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Non-compete agreements are contracts, most often governed by state law instead of the federal level. Most non-compete cases are filed and tried in state courts but, with the passage of the Defense of Trade Secrets Act this May, Congress has shifted many cases to federal jurisdiction.

Most non-compete cases allege trade secret violations, which triggers federal court jurisdiction over the entire lawsuit under the new law.

Why do non-compete agreements go to court?

In most cases, a former employer sues a former employee who, after signing a non-compete agreement, has left to work for a competitor. Non-competes usually prohibit working for a close competitor for both a specific time period and within close geographic proximity.

There are concessions on both sides in such an agreement. When employees attempt to compete, they do so with some degree of knowledge about the field and their former employer. A non-compete protects a company’s secrets but workers have the right to earn a living as well. An agreement should strike a middle ground for both parties, one the court will find reasonable.

How trade secrets affect a non-compete case

In most non-compete cases, employers allege that the former employee took customer lists, used knowledge of pricing structures, or helped the new employer design a new product with proprietary information. Such violations share confidential information with another company instead of maximizing an employee’s expertise or skill. Under Ohio law, an employee’s trade secret knowledge will influence the court’s definition of a reasonable scope.

Under the new Defense of Trade Secrets Act, rulings will often be determined at the federal level instead of by state courts.