- within Intellectual Property topic(s)
- with Inhouse Counsel
- with readers working within the Oil & Gas and Law Firm industries
Executive Summary
As we look back on 2025 and ahead to 2026 for our firm's annual survey, we report that, while 2025 marked an important turning point, we expect continuing efforts to reshape the law of trade secrets and noncompetes. The clearest takeaway is that the Federal Trade Commission's (FTC) attempt to impose a nationwide ban on employee noncompete agreements has failed for the foreseeable future, but regulatory and judicial scrutiny continues, and state legislative reform remains active. Federal attention has shifted to targeted enforcement, with healthcare as a priority sector and with case-specific actions emerging in other industries. States continued to legislate actively, tightening noncompete rules through compensation thresholds and healthcare carveouts; but outliers remain, with some new legislation even loosening restrictions.
In parallel, trade secret litigation has intensified, with outsized verdicts and consequential appellate guidance on damages and the timing and specificity of trade secret identification. Technological catalysts, especially artificial intelligence (AI) and complex data center collaborations, are also amplifying risk and compliance demands. In short, 2026 will require tailored, industry- and jurisdiction-specific strategies with sharper corporate governance on trade secret issues.
Continuing Federal Enforcement Despite the FTC Rule's Demise
The nationwide noncompete ban put forward by the FTC in 2024 was judicially vacated. The agency, under new leadership in 2025, abandoned its appeal before the Fifth Circuit, ending its pursuit of the sweeping rulemaking. The enforcement posture, however, remains.
In February 2025, for example, the FTC launched a Joint Labor Task Force whose stated mission is "to prioritize rooting out and prosecuting deceptive, unfair, and anticompetitive labor-market practices that harm American workers." This effort includes a focus on "no-poach, nonsolicitation, or no-hire agreements," as well as "noncompete agreements."
The FTC also has continued to litigate matters on a case-by-case approach, with particular emphasis on healthcare markets where it asserts restrictions can constrain patient access and labor mobility. The FTC issued warning letters to large healthcare employers and staffing firms to audit their restrictive covenants and pursued an enforcement action against the nation's largest pet cremation business (which allegedly used sweeping, one-year, nationwide noncompetes across all employee levels).
The practical implication is recalibration and deterrence under existing, familiar standards rather than eliminating restrictive covenants entirely. As always, agreements that are disproportionate in duration, geography, or scope — or that reach workers with limited access to sensitive assets — are more likely to invite regulatory scrutiny. Employers should continue to expect the FTC to examine the real-world competitive impact of restraints, to question uniform templates that are not tailored to roles or legitimate interests, and to test alternative protections that avoid post-employment market-wide bans. Although no federal agency has attempted to invalidate a covenant that would be enforceable under governing state law, the FTC's targeted actions elevate compliance risk for companies that rely on broad, legacy restrictions, especially in sectors with heightened regulatory or consumer welfare sensitivities.
Restrictions Expand in Many States, But Divergence Remains
State legislative activity in 2025 produced a more fragmented landscape, albeit with a stronger tilt toward worker mobility. Thirteen states enacted or significantly amended restrictive covenant statutes, with two themes apparent.1
First, many jurisdictions adopted or amended compensation thresholds that bar or sharply limit noncompetes for lower‐wage or nonexempt workers, with several pegging thresholds to inflation or local wage indices that will adjust automatically in early 2026. Second, health care‐specific limitations accelerated, with multiple states banning or tightly regulating physician and medical worker noncompetes and some imposing caps on duration and geographic scope or requiring patient notification upon provider departures.
In some jurisdictions, blue‐penciling restrictive covenants remains an available path to revive an otherwise non‐enforceable noncompete, but courts are increasingly unwilling to revive overbroad noncompete provisions. The Delaware Chancery Court, for example, explicitly declined to blue‐pencil noncompete provisions in two instances this year, emphasizing its discretionary authority and the need for equality in bargaining power and noncompetes that were actually negotiated.
Furthermore, a small group of jurisdictions2 maintain near‐total bans on employee noncompetes, with narrow exceptions for executives or sales of businesses. A growing number of states3 have codified public policy limits that complicate the enforceability of out‐of‐state, choice‐of‐law and forum clauses.
But outliers to restricting noncompetes remain. Florida is the most prominent, authorizing long‐ duration, garden leave and post‐employment noncompetes for highly compensated, Florida‐based workers and mandating injunctive relief if statutory conditions for an enforceable noncompete are met. Florida's statutory expansion raises hard questions for multistate employers about cross‐border enforceability, public policy exceptions, and the treatment of remote or hybrid workforces.
Trade Secret Litigation: Intensification Continues with Large Jury Verdicts and Consequential Appellate Decisions
Trade secret litigation intensified again in 2025. Juries issued large damages awards (many of which subsequently were reduced), and appellate courts addressed consequential questions that will shape litigation strategy in 2026. The large verdicts and subsequent reversal or reduction of some of those verdicts indicate the current volatility of litigation in this space. For example, in Rex v. Intuitive, the Federal Circuit affirmed a decision by the Delaware District Court to reduce a jury award from $10 million to $1, excluding the testimony of the plaintiff's damages expert because he failed to apportion the value of the patent‐in‐suit from the plaintiff's other licensed patents. In Insulet Corp. v. EOFlow, the Massachusetts federal district court reduced a $452 million jury award regarding medical device technology to $59.4 million based on the scope of injunctive relief.
In Virginia, the intermediate Court of Appeals overturned a $2 billion jury verdict in Pegasystems Inc. v. Appian Corp., though the Supreme Court of Virginia has granted review of that decision, with the state's high court poised to address, among other issues, whether a defendant must disprove the causal link between the sales for which the plaintiff seeks disgorgement and the alleged misappropriation or whether the finder of fact can presume, in the absence of evidence to the contrary, that all of the sales for which the plaintiff seeks disgorgement were proximately caused by the alleged misappropriation.
Finally, a Federal Circuit decision vacated a $14 million award in Mondis Technology Ltd. v. LG Electronics Inc., concluding that the plaintiff's definitions of its trade secrets were insufficiently particularized or not actually secret. Collectively, these outcomes push litigants toward earlier precision, closer alignment between remedies and evidentiary proof, and more disciplined damages methodologies.
A separate, yet critical, line of cases focuses on the timing and specificity of trade secret identification. Decisions diverged on whether early, "reasonable particularity" identification is required under the Defend Trade Secrets Act (DTSA), with the Fourth Circuit (in Sysco Machinery Corp. v. DCS USA Corp.) affirming dismissal at the pleadings stage for insufficient identification, while the Ninth Circuit (in Quintara Biosciences Inc. v. Ruifeng Biztech Inc.) rejected early-stage specificity mandates, reserving the issue for later in the case. Meanwhile, a Federal Circuit ruling in Coda Development SRO v. Goodyear Tire & Rubber, which affirmed the reversal of a $64 million jury verdict, emphasized that plaintiffs must identify their trade secrets with particularity during discovery and may not rely on late supplementation to cure deficiencies. These decisions will influence forum selection, pleading strategies, discovery planning, and the calibration of protective orders and interrogatory practice. They also arguably raise the bar on pre-suit preparation, documentation, and internal governance around what, precisely, businesses consider to be trade secrets and what they need to do to ensure trade secret protection.
We also expect more courts to confirm DTSA's extraterritorial reach. In 2024, the Seventh Circuit (in Motorola Solutions, Inc. v. Hytera Communications Corp. Ltd.) held that DTSA has an extraterritorial reach so long as "an act in furtherance" of misappropriation was committed in the United States. This year we saw a court (in GTY Technology Holdings Inc v. Wonderware, Inc.) conclude that a plaintiff sufficiently alleged a DTSA claim where the misappropriation took place outside the United States because the plaintiff's former employees and the foreign defendant met in Chicago, Illinois, to conspire to take the plaintiff's trade secret information. However, another court (in Whaleco Inc. v. Shein Tech. LLC) dismissed a DTSA claim because the plaintiff pleaded no plausible facts to infer that any act in furtherance of the defendant's misappropriation took place in the United States.
Technology Frontiers: AI and Data Center Collaborations
The expansion of AI and the corresponding growth in data centers are magnifying familiar trade secret issues and creating new ones. Disputes, like OpenEvidence Inc. v. Doximity Inc., in the Massachusetts federal district court, are already testing whether prompting large language models (LLMs) to elicit system behaviors or outputs that expose confidential logic constitute permissible reverse engineering or unlawful misappropriation.
Other questions also emerge.
- To what extent do AI training or deployment practices risk waiving trade secret protection if protective measures are not robust and consistently enforced?
- How do projects at the intersection of AI and data center growth, which often involve joint development, accelerated timelines, and large-scale compilation and processing of data, respond to a legal climate accustomed to traditional trade secret hygiene?
- What are the ownership boundaries around compilations?
- What are the rules for information exchange?
- How must one label and track confidentiality designations?
- What are the proper exit mechanics for codeveloped assets?
These questions establish recurring pressure points that may alter the traditional paradigms of trade secret law in the coming years.
2026 Watchlist and Practical Expectations
These converging trends warn of a structural shift in compliance and risk management.
At the federal level, the FTC's targeted enforcement approach is likely to produce additional actions in certain industries and challenge oppressively restrictive covenants that attempt to bind lower-wage roles or rely on broad-scale boilerplate definitions. Thus, regulated and labor-constrained sectors — especially health care — should assume heightened federal attention and maintain response plans for inquiry letters, contract remediation, and other remedial undertakings.
Several state legislatures4 are poised to continue introducing or refining compensation thresholds, healthcare carveouts, notice requirements, and fee-shifting provisions, with automatic threshold adjustments taking effect early in the year in several jurisdictions. Other legislatures, like in Florida, invite conflict-of-laws contests that will play out in cross-border workforces and remote arrangements, given the broad statutory scope of permissible noncompetes.
This means employment agreement portfolios should be audited (and, as needed, rebuilt) on a jurisdiction-by-jurisdiction basis, with role-specific tailoring that ties any restraint to a legitimate business interest and a defensible duration and scope. Wage and compensation thresholds should be monitored annually where they adjust automatically by statute, and healthcare-facing provisions should be capped, disclosed, and aligned with patient access obligations where required by state law.
Appellate courts are likely to clarify at least some important issues. This could include the proper burden of proof allocation for damages and causation. Courts may also grapple with the divergence in federal precedent as to the timing and specificity required for identification of alleged misappropriation of a trade secret. And they may continue to police the overlap between money remedies and injunctions, trimming awards where an injunction provides an adequate remedy against future financial harm.
However, 2025 already has shown that trade secret programs benefit from precision. Businesses should formalize identification protocols that map specific secrets to business use cases, assign custodians, and document reasonable measures to maintain secrecy comprehensively. Litigation readiness requires early articulation of the secrets at issue, disciplined disclosure practices, and damages models that distinguish between past enrichment from future misconduct barred by the court.
On the technology front, AI-related disputes will test the line between acceptable probing of systems and misappropriation, while collaborations in data-centric infrastructure will drive case-by-case applications of ownership and secrecy doctrines. AI-intensive workflows demand reinforced access controls, auditable guardrails for model interaction, and internal policies that preempt claims of inadequate secrecy.
Across these fronts, the common denominator is discipline: tight industry- and jurisdiction-specific corporate governance and precise investigation and preparation before commencing litigation.
The following table summarizes the final takeaways:
2025 Developments and 2026 Outlook
| Domain | 2025 Key Developments | 2026 Expectations |
|---|---|---|
| Federal Enforcement | Nationwide FTC ban judicially vacated; shift to targeted, case-by-case actions; health care warning letters; enforcement beyond health care in outlier industries | Continued selective actions, with health care priority; scrutiny of broad, non-tailored restraints; emphasis on real-world competitive effects. |
| State Legislation | Thirteen states enacted or tightened rules (e.g., expanded compensation thresholds, health care carveouts, near-total bans); while Florida broadened enforceability for highly compensated workers. | More threshold updates to state noncompete laws; passage of additional health care-focused limits; continued divergence between states with or without noncompete limits; conflict-of-laws tests involving Florida and other employer-protective forums. |
| Litigation and Remedies | Large verdicts with post-trial reductions; confirmation of DTSA extraterritorial reach; federal circuit split on timing and specificity of trade secret identification in litigation; emphasis on avoiding overlap between damages and injunctions. | Appellate guidance on damages causation and apportionment; further refinement of identification standards; closer linkage between remedies and proof. |
| Technology Issues | AI disputes over prompt-based exposure and reverse-engineering analogues; data center collaborations raising ownership and secrecy questions. | More AI-centric claims; governance scrutiny for access, secrecy, and documentation; collaboration agreements tested for allocation and exit. |
Conclusion
The record from 2025 points to a new normal, defined by targeted federal enforcement, state-level divergence, heightened judicial demands on trade secret precision, and increased activity related to artificial intelligence. Rather than nationwide templates, employers and innovators will need calibrated, industry- and state-specific contracts; clear and consistently enforced trade secret programs; and litigation strategies that anticipate appellate expectations on identification, protection, damages, and remedies.
The growth of AI and data-center collaborations intensify these demands by multiplying access points and complicating ownership and confidentiality boundaries. Although the potential for a sweeping national ban on noncompetes has receded, the overall risk environment for continued reliance on noncompetes is not gone; rather, it has shifted to granular enforcement and proof. As such, there should be continued focus on the ability to rely on other mechanisms — such as trade secret enforcement and nondisclosure protocols — to mitigate the risk of competitive harm. Enterprises that simplify their agreements, are diligent in the governance of proprietary information, and align their remedies with demonstrable harms will be best positioned to navigate 2026's scrutiny across courts, agencies, and jurisdictions.
To view the full article, click here.
Footnotes
1. These newly enacted state‐law noncompete restrictions can be found in the Appendix below.
2. Those states are California, Minnesota, North Dakota, Oklahoma, and Wyoming.
3. Those states are Colorado, Louisiana, and Massachusetts.
4. Such bills are being considered in Illinois, Washington, and New York as of January 2026.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
