Access Plus Similarity Starts the Clock for Trade Secret Misappropriation Claims

Insulet Corp. v. EOFlow, Co. Ltd.

Before Dyk, Prost, and Reyna. Appeal from the United States District Court for the District of Massachusetts.

Summary: A trade secret misappropriation claim accrues when the plaintiff knew or should have known facts sufficient to plead misappropriation as evidenced by access to the trade secrets and similarities between those secrets and the competing product.

Insulet sued EOFlow for trade secret misappropriation under the Defend Trade Secrets Act (“DTSA”) and for patent infringement after EOFlow hired several former Insulet employees and developed a competing insulin patch pump. The district court bifurcated the DTSA claim from the patent infringement claims. On the DTSA claim, the jury found that EOFlow misappropriated four trade secrets, found that the claim was not time-barred, and awarded compensatory and exemplary damages. The district court denied EOFlow’s JMOL motion and issued a permanent injunction. EOFlow appealed.

On appeal, the Federal Circuit first held that it had jurisdiction because Insulet’s voluntary dismissal of its patent claims, though labeled “without prejudice,” functioned as a dismissal with prejudice prejudice for jurisdictional purposes only because the six-year statute of limitations for the earliest alleged act of patent infringement had expired.

Next, the Federal Circuit concluded that EOFlow was entitled to JMOL because the DTSA’s three-year statute of limitations had expired before suit was filed. Applying the access-plus-similarity standard, the court concluded that Insulet knew or should have known of facts sufficient to plead misappropriation well before the critical date. Specifically, Insulet knew of EOFlow’s access to the trade secrets because it knew EOFlow had hired a former Insulet employee with detailed knowledge of the trade secrets and that the employee was working on EOFlow’s competing product. Additionally, similarities between the trade secrets and the competing product were publicly observable before the critical date at trade shows and conferences where EOFlow displayed samples of its product, on EOFlow’s website, and in EOFLow’s prospectus.

The court explained that the DTSA treats “continuing misappropriation” as a single claim of misappropriation, which means that related trade secrets disclosed as part of the same course of alleged misappropriation accrue at the same time. Because Insulet had sufficient knowledge of access and similarity to plead misappropriation as to at least one trade secret before the critical date, the alleged misappropriation of the related trade secrets constituted a single claim of misappropriation and the statute of limitations expired before Insulet filed its complaint.

The Federal Circuit reversed the district court’s judgment and held that Insulet’s DTSA claim was time-barred.

Editor: Sean Murray