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China Worries Loom in Wake of US Non-Compete Clause Ban, IAM Trade Secrets

Friday, May 10, 2024

The US Federal Trade Commission’s recent final rule banning non-compete clauses has proven to be a divisive move and has been met with applause, debate, and legal challenges. Yet the ban, should it enter into force, also has ramifications for the wider US economy, with arguments being made that the only benefit it is likely to have will be to boost China’s capabilities in high technology areas, according to the IAM article.

“Non-compete agreements are often considered the first line of defense for trade secret protection,” writes partner Shaobin Zhu. According to Shaobin, unless a company routinely runs computer forensics on departing employees’ computers or has policies and software that monitor data loss, companies may not immediately know if an employee has stolen trade secrets. In contrast, he adds, “if an employee has a non-compete agreement, it’s relatively easy to determine whether a former employee is in breach of that agreement.”

“This allows employers to promptly seek legal relief, including seeking a restraining order and/or injunction, which could also have a dual effect of protecting against any improper use or disclosure of trade secrets by a competitor, Shaobin added.”

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