiate with the company and sign new contracts.

Other types of restrictive covenants can help protect trade secrets even if non-compete Agreements are no longer enforceable. A non-disclosure agreement could prevent a worker from sharing or publishing any private information about the company after leaving their job. Non-solicitation agreements could prevent them from attempting to poach clients or customers. Companies may also want to limit how much access individual workers have to company trade secrets.

The negotiation of new employment contracts and the adjustment of operations can potentially help companies protect their trade secrets. Recognizing how changing employment regulations affect business operations – and seeking legal guidance and support accordingly – can help employers mitigate operational risk.

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