AI Virtual Inn of Court September 2025 Member Meeting - Agentic Non-Compete Legal Prompt Example - Ethan Holland Presentation

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AI Virtual Inn of Court September 2025 Member Meeting – Agentic Non-Compete Legal Prompt Example – Ethan Holland Presentation

September 17, 2025

Agentic Prompt Example: Non-compete enforceability in Delaware

This is part of the full AI Virtual Inn of Court September 2025 Member Meeting presentation.

This example uses GPT-5 Pro without selecting the agent tool.

“I need to know about the enforceability of non-compete agreements in Delaware for mid-level employees in the tech industry. Can you please:

Search recent case law and statutes in Delaware.
Summarize the current legal standard in plain English.
Identify any unsettled issues or conflicting rulings.
Draft a short client-ready memo (3–4 paragraphs) explaining the risks and likely enforceability.
Double-check citations against authoritative sources before finalizing.”

GPT-5 Pro thought for 8 minutes and 51 seconds and returned a 7-page report.

Agentic Prompt Example Result from GPT-5 Pro:

Note: The chat window shows multiple URLs which are not supported in WordPress. I’ve pasted all of the links referenced at the end of the report, in case you want to click on them and explore/double check GPT-5 Pro’s work.

Absolutely — I ran the research as if I were your firm’s AI legal assistant and packaged the results the way I’d hand them to a partner.

TL;DR (for the room)

Delaware still enforces employee non‑competes, but only when they’re narrowly tailored to a legitimate business interest (e.g., trade secrets, client goodwill), with reasonable scope and duration, and the court is increasingly unwilling to “blue‑pencil” overbroad clauses. Delaware Courts+1
Statutes: Delaware has no general ban for tech workers; physician non‑competes are void by statute. Choice‑of‑law clauses favoring Delaware are statutorily supported but not bullet‑proof if another state’s policy has a materially greater interest. Delaware Code+2Justia Law+2
Recent cases (2023–2025) show a trend against broad, nationwide, “any job at any competitor” restrictions; courts declined to rewrite them. Delaware Courts+1
“Employee‑choice” forfeiture (lose equity/cash if you compete) is distinct from a flat work ban and, after Ainslie and LKQ, can be enforced without reasonableness review in many contexts—though boundaries remain. Delaware Courts+1
FTC national rule banning non‑competes is not in effect; a federal court set it aside and the FTC has taken steps to dismiss its appeal. Delaware law governs. Federal Trade Commission

Plain‑English: the current Delaware standard

A Delaware employment non‑compete is enforceable if the employer proves it (1) protects a legitimate economic interest (e.g., confidential information, customer relationships, acquired goodwill), (2) is reasonable in scope (what roles/functions are barred and where), (3) is reasonable in time, and (4) is equitable to enforce on these facts. The court looks at how the restrictions operate in practice, not just how they’re drafted. Overbreadth sinks the clause; judges won’t rescue it for you. Delaware Courts+1

No blue‑pencil trend: The Delaware Supreme Court affirmed Chancery’s refusal to “blue‑pencil” facially overbroad covenants; if the clause is too broad, expect no court‑ordered rewrite. Delaware Courts
Legitimate interest is cabined: In agreements tied to a business sale, Delaware has emphasized the interest is the goodwill actually purchased—you can’t use a non‑compete to block ordinary competition beyond that.
Examples of overbreadth: Courts have rejected nationwide or any‑capacity bars, and provisions untethered to the employee’s actual customers/markets. Delaware Courts

Statutes that matter

Physicians: Non‑competes between/among physicians are void (damages clauses may still be enforceable). (6 Del. C. § 2707.) Delaware Code
Choice of law: Delaware permits parties to choose Delaware law (6 Del. C. § 2708), but Chancery may decline to apply it where another state has a fundamental policy and materially greater interest in the dispute (seen in recent employment cases). Justia Law+1

Federal overlay

The FTC’s April 2024 non‑compete ban never took effect; a Texas federal court set it aside and, as of Sept. 5, 2025, the FTC has moved to dismiss its appeal. Delaware’s common‑law rules control. Federal Trade Commission

Recent Delaware decisions (what they actually did)

Sunder Energy, LLC v. Jackson (Del. Supr. June 10, 2024): Supreme Court affirmed denial of a preliminary injunction; covenants were facially unreasonable and the court declined to blue‑pencil. Clarifies the judiciary’s reluctance to rewrite overbroad restraints. Delaware Courts
Kodiak Building Partners v. Adams (Del. Ch. Oct. 6, 2022): In a sale‑of‑business setting, the court refused to rewrite an overbroad non‑compete and limited the legitimate interest to purchased goodwill. (Still cited post‑2022.)
Intertek Testing Services NA, Inc. v. Eastman (Del. Ch. Feb. 14, 2023): Court declined to “blue‑pencil” an overbroad restraint; preference is to enforce or not, not to re‑draft.
Centurion Service Group v. Wilensky (Del. Ch. Aug. 31, 2023): Court refused a nationwide non‑compete, emphasized reasonableness, and—importantly—declined to apply Delaware law despite a Delaware choice‑of‑law clause, given another state’s stronger policy interest. Delaware Courts
Payscale, Inc. v. (former sales director) (Del. Ch. May 27, 2025): Court found the non‑compete unreasonable in scope and unenforceable; additional claims failed. Delaware Courts
PSH/“maximum enforceable” clauses (Del. Ch. June 27, 2025): Court addressed agreements that say overbroad covenants should be enforced to the “maximum reasonable” extent; the opinion underscores that such boilerplate does not guarantee judicial reformation. Delaware Courts
Cantor Fitzgerald, L.P. v. Ainslie (Del. Supr. Jan. 29, 2024): Forfeiture‑for‑competition in a limited partnership agreement enforced based on freedom‑of‑contract—not subject to reasonableness review (distinct from a traditional work ban). Delaware Courts
LKQ Corp. v. Rutledge (7th Cir. Jan. 22, 2025, after Del. Supr. Dec. 18, 2024): Following certified questions to the Delaware Supreme Court, the Seventh Circuit held forfeiture‑for‑competition provisions in RSU agreements are enforceable under Delaware law without reasonableness review. (Contrast with flat non‑compete clauses.) media.ca7.uscourts.gov

What’s unsettled or in flux (and why it matters)

How far “employee‑choice” forfeiture travels
Delaware has green‑lit forfeiture‑for‑competition in LP agreements and, post‑LKQ, equity/RSU settings. It’s still developing how far that extends across different employee levels, involuntary separations, or where the forfeiture resembles a penalty. Expect litigation around unconscionability/bad faith exceptions. Delaware Courts+1
Blue‑pencil vs. severability boilerplate
Multiple opinions signal courts will not rewrite sweeping clauses despite “maximum enforceable” language. Overbreadth risks total loss. Draft precisely the first time. Delaware Courts+1
Choice‑of‑law workarounds
Even with § 2708 and a Delaware forum, Chancery can decline Delaware law when another state’s fundamental policy and material interest dominate (common with out‑of‑state, remote tech workers). Plan for the most restrictive law that could apply. Justia Law+1
Scope in modern tech roles
Nationwide, “any role with any competitor” and “all customers (including prospects/affiliates)” language is drawing close scrutiny. Target specific competitors, product lines, and channels, and tie the scope to what the employee actually did. Delaware Courts
Interaction with consideration
Equity‑based consideration and forfeitable grants are under the microscope. Opinions and 2025 rulings scrutinize whether consideration really persists when awards are unvested/forfeitable. Conservative approach: give fresh, non‑illusory consideration at signing. Delaware Courts

Short client‑ready memo (3–4 paragraphs)

Issue & standard. Delaware law will enforce a non‑compete against a mid‑level tech employee only if it is narrowly tailored to protect legitimate business interests (e.g., trade secrets, confidential roadmaps, key client goodwill), with reasonable function, geography, and duration, and if enforcement is equitable on these facts. Over the last two years, Delaware courts—and the Delaware Supreme Court—have declined to “blue‑pencil” overbroad clauses; if a covenant reads too broadly on its face, the remedy is typically non‑enforcement, not judicial redrafting. Delaware Courts+1

Risk assessment. For a typical mid‑level engineer, product manager, or sales lead, a clause barring work for “any competitor, in any role, nationwide” for a year or two is unlikely to hold in Delaware absent a strong, specific justification (e.g., the employee managed defined strategic accounts or core IP). Non‑solicitation and confidentiality provisions, carefully tied to customers the employee actually served or information actually accessed, fare better. Where equity is involved, consider separating forfeiture‑for‑competition (which Delaware has enforced as a contract remedy) from a flat employment ban, and expect courts to probe fairness if the facts suggest penalty‑like outcomes. Delaware Courts+2Delaware Courts+2

Drafting & enforcement posture. To maximize enforceability, (i) define “competitor” concretely (or list them), (ii) limit functional scope to roles that would exploit your secrets/goodwill, (iii) right‑size geography (markets where the employee actually operated), and (iv) cap duration to what you can justify. Provide real consideration (e.g., a retention bonus/garden leave or a new equity grant) at signing. Avoid “maximum enforceable” filler and broad affiliate/”prospects” definitions; those are frequently criticized. If the worker sits outside Delaware, account for choice‑of‑law risk—Delaware’s § 2708 helps, but Chancery can still defer to a stricter local policy. Delaware Courts+2Delaware Courts+2

Bottom line. Properly narrow non‑competes can still be enforced in Delaware, but the trend is skeptical of aggressive restraints in the employment context. For most mid‑level tech roles, a targeted non‑solicit + confidentiality package, coupled with forfeiture‑for‑competition on meaningful equity/cash, often delivers better protection with lower litigation risk. The FTC’s attempted federal ban is not operative, so Delaware case law governs—for now. Federal Trade Commission

Key primary authorities (with one‑line “why it matters”)

Sunder Energy, LLC v. Jackson (Del. Supr. 2024) — No blue‑pencil for facially overbroad covenants; confirms the modern enforcement posture. Delaware Courts
Kodiak Building Partners v. Adams (Del. Ch. 2022) — Legitimate interest tied to purchased goodwill; court refused to rewrite overbroad language.
Intertek Testing Services v. Eastman (Del. Ch. 2023) — Declined to reform unreasonable sale‑of‑business restraints.
Centurion Service Group v. Wilensky (Del. Ch. 2023) — Struck a nationwide non‑compete; also rejected Delaware law despite a choice‑of‑law clause. Delaware Courts
Payscale (Del. Ch. 2025) — Non‑compete unreasonable in scope; claims dismissed. Delaware Courts
Cantor Fitzgerald, L.P. v. Ainslie (Del. Supr. 2024) — Forfeiture‑for‑competition in an LP agreement enforced sans reasonableness review. Delaware Courts
LKQ Corp. v. Rutledge (7th Cir. 2025 after Del. Supr. 2024) — Confirms employee‑choice forfeiture in RSU context under Delaware law. media.ca7.uscourts.gov
6 Del. C. § 2707 — Physician non‑competes are void (narrow industry carve‑out). Delaware Code

One‑slide checklist you can read in court (what to ask about your clause)

What are we protecting? (named products/secrets; named customer sets)
Who is the “competitor”? (list or market definition, not “any competitor”)
Which roles are barred? (tie to employee’s actual role/knowledge)
Where? (actual territories served; remote work nuance)
How long? (only as long as secrets are “hot” or goodwill is at risk)
What’s the consideration? (fresh compensation; garden leave; equity)
What law will really apply? (employee’s state policy may trump § 2708)

Quick note on the FTC rule (for Q&A)

The FTC’s April 2024 final rule banning most non‑competes was set aside by the Northern District of Texas on August 20, 2024; as of September 5, 2025, the FTC reports the rule is not in effect and has taken steps to dismiss its appeal. Your analysis should proceed under Delaware law unless and until federal law changes. Federal Trade Commission

If you want this turned into a handout, I can format these findings into a one‑page bench card and a short slide with the case citations hyperlinked to the official opinions.

Clean list of links referenced in the above report:

Sunder Energy, LLC v. Jackson (Del. Supr. June 10, 2024)
https://courts.delaware.gov/Opinions/Download.aspx?id=372810

Kodiak Building Partners v. Adams (Del. Ch. Oct. 6, 2022)
https://courts.delaware.gov/Opinions/Download.aspx?id=355840

Intertek Testing Services v. Eastman (Del. Ch. Feb. 14, 2023)
https://courts.delaware.gov/Opinions/Download.aspx?id=338810

Centurion Service Group v. Wilensky (Del. Ch. Aug. 31, 2023)
https://courts.delaware.gov/Opinions/Download.aspx?id=345240

Payscale, Inc. v. (former sales director) (Del. Ch. May 27, 2025)
https://courts.delaware.gov/Opinions/Download.aspx?id=352590

PSH / “maximum enforceable” clause decision (Del. Ch. June 27, 2025)
https://courts.delaware.gov/Opinions/Download.aspx?id=381630

Cantor Fitzgerald, L.P. v. Ainslie (Del. Supr. Jan. 29, 2024)
https://courts.delaware.gov/Opinions/Download.aspx?id=380760

Choice-of-law analysis case (Del. Ch. 2023)
https://courts.delaware.gov/Opinions/Download.aspx?id=359170

Additional Delaware non-compete ruling (Del. Ch. 2024)
https://courts.delaware.gov/Opinions/Download.aspx?id=373150

LKQ Corp. v. Rutledge (7th Cir. Jan. 22, 2025, after Del. Supr. 2024)
https://media.ca7.uscourts.gov/cgi-bin/OpinionsWeb/processWebInputExternal.pl?Path=Y2025%2FD01-22%2FC%3A23-2330%3AJ%3AScudder%3Aaut%3AT%3AfnOp%3AN%3A3321769%3AS%3A0&Submit=Display

6 Del. C. § 2707 (Physician non-competes void)
https://delcode.delaware.gov/title6/c027/sc01/index.html