2025 USPTO Fee Changes Disproportionately Impact Hemp Businesses
Effective January 18, 2025, the United States Patent and Trademark Office (USPTO) enacted a new trademark fee structure that affects fast-paced industries more than others, most notably, the hemp and cannabidiol (“CBD”) industries.
The new fee structure is presented as a neutral pricing adjustment to replace the current TEAS Plus and TEAS Standard application filing options with a single base application option that changes based on the “complexity and completeness of the application.” The USPTO released a guide on the fees, here: Trademark Examination Guide 1-25. Yet, the reality is that this change penalizes businesses working with federally legal hemp and cannabidiol products, making it more expensive for them to access brand protection through the federal trademark system.
New Fee Structure: More Than Meets the Eye
Here’s a breakdown of the USPTO’s updated fee framework for federal trademark applicants:
Base Application Fee: $350.00 per Class
Custom Identifications of Goods and Services (i.e., not using Trademark ID Manual): +$200.00 per Class
Long Identifications: +$200.00 for each additional 1,000 characters
Insufficient Information: +$100.00 per Class for missing new content requirements
Applicants who use the USPTO’s Trademark ID Manual—a list of pre-approved goods and services—can avoid the $200.00 custom language fee. But for businesses in the hemp and CBD industries, this lower-cost path appears unavailable to them.
ID Manual Fails to Reflect Legal Hemp Products
The USPTO understandably scrutinizes applications in these industries to ensure compliance with federal law. Through its Exam Guide 1-19.pdf, the USPTO suggests applicants, in part, request amendment of the identification of [goods or] services to specify that the involved cannabis contains “a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis.”
However, despite the legalization of hemp-derived goods under the 2018 Farm Bill, the Trademark ID Manual fails to include acceptable entries for lawful hemp products, such as those containing “0.3% delta-9 THC or less by dry weight,” the federal threshold under current law. The ID Manual includes hemp fibers and other Class 24 goods. The ID Manual also includes “smokers’ articles in the nature of hemp wicks for lighting” in Class 34. However, the legally sufficient language – “not more than 0.3% delta-9 THC by dry weight” does not appear in the ID Manual. Further, there are no entries containing the terms “hemp oil,” “hemp flower,” “cannabis,” “CBD,” or “cannabidiol,” for example.
Applicants who identify their goods or services with the language “not more than 0.3% delta-9 THC” must draft custom language, thereby triggering the $200.00 custom language penalty per Class. If the applicant identifies products and services in three Classes, for example, that’s an additional $600.00 in filing fees.
The best option to avoid the $200.00 fee may be to identify their products or services without specifying hemp or CBD as an ingredient or feature of them. Yet, that option will likely invite further scrutiny during examination. The risk they take with this approach may be having to pay the $200.00 fee during examination rather than at the time of filing the application. The USPTO examining attorney assigned to the application could likely determine that the applicant owes the additional fees during the examination process, but since applications filed after January 18, 2025, have not been examined yet, we have yet to see this approach.
This issue –requiring language but excluding that language from the pre-approved list – was raised directly with the USPTO via [email protected] on January 24, 2025; (the email address offered by the USPTO to suggest an identification of goods or services for possible inclusion in the ID Manual). The USPTO confirmed in its response that it has not included any such entries in the ID Manual and cited the legal complexity surrounding hemp-related products. The USPTO noted that items in the ID Manual must not require further inquiry, and that hemp products often invite review under the Controlled Substances Act, the Federal Food Drug and Cosmetic Act, and other regulations—even when the products are fully compliant. Essentially, the USPTO confirmed – if you want to identify products and services in this industry, expect heightened examination and additional fees as a result.
The Legal Catch-22
The USPTO’s stance creates a legal paradox: businesses that follow the USPTO’s suggestions and include federally compliant hemp language in their applications are punished with higher fees and, often, prolonged scrutiny. The USPTO’s own Exam Guide 1-19 (PDF link) outlines these standards and confirms that hemp-related trademarks will only be approved if the goods comply with federal law. Yet, it fails to offer any streamlined way for such businesses to access cost-effective filings through the standard $350 per Class option.
Opting Out—or Taking a Stand
Faced with this uphill battle, many hemp and cannabis businesses are making a calculated decision: to opt out of federal trademark registration for the core goods and services or even opt out altogether. Some are finding ways to identify ancillary products – clothing items, keychains, educational or entertainment services – and seeking federal trademark registration, there. Others are avoiding the USPTO process in order to sidestep a public record of unlawful use refusals, which can damage credibility, attract regulatory attention, or affect partnerships and financing.
Instead, some are relying on common law trademark rights or state-level registrations, which offer limited protection but avoid the federal red tape.
Many, however, are choosing a different path—opting to challenge the USPTO head-on. As our law firm’s prior article on hemp brand protection notes, brand protection strategies should not be abandoned in the face of generalized resistance from the USPTO. With a clear understanding that hemp-derived products are lawful under federal law (as long as they meet the THC threshold), many brand owners are fighting to secure equal protection and recognition for their trademarks. These business owners argue that their brands deserve the same treatment as any other lawful product in the marketplace, and some are prepared to endure USPTO refusals, Office Actions, increased costs, and appeal processes in the pursuit of such protection.
What Needs to Change
Possible solutions include:
Update the Trademark ID Manual to include goods and services with language that is certain to be accepted by the USPTO in this industry such as: “Cosmetics containing hemp-derived cannabinoids with less than 0.3% delta-9 THC on a dry weight basis” or by adding, “any CBD in the goods being solely derived from hemp with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis.”
Waive the $200.00 custom identification fee when the USPTO requires further specificity on examination for industries that were excluded from the ID Manual at the time of filing the application due to federal compliance complexities.
Create an updated and clarified pathway for hemp-derived products to be registered under trademarks, using the USPTO’s own Exam Guide 1-19 as a foundation, but with greater transparency and clearer guidance.
A Matter of Fair Access
Hemp and cannabis brands represent a fast-growing sector in the economy. Yet under the current USPTO examination guidelines, fee structures, and rules, they are paying more, waiting longer, and being scrutinized harder, despite those working to stay within the bounds of federal law.
Until the ID Manual is updated, the USPTO’s fee system will continue to disadvantage one industry under the guise of regulatory caution. Lawful businesses deserve a trademark system that recognizes and reflects their legitimacy, not one that punishes them for legal compliance.
Shenzhen Releases Patent Subsidy Data – Huawei Received Over 35 Million RMB for Foreign Patent Grants
On April 14, 2025, the Shenzhen Municipal Administration for Market Regulation (SAMR) released the List of recipients of the second batch of special funds for intellectual property rights in Shenzhen in 2023 for foreign invention patent authorization (深圳市2023年第二批知识产权领域专项资金国外发明专利授权资助领款名单). Combined with the List of recipients of Shenzhen’s 2023 special fund for intellectual property rights for foreign invention patent authorization (深圳市2023年知识产权领域专项资金国外发明专利授权资助领款名单) published on March 28, 2024 Shenzhen’s SAMR has subsidized Huawei a total of 35,168,904 RMB for foreign patents granted in 2023. Huawei also received 2,619,103 RMB for Chinese invention patents that granted in 2023. ZTE and Tencent also received significant subsidies for foreign patent grants. Note that these statistics do not include subsidies for subsidiaries located in other cities. Note that direct subsidies for grants will end this year.
The top 5 total 2023 subsidies for foreign patent grants are:
No.
Name of the recipient
Amount
1
Huawei Technologies Co., Ltd.
CNY 35,168,904.98
2
ZTE Corporation
CNY 19,605,473.78
3
Tencent Technology (Shenzhen) Co., Ltd.
CNY 13,358,477.67
4
Shenzhen Goodix Technology Co., Ltd.
CNY 7,249,009.85
5
Shenzhen DJI Innovations Technology Co., Ltd.
CNY 6,430,024.87
The original data for the first tranche is here (Chinese only) and second tranche here (Chinese only). Translated datasets are available here: DomesticPatent1; ForeignPatent1; ForeignPatent2; and DomesticPatent2.
High Burden Dooms Intra-District Transfer Request
The US Court of Appeals for the Federal Circuit denied a mandamus petition requesting transfer from the Marshall division to the Sherman division within the US District Court for the Eastern District of Texas, finding that there was lack of clear error and no abuse of discretion in the district court’s decision to deny transfer. In re SAP America, Inc., Case No. 25-118 (Fed. Cir. Apr. 10, 2025) (Dyk, Prost, Chen, JJ.) (per curiam).
Valtrus Innovations and Key Patent Innovations (collectively, Valtrus) filed a patent infringement lawsuit against SAP. SAP moved for an intra-district transfer from the Marshall division, where the case was originally filed, to the Sherman division. In support of the motion, SAP cited the presence of SAP offices, relevant witness residences, and two SAP employees, all located in Sherman. Valtrus opposed the transfer, pointing out that co-pending litigation in Marshall involved the same asserted patents.
The district court denied SAP’s motion, even though the co-pending case had been closed. The district court also pointed out that most of SAP’s witnesses were out of state or international, making either Texas division equally inconvenient for those witnesses. SAP appealed.
The Federal Circuit reviewed the district court’s ruling under the stringent standards for mandamus relief, which are as follows:
There is no other adequate means to attain the desired relief.
There is a clear and indisputable right to relief.
The writ is appropriate under the circumstances.
Under the Federal Circuit’s 2022 decision in In re Volkswagen, there must be “clear abuses of discretion that produce patently erroneous results.”
Under Volkswagen, a court must consider both private and public factors when deciding whether to transfer venue. The private factors are:
The relative ease of access to sources of proof.
The availability of a compulsory process to secure the attendance of witnesses.
The cost of attendance for willing witnesses.
All other practical issues that make trial of a case easy, expeditious, and inexpensive.
The public interest factors are:
The administrative difficulties flowing from court congestion.
The local interest in having localized issues decided at home.
The forum’s familiarity with the law that will govern the case.
The avoidance of unnecessary conflict of laws issues or in the application of foreign law.
The Federal Circuit found that the district court erred in assigning weight to the co-pending litigation in Marshall, which had been closed and had all defendants dismissed by the time the motion to transfer was resolved. The Court added that the district court improperly weighed the court congestion factor against transfer based solely on the case’s smooth progression to trial.
Despite these errors, the Federal Circuit concluded that SAP failed to demonstrate that the denial of transfer was erroneous. The district court had plausibly found the convenience of the two divisions comparable for most potential witnesses who resided outside of Texas, and that SAP had not sufficiently shown that its Sherman-based employees had relevant knowledge or would be trial witnesses. The Court therefore denied SAP’s petition, underscoring the high burden faced by petitioners seeking such extraordinary relief.
Opposers Beware: Your Own Mark May Not Be Protectable
The US Court of Appeals for the Federal Circuit affirmed the Trademark Trial & Appeal Board’s dismissal of an opposition to the registration of the marks IVOTERS and IVOTERS.COM while also noting that the US Patent & Trademark Office (PTO) might want to reconsider whether it permits registration of those marks. Heritage Alliance v. Am. Policy Roundtable, Case No. 24-1155 (Fed. Cir. Apr. 9, 2025) (Prost, Taranto, Stark, JJ.)
American Policy Roundtable (APR), a publisher of campaign and political information since June 2010, filed applications to register the marks IVOTERS and IVOTERS.COM for “providing a web site of information on current public policy issues, political campaigns and citizen concerns related to political information” after the PTO approved the marks for publication. Heritage filed an opposition.
Since the 2008 US presidential election season, Heritage has published online voter guides under the names “iVoterGuide” and “iVoterGuide.com” (the iVoters marks). Without a valid registration but having priority of use, Heritage filed an opposition asserting its common law rights in the iVoters marks.
The Board considered Heritage’s opposition but ultimately found that Heritage’s mark was not distinctive. The Board first considered whether the iVoters marks were inherently distinctive and determined they were not just descriptive but “highly descriptive.” The Board next considered whether the iVoters marks had acquired distinctiveness through secondary meaning but found that the record evidence Heritage submitted was inadequate to support a finding that the iVoters marks had any source-identifying significance. Heritage appealed.
On appeal, Heritage argued that the Board had erred by finding the iVoters marks to have neither inherent nor acquired distinctiveness and that the Board violated the anti-dissection principle by evaluating the individual components of the marks instead of the marks as a whole. The Federal Circuit disagreed. The Court found the Board’s determination that the iVoters marks were highly descriptive to be supported by substantial evidence because the prefix “i” generally refers to something internet based. Heritage chose not to challenge the Board’s finding that “VoterGuide” and “.com” were not distinctive, a ruling the Court characterized as “facially reasonable.”
The Federal Circuit also disagreed with Heritage’s argument that the Board improperly evaluated the marks’ individual components. The Court found the Board properly considered the marks as a whole through its determination that the iVoters marks “on their face refer to online voter guides” and because no evidence demonstrated that the combination of the individual components conveyed “any distinctive source identifying impression contrary to the descriptiveness of the individual parts.”
Heritage argued that the Board had erred in its determination that notwithstanding over five years of use, the iVoters marks did not have statutory acquired distinctiveness. Under Section 2(f) of the Lanham Act, registration applicants may submit evidence that a mark has acquired distinctiveness because as a consequence of extensive use and promotion of the mark, consumers now directly associate the mark with the applicant as the source of those goods. Heritage argued that the Board should have accepted its five-plus years of continuous use as prima facie evidence of acquired distinctiveness. The Federal Circuit disagreed, explaining that Section 2(f) states that the Board “may accept” proof of substantially exclusive and continuous use of a mark for five years as evidence of distinctiveness. Because the language of the statute is discretionary, the Board was free to reject Heritage’s evidence. Federal Circuit case law “recognizes the Board’s discretion to weigh the evidence, especially for a highly descriptive mark.” The Court found no reason to disturb the Board’s decision to give little weight to the three declarations Heritage submitted as evidence of acquired distinctiveness and affirmed the Board’s determination that Heritage’s marks were highly descriptive and had not acquired distinctiveness.
The Federal Circuit further suggested that in view of the Board’s rulings, the PTO might reconsider its decision to approve APR’s marks for registration. Although registration should generally follow when an opposition fails, “the stated precondition is that the mark at issue be a ‘mark entitled to registration,’…which might allow the PTO, after an opposition fails, to reconsider the examiner’s pre-opposition allowance.” The Court also suggested the possibility that Heritage could now consider cancellation of APR’s marks.
New Rx for High Drug Prices? Senate Judiciary Committee Advances Six Bills With Heavy Dose of Options
The US Senate Judiciary Committee advanced to the full Senate six bills intended to reduce pharmaceutical prices and enhance market competitiveness. The package collectively targets several aspects of the pharmaceutical landscape, including pharmaceutical benefit manager (PBM) pricing practices, next-generation drug releases, patent portfolio assertions, and use of US Food and Drug Administration (FDA) regulatory mechanisms. Many of the bills’ proposals have been proposed before, but it is significant that the six bills were moved to the full Senate with bipartisan support.
The Affordable Prescriptions for Patients Act, if passed, would limit how many patents a reference product sponsor can assert in a Biologics Price Competition and Innovation Act (BPCIA) litigation against a biosimilar applicant, although such limits could be surpassed with court approval. A biologics license holder could assert up to 20 patents in a BPCIA case. Certain patents, such as method of treatment patents, would fall outside the limitation.
Against the backdrop of the Supreme Court’s 2013 holding in FTC v. Watson that certain “pay for delay” agreements are prohibited as anticompetitive, the Preserve Access to Affordable Generics and Biosimilars Act would add precision to the boundaries of permissible settlements in the pharmaceutical industry. The Federal Trade Commission (FTC) would have specific authority to institute a civil action to recover penalties, and certain presumptions would apply. For example, any agreement providing a generic or biosimilar applicant with “anything of value, including an exclusive license,” would be presumptively anticompetitive, with certain exceptions and exclusions. Terms that would remain permissible include a pre-expiration launch date, reasonable litigation expenses, and covenants not to sue for patent infringement.
Targeting the concern that branded small molecule and biologics drug manufacturers release new products with patent protection and withdraw or unfairly disincentivize older products to avoid generic competition, the Drug Competition Enhancement Act would deem the alleged practice of “product hopping” unfair competition subject to enforcement actions. The bill would define a hard switch as when a branded or biologics manufacturer discontinues or withdraws an application and introduces a follow-on product within a certain period relative to generic or biosimilar approval. It would define a soft switch as when the brand manufacturer took actions that “that unfairly disadvantage the listed drug or reference product relative to [a] follow-on product.” The bill would provide specific exclusions and justifications for branded manufacturer actions that would otherwise constitute a hard or soft switch.
Seeking to curb perceived abuses of the FDA citizen petition process, the Stop Significant and Time-Wasting Abuse Limiting Legitimate Innovation of New Generics (Stop STALLING) Act would grant the FTC the authority to bring a civil action against those filing “sham petitions” with the FDA, with penalties up to $50,000 per calendar day of review or the revenue earned by the seller of the branded product, whichever is greater. A petition could be classified as a sham based on its own objective unreasonableness, an intention to delay approval of a generic or biosimilar product, or as part of a series of covered petitions.
Based on the belief that FDA applications may include information relevant to patentability but not presented to patent examiners, the Interagency Patent Coordination and Improvement Act would create an FDA-US Patent & Trademark Office task force to establish processes for sharing submitted information. The goal would be for patent examiners to be able to access and review FDA applications where appropriate, subject to confidentiality restrictions. One area expressly identified for use is the public availability of inventions (i.e., whether subject matter in patent applications was on sale before the relevant effective date).
Finally, the Prescription Pricing for the People Act, if enacted, would require the FTC to publish a report analyzing the pharmaceutical supply chain, with specific inquiries about PBM pricing practices. The bill also calls for the report to describe FTC complaints received about, and authority to act against, sole-source drug manufacturers.
Prosecution Disclaimer Alive and Well, Especially in Closed Claim
The US Court of Appeals for the Federal Circuit affirmed a district court’s noninfringement determination, finding that the presence of a disclaimed compound in the accused product precluded infringement. Azurity Pharm., Inc. v. Alkem Lab’ys Ltd., Case No. 23-1977 (Fed. Cir. Apr. 8, 2025) (Moore, Chen, Murphy, JJ.)
Azurity owns a patent directed to a nonsterile, stable liquid formulation of vancomycin hydrochloride, specifically designed for oral administration to treat Clostridium difficile infections. Following Alkem’s submission of an Abbreviated New Drug Application (ANDA), Azurity brought a Hatch-Waxman Act claim against Alkem for infringement of certain claims of the patent. The district court found that Azurity had disclaimed the presence of propylene glycol in the claimed formulation during the prosecution. Since Alkem’s ANDA product contained propylene glycol, the district court held that it did not infringe. Azurity appealed.
The Federal Circuit affirmed, focusing on the patent’s prosecution history and noting that Azurity used the lack of propylene glycol to distinguish its claimed invention from the prior art. The Court noted that this distinction was made during prosecution multiple times in response to the examiner’s rejections, and that Azurity had added negative claim limitations that specifically omitted propylene glycol from the scope of the claims.
The Federal Circuit also noted that Azurity used a “consisting of” transitional phrase to narrow the claims and relied on the closed transition to overcome the prior art. The Court explained that “consisting of” is a closed transition that limits the claim scope to only the recited components. By using this transition and not including propylene glycol as one of the claim components, Azurity effectively disclaimed propylene glycol from the invention. Therefore, the Court found that omission of propylene glycol during patent prosecution was “clean, unambiguous, and complete.”
Azurity argued that a pretrial stipulation between the parties, which stated that “[s]uitable flavoring agents for use in the asserted claims include flavoring agents with or without propylene glycol,” should preclude the application of the disclaimer. The Federal Circuit did not find this argument persuasive, concluding that the stipulation did not alter the clear and unambiguous disclaimer made during prosecution, nor did it affect the noninfringement finding. Since Alkem’s ANDA product contained propylene glycol and Azurity disclaimed inclusion of propylene glycol, there was no infringement.
Not Secret and Not Used: Misappropriation Claim Dismissed
The US Court of Appeals for the Fifth Circuit upheld a district court’s grant of summary judgment in favor of the defendants, finding that the plaintiff failed to identify a trade secret and presented no evidence of its use or disclosure. DeWolff, Boberg & Associates, Inc. v. Justin Pethick and The Randall Powers Co., Case No. 24-10375 (5th Cir. Apr. 3, 2025) (Smith, Clement, Duncan, JJ.)
In 2018, Justin Pethick was a DeWolff, Boberg & Associates (DBA) employee. That year, DBA’s competitor, The Randall Powers Company (Powers), hired Pethick as regional vice president of sales. After Pethick began working at Powers, some prospective DBA clients hired Powers for consulting services. DBA sued Powers for trade secret misappropriation, asserting that Pethick stole its trade secrets and used them to poach clients. The district court granted summary judgment in favor of Powers and Pethick. DBA appealed.
The Fifth Circuit affirmed but on alternative grounds. To prevail on a misappropriation claim under Texas law (where the initial suit was brought), “a plaintiff must show that (1) a trade secret existed, (2) the trade secret was acquired through a breach of a confidential relationship or discovered by improper means, and (3) the defendant used the trade secret without authorization from the plaintiff.”
On appeal, Powers first argued that the information DBA claimed was trade secrets, such as contact information, meeting notes, and “confidential information related to business opportunities,” did not qualify as protectable trade secrets. DBA pointed to “large swathes of database information” without distinguishing what exactly was supposedly a trade secret. The Fifth Circuit found it was unclear as to what materials were trade secrets, noting that it had “no obligation to sift through the record in search of evidence to support a party’s opposition to summary judgment.” The Court held that summary judgment was justified on this basis.
The Fifth Circuit further held that, even assuming the information qualified as trade secrets, summary judgment was still warranted because there was no evidence that Powers and Pethick used the information. Although Pethick had requested a copy of a document that DBA claimed contained trade secrets prior to joining Powers, there was no evidence that he ever possessed it while at Powers. To the contrary, the forensic expert retained by DBA to remove its data from Pethick’s computer did not find the document. The Court concluded that DBA failed to demonstrate any use of an alleged trade secret.
New York State Proposes Bill to Ban Noncompetes Except for Highly Compensated Workers and in Sales of Businesses
New York State Senator Sean Ryan recently introduced Senate Bill 4641 (the “Bill”) that proposes to ban noncompete agreements for most New York employees.
If passed, the Bill would prospectively prohibit employers from enforcing noncompetes, except for highly compensated individuals who make an average of $500,000 or more per year and in the context of the sale of a business. The Bill would not apply retroactively, so if passed, existing noncompetes would remain enforceable consistent with New York common law.
The Bill follows Governor Hochul’s December 2023 veto of Senate Bill 3100-A, also sponsored by Senator Sean Ryan, that sought to broadly ban noncompetes for all employees regardless of income. As we reported in December 2023, Governor Hochul stated that she would not sign an outright noncompete ban, but instead preferred a “balance” with a compensation threshold and a carveout for noncompetes entered into in connection with the sale of a business. The new Bill does just that.
Who’s Covered?
If passed, employers would not be able to enter into noncompete agreements with any workers earning less than the highly compensated threshold or with certain health-related professionals, regardless of their annual income, such as physicians, physician assistants, chiropractors, dentists, perfusionists, veterinarians, physical therapists, pharmacists, nurses, podiatrists, optometrists, psychologists, occupational therapists, speech pathologists/audiologists, and mental health practitioners (collectively, “covered individuals”).
Employers would be able to enter into and/or seek to enforce noncompete agreements with “highly compensated” individuals who are not health-related professionals.
Highly compensated individuals, as defined in the Bill, are those making an average of $500,000 or more per year based on their three most recent W-2 or K-1 statements. If enacted the law will require individuals without three years of W-2 or K-1 statements to average the amounts listed on the statements for the period they have worked to determine their average compensation. Beginning in 2027, the $500,000 threshold will increase based on the Consumer Price Index.
The Bill would also allow noncompetes as a result of the sale of the goodwill of a business or sale of a majority ownership interest in a business for certain individuals or entities. To meet the sale of a business exception, the partner, member, or entity must either (1) own at least a 15% interest in the partnership or limited liability company or (2) own 15% or more of an interest in the business.
Prospective Effect and Notice Requirement
As presently drafted, the Bill would apply only on a prospective basis, meaning lawful noncompetes currently in place before the effective date of the Bill will remain enforceable, provided they meet the obligations of New York common law. The Bill’s restrictions will go into effect thirty days after the Governor signs the law.
The Bill also contains a notice requirement to inform employees of the new protections. Employers will be required to post a workplace notice developed by the New York State Department of Labor. Specific notice to individual employees would not be required.
Requirements of Common Law Reasonableness and Payment During Noncompete Period
Section 7 of the Bill provides that any noncompete that is permissible or enforceable under Section 1 of the Bill (i.e., for highly compensated individuals and, apparently, in the sale of business context) must:
still comply with New York common law, including the following factors: (i) it is reasonable in time, geography, and scope (and as to time, the Bill provides that a noncompete shall not contain a term greater than one year), (ii) it does not impose an undue burden on the employee, (iii) it does not harm the public, and (iv) its restrictions are no greater than necessary to protect the legitimate business interests of the employer; and
provide for the payment of salary during the period of enforcement of the noncompete.
Enforcement and Remedies
Pursuant to the Bill, covered individuals would be able to bring a civil action for injunctive relief and damages against employers or other persons who seek, require, demand, or accept a prohibited noncompete.
Employers cannot attempt to avoid the Bill’s requirements by maintaining a non-New York choice-of-law provision within the noncompete. Section 8 of the Bill states that “[n]o choice of law provision or choice of venue provision that would have the effect of avoiding or limiting the requirements of this section shall be enforceable if the covered individual is and has been, for at least thirty days immediately preceding the covered individual’s cessation of employment, a resident of New York or employed in New York, including individuals who work remotely in another state but who report to a New York worksite or office or who report to a New York-based supervisor.”
If a court were to find that the noncompete was prohibited under the Bill, the court would have the ability to void the agreement, enjoin the employer’s conduct, and award lost compensation, liquidated and compensatory damages, and reasonable attorney’s fees and costs. The Bill also states the court “shall award liquidated damages” of no more than $10,000 for covered individuals affected by a noncompete that violates the Bill.
Takeaways
The Bill would limit the number of employees with whom employers can enter into noncompetes, so employers with employees in New York are advised to consider taking steps to prepare, in case the Bill is passed. First, employers who are considering entering into noncompete agreements with current employees should do so before the effective date of the Bill. For future hires made after the effective date of the Bill, employers will need to rely on agreements containing non-solicitation and confidentiality restrictive covenants, rather than noncompetes. As we reported after the FTC introduced its Noncompete Rule, employers also should consider working with outside counsel to conduct a trade secret assessment to ensure that their confidential information is protected as robustly as possible.
This Bill is the second New York bill introduced in 2025 that seeks to restrict noncompetes. As we reported, in January 2025 the New York State Assembly introduced another bill that would mandate new requirements for lawful restrictive covenants. That bill remains pending in the Assembly’s Labor Committee.
Currently, the Senate Bill 4641 has been referred to the Senate Labor Committee for further discussion. As Senate Bill 4641 and Assembly Bill A01361 progress through the legislative process, we will be sure to update you.
Ill-Gotten Gains: Unjust Enrichment Remedy Not Barred by Limitation of Liability Provision
Examining the issue of trade secret misappropriation when parties have contractually limited their liability from breach, the US Court of Appeals for the Eleventh Circuit reversed the district court’s dismissal of the case, finding that a plaintiff could still recover damages under a theory of unjust enrichment. Pemco Aircraft Engineering Services Inc. v. The Boeing Company, Case No. 22-13776 (11th Cir. Apr. 4, 2025) (Pryor, Branch, Carnes, JJ.)
Pemco and Boeing, who are usually competitors, entered into an agreement to jointly bid for a government contract. The parties’ contract had three separately executed parts that functioned as one agreement. When the contractual relationship fell apart, Pemco sued Boeing for breach of contract and trade secret misappropriation. Based on Boeing’s contractual breach, a jury awarded Pemco more than $2 million of out-of-pocket damages. The district court dismissed the trade secret misappropriation claim, however, as time-barred under Alabama law. After Pemco appealed, the Eleventh Circuit reviewed and determined that the trade secret misappropriation claim arose under Missouri law, not Alabama law, and that under Missouri law, Pemco’s trade secret claims were not time-barred. On remand, Pemco brought amended trade secret misappropriation claims under Missouri law, which the district court dismissed based on the parties’ contract, which limited liability. Pemco appealed.
The issue on appeal was whether the parties’ contractual limitation of liability provision precluded any damages, even for misappropriation. The contractual provision lists the categories of damages that the parties disclaimed, namely, incidental, punitive, and exemplary, or consequential damages. The Eleventh Circuit explained that two sophisticated parties negotiating at arm’s length are permitted by Missouri public policy considerations to contractually limit future recovery for even intentional torts. By including punitive and exemplary damages, which are available only for tort claims and not contractual ones, the parties clearly intended to include torts related to the contract within its scope. Thus, even though trade secret misappropriation is a tort and not a contractual claim, the Court found that the claim was restricted by this provision and Pemco was therefore limited in its potential recovery.
The Eleventh Circuit next looked to whether the jury award had sufficiently compensated Pemco. The district court found that a Missouri trade secrets claim was barred in this context because of a full recovery under the related contract claim. The Court, however, distinguished the two causes of action. So long as the trade secrets claim provides a separate, non-duplicative remedy, it can stand on its own despite other recoveries under the contract. The Missouri Trade Secrets Act explicitly provides for an unjust enrichment remedy not available for contractual breach and the parties chose not to limit recovery for unjust enrichment. Thus, the Court concluded that this remedy was available as a trade secret claim that was not, and could not have been, available to Pemco under the contract.
Boeing advanced two arguments against the availability of an unjust enrichment remedy. Boing argued that any further award would be duplicative of the previous jury award and that unjust enrichment constitutes a consequential damage and thus is barred under the contract.Relying on the jury instructions and basic damages principles, the Eleventh Circuit explained that the jury verdict compensated Pemco for reliance expenditures while an unjust enrichment award would function to disincentivize corporate espionage and would remove ill-gotten profits from Boeing that it acquired by theft. The Court reasoned that the jury award was compensatory while an unjust enrichment remedy would be restitution. Regarding Boeing’s second argument, the Court differentiated consequential damages from an unjust enrichment remedy, explaining that consequential damages are foreseeable and proximate damages experienced by the plaintiff, while unjust enrichment considers an unfair profit that a defendant has acquired. The Court further explained that unjust enrichment goes beyond making a plaintiff whole and “seeks to deprive the wrongdoer defendant of the gain it obtained from conduct that inflicted the loss on the plaintiff.”
The Eleventh Circuit remanded the case to allow Pemco to prove it is entitled to a further remedy under unjust enrichment.
Munich Court Addresses Implementer’s Obligation To Provide Security in FRAND Negotiations
The Munich Higher Regional Court issued a decision concerning the fair, reasonable, and nondiscriminatory (FRAND) negotiation process and an implementer’s obligation to provide security if a license offer for standard essential patents (SEPs) is rejected. HMD Global v. VoiceAge, Case No. 6 U 3824/22 Kart, (Judgment of 20 March 2025).
In this case, the Munich Higher Regional Court attempted to fill a gap left by the Court of Justice of the European Union (CJEU) in Huawei v. ZTE regarding an implementer’s obligation to provide adequate security for royalties. This obligation arises when an implementer rejects a SEP holder’s license offer and the SEP holder rejects the implementer’s counteroffer, so there is no agreement on a license.
The Munich Court found that the implementer, HMD Global, provided an inadequate security that was based on HMD Global’s lower counteroffer. The Court explained that it is the SEP holder’s, here VoiceAges, final offer (i.e., the requested royalty) that is determinative for calculating the security amount that an implementer should provide. This is because a willing licensee must accept the SEP holder’s offer if a court declares it to be FRAND and the royalties subject to this offer must be covered by the security. The Court emphasized that an implementer can only establish that it is a willing licensee by making a counteroffer and providing adequate security after rejecting the offer.
However, the Munich Court left open the issue of whether security must be provided if the SEP holder’s final offer is obviously not FRAND, noting that there may be “special cases” where the SEP holder’s final offer may not be determinative of the security without further defining those cases.
The CJEU’s Guidelines to FRAND Negotiations Are Not a Rigid Set of Rules
The Munich Court also took a critical stance in response to the European Commission’s amicus curiae brief and found that the FRAND guidelines set by the CJEU in Huawei v. ZTE are not to be viewed as a rigid set of rules but rather as a “dynamic concept for negotiation.” A court is not limited to assessing the FRAND defense by strictly examining in sequence each step of the CJEU’s guidelines, which includes the following:
The SEP holder must send a notice of infringement to the implementer.
The implementer must declare to be a willing licensee.
The SEP holder must make a FRAND offer.
If the offer is not FRAND, the implementer is allowed to reject it but must make a counteroffer.
The implementer must provide adequate security for royalties if the SEP holder rejects the implementer’s counteroffer.
The European Commission argued that a court must examine each step before moving on to the next one. This means that, for example, once a court has found that the implementer is a willing licensee, the court must leave the implementer’s subsequent (possibly non-FRAND) conduct out of consideration and cannot undermine the implementer’s established willingness to take a license. A court must then assess whether the SEP holder’s offer was FRAND.
Instead, in view of the Munich Court (a view that is also shared by the Unified Patent Court (Local Division Munich, judgment of 18 December 2024, Case No. ACT_459771/2023, UPC_CFI_9/2023)), a court may consider the entirety of the parties’ conduct, including subsequent conduct, during FRAND negotiations. Therefore, a party may not rely on a formal omission by the other party, such as the absence (or inadequacy) of an infringement notice or a declaration to be a willing licensee in the early stages of negotiations, if the omission was remedied by the party’s subsequent conduct and the parties continued to negotiate with the goal of concluding a license. On the other hand, the implementer’s subsequent non-FRAND conduct may undermine its established willingness to take a license.
No Review of the SEP Holder’s Final Offer if the Implementer Fails to Comply With Its FRAND Obligations After Rejecting the Offer
The Munich Court found that it need not review whether the SEP holder’s final offer was FRAND before assessing the implementer’s conduct after rejecting the offer.
The Munich Court explained that in general, whether a SEP holder’s final offer is FRAND is not decisive to the success of a FRAND defense because even if a SEP holder’s offer is not FRAND, the implementer cannot simply walk away from the negotiations. Instead, to comply with its CJEU negotiation obligations, the implementer must take further action, such as making a counteroffer and providing adequate security, to maintain a FRAND defense against a SEP holder’s injunction claim. In other words, the implementer will lose its FRAND defense anyway if it does not comply with its own FRAND obligations. Therefore, a court is only required to perform the time-consuming examination of whether the SEP holder’s final offer is FRAND if the implementer has complied with its own CJEU FRAND obligations.
Practice Notes
This judgment by the Munich Court strengthens the position of SEP holders. Implementers should consider providing security for royalties in the amount of the SEP holder’s final offer even if the relevant royalties seem to slightly exceed what might be considered as FRAND. Otherwise, an implementer risks a finding that it is an unwilling licensee, thus losing its FRAND defense.
It is also noteworthy that the Munich Court expressly allowed an appeal to the German Federal Court of Justice. This is rare in German case law and shows that the Munich Court is aware that its decision touches on a fundamental issue of FRAND law that still needs to be clarified by the German Federal Court of Justice. The appeal has already been filed (Case No. KZR 10/25).
Texas Joins List of Legislatures Seeking to Ban Noncompete Agreements
After the nationwide injunction barring the Federal Trade Commission (FTC) Noncompete ban, we reported our anticipation that state legislatures would likely introduce legislation restricting the use of noncompetes.
As expected New York, Washington, Virginia, Ohio, and Wyoming have all introduced—or enacted—legislation in 2025 aimed at limiting noncompetes and other restrictive covenants. On March 7, 2025, Texas joined this growing list of states when the Texas legislature introduced Texas House Bill 4067 (the “Bill”). If enacted, the Bill would amend Texas’s Business & Commerce Code by adding sections 15.501, 15.502, and 15.503 to broadly prohibit noncompetes against all “workers” and would prohibit noncompetes with “senior executives” after September 1, 2025. If passed, the law would take effect on September 1, 2025.
The Bill prohibits a person (an undefined term under the Bill) from entering into or enforcing a noncompete with a “worker,” regardless of when such covenants were entered into. The Bill broadly defines a “worker” as “an individual who works or previously worked, without regard to whether the individual was paid, to the worker’s title, or to the worker’s status under any other state or federal laws, including whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or sole proprietor who provides a service to a person.”
The Bill provides a limited exception to allow for certain noncompetes with “senior executives.” A “senior executive” is defined as someone in a “policy-making position” who earned at least $151,164 in total annual compensation in the previous year. The Bill defines “policy-making position” to include CEOs or presidents, other officers with authority to make significant policy decisions, and certain officers of subsidiaries or affiliates with similar authority. Agreements made with senior executives before September 1, 2025, will remain enforceable. However, if enacted, the Bill will prohibit employers from entering into or enforcing noncompete agreements with senior executives after September 1, 2025.
The Bill is strikingly similar to the proposed FTC Noncompete Rule issued in April 2024 in which the FTC attempted to ban all existing and new noncompetes, with a few limited exceptions, including for existing noncompetes with senior executives and noncompetes entered into in connection with the sale of a business. Under the proposed FTC Noncompete Rule, “senior executive” was similarly defined as a “worker who was in a policy-making position” and who received total annual compensation of more than $151,164.
In addition to the exception for noncompetes with senior executives entered into before September 1, 2025, the Bill does not apply to noncompetes entered into by a person under a bona fide sale of: (1) a business entity; (2) the person’s ownership interest in a business entity; or (3) all or substantially all of the business entity’s operating assets.
If the Bill becomes law, employers will be required to notify affected workers by January 1, 2026 that their noncompete agreement is no longer enforceable. The notice must be “clear and conspicuous” and must identify the parties subject to the agreement and be delivered by hand, mail, e-mail, or text message to the worker.
As we reported with the FTC Noncompete Rule, we do not think that the Bill will gain much traction in Texas, a traditionally employer-friendly state. Even if it does pass, there is a strong likelihood that Governor Abbott will veto the Bill. While there may not be a strong likelihood of the Bill becoming law, the introduction of the Bill in Texas highlights that states are likely to continue to introduce legislation aimed at restricting or limiting the use of noncompetes. We will continue to monitor the Bill and provide updates.
Stay tuned for other state bills relating to employer noncompetes, including another bill pending in the State of New York.
Gianna Dano, a Law Clerk in Epstein Becker & Green’s Newark Office (not admitted to practice), contributed to the preparation of this piece.
USPTO Announces Changes to Patent Issue Timelines and Design Application Examinations
This week, the U.S. Patent and Trademark Office (USPTO) made two announcements of interest to patent holders and practitioners as part of modernization and efficiency efforts:
Suspension of Expedited Design Application Examinations—On April 14, 2025, the USPTO announced that it has suspended expedited examination of design applications starting April 17, 2025. This decision follows a 560 percent surge in requests for expedited examination in recent years, driven largely by fraudulent applications. The suspension aligns with the USPTO’s ongoing efforts to address issues such as erroneous micro entity certifications and to strengthen protections against threats to the intellectual property system.
Any request for expedited examination of a design application, including renewed requests, submitted on or after the effective date will not be approved. However, the USPTO will refund the associated fee for any request filed on or after this date.
Expedited Patent Issue Dates—Starting May 13, 2025, the USPTO will accelerate the timeline for patent Issue Dates. As part of the USPTO’s modernization efforts, the time between receiving an Issue Notification and the Issue Date will be reduced to roughly two weeks, down from the three-week average seen in recent years.
With this shortened timeframe, Applicants are reminded to file continuing applications before payment of issue fees to ensure copendency, per the Manual of Patent Examining Procedure (MPEP) 211.01(b), subsection I. For those applicants that do not participate in the e-Office Action program, patent issuance may occur before receipt of the Issue Notification.
Patent holders should be aware of these two changes for planning and scheduling purposes.