Is our NDA with no time limit enforceable in Illinois, and does the trade-secrets act swallow our common-law claims?
Except as provided in subsection (b), the Illinois Trade Secrets Act 'is intended to displace conflicting tort, restitutionary, unfair competition, and other laws of this State providing civil remedies for misappropriation of a trade secret', but it does not affect contractual remedies, whether or not based upon misappropriation, and expressly provides that a contractual or other duty to maintain secrecy or limit use of a trade secret shall not be deemed void or unenforceable solely for lack of durational or geographical limitation on the duty (765 ILCS 1065/8(a), (b)(1)). Three more things the Act leaves alone: other civil remedies not based upon misappropriation of a trade secret, criminal remedies, and the definition of a trade secret in any other Illinois Act (§ 8(b)(2)-(4)).
The trap
This is why the two clauses must be drafted separately. An unlimited-duration covenant survives § 8(b)(1) only AS TO A TRADE SECRET: the proviso reads 'a contractual or other duty to maintain secrecy or limit use of a trade secret', so the Act says nothing about the duration of a covenant protecting other confidential information. Which makes the Act's own definition the first thing to check, and it is a two-part test, not a label: a trade secret is information: "technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers" among other things. That is "sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use" AND "is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality" (765 ILCS 1065/2(d)). Fail the second limb and there is nothing for § 8(b)(1) to save. The Freedom to Work Act's definition of 'covenant not to compete' expressly EXCLUDES confidentiality covenants and trade-secret and invention-assignment agreements, so an NDA is not subject to that Act's earnings floor (820 ILCS 90/10(a): no employer shall enter into such a covenant unless actual or expected annualized earnings exceed $75,000 per year (an amount the section itself raises to $80,000 beginning January 1, 2027, $85,000 in 2032 and $90,000 in 2037), and a covenant entered into in violation of that subsection is void and unenforceable) or its 14-day review requirement (820 ILCS 90/20: illegal and void unless the employer advises consulting an attorney and gives 14 calendar days to review). The displacement half is the other trap: a common-law claim for misuse of confidential information that is really a trade-secret claim is displaced, while the contract claim on the same facts is not. What makes a claim a trade-secret claim is the Act's defined "misappropriation": acquisition by a person who knows or has reason to know the secret was acquired by improper means, or disclosure or use without consent by a person who used improper means, or who knew or had reason to know the knowledge was derived through someone who used improper means or owed a duty of secrecy, or who learned before a material change of position that it was a trade secret acquired by accident or mistake (765 ILCS 1065/2(b)).
7 authorities
- statute765 ILCS 1065/8enactment date not established
The words that state the rule
(a) Except as provided in subsection (b), this Act is intended to displace conflicting tort, restitutionary, unfair competition, and other laws of this State providing civil remedies for misappropriation of a trade secret. (b) This Act does not affect: (1) contractual remedies, whether or not based upon misappropriation of a trade secret, provided however, that a contractual or other duty to maintain secrecy or limit use of a trade secret shall not be deemed to be void or unenforceable solely for lack of durational or geographical limitation on the duty;
- statute765 ILCS 1065/8enactment date not established
The words that state the rule
(2) other civil remedies that are not based upon misappropriation of a trade secret; (3) criminal remedies, whether or not based upon misappropriation of a trade secret; or (4) the definition of a trade secret contained in any other Act of this State.
- statute820 ILCS 90/5enactment date not established
The words that state the rule
"Covenant not to compete" does not include (1) a covenant not to solicit, (2) a confidentiality agreement or covenant, (3) a covenant or agreement prohibiting use or disclosure of trade secrets or inventions, (4) invention assignment agreements or covenants, (5) a covenant or agreement entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest, (6) clauses or an agreement between an employer and an employee requiring advance notice of termination of employment, during which notice period the employee remains employed by the employer and receives compensation, or (7) agreements by which the employee agrees not to reapply for employment to the same employer after termination of the employee.
- statute820 ILCS 90/10enactment date not established
The words that state the rule
(a) No employer shall enter into a covenant not to compete with any employee unless the employee's actual or expected annualized rate of earnings exceeds $75,000 per year. This amount shall increase to $80,000 per year beginning on January 1, 2027, $85,000 per year beginning on January 1, 2032, and $90,000 per year beginning on January 1, 2037. A covenant not to compete entered into in violation of this subsection is void and unenforceable.
- statute820 ILCS 90/20enactment date not established
The words that state the rule
A covenant not to compete or a covenant not to solicit is illegal and void unless (1) the employer advises the employee in writing to consult with an attorney before entering into the covenant and (2) the employer provides the employee with a copy of the covenant at least 14 calendar days before the commencement of the employee's employment or the employer provides the employee with at least 14 calendar days to review the covenant.
- statute765 ILCS 1065/2enactment date not established
The words that state the rule
(d) "Trade secret" means information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that: (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.
- statute765 ILCS 1065/2enactment date not established
The words that state the rule
(b) "Misappropriation" means: (1) acquisition of a trade secret of a person by another person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of a trade secret of a person without express or implied consent by another person who: (A) used improper means to acquire knowledge of the trade secret; or (B) at the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was: (I) derived from or through a person who utilized improper means to acquire it; (II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (C) before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.