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[00:00:00] Justin Brady: From Iowapodcast.com, I’m Justin Brady, and with technology scaling and AI creeping everywhere, how do you protect your personal information? How do you protect your intellectual in- in- intellectual property? How is it even possible? Especially because laws are changing that are actually kind of allowing, uh, like, like disallowing non-competes and making those even harder.

[00:00:23] So a lot of companies are like, “We have a lot of really, really good information, and how do we protect [00:00:30] that all?” Like, this is a, a huge concern. And to break that all down is Anne Kendall, the employment and commercial litigator, of course, at Dentons Davis Brown, one of our wonderful collaborators here on Iowapodcast.com.

[00:00:41] Anne, thank you so much for coming on the show.

[00:00:43] Ann Kendell: I’m glad to be here. Thanks so much for having

[00:00:46] Justin Brady: This is a super hot topic. I know you’re getting tons, tons of questions about this.

[00:00:51] Ann Kendell: yes

[00:00:52] Justin Brady: I have a ton here, but is this all rooted in like, um, you know, technology spreading everything e- everywhere? There’s [00:01:00] the, the r- the Chinese and American manufacturing rush.

[00:01:03] What’s the core concern that most leaders have right now when it comes to, like, protecting intellectual property?

[00:01:09] Ann Kendell: So I think that technology has definitely kind of sped up that pace. Um, so just a little bit of historical reference.

[00:01:17] Justin Brady: yeah

[00:01:18] Ann Kendell: in day, um, I– my first big federal lawsuit in 1999 was a restrictive covenant case. And so just to kind of break that down, restrictive covenants are [00:01:30] non-competes, non-solicitation agreements, and even confidentiality agreements.

[00:01:33] So something that literally restricts

[00:01:36] Justin Brady: Right

[00:01:37] Ann Kendell: is a restrictive covenant. Um, and, and even at that time, I remember someone, you know, I was talking about what I was doing at work, and someone said, “Oh, non-competes, those aren’t enforceable,” which I have heard throughout the rest of my career as well. Um, so that is not true.

[00:01:55] I mean, if you’re in California, yes. So it’s very… It can be very [00:02:00] state-specific. But here in Iowa, uh, they are enforceable, and, and really when we’re looking at what are the types of protections that, you know, are, are best, uh, again, back in the day, we used to focus more on the non-compete part and the non-solicitation part.

[00:02:17] So what I mean by that is someone couldn’t go down the block and open up the same shop that, you know, you had them working for you, and, um, and then drawing your customers there, et cetera. Well, [00:02:30] technology, I mean, y- you know, the geographic space is really, most of the time, irrelevant now because so much is done online.

[00:02:39] Justin Brady: Oh, good point Right

[00:02:41] Ann Kendell: So, you know, we used to look at does this person, this sales… It’s usually sales. Does this salesperson, you know, what, what is their sales

[00:02:51] Justin Brady: Territory

[00:02:53] Ann Kendell: And, and we still do look at that to some extent, but, you know, the courts don’t [00:03:00] love these. I mean, they will enforce them, but they don’t love them, especially when it is keeping someone from, you know, gainful employment- Right

[00:03:08] especially in an area that they know,

[00:03:10] Justin Brady: I’ve heard that the FTC has been, like, threatening to change rules. I don’t know the state of that, but I have heard two things, which is, oh, earlier they were considering throwing out non-competes and making them… I don’t know what the state of that is.

[00:03:24] But then I’ve also heard in the past, before the FTC got involved, that non-competes, well, [00:03:30] they’re really, really hard to enforce.

[00:03:32] So what is the state of non-competes now and, and, uh, some of these restrictive covenants now?

[00:03:38] Ann Kendell: Great, great question. So under the Biden administration, the FTC, the Federal Trade Commission, had proposed a rule that I think people often called the non-compete rule. Um, then there was a change in administration. Before it went into effect, there was an injunction in Texas, which is where we always go for injunctions is, is Texas, uh, for a [00:04:00] national, uh, uh, injunction basically. Uh, uh, the effect of it was national. That actually has changed, so I’m curious to see what happens with new proposed things

[00:04:10] Justin Brady: Sure, yeah

[00:04:11] Ann Kendell: you know, we are not going to be able to get those types of injunctions. And I say we, I don’t mean me. I wasn’t doing it. But people who are

[00:04:18] Justin Brady: Just to clarify.

[00:04:19] Ann Kendell: No, it wasn’t me.

[00:04:20] Justin Brady: It wasn’t me. It wasn’t me?

[00:04:20] Ann Kendell: Um, but that’s where folks used to go if they didn’t like something that the federal government was doing, and they wanted it. They would usually go to a court in, in [00:04:30] Texas and, and try to get an injunction. That did happen, so that rule did not go into effect. Well, then we had a change in administration. The Trump administration basically kind of abandoned that, but they didn’t necessarily abandon, um, uh, the negative consequences of non-competes because I do think there has been an abuse of them. Um, you know, uh, and in particular with low-wage earners, you know, and employees that, know, they’re, they’re struggling to earn a living. And, [00:05:00] and I do think that’s something that frankly cuts across this whole nation of ours where we seem to have trouble agreeing on a lot. But I do think that’s one of the things, is we don’t like seeing someone, you know, especially like, like I said, a low-wage earner not be able to earn a living because of a contract. So what, uh, the Trump FTC has done has… is basically like we have enough case law, there’s enough precedent, we don’t have to, you know, we don’t have to have a new rule. And I will say [00:05:30] they haven’t ignored this issue. Um, they have entered into some, you know, consent proposals. They’ve sent some threatening letters.

[00:05:37] Uh, I think that was to the healthcare folks, basically like, “Take a look at your agreements and see if they really matter. if they’re really important. Um, see if they really comply.”

[00:05:47] Justin Brady: Huh

[00:05:48] Ann Kendell: so they’re taking a careful look at those things, which I think all employers should do. Um, if you want to actually enforce it, you need to, you need to look at it. Um, so they, they are [00:06:00] still being active about it, and they’ve, you know, picked a couple of industries. Like I said, they kind of have put the healthcare industry on notice. But then also with these, uh, consent, uh, decrees think it was a pest care company. Then there was another company where it was people who were work in offices, cleaning, concierge services, et cetera. So those folks would have a lot of contact with the people, you know, in the, in the business.

[00:06:28] Justin Brady: goodness

[00:06:29] Ann Kendell: [00:06:30] then what might happen is a competitor would want to basically hire that nice group of folks that work, like let’s say they worked, you know, they cleaned at our law firm or cleaned here, uh, you know, steal the folks that the customer likes, and then bid for that work, and then replace them.

[00:06:51] Justin Brady: Crazy

[00:06:52] Ann Kendell: so you can kind of see why, you know, they were trying to shut some of that down.

[00:06:56] um, but basically saying, “No, this, you’re, [00:07:00] you’re using this way too broadly.

[00:07:01] Justin Brady: Ja.

[00:07:02] Ann Kendell: This

[00:07:02] many people. This is not, this

[00:07:05] Justin Brady: Well,

[00:07:05] Ann Kendell: isn’t

[00:07:06] Justin Brady: it’s one of those legal areas that you can, at least for me, probably you too, that you can see both sides and you’re like, “Yeah, okay, this makes sense.” ‘Cause, uh, I imagine legal aside, um, you’re, ’cause, well, not legal aside, but I imagine there are negative byproducts to these non-competes even if someone doesn’t take you to court.

[00:07:23] Ann Kendell: Think it has impacted recruiting,

[00:07:25] Justin Brady: Mm-hmm

[00:07:26] Ann Kendell: Like uh, I mean, that, that can definitely be an issue. [00:07:30] And so that’s where, whether it’s from enforcement or recruitment or just kind of that

[00:07:35] reality, we walk through, at least our group does, what is the real practical issue here? What is it that you need to protect?

[00:07:43] I mean, what is it that really could hurt

[00:07:46] Justin Brady: Sure, sure

[00:07:47] Ann Kendell: did this? you know, are you doing enough to protect that in the first place? So that would kind of be starting to touch on more like trade secrets issues. Um, because a judge is going to look at that too. A [00:08:00] ju- you know, if you’re saying, “Oh my gosh, this, you know, is confidential information.

[00:08:04] This hurts us,” et cetera, but you post it on your website,

[00:08:08] Justin Brady: Good point. Good point.

[00:08:10] Ann Kendell: mad ‘ cause this person’s using it.

[00:08:12] Justin Brady: So if it’s focused on, like, trade secrets and stuff that you’ve truly done a good job protecting and keeping private, it’s more likely to go in your favor. A judge, even the public is more likely to side with you and say, “Well, duh.” But if it’s just about controlling the competition and help, you know, and, and it seems like there’s not really any IP [00:08:30] there or trade secrets, tough.

[00:08:32] It’s gonna be, it’s gonna be a little tougher.

[00:08:34] Ann Kendell: Right

[00:08:34] Justin Brady: so what are some of the strategies that are likely to work then when it comes to, like, re- restrictive covenant strategies?

[00:08:40] Is it basically stay focused on the IP and trade secrets, or is there something broader?

[00:08:46] Ann Kendell: is a really good place to start because that’s what, you know, that’s what’s really going to hurt is if that truly trade secret confidential information gets out, you know, that, that really is, is the focus if

[00:08:58] going to hurt you. The [00:09:00] other piece that, that we talk about a lot is non-solicitation, in, in particular of customers, and that’s where we I mean, we will do a geographic non-compete, but it really– We only encourage it if it makes sense for the business.

[00:09:15] Justin Brady: Mm-hmm

[00:09:16] Ann Kendell: So if there really is no geographic territory, then it’s like why even write that into the contract? What we really wanna protect is our information and our customers, you know? So that customer relationship is also [00:09:30] something that the court will, will protect. then looking at what’s the length of time, how long is it going to take to, you know, get someone in, get them trained up, and build up that customer relationship for, let’s say, the salesperson who went somewhere else? And, and that’s not even necessarily that they went to a competitor. That’s just if they’re gone,

[00:09:50] Justin Brady: Yeah. Right

[00:09:51] Ann Kendell: they change industries, they retire, whatever. long is it going to take to get someone up to speed? And that’s where the court is going to look at kind of measuring how [00:10:00] long they should be restricted. And so

[00:10:03] Justin Brady: interesting

[00:10:04] Ann Kendell: basically kind of– We engage with clients that way. Like, let’s walk through what are the things we’re worried about that really could hurt us? Um, customers, I have to assume customer relationships has gotta be right up

[00:10:16] IP and, uh, you know, other confidential information, that sort of thing. So we really start with what, what do you wanna protect, you know, and then let’s find common sense ways to protect that so that we’re [00:10:30] not overreaching. Um, you know, yes, put my white hat on to not be a bully. But also, in my strategic hat, which shouldn’t necessarily be my black hat, but my, you know, my other hat, is a court’s not, uh, they’re not gonna enforce it if it’s too broad. Now, our courts can do what they call a blue pencil, which means that they will cut out the things that are too broad.

[00:10:52] Or if you’re, if it’s too long, like, you know, you have four years, and the court’s like, “Oh, this really should only be

[00:10:57] Justin Brady: Yeah.

[00:10:58] Ann Kendell: enforce it, but only for one [00:11:00] year. Now, it can be so bad that it could be kicked out totally as unconscionable. Oh. So that also is a balancing factor, so we have to be kinda cognizant of all of that and make it, much as we can, you know, common sense for everyone

[00:11:18] enforceability.

[00:11:18] Justin Brady: this is a good clue because you’re saying upfront you can prevent some of this stuff later by not being overbearing or not going overkill on some of these non-competes. That’s some pretty good [00:11:30] legal advice. Last question would be, you indicated there seems to be a difference in fields that have like very tight intellectual property and trade secrets and healthcare.

[00:11:41] Ann Kendell: So they do. So, and that has been something that’s been kind of brewing for a while. Um, you know, back in the day, people would say, “Oh gosh, lawyers can’t have restrictive covenants. Why not another professional like a doctor?” And especially as much as people really like their doctor and they wanna stay with their doctor, et cetera, or the rest [00:12:00] of the care team, not just the doctors. so that’s been brewing for a while. Um, it, it doesn’t mean that they’re not wholesale unenforceable, but we’ve had some new, uh, new laws, particularly on the state level that really has been, uh, first of all it was targeting, uh, travelers, so staffing agencies that hire, you know, nurses, nurse practitioners, et cetera, who, who travel, who go around and, and, you know, fill in especially with the need that we have in healthcare and staffing. [00:12:30] Um, those folks can’t have, uh, restrictive covenants. So that was the first Iowa law recently that

[00:12:36] Justin Brady: Interesting

[00:12:37] Ann Kendell: attacked that. The next, uh, was mental healthcare professionals, which kind of makes

[00:12:43] got a shortage of that. We don’t wanna restrain them. Um, there i- you know, again, there is a balance to that because a lot of, um, these, you know, firms will kind of train up folks and, and kind of invest in- Yeah

[00:12:58] in, in their [00:13:00] education, et cetera. So we try to figure out ways that, you know, is there something we can do that kind of, you know, maybe makes sense, especially if, uh, if the clinic paid for some of

[00:13:10] Justin Brady: Good point.

[00:13:11] Ann Kendell: or something

[00:13:11] Justin Brady: point

[00:13:12] Ann Kendell: but mental healthcare, nope, we cannot restrict those folks. So that was the next year, and then most recently it was, it’s, it’s specific to the University of Iowa, uh, hospitals, clinics, et cetera, and, and those folks can’t have restrictive covenants now.

[00:13:28] But I think what that shows [00:13:30] is growing sentiment of we don’t really want our healthcare folks restricted in that way. And then as I mentioned on the federal side, the FTC has sent, you know, these letters to all these healthcare organizations saying, know, look at your agreements. If you have them, look at those agreements and make sure that they’re not overbroad-” Yeah

[00:13:50] et cetera.

[00:13:50] Justin Brady: Ugh.

[00:13:52] Ann Kendell: firing warning shot

[00:13:53] Justin Brady: “It’s a shortage area, so we can’t afford to have these people locked down for five years.”

[00:13:57] Ann Kendell: years Exactly You

[00:13:59] Justin Brady: it, it is a, it is a [00:14:00] tough situation, and I know a lot of listeners run into these tough situations occasionally. So if that is you, ah, it’d probably be a good idea to reach out to Anne Kendall, employment and commercial litigator at Dentons Davis Brown. Anne, what is the easiest way to get in touch with you?

[00:14:15] Just the website, uh, your page on the website, or is there a more direct path there?

[00:14:19] Ann Kendell: uh, that, yes,

[00:14:21] you know, take you to my phone number, my email address, et cetera. Um, it’s also, uh, my first and last name, although my last name gets [00:14:30] misspelled E-L-L instead of A-L-L,

[00:14:32] Justin Brady: Ja.

[00:14:33] Ann Kendell: husband was the first Kendall I ever met that it was spelled that way

[00:14:37] Justin Brady: It’s his fault. It’s his fault.

[00:14:38] Ann Kendell: it’s…

[00:14:38] him to take my name,

[00:14:40] Justin Brady: Anne, thank you so much for coming on the show. Really appreciate it

[00:14:43] Ann Kendell: Thank you

[00:14:47]