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FTC bans noncompetes: What that means for IP litigation

On Behalf of | Apr 24, 2024 | INTELLECTUAL PROPERTY LAW - Intellectuall Property Litigation

Non-compete agreements have been a staple in employment contracts for a long time. The agreements generally aim to protect a company’s intellectual property rights against misuse and abuse by former employees.

It’s no secret, however, that a potential ban has been in the works – and the Federal Trade Commission (FTC) just announced a final rule that would effectively end the practice almost entirely. Without the deterrent of non-compete agreements, employees may feel more freedom to change jobs or strike out on their own – a fact that is highly touted by the FTC. While this can foster more innovation, it can also lead to an increase in legal disputes over the alleged misuse of intellectual property (IP) rights.

What does that mean for IP litigation?

Non-compete agreements are often used to protect a company’s IP by preventing employees from working for competitors. Without these agreements, companies may find it more challenging to prevent former employees from using or disclosing proprietary information.

With non-compete agreements off the table, companies will need to place greater emphasis on safeguarding their trade secrets and other proprietary information. They’ll likely have to rely more heavily on mechanisms like non-disclosure agreements and confidentiality clauses, as well as practical steps like tighter access controls and enhanced employee training programs. 

Strategies in IP litigation cases will also have to evolve. More than likely, the number of lawsuits related to trade secret misappropriation will increase. 

If you’re uncertain what your business should do in response to the new rule by the FTC, it’s important not to delay. Seeking legal guidance today can help you respond in a timely manner to the upcoming changes and be ready to respond appropriately to threats against your IP rights.