As we welcome 2025, Wilson Sonsini litigators shed light on the emerging trends and key issues they see shaping the legal landscape, from AI regulation to evolving trade secret laws and increasing scrutiny on corporate disclosures.
As M&A activity is projected to increase, we continue to see litigation over contingent earn-out payments and related reasonable and best-efforts contractual commitments. Companies should carefully review these provisions in connection with M&A deals when taking on conditional payment obligations post-close.
Founder-led companies or those with significant stockholders will continue to see new and creative challenges to corporate actions based on controlling stockholder theories of liability. But we expect the law surrounding controlling stockholders will continue to evolve. We are already seeing healthy debate among many academics pushing Delaware courts to revisit (or return to) more practical standards to govern controller duties.
While the FTC's attempt to enforce a nationwide ban on covenants not to compete has been unsuccessful to date, there is a growing aversion to covenants not to compete among courts and state legislatures that is making it more difficult to enforce them. In addition to decisions from courts strictly scrutinizing the enforceability and application of covenants not to compete, including a number of decisions from the Delaware Chancery Court, states have been passing statutes limiting covenants not to compete or outright banning them. The NLRB has piled on, ruling that overbroad non-compete provisions chill employees from exercising their rights under Section 7 of the NLRA. As a result, employers should consider implementing and strengthening other mechanisms to protect their trade secrets, including more strictly limiting access to trade secrets, revisiting their employee hiring and exit procedures, and auditing their NDAs and confidential information agreements to ensure execution and compliance. They also should carefully review their covenants not to compete and amend them if necessary to maximize the likelihood of enforcement.
Trade secret misappropriation cases involving AI are likely to increase substantially. These cases will bring new questions regarding what constitutes a trade secret in the context of AI development, especially the protectability of training data. They will also stress already challenging questions regarding a plaintiff's burden to identify its trade secrets with specificity and how to calculate damages in nascent markets.
With the Seventh Circuit's recent decision in Motorola Solutions Inc. v. Hytera Communications Corp. Ltd., resoundingly reaffirming the extraterritorial reach of the Defend Trade Secret Act, we expect to see more cross-border trade secret misappropriation litigation. The Seventh Circuit ruled that, under the DTSA, liability can accrue for acts committed wholly abroad if some act in furtherance of the misappropriation occurred in the U.S. More U.S. corporations are likely to avail themselves of the DTSA as a powerful weapon to address the wrongful exfiltration of their trade secrets to other countries.
While patents have traditionally formed the baseline of IP protection in the technology and life sciences industries, recent years have seen a growing emphasis on trade secrets. Understanding what warrants patent and trade secret protection is critical, and selecting the right method of IP protection will rest on the balance of several considerations—particularly in view of recent court decisions, statutory enactments, and developments in the technologies themselves.
We continue to see the value of a strategic patent portfolio in protecting and fostering growth and bringing products to market in the life sciences arena. Particularly in the pharmaceutical industry, a focus on short- and long-term patent and regulatory strategy will be especially important in view of recent developments in case law related to Orange Book listing.
One upcoming trend for next year is the ownership of AI-created IP. While purely AI-created material may not be patentable or copyrightable under the Thaler decisions, many open questions remain on how much involvement of AI in the creation process is acceptable while still being able to maintain and enforce IP rights.
AI continues to be an obvious area of focus in the technology sector and has yielded a corresponding focus both in private litigation as well as regulatory enforcement. Private plaintiffs and enforcement staff alike are stress testing disclosures made by companies operating in the AI space to ensure that the products and services purportedly deploying AI really do what they claim. Notwithstanding the hype and excitement surrounding AI technology, companies would be well-advised to be measured, precise, and accurate in their public disclosures on the topic. In addition, regulators in particular have made clear that even with the rapidity of advancement in AI technology, they expect a company's internal control environment (which could be impacted by the deployment of that technology) to keep pace.
Whenever technology leaps forward, judges and attorneys are called upon to draw imperfect analogies to apply existing law and past decisions to novel situations. We're seeing that process play out with AI in a range of areas, from patents to torts to copyright. For institutional stakeholders or repeat players in AI-related litigation, it will be critical to craft a cross-cutting strategy that stake out consistent positions across the board as issues arise in different contexts.
Companies utilizing AI technologies to communicate with their customers should be aware of FCC and TCPA considerations. Agencies across state and federal levels are paying closer attention to this type of use; in particular, the FCC recently issued a unanimous Notice of Proposed Rulemaking and Notice of Inquiry targeting the use of AI-related technologies for communicating with consumers.
The SEC might reduce its focus on the use of off-channel messaging applications in the financial industry, but the DOJ will continue to focus on this issue in its corporate investigations. The DOJ's official guidance on off-channel messaging applications was very broad and didn't give much guidance other than recommending that companies spend time thinking about how they can capture, retain, and use messages from off-channel applications. The DOJ will, eventually, give companies more guidance on using off-channel messaging applications, but not through official guidance—it will be through corporate resolutions and public speeches.
Until the DOJ announced its new whistleblower program, private companies were largely immune from cases driven by whistleblowers. The DOJ's new whistleblower program, however, will lead to more investigations of privately held companies and larger corporate fines. Private companies now need to have whistleblower programs—a hotline, policies, procedures, ways to ensure that employees aren't retaliated against, and training—to ensure that employees report concerns internally instead of going to the DOJ.
The DOJ approved companies' using AI as a compliance tool in the most recent version of its Evaluation of Corporate Compliance Programs. The DOJ's acceptance of AI could help speed up fundamental changes to how compliance programs operate. Companies have been using AI in other aspects of their business, so they should be able to use it to improve their compliance programs. It's finally clear that the DOJ understands that as businesses change how they operate, compliance programs also have to change if they are going to be effective. Your compliance team needs to have a role in overseeing AI, just like compliance needs to oversee other aspects of a business, but compliance shouldn't have exclusive control over AI use. Just like any other aspect of compliance, it's a team effort.
