The Long Shadow Of Inevitable Disclosure

Category: Print Issues

Stacey Dogan & Felicity Slater

Volume 30

, Issue 3

30 GEO. MASON L. REV. 655 (2023)

Introduction

The Inevitable Disclosure Doctrine (“IDD”) is one of the most controversial and poorly understood doctrines in trade secret law.¹ The doctrine permits courts to block employees from taking a new position even in the absence of a contractual non-compete commitment, based on the notion that they cannot help but use or disclose their former employer’s trade secrets in the new job.² Courts apply the IDD most often in cases involving senior executives or others with intimate knowledge of time-sensitive, competitively important information, relying on it to intervene in the tricky balancing act between employers seeking to protect their trade secrets and highly skilled employees who want the freedom to change jobs.³ The IDD is so contentious because it allows courts to impose un-bargained-for restrictions on employment mobility, thus implicating a heightened version of the concerns raised by other restrictive devices, such as non-compete and no-poach agreements.⁴

The ongoing debate over the IDD sits within a broader reckoning over the wisdom and consequences of a whole class of laws that allow employers to block workers from taking new jobs. Such restrictions on mobility, which most commonly come in the form of express contractual non-compete clauses, “have the potential to profoundly impede individual workers’ access to economic opportunity . . . [and thus] pose an especially high risk of economic harm to the individual employees who sign them, as well as the broader harms to society that flow from any private agreement in restraint of trade.”⁵ A growing awareness of these harms has brought non-compete clauses under increasing scrutiny in recent years. A 2020 letter to the Federal Trade Commission (“FTC”) signed by nineteen state attorneys general, for example, noted that non-compete clauses can be abused by employers to prevent their employees from seeking out more attractive employment opportunities, rather than to protect trade secrets or to vindicate other legitimate corporate interests.⁶ When considering low-wage workers, who lack the bargaining power to resist onerous contract terms and whose earning potential demonstrably suffers when they’re blocked from considering alternative jobs, these concerns are especially acute.⁷ In response to these and related concerns, in January 2023, the FTC proposed a nationwide ban on non-competes.⁸ In its Notice of Proposed Rulemaking, the agency noted evidence that non-compete clauses have had negative effects on competition in labor, product, and service markets, and proposed treating them as an “unfair method of competition” under section 5 of the FTC Act.⁹

Even before the FTC’s action, non-compete agreements had faced increasing scrutiny in the states. Since 2007, myriad state legislatures have amended their laws to limit the use of non-competes in various contexts.¹⁰ This movement has seen renewed energy in recent years. Illinois’s 2021 amendments to its Freedom to Work Act, for example, prohibit non-compete agreements for employees with annual earnings of $75,000 or less¹¹ and for most workers covered by collective bargaining agreements.¹² A 2018 Massachusetts law forbids the use of non-compete agreements for student interns, minors, and employees classified as non-exempt under the Fair Labor Standards Act (“FLSA”).¹³ A recent amendment to Oregon law tightens the duration of non-compete agreements and allows them only for exempt employees earning over $100,533 per year.¹⁴ Washington, D.C. limits non-competes to professionals earning $150,000 or more ($250,000 for doctors).¹⁵ Several new laws strengthen employee protections by demanding specific consideration, advance notice,¹⁶ or more precise articulation of the business interest underlying any non-compete.¹⁷ While these and other state laws have mostly limited the terms of non-compete agreements and the types of employees that they cover, California, North Dakota, and Oklahoma have gone further and treat all non-compete agreements—with certain narrow, enumerated exceptions—as unenforceable.¹⁸

This disparity in approach to employment restrictions reflects a more general divergence over core philosophical and economic questions about the employment relationship and its role in the economy. California’s commitment to employee mobility, which dates back to the late nineteenth century, began as a principle to protect “open competition” and employees’ autonomy,¹⁹ but has evolved into a model for an innovation-driven startup ecosystem. The knowledge spillovers that result from fluid movement between firms have been credited with spurring and sustaining California’s start-up economy.²⁰ The skepticism of non-competes thus has economic dimensions that go beyond a desire to protect vulnerable workers against exploitation. Even so, the strict ban on non-competes is the exception: at least for now,²¹ the majority of states, operating within different ecosystems and traditions, enforce non-compete agreements that meet the state’s standard for “reasonableness” and satisfy requirements such as notice, consent, and consideration.²² Generally, “reasonableness” turns on whether the employee has access to trade secrets, confidential information, or goodwill that could be threatened if she went to work with a competitor, and whether the agreement’s duration and geographic scope are tailored to protect those interests. While some of these states have exempted certain workers from the reach of non-competes,²³ all of them embrace the general principle that (some) employees can contractually commit to limit their employment options, at least for a time. When a court enjoins an employee from working in violation of a non-compete agreement, it is thus enforcing the terms of a contract that is deemed valid under the relevant state law.

The IDD, in contrast, does not involve a contractual promise not to compete. In IDD cases, the employee is usually bound by a different contract—a trade secret non-disclosure agreement—in which the employee promises not to use or disclose trade secrets or other confidential information obtained in the course of the employment.²⁴ Injunctions in standard trade secret cases forbid the use or disclosure of trade secrets in situations where such use is imminent, or order the return or destruction of materials that have already been divulged. A typical trade secret injunction involving a former employee, for example, might require the employee to relinquish confidential documents or customer lists from the former employer, to prevent their use for the benefit of a competitor.²⁵ Whereas non-compete agreements involve duties with respect to employment relationships, trade secret non-disclosure agreements involve duties with respect to information. The IDD conflates these two types of duties and imposes a restriction on employment without even the fiction of a consideration-based contract to that effect. As a result, even in states that enforce contractual non-compete agreements, the IDD has proven controversial. The doctrine is used sparingly in jurisdictions that adopt it,²⁶ and outright rejected in others.²⁷ The majority of states, however, have either not yet addressed the doctrine or discussed it in equivocal or confusing ways, leading to uncertainty about the doctrine’s viability across jurisdictions.²⁸

The confusion over the IDD arises from a combination of definitional ambiguity regarding the doctrine itself, and widespread use of IDD-like language in related but distinct doctrinal contexts. As a definitional matter, courts appear uncertain about whether the IDD relates to the merits of a trade secret claim, the appropriate remedy, or both.²⁹ Relatedly, they often sidestep the question of whether the IDD is limited to situations involving injunctions against employment.³⁰ The prototypical IDD case involves an injunction against future employment to avert the imminent threat of trade secret misappropriation. In the classic PepsiCo, Inc. v. Redmond³¹54 F.3d 1262 (7th Cir. 1995). case, for example, a senior sales executive in a sports drink division had accepted a similar role at a direct competitor.³² The Seventh Circuit upheld the district court’s conclusion that the employee’s “extensive and intimate knowledge” of the former employer’s strategic goals for the upcoming year would inevitably shape his strategic advice at the competing firm, making an act of misappropriation unavoidable.³³ This conclusion was buttressed by the trial court’s finding that neither the employee nor his new employer had given reason to trust that they would make efforts to avoid use of the information.³⁴ Inevitability thus played a role in the court’s decision on the merits of the trade secret misappropriation claim. It also shaped the decision as to remedy: despite recognizing “some merit” in the employee’s charge that the injunction was overbroad, the court pointed to the inevitability of disclosure as a reason to uphold a court-imposed five-and-a-half-month delay in the employee’s assumption of his new job.³⁵

In the wake of PepsiCo, courts have invoked the IDD in a wide variety of contexts, but have rarely applied it to the prototypical case involving both a finding that trade secret misappropriation is inevitable but has not yet occurred, and an injunction against employment.³⁶ Under that interpretation, only a handful of states have actually adopted the doctrine, rather than discussing it in dictum.³⁷ Similarly, only two states have definitively rejected the doctrine.³⁸ Even so, the case law is littered with ambiguous or imprecise references to the IDD, which has blurred the contours of the doctrine and led some courts to view it as a more general tool for considering “inevitability” in trade secret (and, indeed, non-compete) cases.³⁹ Indeed, the vast majority of courts have invoked the IDD in this way, without conclusively adopting or rejecting it. Some courts, for example, discuss the doctrine to support their conclusion that an employee’s past misappropriation suggests that future misappropriation will likely also occur, thus mingling findings about actual and threatened misappropriation.⁴⁰ Other courts rely on the doctrine to find a likelihood of misappropriation, but enter an injunction focused on use of trade secrets, rather than the employee’s ability to take a new job.⁴¹ Still other courts purport to invoke the doctrine in cases involving non-compete or non-solicitation agreements—contexts in which inevitability may well bear upon the “reasonableness” of the contract, but the IDD as a doctrine is unnecessary and indeed irrelevant to the merits of the case.⁴² Compounding all of this confusion, courts frequently discuss the IDD approvingly in dictum even while finding it inapplicable to the case before them,⁴³ leaving tantalizing tea leaves for employers, employees, and scholars trying to gauge the state’s position on the question at the heart of the IDD: whether a risk of future misappropriation can justify an injunction against employment, even in the absence of a non-compete.

It is this feature of the IDD—its function as a judicially constructed, non-bargained-for limitation on employee mobility—that makes it a game changer in jurisdictions that adopt it. In states that apply the IDD in its purest form, the risk of an injunction against employment undoubtedly shapes employees’ risk-benefit calculations as they consider potential new jobs. Whereas employees in non-IDD states can pursue opportunities with confidence as long as they have not signed a contract not to compete, in strong-form IDD states—and those that have flirted with the doctrine—employees (and their future employers) must factor the risk of an injunction into the calculus.⁴⁴ Research has demonstrated that a state’s adoption (or perceived adoption) of the IDD shrinks executive mobility within the state.⁴⁵ Given the connection between untrammeled employee mobility and economic dynamism, this forced stability may impede innovation and economic growth.⁴⁶ The slipperiness of the IDD as a doctrine—and the uncertainty about its validity and scope in individual states—thus has real consequences for individuals, businesses, and the broader economy.⁴⁷ Particularly in a moment of increased concern about limitations on employee mobility, the IDD requires attention and clarification to minimize those effects.

Indeed, as states and the federal government move toward narrowing or eliminating contractual non-compete clauses, they fortify the case for rejecting the IDD altogether. If the legislature has determined that employers cannot restrict certain classes of employees through an express contract, it cannot mean to allow them to end-run that restriction by asserting a claim under trade secret law. On the other hand, if the law does allow certain employees to be constrained by non-competes, their employers’ failure to obtain such an agreement indicates either neglect or an inability to obtain the employees’ consent to the restrictive term. Either way, applying the IDD would undermine the existence and limits of the specialized rules governing non-compete agreements. State legislatures can resolve this conflict by amending their trade secret law to prohibit employment-limiting injunctions, as Congress did in the federal Defend Trade Secrets Act of 2016.⁴⁸

In addition to its threat to employee interests, the muddled state of the IDD also complicates efforts to study the doctrine and measure its impact. In finance and economics journals alone, the past decade has generated at least three different lists of the dates on which various states have adopted or rejected the IDD, with disparities from one list to the next.⁴⁹ While the details of these disparities vary from chart to chart (and state to state), at least some of them result from an apparent assumption by some scholars that a court’s discussion of “inevitable disclosure,” as a factual matter, means that the court has adopted or rejected the IDD as a legal doctrine.⁵⁰ Clarification about the meaning and consequences of the IDD would enable a more informed and accurate assessment of its prevalence and economic effect.

This Article has three goals: to provide an accurate picture of the role of the IDD in state laws across the United States; to demonstrate the economic costs of the current disarray; and to propose a framework to fix the problem. We focus less on normative critique of the doctrine itself, as others have ably covered that ground.⁵¹ Instead, we seek to limit the negative consequences that have resulted from its ambiguous penumbra.

We begin in Part I with an introduction to trade secret and non-compete law, which provide a legal backdrop to the IDD. Part II turns to the doctrine itself. It shows that, while “inevitability” pervades judicial opinions in trade secret and non-compete cases, courts only rarely use it as a basis to enjoin employment in trade secret cases—the classic IDD case and the one that raises the greatest concerns about chill. Even so, the frequent casual and non-specific reference to the doctrine has created uncertainty about its definition and status under various states’ laws. That uncertainty has led to a mistaken impression that the IDD is widespread,⁵² when in fact only a handful of jurisdictions have adopted its most extreme form, and even those states rarely apply it. Part III reviews recent empirical research that demonstrates that executive mobility suffers in states where the IDD appears viable. Given the individual and economic costs associated with restraints on employee mobility, it’s important that states clarify their position on the IDD. Part IV proposes mechanisms to do so. The most straightforward option is for state legislatures to address the doctrine in connection with their reform of non-compete law and other mobility restraints. The rationales supporting the move to narrow or block non-compete enforcement apply even more forcefully to the IDD. As a result, we suspect that state legislatures confronted with the issue would find the IDD incompatible with state law or would limit it to extreme cases.⁵³ Either way, employees would benefit from clarity about whether and when employers can sue to limit their employment options in the absence of a non-compete. Even without legislative action, however, courts can help by using more rigor and precision in their treatment of the IDD. We propose an analytical framework to provide greater clarity about what the doctrine means and what function it serves in a particular state’s law, to limit its most pernicious effects. The Article then concludes.

I. The Law of Trade Secrets and Non-Compete Agreements

Because the IDD sits near the intersection of trade secret law and the law governing enforcement of non-compete agreements, this Part offers an overview of those areas of law. Understanding the scope and the limits of employers’ (and employees’) rights under these legal regimes helps to explain the pressure for courts to recognize the IDD. As we will see, traditional trade secret doctrine seeks to protect employers’ secret information, while at the same time preserving the ability of employees to sell their skills in the marketplace. Non-compete agreements, in contrast, involve explicit promises by employees not to accept certain jobs in competition with their former employer. The assumption (or in most cases, the legal fiction) is that employees enter into such restrictive agreements in exchange for other valuable benefits, and that non-compete agreements protect legitimate business interests of the employer and do not unduly restrict employees from using their general skills.⁵⁴ As we discuss below, however, each of these assumptions has come under increasing scrutiny in recent years. Critics and regulators have questioned whether non-compete agreements are indeed freely bargained for and have scrutinized their impact on labor markets, product markets, and the broader economy. In doing so, they have found a troubling mismatch between the purported purpose of noncompetition agreements and their real-world effects, prompting a re-evaluation of non-compete doctrine at both the state and federal level. This process has important implications for the IDD.

A. Trade Secret Law

Trade secret law provides a tool for parties to protect against disclosure and use of their valuable, closely held confidential information. Although Congress passed a federal trade secrets law—the Defend Trade Secrets Act (“DTSA”)—in 2016,⁵⁵ trade secret law is principally a creature of state law, where it has its origins.⁵⁶ Employment-related trade secret disputes reflect a persistent struggle between employers’ interest in protecting their secrets and employees’ desire for economic self-determination. While recognizing that employees often have duties with respect to trade secrets, both state and federal law try to enforce those duties without unduly interfering with employees’ employment prospects. As a result, successful trade secret plaintiffs may be entitled to an injunction against the use or disclosure of their secret information, but trade secret injunctions usually do not limit a former employee’s ability to seek new employment.⁵⁷ The federal DTSA is explicit on this point, authorizing courts to grant injunctions “to prevent any actual or threatened misappropriation,” but only so long as such injunctions do not “prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows.”⁵⁸ While the Uniform Trade Secrets Act (“UTSA”) lacks such an express prohibition, most states’ case law reflects a strong presumption against employment-related injunctions. Occasionally, however, courts have stretched the law to meet the perceived equities of the case before them, and have granted injunctions prohibiting an employee from taking a new job. The IDD reflects one such extension, which we will explore in Part II. We begin here with the basics: trade secret law’s traditional subject matter, scope, and remedies.

Today, most states have adopted some version of the UTSA,⁵⁹ with just one state, New York, still grounding its state trade secret doctrine in state common law.⁶⁰ The UTSA defines “trade secret” as confidential business information that (a) provides a business with a competitive advantage because of its secrecy, and (b) is the subject of reasonable efforts to maintain that secrecy.⁶¹ Courts in New York use the definition of trade secret from the Restatement of Torts as “any formula, pattern, device or compilation of information which is used in one’s business, and which gives [one] an opportunity to obtain an advantage over competitors who do not know or use it.”⁶² Like other states, New York law puts secrecy at the core of the definition, insisting that “a trade secret must first of all be secret.”⁶³ In other words, every state’s trade secret law excludes generally known business information from the definition of trade secret. Nor does the law protect information that the owner treats with casual disregard; only when businesses actively work to keep the information secret can they qualify for trade secret protection.⁶⁴ The “reasonable efforts” requirement serves two functions: it ensures that those seeking trade secret protection have earned the right to that protection, by acting within reason to protect themselves first;⁶⁵ and it gives notice to employees (and others) of which aspects of the trade secret holder’s business fall within the scope of a duty not to disclose.⁶⁶

Trade secrets can be immensely valuable, and companies will go to great lengths to protect them. At the same time, not all business information meets these two requirements, and courts are skeptical of attempts by businesses to protect non-secret and non-proprietary information as trade secrets.⁶⁷ Overly broad trade secret claims can impede employees and others from applying their general skills and knowledge to new tasks, which not only harms the employees’ autonomy and earning power, but can also hamper the kind of knowledge spillovers that often spur innovation.⁶⁸ Given these costs, and the difficulty that courts have in distinguishing between business information that does or does not qualify as a trade secret, some scholars have urged courts to delineate a negative space of content that trade secret claims cannot reach—that is, a “public domain for trade secret law.”⁶⁹

To make out a trade secret misappropriation claim, plaintiffs must demonstrate that they possessed a trade secret, that the defendant improperly obtained, used, or disclosed the trade secret (or threatens to do so), and that they were (or will be) damaged as a result of the defendant’s conduct.⁷⁰ The clearest case of an “improper use” is one that breaches a duty, such as a fiduciary duty, or a contractual agreement, such as a trade secret non-disclosure clause in an employment contract.⁷¹ In the employment context, common disputes involve a departed employee accused of using their former employer’s confidential information while employed by a competitor.⁷²

Both the UTSA and the DTSA (discussed below) authorize courts to enjoin “actual or threatened misappropriation,” and thus target continuing misappropriation that has already occurred as well as the threat of misappropriation that has not yet taken place. In evaluating claims of “threatened” misappropriation, courts generally apply an exacting standard, requiring plaintiffs to show a specific “threat, manifested by words or conduct, that would indicate imminent misuse.”⁷³ It is not enough that the defendant has knowledge of the information and an incentive to use it against the former employer’s interests.⁷⁴ In the context of employment relationships, courts trust that employees can fulfill their duty not to use or disclose trade secrets, even when they go to work for a competing employer.⁷⁵ As a result, they rarely find “threatened” misappropriation in the absence of evidence that the employee has absconded with documents or files, demonstrated an intent to misuse secrets, or is otherwise acting in bad faith.⁷⁶ The IDD, as discussed below, is sometimes treated as a variant of “threatened misappropriation.”⁷⁷

Not surprisingly, the line between trade secrets, on the one hand, and an employee’s general knowledge and skills, on the other, plagues the inquiry into misappropriation. Trade secret defendants commonly contend that the information they supposedly misappropriated was not a trade secret, but rather falls “within the realm of general skills and knowledge in the industry . . . .”⁷⁸ Courts must make nuanced inquiries to determine whether a piece of information qualifies as a trade secret, which makes it hard to dismiss trade secret lawsuits at the preliminary injunction stage. Employees bound by trade secret non-disclosure agreements thus face a risk in taking positions with their employer’s competitors. Even employees who have no intention of misusing secret information can face legal action by former employers, based on broad assertions about their use of information learned or acquired during their employment. Even when courts ultimately resolve the claim in the employee’s favor, the time, expense, and vexation of litigation may well chill the decision to change jobs.

The UTSA provides an arsenal of remedies for successful trade secret plaintiffs, including injunctive relief,⁷⁹ actual damages,⁸⁰ and punitive damages and attorneys’ fees in cases of “willful and malicious” misappropriation.⁸¹ Although the UTSA contemplates injunctions only against “misappropriation” (and does not mention “employment”), it does not—unlike the DTSA—explicitly prohibit courts from imposing employment-related injunctive relief.⁸² The case law, however, shows a strong commitment to employee mobility: injunctions in trade secret misappropriation cases generally target use of the trade secret without jeopardizing the employee’s ability to continue to sell their labor in the marketplace.⁸³

The reluctance to grant employment-related injunctions in trade secret cases reflects two interrelated philosophical commitments: one intrinsic to trade secret law, and another focused on the relationship between trade secret and non-compete law. First, as a matter of trade secret principles, it reinforces the law’s emphasis on duties with respect to information, while leaving alone individuals’ right to practice their livelihood by utilizing their general knowledge and skills. The law assumes that individuals can fulfill their duties to maintain the confidentiality of information, even after joining a competitor that might benefit from knowledge of the secret.⁸⁴ Second, it serves a kind of channeling function, by forcing employers to use non-compete agreements as the exclusive device for limiting their workers’ future options.⁸⁵ In jurisdictions that enforce non-compete agreements, this channeling function ensures that restrictions on employment meet the state’s requirements for enforcement of such terms, and prevents the employer from imposing “an after-the-fact non-compete agreement to enjoin an employee from working for an employer of his or her choice.”⁸⁶ In jurisdictions that don’t enforce non-compete agreements, courts recognize that granting employment-related injunctions in trade secret cases would effectively abrogate that policy choice, by allowing employers to achieve through non-negotiated trade secret remedy what they could not legally accomplish through contract.⁸⁷

B. The DTSA & Federal Trade Secrets Law

The DTSA, passed in 2016, provides private plaintiffs with a federal civil cause of action for trade secret misappropriation.⁸⁸ The DTSA does not preempt state trade secret laws, but provides an additional option for plaintiffs whose trade secrets relate to interstate commerce.⁸⁹ Plaintiffs may bring DTSA claims in either state or federal court,⁹⁰ where plaintiffs may sue under the relevant state law, the DTSA, or both.⁹¹ Courts have interpreted the DTSA to apply to misappropriation both in and outside of the United States.⁹² This makes it a powerful tool for U.S.-based plaintiffs seeking relief for misappropriation that occurs in foreign jurisdictions. The DTSA authorizes a slate of remedies, including injunctive relief and damage awards that may be enhanced “if the trade secret is willfully and maliciously misappropriated.”⁹³ Thus, while the DTSA does not radically alter the U.S. trade secrets legal terrain, it elevates misappropriation claims by affording them a federal venue and signals Congressional concern about the theft of commercial secrets.

Most relevant for the purposes of this paper, the statutory language appears to preclude injunctions against employment in DTSA cases. The remedies provision of the statute provides:

(3) Remedies.—In a civil action brought under this subsection with respect to the misappropriation of a trade secret, a court may—

(A) grant an injunction—

(i) to prevent any actual or threatened misappropriation described in paragraph (1) on such terms as the court deems reasonable, provided the order does not—

(I) prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows; or

(II) otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business;

(ii) if determined appropriate by the court, requiring affirmative actions to be taken to protect the trade secret, and

(iii) in exceptional circumstances that render an injunction inequitable, that conditions future use of the trade secret upon payment of a reasonable royalty for no longer than the period of time for which such use could have been prohibited . . . .⁹⁴

The italicized language is clear on its face: injunctions must not “prevent a person from entering into an employment relationship.”⁹⁵ And while courts may place “conditions” on a new employment relationship—by, for example, restricting the employee from working on a particular technology, or from participating in strategic planning in markets that directly overlap with the former employer—even these restrictions require evidence of actual or threatened wrongdoing (with “threat” based on facts rather than speculation).⁹⁶ Regardless of how much knowledge the employee might have about her former employer’s products and operations, her mere possession of such knowledge cannot justify an injunction that limits her future employment prospects. At least one district court, in Oregon, has recognized that the DTSA precludes the use of the IDD to justify injunctions against employment.⁹⁷

Despite this unambiguous language, however, a handful of opinions have invoked the IDD in DTSA cases, leading to some confusion over the doctrine’s viability as a matter of federal trade secret law.⁹⁸ These cases generally involve claims under both state and federal law, with the court blending the two in its substantive analysis and failing to address the limiting language of the DTSA.

For example, in Molon Motor and Coil Corp. v. Nidec Motor Corp.,⁹⁹ the plaintiff, Molon, brought both DTSA and Illinois state trade secrets claims against a former employee, Manish Desai, alleging that he had used and was continuing to use its trade secrets at a new job.¹⁰⁰ In responding to Desai’s motion to dismiss, the Illinois district court invoked the IDD to conclude that “Molon’s allegations . . . are enough to trigger the circumstantial inference that the trade secrets inevitably would be disclosed by Desai.”¹⁰¹ The court did not distinguish between Molon’s DTSA and Illinois state law claims, creating the potential for confusion about whether the IDD applies under the DTSA. This ambiguity has persisted in subsequent Illinois federal case law.¹⁰² In other states, courts have sometimes combined DTSA and state trade secret analysis in rejecting IDD claims on the merits, often expressing skepticism about the doctrine but failing to rule it out entirely under either state or federal law.¹⁰³

To the extent that these opinions (and others like them) suggest that the DTSA may provide the basis for an injunction against employment, they are flatly inconsistent with the statutory language, and we trust that appeals courts will correct the error in time. To the extent that the opinions blend analysis of state and federal trade secret law and fail to distinguish between the remedies available under each regime, they reflect sloppy reasoning but don’t necessarily commit legal error in interpreting the federal statute. In other words, if a court finds threatened misappropriation under both state law and the DTSA, and the state has adopted the IDD, an injunction against employment may be legally authorized as a matter of state law, even though the DTSA precludes it. This is because the DTSA explicitly declines to alter state trade secret law, including states’ position on the IDD.¹⁰⁴ Congress’s decision not to preempt state trade secret or employment law means that individual states retain their ability to decide the IDD’s status under their laws.¹⁰⁵

* * *

This brief survey of trade secret law underscores several key points that inform our discussion of the IDD. First, trade secret doctrine provides circumscribed protection to discrete, firm-specific information that is both secret and guarded by its owner. It does not generally allow courts to constrain employee mobility or to interfere with a former employee’s ability to use the general skills and knowledge that she developed in the workplace, even though those skills and knowledge may have come at the employer’s expense. Courts in trade secret cases repeatedly emphasize the importance of allowing employees to change jobs and to realize the benefits of their general knowledge and skills.

Second, to make a successful case for trade secret misappropriation, companies must prove that their trade secrets have already been wrongly misappropriated, or that the defendant’s behavior demonstrates that misappropriation is about to occur. The law generally trusts that people have the capacity to meet their commitment to avoid using protected secrets, even in circumstances that might invite such use.¹⁰⁶ But when a party signals an intention to betray that trust, courts do not hesitate to bolster the contractual commitment with a court-ordered mandate not to use or disclose. Even so (and third), as a matter of remedy, traditional trade secret injunctions focus on use or disclosure of information, rather than prohibitions on employment. The IDD’s principal departure from traditional trade secret law, in jurisdictions that have adopted it, is to expand the available remedies to include injunctions against employment. Because the IDD allows courts to enjoin former employees from accepting new employment under the theory that they will “inevitably” disclose their former employer’s trade secrets in their new position, it poses a distinct threat to the personal and economic freedoms of individual employees.

C. Non-Compete Agreements

Employers have been attempting to constrain their employees’ post-employment behavior for centuries, and scholars have located some of the earliest instances of non-compete agreements in English contracts dating back to the 1700s.¹⁰⁷ While English courts deemed these earliest non-compete agreements “per se void as against public policy,” by the 1890s they were beginning to enforce these clauses regularly on freedom of contract grounds.¹⁰⁸ Today, employment agreements commonly include non-compete clauses,¹⁰⁹ which require employees not to work for a competitor of their employer for some period of time after their employment has ceased. These agreements are powerful because they place contractual restrictions on an employee’s future behavior, even after the employment relationship has ended. Such clauses are reassuring to employers who worry about former employees absconding with their valuable trade secrets, on-the-job training, and consumer good will, but can have a negative impact on individual employees’ ability to choose the job that maximizes their economic prospects and personal fulfillment; the friction that results from these agreements, moreover, can serve as a drag on the broader labor market and economy. For this reason, non-compete agreements “have been contentious in the common law for centuries,”¹¹⁰ and courts have long evaluated them for reasonableness, rather than applying the traditional contract interpretation standard that focuses on the intent of the parties.¹¹¹

In the United States, employment contracts—including non-compete agreements—are principally governed by state employment law, although federal law imposes its own requirements in areas such as wages and hours,¹¹² health and retirement benefits,¹¹³ workplace safety,¹¹⁴ and antitrust and unfair competition.¹¹⁵ Although industry-wide non-compete practices have sometimes caught the attention of antitrust regulators,¹¹⁶ the enforceability of non-compete agreements has historically been addressed by state law. Most states give non-competes less deference than other forms of contract because of their impact on employee mobility, individual autonomy, and the balance of power between employees and employers. Three states—California, North Dakota, and Oklahoma—have endorsed complete employee mobility, finding non-compete agreements unenforceable except in limited circumstances, such as the sale of a business.¹¹⁷ Most states, however, have tried to craft a balance between employer and employee interests, and will enforce non-compete agreements that are “reasonable” as defined by the state’s statutory and common law.¹¹⁸ For example, Massachusetts will enforce non-compete agreements that are: “(1) necessary to protect a legitimate business interest, (2) reasonably limited in time and space, and (3) consonant with the public interest.”¹¹⁹ In Idaho, non-compete agreements “are . . . disfavored and will be strictly construed against the employer.”¹²⁰ Idaho courts will enforce these agreements only against “key employee[s]” and only if the restrictions are “1) . . . ancillary to a lawful contract, 2) . . . supported by adequate consideration, and 3) . . . consistent with public policy.”¹²¹ Colorado law declares non-compete agreements generally void, but provides a fairly broad set of exceptions, including agreements designed to protect trade secrets and certain investments in employee training and education, as well as agreements that bind “executive and management personnel” and their staff.¹²² Such agreements must be “reasonable and narrowly drafted.”¹²³

States that enforce some non-compete agreements do so at least in part because they accept them as legitimately bargained-for contracts between consenting parties. Under this conception, employees accept restrictions on their future employment mobility in exchange for employment benefits, such as a higher salary or a more attractive benefits package.¹²⁴ While this image may well describe some employment relationships, there is reason to doubt that it captures the dynamics underlying non-compete agreements generally. First, for many workers, this imagined bargaining process never occurs.¹²⁵ Instead, many employees sign their employment agreements without engaging in any negotiation at all over salary or other terms of employment.¹²⁶ The data suggests that these employees lack, or feel that they lack, the legal sophistication or bargaining power to engage in such negotiations, and at least 20% of employees who reported not negotiating said that they were worried about “creating tension with their employers or simply being fired if they try to negotiate.”¹²⁷ This is particularly true for low-wage workers, who may not feel they possess any real bargaining power.¹²⁸ Second, as Rachel Arnow-Richman has demonstrated, many employers do not even allow the fiction of a bargaining process, because they require employees to sign non-compete agreements after they have accepted the job, and without any offer of enhanced benefits or pay.¹²⁹ Even outside the context of low-wage workers, economists, policymakers, and legal scholars have begun to question the economic role of non-compete agreements, particularly in the context of fast-paced innovation economies. In her 2013 book Talent Wants to Be Free, Orly Lobel surveys the literature and concludes that states with restrictive non-compete laws perform poorly on a number of metrics relative to states that enforce non-competes rarely or not at all.¹³⁰ Indeed, she goes further to contend—perhaps paradoxically—that the benefits of employee mobility flow to all firms in a fluid market, including those that may feel stung by the loss of top talent in the short term. Some of these benefits come from the growth of a firm’s social capital as its alumni disperse within and across industries and retain connections with their former colleagues; some arise from the observed increase in complementary technological innovation as employees move between firms; others result from “boomerang hiring” as firms rehire departed employees; and more generally, all firms gain from the collective buzz that occurs in a dynamic geographic community of thinkers, creators, and entrepreneurs.¹³¹

A 2015 study by Matt Marx, Jasjit Singh, and Lee Fleming provides empirical support for the theory that enforcement of non-compete agreements can have a negative impact on entrepreneurship and innovation within a state.¹³² The authors took advantage of the “natural experiment” that occurred when, in 1985, the Michigan legislature accidentally abandoned the longstanding state law against enforcement of non-competes.¹³³ Earlier studies had shown that the legal change not only shrunk employment mobility within the state, but also dampened the diffusion of knowledge and innovation.¹³⁴ The 2015 project extended these findings to demonstrate that Michigan’s change of law triggered a “brain drain” of innovators to more mobility-oriented states. The departing workers, moreover, were often the most “collaborative” employees, “whose work has greater impact.”¹³⁵ As the authors point out, “Such workers may be particularly painful for a state to lose, given their roles both as ‘carriers’ of the knowledge involved in spillovers and as sources of entrepreneurial activity.”¹³⁶ The Marx study is not definitive; another recent study by the Federal Reserve Bank of Philadelphia found no negative impact on the start-up ecosystem from the enforcement of non-competes in Pennsylvania.¹³⁷ Even so, the available economic evidence suggests at least a possible inverse relationship between employee mobility restrictions and economic dynamism within a state.

For these reasons and others, employee advocates, scholars, and policymakers have begun to question the value of non-competes and the wisdom of state laws that enforce them.¹³⁸ Recent years have seen an uptick in government challenges to non-competes, particularly those that bind low-wage workers. The Illinois attorney general’s office, for example, sued the fast-food chain Jimmy John’s for a standard franchisee policy that required “all employees . . . irrespective of title or job function” to agree not to work for a competing sandwich shop for two years after leaving their employment with a Jimmy John’s franchise.¹³⁹ The attorney general challenged the non-compete agreements as “unreasonable, unconscionable, and unenforceable” under Illinois law, because they served no legitimate business interest, were not supported by consideration, and were not narrowly tailored to any defensible corporate goal.¹⁴⁰ Jimmy John’s ultimately settled the lawsuit by agreeing not to enforce the restrictions and promising to inform its employees that the agreements were unenforceable.¹⁴¹

In addition to litigation challenging non-compete agreements under existing state law, many state legislatures have amended their laws to limit the use of non-competes. In Massachusetts, for example, a reform bill that took effect on October 1, 2018, prohibits the enforcement of non-compete agreements against non-overtime-exempt employees, short-term graduate or undergraduate student workers, employees that have been laid off or fired without cause, and employees under the age of eighteen.¹⁴² The law also limits the duration of non-competes,¹⁴³ requires employers to disclose them to employees at least 10 days before the employment begins, and demands a written contract signed by both parties.¹⁴⁴

More recently, both Illinois and Washington, D.C. passed bills that likewise limit the existence and scope of non-competes. Illinois’ bill extends the state’s Freedom to Work Act’s prohibition against non-compete agreements with “low wage” employees to cover all employees earning $75,000 or less per year. “This revised language means that the new law will apply to the majority of Illinois’ 5.5 million employees.”¹⁴⁵ The act also mandates that “non-competition agreements cannot be enforced against furloughed or laid off employees unless the agreement provides for payment of the employee’s base salary for a period of time.”¹⁴⁶ Washington, D.C.’s Ban on Non-Compete Agreements Amendment Act forbids the use of non-compete agreements as applied to D.C. workers making less than $150,000 per year, and requires other protections such as notice and an opportunity to consult counsel.¹⁴⁷ Lots of other states have gotten into the action, passing or considering legislation to curtail the use of non-competes involving physicians¹⁴⁸ advanced practice registered nurses,¹⁴⁹ employees “terminat[ed] or furlough[ed] as the result of . . . the COVID-19 pandemic,”¹⁵⁰ and low-wage workers.¹⁵¹ Such legislation also commonly includes more rigorous review of the rationale for particular agreements, as well as procedural protections such as advance notice requirements.¹⁵²

Even as states curtail the enforceability of non-compete agreements, many employment contracts continue to feature non-compete clauses that are patently unenforceable under relevant state law.¹⁵³ As Professor Charles Sullivan points out, the very existence of these clauses likely chills employee movement: most employees probably assume they are valid, and many others (and their prospective employers) are deterred by the cost of litigating.¹⁵⁴ Until recently, employers have had nothing to lose—and lots to gain—by including these unenforceable terms in employment contracts, especially when dealing with legally unsophisticated employees. That calculus may be changing, as state attorneys general begin to challenge the legality of non-compete clauses as applied to certain categories of workers, and the FTC threatens to ban them altogether.¹⁵⁵ Even so, the existence of these provisions undoubtedly discourages some employees from leaving their jobs, leading not only to lost opportunities for them, but to misallocation of workers across the economy.

This review of the law of non-compete agreements—including the current foment over their legality and scope—has important implications for the IDD. First, it demonstrates that, in most states, employers have a contractual mechanism to limit key employees from jumping ship and working for a competitor, at least for limited times. Although many states have tightened the class of employees that can be subject to these restrictions, most have retained the option for executives and others who are likely to have access to the type of time-sensitive, confidential information that would give a “substantial advantage” to a competitor.¹⁵⁶ Second, and relatedly, the existence of this contractual option suggests that employers who don’t utilize it—either because they failed to propose a non-compete clause, or because the employee didn’t agree to one—cannot later claim that such a limitation was implicit in the arrangements between the parties.¹⁵⁷ Third, as more states abandon or severely limit the availability of non-compete agreements based on concerns about their impact on individuals and the economy, those same considerations counsel a skeptical approach to other, non-consensual restraints like the IDD.

II. The Nature of and Confusion over the IDD

As the above discussion illustrates, both trade secret and non-compete cases frequently involve factual questions about the risk (and sometimes the inevitability) of disclosure of confidential information. In trade secret disputes between employers and former employees, the imminent threat of disclosure can justify an injunction prohibiting the employee from using or disclosing trade secrets in her new job.¹⁵⁸ And the reasonableness of non-compete agreements may turn, at least in part, on a conclusion that an employee’s knowledge of confidential, time-sensitive information would create a high risk of harm to the employer if the employee took a similar position in a competing firm. In both of these contexts, inevitability plays a factual role in evaluating the merits of a standard doctrinal claim. It does not, however, alter the essential terms of the parties’ rights and responsibilities as reflected in the employment contract. As a result, while courts sometimes purport to invoke the inevitable disclosure doctrine in these cases, the doctrine itself does little independent work.

The strong-form version of the inevitable disclosure doctrine, in contrast, involves a distinct, judicially created form of relief in trade secret cases: an injunction against employment rather than merely against disclosure or use. Because this doctrine applies when the parties have not agreed, ex ante, to restrictions on the employee’s future prospects, it raises concerns that go beyond the general objections to non-compete clauses and poses a unique threat to principles of employee mobility. As a result, courts have approached this version of the doctrine with caution and have applied it sparingly.¹⁵⁹ Yet the case law and literature leave the impression of a doctrine with a strong foothold across the states—undoubtedly because of courts’ widespread use of the “IDD” terminology in different factual and doctrinal contexts.¹⁶⁰

The fact that the IDD means different things, to different courts, in different contexts, has real costs for employees.¹⁶¹ Imagine that a state court announces its adoption of the doctrine in the context of evaluating the reasonableness of an express non-compete agreement. By declaring “the IDD” as a valid doctrine under the relevant state law, the court generates uncertainty over which version of the doctrine prevails in the state. In particular, employees (and their lawyers) may reasonably worry that employers could wield the IDD as a weapon to prevent them from taking a new job, even in the absence of a non-compete agreement. Indeed, recent empirical work demonstrates that a state’s stated adoption of “the IDD” has a demonstrable negative impact on executive mobility in the state.¹⁶²

We consider the implications of this problem, and potential solutions, in Parts III and IV. This Part describes the current status of the IDD. We begin with the classic PepsiCo case, which first called widespread attention to the idea that “inevitable” disclosure might justify an injunction against employment in trade secret cases. Section II.B then turns to the range of scenarios in which courts have purported to address the inevitable disclosure doctrine. We separate the cases into four clusters, based on the extent to which they impose ex post restrictions on employees’ mobility. Our first two clusters of cases involve the prototypical version of the IDD, which allows an injunction against employment based solely on a prospective risk that misappropriation or disclosure will occur if the employee is allowed to assume a new job. This version presents the gravest threat of chill, because it raises the risk that an employee could be enjoined from a new position despite having breached no legal duty to her former employer. As a result, some states have expressly ruled it out, while a handful of others have recognized it, though even the adopters apply it only rarely. The third cluster of cases involves the use of employment-related injunctions against defendants who have already misappropriated the trade secrets of their former employer, or committed acts that demonstrate an intention to do so. While this form of the doctrine raises similar concerns about ex post employment restrictions, it does not base those restrictions on an inference that an employee will necessarily violate her trade secret commitments. As a result, it poses less of a risk to parties who have acted in good faith to avoid misuse of trade secrets that they learned in their prior job. Finally, the fourth cluster of cases involves the IDD as an evidentiary tool to evaluate the merits of trade secret or non-compete agreement claims. In these cases, inevitability does not alter the contractual obligations of the parties or expand available remedies beyond those set forth in the employment contract. However, in our view, the use of IDD terminology in these contexts creates unnecessary confusion by conflating inevitability as a factual question with inevitability as a separate doctrine. By bundling these widely disparate cases under the IDD label, courts have created a cloud of uncertainty about the meaning of the doctrine and its implications for employee mobility.

A. PepsiCo v. Redmond

Although American courts have applied variations of what we now call the IDD for well over a century,¹⁶³ the doctrine remained largely confined to the “fringes of jurisprudence”¹⁶⁴ until the famous PepsiCo v. Redmond case was decided by the Seventh Circuit Court of Appeals in 1995.¹⁶⁵ In PepsiCo, Redmond, a PepsiCo executive with access to “inside information and trade secrets,” accepted a job at Quaker, maker of the Gatorade sports drink and a direct PepsiCo competitor, during a time of intense competition in the beverage industry.¹⁶⁶ The Northern District of Illinois entered a preliminary injunction that forbade Redmond from assuming his new position for five months.¹⁶⁷ On appeal, the Seventh Circuit affirmed, concluding that an injunction was warranted because of the “inevitab[ility]” that Redmond would use or disclose PepsiCo’s trade secrets if allowed to take the new job.¹⁶⁸

The court began its opinion with a nod to the “tension” between the normative goals of trade secret protection¹⁶⁹ and the interests of employees in “pursuing their livelihoods when they leave their current positions.”¹⁷⁰ Nonetheless, the court concluded that Illinois trade secret law allowed a finding of misappropriation if a plaintiff “demonstrat[es] that defendant’s new employment will inevitably lead him to rely on the plaintiff’s trade secrets.”¹⁷¹ Two factors persuaded the court that the plaintiff had met this standard. First, the court emphasized Redmond’s intimate familiarity with PepsiCo’s trade secrets and confidential business information that bore directly on the roles he would perform at Quaker. In particular, Redmond knew “important and sensitive information about [PepsiCo’s] ‘pricing architecture’” and distribution plans for its beverages, which he could not help but take into account in performing his new job.¹⁷² Second, the court found support—albeit not “ineluctabl[e]” proof—for the trial court’s finding that Redmond and his new employer had shown “lack of candor” that suggested a “willingness to misuse [PepsiCo’s] trade secrets.”¹⁷³ Significantly, the district court did not find any evidence that Redmond had absconded with documents or already misused any of PepsiCo’s secret information. Instead, the bad-faith finding had to do with (a) Redmond’s misleading statements to PepsiCo colleagues about whether and when he accepted the Quaker job, (b) a discrepancy in how Redmond and his new boss described his new position at Quaker, and (c) the fact that his supervisor at Quaker had shown an “unnatural interest in hiring [PepsiCo] employees”—which the trial court saw as evidence that Quaker sought employees for their knowledge of confidential information, rather than their professional skills.¹⁷⁴ The Seventh Circuit concluded:

Thus, when we couple the demonstrated inevitability that Redmond would rely on [PepsiCo] trade secrets in his new job at Quaker with the district court’s reluctance to believe that Redmond would refrain from disclosing these secrets in his new position (or that Quaker would ensure Redmond did not disclose them), we conclude that the district court correctly decided that PepsiCo demonstrated a likelihood of success on its statutory claim of misappropriation.¹⁷⁵

In affirming the injunction, the Seventh Circuit never discussed the fact that PepsiCo could have achieved its objectives more directly through an express non-compete agreement, nor whether its failure to obtain one should influence the analysis of its trade secret claim.

The PepsiCo case brought the inevitable disclosure doctrine into the jurisprudential mainstream and simultaneously provoked outrage among scholars and advocates for employee rights.¹⁷⁶ Critics charged the court with rewriting trade secret and non-compete law for the benefit of employers, and warned that the doctrine would chill employee mobility by raising the specter of injunction for employees not bound by any non-compete.¹⁷⁷ Despite these concerns, the opinion—by one of the most influential federal courts of appeals in the country—caught the attention of other state and federal courts, and led them to consider the role of inevitability under their own jurisdictions’ law.

Some of these cases involved comparable factual and doctrinal scenarios, but many others did not. By citing PepsiCo with apparent approval, courts sometimes created an impression that they had adopted the IDD, even when they were addressing a completely different doctrinal context. Other courts rejected the doctrine as inconsistent with their state law. Even courts that explicitly adopted the IDD have struggled to define limiting principles that might cabin its most pernicious effects. Without such principles, misuse of the IDD would be practically certain, as “[e]very former employer, of course, wants to prevent an ex-employee from working in any capacity for a rival.”¹⁷⁸ Despite these efforts to constrain the doctrine, its very existence creates uncertainty about employees’ legal right to change jobs; that uncertainty, in turn, likely impairs not only mobility, but also innovation spillovers and economic dynamism in IDD states.¹⁷⁹

B. The IDD post-PepsiCo: Oft-Invoked, Rarely Applied, and Source of Confusion

Despite the frequent reference to PepsiCo in the case law, only a few states have considered the doctrine in its purest form—in which the risk of disclosure, alone, justifies an injunction against employment. Of these, two states have rejected the doctrine, and four have applied it (albeit rarely). Another handful of states have used inevitability as a basis for injunction, but only after concluding that the former employee has already committed an act of trade secret misappropriation. In the remainder of states, courts have either not addressed the IDD at all, have discussed it in dictum, or have used IDD terminology in such disparate contexts that they have created confusion about the meaning of the doctrine and its implications for employee mobility.

1. States that Reject the IDD Whole Cloth

Courts in two states—California¹⁸⁰ and Maryland¹⁸¹—have flatly rejected the IDD as inconsistent with state policy in favor of employee mobility.

Given California’s near-absolute ban on mobility restrictions, its rejection of the IDD should come as no surprise. In Whyte v. Schlage Lock Co.,¹⁸² a California appeals court described the doctrine as “contrary to [both] California law and policy because it creates an after-the-fact covenant not to compete restricting employee mobility,”¹⁸³ by which “the employer obtains the benefit of a contractual provision it did not pay for, while the employee is bound by a court-imposed contract provision with no opportunity to negotiate terms or consideration.”¹⁸⁴ By this reasoning, the IDD not only offends California’s policy against restraints on employment, but also violates basic principles of fair contracting, including the requirements of consideration and meeting of the minds.¹⁸⁵

In LeJeune v. Coin Acceptors, Inc.,¹⁸⁶ the Maryland Court of Appeals aligned itself with this analysis, citing extensively to the Whyte decision in refusing to adopt the IDD.¹⁸⁷ Like Whyte, the court cited state policy favoring employee mobility as one reason for skepticism of the IDD. The fact that Maryland enforces non-compete agreements, moreover, did not counsel in favor of an injunction; to the contrary, the court viewed the plaintiff’s failure to obtain such an agreement as further reason to resist its attempt to use trade secret law to achieve an “ex post facto covenant not to compete.”¹⁸⁸

2. States That Have Applied the Strong Version of the IDD

At the other extreme, courts in four states—Illinois,¹⁸⁹ Ohio,¹⁹⁰ Delaware,¹⁹¹ and Pennsylvania¹⁹²—have applied the IDD in its strongest form: to enjoin employment before any misappropriation has occurred, based on the “inevitability” that the employee will use its employer’s trade secrets in performing the new job.¹⁹³ In most of these states, the doctrine was adopted decades ago and is treated as good law but applied sparingly “due to its significant potential to curb employee mobility among competitors.”¹⁹⁴ Courts have developed limiting principles that reserve the doctrine for unusual situations involving head-to-head competition, identical jobs, and (at least implicitly) evidence of bad faith.¹⁹⁵ Even then, modern cases rarely apply the doctrine to block employment altogether, opting instead for an injunction limiting the scope of the employee’s duties, her ability to solicit former clients, or other conditions of employment.¹⁹⁶ Yet the threat of an employment-related injunction lurks in the background, and every once in a while, a court will follow through with the threat.¹⁹⁷ Indeed, in at least one state—Pennsylvania—a federal appeals court affirmed an IDD-based injunction against employment as recently as 2010.¹⁹⁸ In other states, the doctrine may cast an outsized shadow because courts routinely describe it as a well-established feature of state law, even while usually rejecting its application to the case at hand.¹⁹⁹

a. Illinois

Illinois, whose law was at issue in PepsiCo, is illustrative. Since PepsiCo, state and federal courts in Illinois have affirmed the IDD as the law of the state, routinely invoking a three-part inquiry that considers

“(1) the level of competition between the former employer and the new employer; (2) whether the employee’s position with the new employer is comparable to the position he held with the former employer; and (3) the actions the new employer has taken to prevent the former employee from using or disclosing trade secrets of the former employer.”²⁰⁰

Taken at face value, this standard might allow an injunction any time a former employee jumps ship for an identical job with a competitor, and the competitor takes no affirmative actions to protect against use of the former employer’s trade secrets. In practice, however, courts have applied the standard narrowly, insisting on proof that the employee “could not operate or function” without relying on the former employer’s trade secrets, and usually finding that standard satisfied only in the face of evidence that the employee actually misappropriated or otherwise breached its duties to its former employer.²⁰¹

RKI, Inc. v. Grimes,²⁰² for example, involved a dispute between two firms that sold equipment used in pipe manufacture.²⁰³ Grimes, who had entered into both a non-compete and a non-disclosure agreement with RKI, had worked in sales for the plaintiff for over two years when he decided to accept an identical job with its direct competitor.²⁰⁴ In the weeks between accepting his new job and resigning from the old one, he copied voluminous data onto his home computer.²⁰⁵ The record contained forensic evidence demonstrating that, around the time that his home computer was being inspected for purposes of the litigation, he had deleted large quantities of data from the computer and defragmented it, both acts that “raise[d] a red flag of eliminating data or concealing electronic data.”²⁰⁶ RKI brought trade secret misappropriation, breach of non-compete agreement, and breach of confidentiality agreement claims against Grimes.²⁰⁷ Citing PepsiCo, the court concluded that, while it did not have direct evidence of particular trade secrets that were misappropriated, the employee’s actions suggested that he either “ha[d] violated or inevitably w[ould] violate” his employer’s trade secret rights.²⁰⁸ The doctrine, in other words, was used to infer actual misappropriation, rather than merely to project its likelihood in the future.²⁰⁹

Likewise, in Liebert Corp. v. Mazur,²¹⁰ a court of appeals reversed a trial court dismissal of a trade secret misappropriation claim, finding misappropriation inevitable when an employee (a) left to form a direct competitor, (b) misappropriated by downloading the equivalent of 40 bankers’ boxes of documents, some of which contained trade secrets, and (c) intentionally destroyed evidence that would have revealed whether he burned those documents to a CD.²¹¹ As in RKI v. Grimes, the court emphasized the employee’s demonstrated malfeasance, even while relying on the IDD. Indeed, the Liebert court concluded that the defendant had engaged in “willfull[] misappropriat[ion].”²¹² At the same time, it did not mandate an injunction against employment, instead remanding to the district court for entry of appropriate injunctive relief.

In contrast to these opinions, in which employee wrongdoing influenced courts to resolve IDD claims in plaintiffs’ favor on the merits, courts have sometimes allowed IDD claims to proceed to discovery in the absence of clear evidence of bad faith or misappropriation.²¹³ Strata Marketing, Inc. v. Murphy,²¹⁴ for example, reversed the dismissal of an IDD-based trade secret misappropriation claim because the former employer had alleged that the employee “could not operate or function” in the new position without relying on the employer’s trade secrets.²¹⁵ The court cautioned that it was not passing judgment on the merits, but allowing the plaintiff to develop its case because “we cannot say that Strata could prove no set of facts entitling it to relief.”²¹⁶ From the plaintiff’s perspective, this use of the IDD at the pleading stage may generate direct evidence of misappropriation that circumstantial evidence suggests may have occurred. From the defendant’s perspective, however, it can look like an anticompetitive fishing expedition.²¹⁷

In Molon Motor v. Nidec Motor, for example, the court initially denied a motion to dismiss a trade secret claim based in part on the IDD.²¹⁸ Applying Illinois’ three-factor test, the court concluded:

All told, Molon’s allegations on the direct competition between the parties, as well as the allegations on the employment breadth and similarity of Desai’s quality control work at the two companies, are enough to trigger the circumstantial inference that the trade secrets inevitably would be disclosed by Desai to Nidec. To be sure, going forward, Molon ultimately will bear the burden of proving—not just alleging—enough facts such that disclosure is not premised on a mere unsubstantiated fear. For now, Molon has pled enough for the trade secrets claims to avoid the Rule 12(b)(6) chopping block.²¹⁹

After a couple of years of discovery failed to generate any evidence of misappropriation or harm to the plaintiff, however, the court ultimately dismissed the complaint and, indeed, took the unusual step of imposing sanctions against the plaintiff for the bad-faith pursuit of its trade secrets claim.²²⁰ The Molon case demonstrates the substantial costs—in terms of time, uncertainty, and litigation expense—that defendants can suffer when courts allow IDD claims to proceed in the absence of any evidence of misappropriation.

Yet another context in which Illinois courts invoke the IDD is to justify an injunction against disclosure and use of trade secrets, rather than blocking their employment.²²¹ Such injunctions reaffirm former employees’ existing obligations and do not impair their ability to take a new job. As discussed in Section III.B.4 below, this use of the IDD generates confusion by validating “the IDD” in the state but neglecting to clarify whether (and if so, when) it can justify employment-limiting injunctions.

Given the multiplicity of functions that the IDD serves in Illinois case law, it’s hard to call it a coherent doctrine because doctrines are principles that suggests some consistency in their application.²²² Instead, the IDD offers a uniform label for a collection of disparate circumstances in which trade secret misappropriation appears to be—or at least is alleged to be—inevitable. Most of these cases do not result in PepsiCo-like injunctive relief. By contributing to an impression of the IDD as a well-established doctrine, however, these opinions undoubtedly reduce employees’ confidence in their ability to change jobs without triggering a lawsuit. The fact that it is rarely applied in connection with injunctions against employment likely offers cold comfort to such employees, given the PepsiCo precedent and continuing dictum suggesting the availability of this form of relief.

b. Ohio

The situation in Ohio resembles that of Illinois: a federal court used IDD-like reasoning to issue an injunction against employment decades ago, and since then, state and federal judges have struggled over the meaning of inevitability, the legal contexts in which it is relevant, and its implications for employee mobility. The strong-form IDD made its Ohio appearance in Emery Industries, Inc. v. Cottier,²²³ a 1978 opinion in which a federal district court enjoined a company’s former employee from working for a competitor for one year, stating that “there is an inevitable and imminent danger of disclosure of plaintiff’s trade secrets.”²²⁴ As in PepsiCo, the case involved an executive with detailed knowledge of product information, internal strategy, and business plans who sought to work for the firm’s direct competitor in a senior executive role. The court acknowledged that an injunction “prohibiting the defendant from working for [the new firm] for any appreciable length of time would obviously cause the defendant irreparable injury,” because “the defendant’s employability, as a practical matter, is limited” to the field in which the parties competed.²²⁵ The court also pointed out that the former employer had the opportunity to negotiate an express non-compete agreement with the defendant, but never did so.²²⁶ Nonetheless, the court found that an injunction against employment was necessary to protect the plaintiff’s trade secrets, although it softened the blow somewhat by requiring the plaintiff to pay a monthly fee to its former employee during the term of the injunction.²²⁷

In the decades since Emery Industries, Ohio courts have invoked the IDD in a wide range of situations, but rarely to enjoin employment altogether in the absence of a non-compete. Sometimes they use the doctrine to justify an injunction against misappropriation;²²⁸ sometimes they use it to buttress a claim of actual misappropriation;²²⁹ and most commonly, they invoke it as a reason to enforce a non-compete.²³⁰ Indeed, in a 2008 case, Hydrofarm, Inc. v. Orendorff,²³¹ an Ohio Court of Appeals suggested that the IDD should apply only in cases involving non-compete agreements. Noting that “[n]either this court nor the Supreme Court of Ohio has applied the inevitable-disclosure doctrine in a case that did not involve an enforceable noncompetition agreement,”²³² the court emphasized that even employees exposed to trade secrets have a presumptive right to change jobs unless they have contractually agreed to limits.²³³ Absent express language in the trade secret statute authorizing employment-blocking injunctions, the Hydrofarm court concluded that the legislature intended trade secret injunctions to target only use or disclosure of trade secrets.²³⁴ Lamentably, the court equivocated on that point later in the opinion, when it distinguished PepsiCo on the facts, rather than rejecting it as inconsistent with Ohio law.²³⁵ In other words, even a court that recognized both the normative and doctrinal objections to the strong-form IDD could not quite bring itself to rule it out entirely, leaving the prospect of employment-blocking injunctions lurking in the background of Ohio trade secret law.

Other IDD opinions in Ohio perpetuate the uncertainty over the scope of the doctrine by describing it in broad strokes that focus on the nature of the new position and don’t seem to require wrongdoing by the former employee. The statement of the court in Dayton Superior Corp. v. Yan²³⁶No. 12-CV-380, 2012 WL 5497804 (S.D. Ohio Nov. 13, 2012). is typical: “under the ‘inevitable disclosure rule,’ a former employee working for a competitor will be enjoined because an individual cannot compartmentalize a competitor’s knowledge and disclosure or misappropriation of trade secrets is inevitable.”²³⁷ While the court in that case did not grant an injunction based solely on the risk of trade secret misappropriation, nothing in its description of the doctrine precluded that form of relief. By citing PepsiCo as authority for the IDD, moreover, the court—along with many others in Ohio—suggests endorsement of employment-blocking injunctions as a remedy for trade secret claims.²³⁸ To make matters worse, courts addressing claims involving both non-disclosure and non-compete agreements sometimes sloppily blend them together, leaving the impression that either claim could provide the basis for an employment-blocking injunction.²³⁹ As in Illinois, then, the IDD casts a shadow over employment mobility in Ohio. By failing to foreclose the possibility of employment-blocking injunctions in trade secret cases, Ohio courts preserve the specter of the IDD as a mobility-restricting doctrine in the state.

c. Delaware

Although Delaware courts have rarely applied the IDD to block employment in recent years, the doctrine nominally remains good law in the state.²⁴⁰ The Delaware Chancery Court adopted the IDD in E.I. duPont de Nemours & Co. v. American Potash & Chemical Corp.,²⁴¹ which has been cited as one of the first judicial decisions to use the phrase “inevitability of disclosure.”²⁴² In that case, a duPont employee not bound by a non-compete who worked on a team focused on a secret chemical process was recruited by a rival company seeking to develop expertise in the same process. The court noted that duPont’s development of corporate expertise around the chemical process had been expensive and slow, and that the company had gone out of its way to protect its IP by securing patents and obliging employees to enter into confidentiality agreements.²⁴³ The court had previously granted a temporary restraining order (“TRO”) barring the employment, which remained in effect; the opinion addressed the defendant’s subsequent motion for summary judgment, which the court denied, concluding that “the threat of unlawful disclosure [was] implicit in the situation itself.”²⁴⁴

Because of the posture of the case, the court’s decision addressed the merits of the trade secret claim, rather than the propriety of either preliminary or permanent injunctive relief. Indeed, in a footnote, the court deferred judgment on the “difficult and significant issue” of whether to grant a permanent injunction against employment in the absence of a non-compete.²⁴⁵ Even so, by finding the plaintiff’s allegations of inevitable disclosure sufficient for purposes of summary judgment, and by allowing the TRO to remain in place, the court effectively endorsed the IDD, at least in connection with interim injunction relief.

While some subsequent courts have followed the lead of duPont,²⁴⁶ the doctrine has been applied sparingly in Delaware, particularly in recent years. In a rare post-PepsiCo Delaware case purporting to apply the IDD, W.L. Gore & Associates, Inc. v. Wu,²⁴⁷ the defendant employee, a high-level scientist who had entered into both confidentiality and non-compete agreements with the plaintiff company, displayed almost comically high levels of bad faith.²⁴⁸ While the Gore court imposed an employment-related injunction extending beyond the term of the non-compete, it has to be treated as an outlier given the unusual circumstances of the case. The smattering of other recent Delaware IDD cases offer little insight into the nature and scope of the doctrine, including the conditions (if any) that might justify an injunction against employment.²⁴⁹ Nonetheless, the Delaware courts have neither rejected nor expressly limited the holding in duPont, so employment-blocking injunctions remain theoretically available under Delaware law.²⁵⁰

d. Pennsylvania

While other jurisdictions have retreated from using the IDD to enjoin employment in recent decades, the strong form of the doctrine remains alive and well in Pennsylvania, at least according to a 2010 opinion from the federal Court of Appeals for the Third Circuit. Bimbo Bakeries USA, Inc. v. Botticella²⁵¹613 F.3d 102 (3d Cir. 2010). involved a suit filed by the manufacturer of Thomas’ English Muffins against one of its senior executives who had accepted a job with Hostess, a competing national baking company. The facts of the case closely resembled PepsiCo: the executive had high-level knowledge of the plaintiff’s business and sales strategy, and he was one of only eight employees who were privy to the secret “nooks ‘n crannies” English muffin recipe. The record showed evidence that the defendant had hidden his plans from his employer for months after accepting the new offer, and had downloaded at least some sensitive documents to his personal computer on his last day at the firm. He never testified on his own behalf in court, which the court used as a basis for a negative inference against him regarding his past behavior as well as his plans for the new job. Collectively, the district court viewed this evidence as demonstrating an affirmative intention to use his former employer’s trade secrets in his new job, and entered a preliminary injunction blocking his employment pending an expedited trial.²⁵² The Third Circuit affirmed.²⁵³

Bimbo is notable not only for its rare invocation of the IDD to block employment, but also for the undemanding legal standard that it applied in reaching that conclusion. Rather than limiting the IDD to cases in which an employee could not perform her new job without relying on her former employer’s secrets,²⁵⁴ the district court held that a plaintiff need demonstrate only a “substantial threat of disclosure.”²⁵⁵ In reaching this conclusion, the district court adopted a questionable interpretation of state court precedent²⁵⁶ and contradicted a recent Third Circuit opinion that had (albeit in dictum) explicitly rejected an expansive notion of the IDD.²⁵⁷ On appeal, the Bimbo panel decided to disregard the dictum and agreed with the district court’s interpretation of the Pennsylvania precedents.²⁵⁸ The upshot is that, at least nominally, Pennsylvania law offers the prospect of injunctive relief any time a new employee’s job presents a “substantial threat” of disclosure. As a result, the prospect of an employment-blocking injunction looms large for Pennsylvania executives and others with detailed knowledge of their employer’s affairs, even in the absence of a non-compete. Notably, neither the trial court nor the court of appeals in Bimbo considered whether the employer’s failure to obtain a non-compete agreement should count against it in the trade secret claim. Instead, they gave the employer—at least temporarily—the equivalent of non-compete enforcement, without the support of a written contract, consideration, or a meeting of the minds.

* * *

As a practical matter, courts very rarely invoke the IDD to prevent an employee from taking a new job when the employee (a) is not bound by a non-compete agreement, and (b) has neither actually misappropriated nor committed acts that demonstrate an intention to do so. As a result, even executives with substantial firm-specific knowledge arguably face little risk that a court will enjoin them from assuming a job with a competitor, as long as they behave in good faith and work with their new employer to avoid inadvertent use of their former employer’s secrets.²⁵⁹

Even so, the fact that a handful of states have occasionally invoked the IDD to block employment means that employees in those states face a non-negligible risk of a lawsuit if they accept a directly competing job. That risk is exacerbated by the broad language that courts use to describe the IDD, even while (usually) applying it narrowly. As discussed below, moreover, the fact that the IDD sometimes allows an employment-blocking injunction, at least in some states, creates ambiguity about its scope in other jurisdictions, including those that have so far applied the doctrine more narrowly.

3. The Use of the IDD to Enjoin Employment After Actual Misappropriation

While courts rarely enjoin employment based solely on the perceived “impossibility” that the employee can perform her new job without misappropriating, it is more common for courts to enter employment-related injunctions as a remedy for actual misappropriation, and when they do so, they often cite the IDD. Indeed, as discussed above, many of the strong-form IDD states have largely followed this path in recent years, entering injunctions only against employees who have proven themselves unwilling to meet their non-disclosure obligations. Courts in Arkansas,²⁶⁰ Indiana,²⁶¹ Iowa,²⁶² New York,²⁶³ South Carolina,²⁶⁴ Utah,²⁶⁵ and Minnesota²⁶⁶ have also used IDD-like language in this context, reasoning that someone who has intentionally misappropriated in the past will inevitably repeat the offense in the future. Typically, these courts invoke inevitability in the context of evaluating “irreparable harm” for purposes of crafting injunctive relief.²⁶⁷ Some of these courts have enjoined employment altogether, while others have restricted the conditions of employment by, for example, limiting the employee’s ability to work on certain technologies or to solicit groups of clients.

In Cardinal Freight Carriers, Inc. v. J.B. Hunt Transport Services, Inc.,²⁶⁸ for example, the Arkansas Supreme Court enjoined several former employees of J.B. Hunt Transport Services (“Hunt”), a trucking company, from doing business with four of Hunt’s key customers for a year in their new roles at Cardinal Freight Carriers (“Cardinal”), a Hunt competitor, after finding that the employees had revealed an intent to use their knowledge about Hunt’s pricing models, future plans, and software capabilities to court those customers.²⁶⁹ The record showed that Cardinal’s president, after hiring the former Hunt employees, had encouraged them to use their former employer’s secrets, including by “comparing Hunt’s future plans and operational capabilities [to Cardinal’s],” and that Cardinal employees had plans to use the former employees’ knowledge of Hunt’s proprietary software program”to exploit the holes” in that program.²⁷⁰ Invoking the IDD to find that such misappropriation would inevitably continue, the court affirmed the one-year injunction applied by the lower court.²⁷¹

Courts in other states have occasionally applied the IDD to block employment after finding actual misappropriation. In DoubleClick, Inc. v. Henderson,²⁷² a New York state court relied in part on the IDD to issue a six-month injunction against employment in the absence of a non-compete covenant, but only after finding “evidence of actual misappropriation” of trade secrets.²⁷³ In Nucor Corp. v. Bell,²⁷⁴ a federal district court sitting in South Carolina concluded that the state would adopt the IDD despite its general policy against restraints on trade.²⁷⁵ The court found that the former employee in the case, John Bell, had misappropriated trade secrets from his former employer, Nucor, a steel plant, and then acted in bad faith by attempting to hide this misappropriation.²⁷⁶ The court applied the IDD to preliminarily enjoin Bell from working on certain steel manufacturing processes with a competing steel manufacturer, reasoning that Bell would inevitably disclose more of Nucor’s trade secrets if permitted to work in this area.²⁷⁷ The court refused, however, to enjoin him altogether from working in the new job, concluding that the balance of equities weighed in favor of a narrower injunction.²⁷⁸ The court did not explicitly limit the IDD to situations involving actual misappropriation, but subsequent federal courts applying South Carolina law have restricted it in this way.²⁷⁹

In Utah, the court in Novell Inc. v. Timpanogos Research Group Inc.²⁸⁰No. 970400339, 1998 WL 177721 (D. Utah Jan. 30, 1998). relied on findings of both actual misappropriation and inevitable continued misappropriation to award a lengthy preliminary injunction that restricted three former employees from using their former employer’s technology at a new company that they had formed.²⁸¹ The former employees of Novell had been intimately involved in developing a complex software product and had signed agreements identifying the software as “top secret” and promising not to use or disclose it outside the firm.²⁸² The court found that they violated that promise both by disclosing details of the software to third parties and by using its core architecture in developing a competing product in their new firm.²⁸³ Indeed, the defendants not only “took and intended to use Novell’s technology for [their] own use,” but one of them “even bragged to the press and to other Novell employees that he had under-documented the technology so that Novell would not know what he had, and that if Novell sued him, it would not even know what to sue for.”²⁸⁴ Based on this evidence, the court found that the defendants had “misappropriated trade secrets, violated their contractual obligations of confidentiality, and breached their fiduciary duties to their former employer.”²⁸⁵ It went on to discuss the IDD, concluding that the doctrine justified “an inference” that, based on the facts, future misappropriation was “inevitable” and warranted an injunction preventing the defendants from developing the same type of software product for an additional nine months.²⁸⁶

* * *

Although these cases limit employment mobility in the absence of a non-compete and thus raise some of the same concerns as PepsiCo,²⁸⁷ they do not present the same risk of chill as the PepsiCo standard, which largely presumes misappropriation based on similarities between two jobs.²⁸⁸ By requiring proof of actual misappropriation, jurisdictions can assure employees not bound by non-compete agreements that if they honor their non-disclosure obligations, they can change jobs without risking an injunction.²⁸⁹ Employees and their new employers can insulate themselves more completely by using firewalls or other devices to avoid unintentional disclosure; but such efforts are unnecessary if the standard requires actual misappropriation.²⁹⁰

Yet even in actual-misappropriation jurisdictions, courts have sometimes created confusion by refusing to foreclose the possibility of the strong-form IDD in “the rarest of cases.”²⁹¹ Jilted employers, of course, always view their case as the exceptional one; by leaving the door open, however slightly, to non-misappropriation-based IDD claims, such language gives fodder for threats, cease and desist letters, and meritless lawsuits.²⁹²

4. The Use of Inevitability in Other Doctrinal Contexts

In the majority of U.S. states, courts either have not resolved the IDD’s status or have put it to such disparate uses that it loses coherence as a distinct “doctrine.”²⁹³ Many courts refer to the “doctrine” any time that inevitability appears factually relevant to a dispute involving trade secrets or non-competes. The high risk that an employee would use her knowledge of corporate strategy in the same job with a direct competitor, for example, might play a role in evaluating the reasonableness of an express non-compete agreement—a finding that fits squarely within existing employment law doctrine rather than creating a new form of relief.²⁹⁴ While individual outcomes in these cases do not stretch the limits of trade secret law as PepsiCo did, the use of the IDD label, paired with courts’ tendency to cite PepsiCo as authority, leads to confusion about which version of the doctrine prevails in the state. A few states have spoken clearly, limiting the IDD to defined situations such as disputes involving written non-competes.²⁹⁵ In other states, however, courts sometimes speak in broad terms about the doctrine, even while applying it to a narrow set of facts or granting limited relief. Other courts speculate about whether the state would adopt the IDD, but find it unnecessary to resolve the question because the plaintiff’s allegations would fall short in any event.²⁹⁶ As a result, lawyers, scholars, and even judges struggle to understand the doctrine’s status in many of these states, including whether it can be used to block employees from changing jobs.²⁹⁷

a. Non-Competes

Courts commonly invoke the IDD in cases involving express non-compete agreements. Inevitability can play three related but distinct roles in these cases: in evaluating the reasonableness of the agreement,²⁹⁸ in assessing whether the defendant’s proposed employment threatens the legitimate interests underlying the contract,²⁹⁹ and in weighing the equities for purposes of injunctive relief.³⁰⁰ If courts explicitly limited the use of inevitability to these contexts, they would not only clear up the muddle surrounding the IDD, but also ameliorate the resulting chill. In other words, if courts considered “inevitability” only in the context of non-compete agreements, employees who have not signed such agreements could rest easy in the knowledge that they could change jobs without facing an injunction.

b. Injunctions Against Disclosure or Conditions of Employment.

In some states, courts have invoked the IDD to find a compelling risk of disclosure that justifies injunctive relief, but have fashioned that relief narrowly, to avoid an injunction on employment. Sometimes these courts enjoin use or disclosure; other times, they limit the employee’s functions in the new job, to avoid situations in which the confidential information would inevitably affect her decisions.³⁰¹ Typically, these courts require evidence of actual misappropriation or behavior that manifests an intent to use the former employer’s trade secrets in the new job.³⁰² Of course, if carried to an extreme, this type of injunction could effectively constitute a bar on employment, so the distinction between these cases and PepsiCo is one of degree rather than kind; to address this concern, courts crafting this type of relief give careful attention to the nature of the job and the injunction’s impact on the employee’s ability to function in the role.³⁰³ But least in some cases, limited injunctive relief can offer a middle ground when the court believes that certain aspects of the new job will make it hard to avoid trade secret use or disclosure.

c. Dictum

Finally, the IDD makes frequent appearance in dictum, with courts musing about its place in their state’s law but declining to settle the issue because the case before them is distinguishable on its facts. In North Carolina, for example, a 1996 federal district court predicted that the state would adopt the employment-blocking version of the IDD, even while finding it inapplicable to the case before it.³⁰⁴ By 2018, however, a state trial court pointed out that no North Carolina court had yet applied the doctrine to block employment.³⁰⁵ Without definitively rejecting the doctrine on principle, the court “decline[d] at this time to adopt and apply” it.³⁰⁶ This pattern repeats itself in state after state: courts entertain the doctrine, sometimes skeptically and sometimes with approval, but ultimately decline to resolve its status in their state.³⁰⁷ The result is continued uncertainty over the doctrine’s power to block employee movement, which undoubtedly explains why executive mobility suffers in response to a state’s embrace of any version of the IDD.³⁰⁸

* * *

As this discussion has demonstrated, the IDD has no consistent meaning across—and often within—jurisdictions. Courts almost never apply it to block employment in the absence of a non-compete. At the same time, however, courts across multiple jurisdictions cite PepsiCo as the source of their state’s version of the IDD, and fail to repudiate the most expansive reading of the Seventh Circuit’s opinion. As a result, the shadow of PepsiCo extends over a sizable portion of U.S. states.

III. The Economic Effects of the IDD

The cloud of uncertainty surrounding the IDD has not only created confusion in the case law,³⁰⁹ but has discouraged executives from changing jobs. Recent empirical studies have shown that the specter of the IDD has a negative impact on employment mobility within a state, particularly among executives and others who typically have knowledge of trade secrets. A state need not formally adopt the doctrine; a court’s nod to the IDD (in whatever form) as consistent with state trade secret principles is sufficient. In contrast, when a court either rejects the IDD or signals its incompatibility with a state’s trade secret principles, executive mobility rebounds.³¹⁰ Because the most vibrant and innovative regional economies are also the most fluid and dynamic,³¹¹ these shifts in mobility undoubtedly affect the broader economy.

To understand this empirical evidence requires some background on the IDD’s treatment within the economics and finance literature. Studies of the doctrine’s economic impact are complicated by its incoherence and variability in meaning across (and sometimes within) states. In particular, scholars have struggled to fix the dates of adoption or rejection in particular states because of ambiguity about what, exactly, courts are doing when they discuss the IDD. As a formal legal matter, a court does not adopt a doctrine when it discusses it favorably but declines to apply it or to resolve its status in the state. As discussed above, moreover, courts often purport to adopt the IDD but use it to evaluate non-competes or to set remedies for actual misappropriation³¹²—scenarios far removed from those in which inevitability alone justifies an employment-blocking injunction.

Rather than wrestling with these nuances and distinguishing between the different shades of the IDD, however, scholars often set dates of adoption and rejection based on their reading of the tea leaves in opinions discussing the doctrine. Dates of adoption, for example, may include opinions that discuss the IDD favorably while distinguishing it on the facts. If the studies acknowledged this move, it would not undermine their findings; to the contrary, it would demonstrate that markets respond not only to definitive doctrinal rulings, but also to signals about the direction that a state’s law might take. But when they fail to acknowledge the move, their analysis is inaccurate and misleading from a legal perspective, because it mischaracterizes the doctrine’s status and leads to a mistaken impression that many states have adopted its strong form.

In a commonly cited 2018 article in the Journal of Financial Economics, for example, Sandy Klasa and coauthors attempt to examine the relationship between a firm’s relative risk of losing its trade secrets, on the one hand, and the nature of the firm’s capital structure decisions, on the other.³¹³ They hypothesize that firms facing a greater risk of losing trade secrets to competitors would adopt more conservative capital structures than less vulnerable firms. To measure that effect, they turn to the IDD, reasoning that a state’s adoption of the IDD reduces the risk of loss of trade secrets for firms in that state, and should therefore lead to more aggressive capital strategies.³¹⁴ Their results show that after a state adopts the IDD, it sees a relative decline in the mobility of workers in “managerial and related occupations” to rival firms.³¹⁵ The authors focus on these employees based on the assumption that they are most likely to have knowledge of firm trade secrets.³¹⁶

Apart from the contestable assumption that the IDD’s principal impact is to make trade secrets more secure rather than to inhibit the flow of employees’ experience, skills and knowledge,³¹⁷ the Klasa study reflects the same definitional muddle as the case law. In the introduction that sets up the study, the article defines the IDD in its the strong, mobility-restricting iteration:

The IDD is a legal doctrine that states that a firm’s former employee can be prevented from working for a rival firm if this would “inevitably” lead the employee to divulge the firm’s trade secrets to the rival. It is applicable even if the employee did not sign a noncompete or nondisclosure agreement with the firm, if there is no evidence of bad faith or actual wrongdoing, or if the rival is located in another state.³¹⁸

Despite this definition, however, the dates of adoption used in the study include several opinions that applied a narrower version of the IDD— or that failed to adopt it at all. For Connecticut, for example, the study cites the 1996 Branson Ultrasonics Corp. v. Stratman³¹⁹921 F. Supp. 909 (D. Conn. 1996). opinion, which involved a non-compete agreement and found the agreement reasonable, in part, based on a theory of inevitable disclosure.³²⁰ It did not involve the strong-form IDD as defined by the study. Nor did the cited opinion for Missouri, which discussed inevitable disclosure but found it inapplicable on the facts.³²¹ The decision identified by the study as adopting the IDD in Kansas described the doctrine as unresolved in the state, concluding that it did “not need to determine if Kansas courts would adopt this doctrine because even if this doctrine were the law in Kansas, Plaintiff’s claim, insofar as it relies on this theory, would be barred by the statute of limitations.”³²²

We have no reason to doubt the robustness of Klasa’s conclusion that, by entertaining the IDD and not rejecting it, courts support an impression of the doctrine as viable in a state, which in turn shapes both employee and firm behavior. Indeed, given the muddled state of the doctrine, it should come as no surprise that markets respond to any hint about whether a state’s law might allow non-contractual, inevitability-based injunctions against employment. Yet by bundling so many different treatments of the doctrine into crude categories of adopt or reject, the study over-simplifies and leaves an inaccurate impression of the doctrine’s penetration across states. We encourage scholars who study the IDD to take care with how they characterize the doctrine, to avoid exacerbating the existing chaos.

Other recent studies have relied upon variants of the Klasa dates to find a statistically significant relationship between the IDD and employment mobility within a state. In a 2022 article, for example, Deqiu Chen and coauthors conclude that a state’s adoption or rejection of the IDD has a significant impact on voluntary CEO turnover in the state.³²³ As dates of adoption and rejection, the authors rely upon a combination of the Klasa dates and a list of rejection dates from a 2019 article by Caroline Flammer and Aleksandra Kacperczyk.³²⁴ Like the Klasa list, the Flammer and Kacperczyk version has some questionable entries, including at least two opinions that explicitly decline to resolve the IDD’s status under the relevant state law.³²⁵ The Chen results, therefore, bundle definitive doctrinal adoptions and rejections together with opinions that only hint at the IDD’s status in a state, and reinforce the notion that employment markets respond to these hints, just as they do to changes in the law.³²⁶

Together, the Klasa, Chen, and related studies demonstrate empirically what we have warned throughout this Article: that the ambiguity surrounding the IDD has real costs for employees in states that have not renounced it. By equivocating about the IDD’s status and thus perpetuating the perception that a court might enjoin an executive from assuming a job with a competitor, courts distort the employment marketplace. Only by clearly rejecting the employment-blocking version of the IDD can states correct that distortion, protect employees’ right to exploit their skills and experience, and preserve restrictive-covenant law as the exclusive domain for employment restraints.

This evidence of the mobility-restricting impact of the IDD takes on added significance when considered in light of the relationship between mobility restrictions and economic dynamism in a state.³²⁷ As Michigan’s experience demonstrates, states that inhibit employee movement risk losing their most dynamic and creative innovators to states with less restrictive laws, which can in turn stifle the state’s innovation economy. The Klasa and Chen studies suggest that the IDD may have this same dampening effect, even in states that have not adopted the most aggressive form of the doctrine.³²⁸

IV. Limiting the IDD’s Fallout

The inevitable disclosure doctrine needs reform.

The most extreme version of the doctrine not only limits employee mobility through ex post, non-contractual intervention, but it also displaces the legislature’s role as the principal architect of state employment law. This concern has special salience in this moment of increased scrutiny of non-compete agreements and other mobility restraints. Indeed, as states add rigor and precision to their laws governing non-compete agreements, they strengthen the case for rejecting the IDD. If the legislature has decided to make non-competes inapplicable to certain groups of employees, surely it doesn’t intend to give employers a back-door way to limit those same employees’ prospects. On the other hand, if the law does allow senior executives and other enumerated employees to be constrained by non-competes, their employers’ failure to obtain such an agreement indicates either neglect or an inability to obtain the employee’s consent to the restrictive term. Either way, applying the IDD would undermine the existence and limits of the specialized rules governing non-compete agreements.

For these and other reasons, very few courts have applied the IDD in its most aggressive form; given its limited value and considerable costs, state legislatures would do well to reject it explicitly.³²⁹ The federal Defend Trade Secrets Act provides a model, authorizing courts to grant injunctive relief to prevent misappropriation “on such terms as the court deems reasonable, provided the order does not . . . prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows.”³³⁰ By incorporating similar language into their trade secret statutes, states could serve three related goals. First, they would protect the legitimacy of state non-compete law, by eliminating the IDD loophole and forcing employers to use contract law to achieve any limits on employees’ ability to assume a new job. Second, by requiring evidence of wrongdoing or concrete plans to misappropriate as a prerequisite for injunctions regarding other conditions on employment—such as restrictions on working on particular technologies, or soliciting particular sets of clients—states would enable employees (and their new employers) to avoid abusive lawsuits by preemptively demonstrating their intention to honor non-disclosure obligations. At the same time, courts would retain the equitable power to impose stricter limits on individuals who have shown themselves either incapable or unwilling to honor their duties to their former employer. Third, this discrete legislative fix would remove the fog of uncertainty about the potency of the IDD and thus reduce the drag on employee mobility caused by the doctrine’s shadow.

Even without legislative action, courts could go a long way toward minimizing the IDD’s adverse impact by expressly rejecting the employment-blocking version of the doctrine, as courts in California and Maryland have done. The vast majority of states that purport to follow the IDD have never used it to enjoin employment in the absence of a non-compete, undoubtedly out of a combination of deference to non-compete law and normative concerns about non-negotiated limits on employee mobility. Yet courts’ failure to say that explicitly creates uncertainty and confusion over whether the doctrine could ever be used to block mobility in a state. Courts do not need legislative action to reject this version of the IDD. In states that enforce non-compete agreements that meet certain substantive requirements, courts could conclude by negative implication that only contracts meeting those requirements justify an injunction against employment. In other states, courts could follow California’s lead to conclude that non-contractual restraints on mobility would offend the principles that led the state to prohibit non-competes.

Ruling out the most radical form of the IDD would go a long way toward reducing the chill associated with the doctrine. Employees could have confidence that, so long as they did not sign a non-compete agreement, their employer could not entirely prevent them from changing jobs. It would not, however, resolve the more general ambiguity about the doctrine’s applicability, meaning, and scope. The broader doctrinal morass surrounding “inevitability” and its role in trade secret and non-compete analysis requires separate attention. We suggest three straightforward reforms.

First, we urge courts to abandon the use of the label “inevitable disclosure doctrine” to describe anything other than a claim that an employee’s new position—alone—raises the risk of use or misappropriation of trade secrets. Settling on a singular, consistent definition will force more precise and disciplined analysis and will (as discussed above) likely lead to a rejection of the doctrine in most states. It will also sharpen the doctrine’s blurry lines and reduce the risk that other references to inevitability will be interpreted as an adoption of the IDD. In cases involving the reasonableness of non-compete agreements, for example, courts could consider the risk (or inevitability) of trade secret disclosure without purporting to invoke a doctrine.

Second, to the extent that state law allows employment-related injunctions as a remedy for actual misappropriation and related misdeeds, we encourage courts to apply that remedy sparingly, and only against parties whose wrongdoing relates directly to the trade secrets themselves. Employees who download reams of confidential documents on their way out the door, for example, signal an intent to misuse information; employees who are less than forthcoming about the fact that they’re considering a new job, on the other hand, do not. Courts should insist on compelling evidence to rebut the ordinary presumption that employees can and will honor their non-disclosure obligations in their new jobs. They should not invoke this extraordinary form of relief absent concrete evidence of active wrongdoing with respect to trade secrets.

Third, given our evolving understanding of the relationship between employee mobility and a healthy economy, courts should recognize the limitations of their expertise and should defer to the legislature to set the rules for employment restraints. Executives and other employees change jobs all the time. Sometimes, their knowledge of their former employer’s strategy and business plans will infect their judgment when they leave to work for a competing firm. In some states, policymakers may view that as a reason to enforce contracts that restrict them from taking those jobs. In other states, the legislature may view that as the price of operating in a vibrant, innovative, spark-filled economy. The law is not designed to optimize short-term outcomes for individual firms; it aims to achieve the best outcomes for society. Particularly as economists demonstrate the positive economic impact of employee movement, courts need to step back and resist their impulse to protect spurned employers from short-term harms, in favor of a longer-term and bigger-picture perspective.

Conclusion

At a moment when state and federal governments are reckoning over the economic and human consequences of limitations on employment mobility, the time is ripe to revisit the IDD. This Article has revealed the confusion and inconsistency that characterizes the doctrine, as well as the cost of that confusion for employees and the economy. The time has come to lay the IDD to rest.

Category: Print Issues

The Long Shadow Of Inevitable Disclosure

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