Trade secret law and noncompete restrictions: navigating an evolving landscape

October 2026 | SPOTLIGHT | INTELLECTUAL PROPERTY

Financier Worldwide Magazine

October 2026 Issue

In recent years, states have continued to limit when companies may use noncompetition agreements and, in some jurisdictions, related restrictive covenants. This shift has led more companies to rely on trade secret law to protect legitimate business interests. At the same time, courts have increasingly required trade secret plaintiffs to identify alleged trade secrets with specificity to pursue their claims.

These parallel developments, proliferating legislative restrictions on noncompetes and tightening judicial standards for trade secret identification, point to a practical imperative: companies should consider revisiting their trade secret protection programmes and evaluating them against the current legal landscape. This article first surveys recent noncompete developments, then turns to the resulting shift toward trade secret protections, evolving standards for identifying protectable information, and practical guidance for in-house counsel navigating these changes.

Developments in noncompetes

In 2024 and 2025, the Federal Trade Commission (FTC) attempted to ban noncompetes nationwide for certain employees. The courts blocked that effort. Although the FTC’s proposal remains blocked and unenforceable, federal and state scrutiny of overbroad noncompetes continues. Individual states have continued to restrict or eliminate noncompete agreements through legislation, including several new laws enacted in the first half of 2026.

On 23 March 2026, Washington enacted a near-total ban on noncompete agreements, effective from 30 June 2027. The new law voids noncompete covenants with employees and independent contractors, regardless of when they were signed and without regard to compensation level. Violations expose employers to actual damages or a $5000 statutory penalty, plus reasonable attorneys’ fees, expenses and costs. The law preserves certain agreements, including confidentiality agreements, covenants protecting trade secrets and inventions, sale-of-business noncompetes, non-solicitation agreements and franchise agreements. Employers must notify affected current and former workers with existing noncompetes by 1 October 2027, that those agreements are void.

Effective since 1 July 2026, under Virginia law, a noncompete entered into, amended or renewed on or after that date may not be enforced against an employee discharged without cause unless the employer provides severance or another monetary payment and discloses that payment when the covenant is executed. Virginia also prohibits noncompetes for covered healthcare professionals and, through amendments to its franchise law, bars post-termination noncompete provisions in franchise agreements, subject to prospective application and a limited sale-of-franchise exception.

Effective since 1 July 2026, Tennessee renders noncompetes void and unenforceable for employees earning less than $70,000 in annualised compensation. For employees earning over $70,000, the legislation creates a rebuttable presumption that employee and independent contractor noncompetes lasting two years or less are reasonable in duration, with longer restrictions carrying greater risk of unenforceability.

In Utah, amendments signed on 6 May 2026 prohibit post-employment noncompetes for covered healthcare workers – broadly defined to include many licensed clinical roles – subject to limited exceptions, including certain severance agreements and sale-of-business restrictions. Utah also limits nonsolicitation provisions that would prevent healthcare workers from informing patients of their current or future place of employment.

Together, these legislative changes show that the enforceability of traditional noncompete agreements is shrinking, and employers may increasingly need to look to complementary mechanisms, including appropriately tailored trade secret protections, to safeguard competitive information.

Shift to trade secrets

The tightening of noncompete restrictions has shifted attention to trade secret law, but the two tools serve different functions. A noncompete is a contractual restraint on post-employment competitive activity, typically limiting competition for a defined period or market. Trade secret law, by contrast, is an information-protection regime that addresses the acquisition, use or disclosure of information protected under the federal Defend Trade Secrets Act (DTSA) or applicable state law. For executives, that means focusing less on restricting competition in the abstract and more on identifying valuable information, limiting access and documenting protective steps.

The universe of potentially protectable information is therefore broad, but not unlimited. Depending on the industry and governing statute, trade secret protection may extend to formulas, processes, business strategies, customer lists, financial data, technical know-how and other financial, business, scientific, technical, economic or engineering information. But this protection is available only if statutory elements are met. These elements include reasonable measures to maintain secrecy and independent economic value from not being generally known or readily ascertainable.

When those elements are met and misappropriation is threatened or occurring, trade secret law also offers the possibility of an injunction to prevent actual or threatened acquisition, use or disclosure of trade secret information. That remedy does not make trade secret law a general substitute for a noncompete; it targets actual or threatened misappropriation, not competition alone.

Evolving judicial standards for trade secret identification

With the growing use of trade secret law, federal courts have emphasised that trade secret plaintiffs must define their alleged secrets with sufficient specificity – a standard that sounds straightforward but has generated a developing split on timing and procedural treatment. Recent decisions illustrate the stakes at every procedural stage, from pleading through post-trial review.

In Applied Predictive Techs., Inc. v. MarketDial, Inc., the Federal Circuit affirmed summary judgment against a plaintiff that failed to sufficiently identify 14 categories of alleged trade secrets, holding that citing more than 200 exhibits through unexplained string citations did not satisfy its burden. This signals that courts may demand definiteness at summary judgment. Similarly, in Coda Development s.r.o. v. Goodyear Tire & Rubber Co., the Federal Circuit affirmed an order setting aside a jury verdict awarding $2.8m in compensatory and $61.2m in punitive damages, finding certain alleged trade secrets insufficiently definite, not actually secret or not used by the defendant. The court reiterated that a plaintiff must define the information sought to be protected with sufficient definiteness to permit a court to apply protection criteria and determine appropriation.

A divide has emerged over when a plaintiff must identify its trade secrets. The Fourth Circuit, in Sysco Machinery Corp. v. DCS USA Corp., affirmed dismissal of a DTSA complaint at the pleading stage because it failed to identify alleged trade secrets with sufficient particularity. The court held that this effectively forced it to undertake “a fishing expedition”. The Ninth Circuit has taken a different approach. In Quintara Biosciences Inc. v. Ruifeng Biztech Inc., the court held that the DTSA does not require particularity at the outset of litigation; rather, sufficient identification is a merits issue typically resolved at summary judgment or trial. The court recognised that discovery in trade secret cases is “iterative” and must balance proving misappropriation against prematurely disclosing the secrets at issue.

The Eighth Circuit has also weighed in. In Wilbur-Ellis Company v. Gompert, the court held that inadequate identification can foreclose discovery and, ultimately, a plaintiff’s claims.

Although there may be jurisdictional differences as to when a plaintiff must sufficiently identify its trade secrets, these decisions underscore the importance of trade secret identification. Trade secret holders should consider defining their trade secrets in a manner that distinguishes protectable information from general knowledge.

Practical recommendations for companies

Given these converging trends, companies may wish to consider steps to strengthen trade secret protection programmes and adapt restrictive-covenant strategies, depending on their workforce, industry, jurisdictions and risk profile. Companies may wish to prioritise high-value information, access controls and agreements for personnel with the greatest exposure to sensitive competitive assets.

One option is to periodically catalogue information the company considers trade secrets, distinguishing protectable information from general industry knowledge. This exercise may support litigation readiness and help align internal practices with judicial expectations for specificity.

Depending on the circumstances, a trade secret protection plan might include confidentiality and invention-assignment agreements, role-based access controls, password protection and technical controls, exit protocols for departing employees, clean-room protocols where relevant and cyber and administrative safeguards. Reasonable measures vary with the nature and value of the information, the company’s operations, and how the information is used.

Multistate employers may wish to assess existing noncompete, nonsolicitation and confidentiality agreements against current state law. Where noncompetes are no longer enforceable or may become void under pending effective dates, one option is to identify affected workers and evaluate whether nonsolicitation agreements, confidentiality agreements or enhanced trade secret protections may provide appropriate coverage.

Companies may also consider whether trade secret protection programmes should extend to third-party relationships through confidentiality and intellectual property ownership provisions in contractor, vendor, cloud, AI, data centre and technology-collaboration agreements, along with access and sharing protocols tailored to the relationship.

Conclusion

Recent developments in trade secret law have accelerated two complementary trends: courts are demanding greater precision from trade secret plaintiffs and legislatures are continuing to narrow the enforceability of noncompete agreements. Together, these developments make proactive trade secret identification and protection more important than ever. Companies that evaluate these issues now, through rigorous identification practices, documented security measures and well-tailored restrictive covenants, may be better positioned to protect their competitive information both in the marketplace and, if necessary, in the courtroom.

Randall E. Kahnke and Bryan K. Washburn are partners at Faegre Drinker Biddle & Reath LLP. Mr Kahnke can be contacted on +1 (612) 766 7658 or by email: randall.kahnke@faegredrinker.com. Mr Washburn can be contacted on +1 (612) 766 8014 or by email: bryan.washburn@faegredrinker.com.

Randall E. Kahnke and Bryan K. Washburn

Faegre Drinker Biddle & Reath LLP