Four Trade Secret Developments to Follow in 2025

At a Glance

• The Seventh Circuit confirmed that the federal Defend Trade Secrets Act allows for damages on misappropriation-related sales outside the United States, so long as there was an act in furtherance of the misappropriation within the U.S. How far this reaches is something we can expect to see developed.
• From a trade secret perspective, the rapid rise of generative AI tools creates both risks and opportunities.
• Will 2025 be another year for colossally large damages awards in trade secret litigation?
• With a new administration set to take the reins in Washington, and a likely return to a state-by-state noncompete regime, trade secret law is likely to continue to gain prominence in IP-protection programs.

Significant developments are likely in 2025 in trade secret law, building on major cases and developments in 2024. Here are four areas to watch.

1. The Federal Defend Trade Secrets Act’s Extraterritorial Reach

Significantly, the U.S. Court of Appeals for the Seventh Circuit’s July 2 decision in Motorola Solutions Inc. v. Hytera Communications Corp. is likely to bring a series of adjacent legal issues into sharper focus this year. The Seventh Circuit confirmed that the federal Defend Trade Secrets Act (DTSA) allows for damages on misappropriation-related sales outside the United States, so long as there was an act in furtherance of the misappropriation within the U.S. How far this reaches is something we can expect to see developed, and key questions include the following:

• Many federal district courts have held that the DTSA applies extraterritorially. Will circuits other than the Seventh Circuit follow suit?
• Courts have found a broad array of conduct to constitute “an act in furtherance of the misappropriation” within the U.S. Will the list of courts and conduct continue to expand in 2025?
• The U.S. has long been an attractive forum for business disputes. Will the extraterritorial reach of the DTSA make it an even more attractive destination for the resolution of business disputes?
• To what extent will other countries recognize U.S. judgments based on the extraterritorial reach of the DTSA?

2. Trade Secrets and Artificial Intelligence

From a trade secret perspective, the rapid rise of generative AI tools creates both risks and opportunities. Look for developments in this space this year and the coming years. Generative AI tools can pose risks to trade secrets by challenging the elements of trade secret status.

First, trade secrets must be the subject of reasonable measures to keep them secret under Title 18 of the U.S. Code, Section 1839(3)(A). What constitutes reasonable measures to ensure secrecy in a world where powerful generative AI tools are widely available? To date, companies have employed a range of approaches to AI, ranging from wait-and-see to a wholehearted embrace of the technology. Companies are also using a variety of measures to protect confidentiality, including, for example, contractual restrictions in agreements with AI providers, as well as operational steps such as enhancing policies, providing training or restricting the availability of unauthorized tools. While existing case law provides guidance on reasonable measures generally, we expect further clarity in the coming years on how these principles apply in the context of generative AI.

Further, under Section 1839(3)(B), trade secrets must derive value from “not being generally known to, and not being readily ascertainable through proper means by” another person who can obtain value from the information. However generative AI tools may significantly enhance others’ ability to reverse-engineer information from public sources. Will this increase in technological capability affect when information is considered generally known or readily ascertainable? Does this affect what information companies can choose to make available publicly while still taking reasonable measures to protect their trade secrets?

On the opportunity side, also look for developments related to the use of trade secret status to protect AI-related innovations, including AI tools themselves, the inputs provided to AI tools and the outputs of AI models, such as products or innovations made with AI assistance. Trade secret status may be particularly well suited to protecting AI-related innovations, many of which are black boxes in an area of rapid technological change. That is especially the case given emerging guidance affecting the availability of other forms of intellectual property protection for such works.

In the last two years, both the U.S. Patent and Trademark Office and the U.S. Copyright Office have issued guidance limiting the availability of patent and copyright protection, respectively, for AI-assisted innovations.¹ In contrast to patent and copyright, trade secret protection does not have an inventorship or authorship requirement. Look for trade secret protection to be an increasingly important part of companies’ intellectual property portfolios, and for developments in the use of trade secret status to protect AI-related innovations.

3. Large Damages Awards in Trade Secret Cases

Trade secret litigation has resulted in several colossally large damages awards in recent years — 2024 was no exception with at least two awards in the hundreds of millions of dollars. Will 2025 be another such year for nuclear and thermonuclear trade secret verdicts?

These mammoth awards are typically subject to intense scrutiny on appeal. Those appeals may then substantially reduce or reverse the large awards. For example, on July 30, 2024, the Court of Appeals of Virginia reversed a $2 billion verdict in the heavily watched Appian Corp. v. Pegasystems litigation. Will more large verdicts be overturned this year?

Or will more damages awards be affirmed, like the Seventh Circuit’s partial affirmance in Motorola, in which the court upheld $407 million of Motorola’s award under the DTSA? The affirmance of that verdict may well continue to fuel the trend toward using trade secret law to protect intellectual property in the face of barriers that have been constructed in recent years that make large verdicts in patent lawsuits more difficult.

The appellate scrutiny in these cases may also serve to develop or bring clarity to open questions of law. The large verdicts likely to be appealed this year are ripe for such consideration. For example, on Dec. 3, 2024, a jury in the U.S. District Court for the District of Massachusetts awarded $424 million in Insulet Corp. v. EOFlow Co. Ltd. A key issue in the case was the proper standard for timeliness under the DTSA. EOFlow argued at trial that Insulet’s claims were barred by the DTSA’s three-year statute of limitations stemming from both parties’ participation in a conference where an EOFlow prototype was shown. Insulet, on the other hand, argued that the clock did not begin to run until it was able to inspect the EOFlow product at issue. In denying summary judgment and allowing the question to proceed to the jury, the district court rejected an inquiry notice standard in favor of a discovery rule standard. The district court acknowledged that this framing “appears to conflict with the conclusion of every court to have thus far considered the issue.” This topic seems poised to receive further attention in the anticipated appeal.

In 2025, keep an eye on this case and other high-stakes, large-verdict cases.

4. Impacts of a Potential U.S. Noncompete Ban on Trade Secret Law

The Federal Trade Commission proposed a new rule that would effectively ban noncompetes across the country; but in the July 3 Ryan LLC v. FTC decision, the U.S. District Court for the Northern District of Texas enjoined its implementation. With a new administration set to take the reins in Washington, and a likely return to a state-by-state noncompete regime, trade secret law is likely to continue to gain prominence in IP-protection programs. The incoming administration seems unlikely to continue to appeal the federal court rulings that prevented the FTC’s new rule from taking effect. And it is unlikely that the FTC, which will now have a newly appointed leader, will attempt to advance a similar noncompete ban, or some variation of it, any time soon. This raises several questions, including the following:

• In those states where noncompete agreements are allowed, to what extent will the defeat of the proposed FTC rule breathe new life into noncompetes governed by those states’ laws, and embolden courts applying those states’ laws to enforce such agreements?
• Several states currently have laws that effectively ban or significantly limit noncompete agreements. To what extent will other states follow suit?
• To what extent will the trend of some states disfavoring noncompete agreements affect the choice-of-law analysis of employers seeking to enforce noncompete agreements?
• To what extent will these developments fuel the trend of employers — particularly those who employ people across multiple jurisdictions — putting more weight on trade secret law to protect their valuable information?