Trade Secret disputes and Non-Disclosure Agreement (NDA) related lawsuits are on the rise, fueled by remote work arrangements, layoffs leading to disgruntled ex-employees, and the increasing use of generative AI. These factors make it easier for confidential corporate know-how to be misused or exposed, whether intentionally or not.
If your company hasn’t updated its protocols, policies, and protections related to proprietary information, now is the time to act—and Ludwig APC can help.
A Breeding Ground for Risk
Before the pandemic, trade secrets were largely confined to office spaces, secure servers, and tightly controlled access points. But as WorkLife News reports, today’s employees work across multiple devices—phones, tablets, personal laptops, even shared family computers—and multiple locations. Sensitive data can be stored in the cloud, in note-taking apps, or in screenshots or recordings from Zoom meetings.
Layoffs have further complicated the picture. Departing employees may still have access to proprietary files, customer lists, or internal strategies. Some may misuse this data out of frustration or a desire for retribution—but many simply don’t realize they’re carrying trade secrets with them. And once that information leaves your corporate confines, recovering it is nearly impossible.
NDAs Being Legally Tested
NDAs are designed to protect trade secrets, but they’re increasingly being tested in court.
Non-compete clauses and NDAs often get lumped together—but they serve distinct legal purposes. NDAs are designed to protect trade secrets and confidential business information, while non-competes restrict where and how someone can work after leaving a company.
In 2024, the Federal Trade Commission announced a rule banning non-compete agreements nationwide. Although its implementation remains in limbo due to legal and internal challenges, the move has sparked broader scrutiny of employment contracts, especially those that blur the line between protecting proprietary information and stifling career mobility.
Even if non-competes are struck down, NDAs remain enforceable as long as they’re narrowly tailored. But if an NDA is drafted so broadly that it functionally blocks your former employees from working in their field, it could be challenged in court under the same scrutiny applied to non-competes.
That’s why businesses must be precise with their NDAs. Vague language, outdated terms, or failure to define what counts as a “trade secret” can expose your agreements to legal risk. Working with experienced counsel like Ludwig APC ensures your contracts protect proprietary information without overstepping the bounds of enforceability.
AI and Trade Secret Exposure
Generative AI tools such as ChatGPT have introduced a new layer of complexity to the protection of trade secrets. Employees may unknowingly input proprietary data into public AI platforms, which can then be absorbed into training models. As WorkLife News notes, this creates a risk of trade secrets being exposed or replicated outside the company’s control.
Even internal AI systems pose challenges. Autonomous tools can scan and replicate sensitive data, making it harder to track ownership or misuse. Businesses must now consider how AI interactions—both internal and external—impact trade secret integrity.
Growing Businesses May Be Especially Vulnerable
Startups and growing companies often operate with lean teams, rapid onboarding practices, and frequently shifting technology platforms. Their agility is a strength—but it also means trade secret protection could be overlooked. Without formalized policies, consistent training, and digital safeguards, sensitive information could be at risk.
Growing businesses also frequently collaborate with freelancers, contractors, and third-party vendors. Each new relationship introduces the potential for trade secret exposure. If NDAs aren’t airtight and trade secrets aren’t clearly defined and tracked, enforcement becomes extremely difficult.
Ludwig APC Can Help
Whether you’re drafting airtight NDAs, responding to a breach, or navigating complex litigation, the Ludwig APC team is here to protect your innovation and growth. Here are several best practices to consider.
Audit Your Trade Secrets
- Identify what qualifies as a trade secret in your organization.
- Classify and prioritize based on value and risk.
Strengthen NDAs and Confidentiality Agreements
- Make sure your NDAs spell out what counts as confidential, how that information should be marked or labeled, and when consent is needed to share it.
- Tailor agreements for remote work scenarios and third-party interactions.
Implement Digital Safeguards
- Use secure cloud platforms with access controls and encryption.
- Monitor data transfers and flag unusual activity.
Train Employees Regularly
- Educate staff on what constitutes a trade secret and how to handle it.
- Include remote work best practices and AI interaction guidelines.
Restrict AI Tool Usage
- Prohibit entering sensitive data into public AI platforms.
- Establish internal policies for AI use and prompt engineering.
Create a Response Plan
- Prepare for potential breaches with a legal and technical action plan.
- Include forensic investigation, notification protocols, and litigation strategy.
Let’s Work Together: Global Experience, Personal Focus
Ludwig APC can help you safeguard your trade secrets and proprietary information before they’re compromised. Contact Ludwig APC today at (619) 929-0873 or consultation@ludwigiplaw.com to arrange a free consultation to discuss your needs.
