Insulet Corporation v. EOFlow, Co., Ltd. Et al. (D. Mass. 23-cv-11780).

Insulet accused EOFlow of infringing three patents relating to wearable insulin pumps and of misappropriating Insulet trade secrets by hiring away key Insulet employees and releasing an insulin pump that was substantially similar to Insulet’s pump.  Insulet further accused EOFlow of contracting with Insulet’s manufacturer, Flex Ltd., and obtaining Insulet trade secrets that were known to Flex through its work for Insulet.

Both parties moved for summary judgment. EOFlow sought judgment that the trade secret claims were barred by the statute of limitations, an issue on which it bore the burden of proof.  Under the Defend Trade Secrets Act (DTSA), a party must bring a claim within three years after the “misappropriation… is discovered or by the exercise of reasonable diligence should have been discovered.”  Judge Saylor first determined that the DTSA’s statute of limitations does not rely on “inquiry notice,” under which the mere possession of sufficient facts to trigger an inquiry would start the clock running.  He noted that this was contrary to most court decisions, but felt that it comported more with Supreme Court precedent concerning similarly-worded statutes of limitations.

This determination was of import because Insulet in 2019, more than three years before filing the complaint, saw the EOFlow pump on display at a trade show.  EOFlow contended that this discovery should have started the statute of limitations clock running because it should have caused Insulet to investigate the matter at that time.  Judge Saylor rejected this proposal and instead found that discovery of the product alone was not enough to trigger the statute because Insulet had not had the chance to actually obtain and inspect the pump, which occurred in 2023.  Given the factual nature of the analysis as to whether the delay in obtaining the pump was reasonable, he denied both parties’ motions for summary judgment on the statute of limitations basis and allowed that issue to go to the jury.

Judge Saylor further found that Insulet had sufficiently identified its trade secrets.  A set of design drawings was prima facie trade secret even where it contained secret and non-secret information, and that there was no requirement that Insulet specifically identify the non-secret portions of the CAD drawings.  He did agree that the inclusion of the phrase “including, among other things,” was too broad and precluded anything not specified in the listing, but otherwise denied summary judgment on the grounds that the trade secret was not properly identified.

Judge Saylor granted Defendants summary judgment on the 93A claims on the grounds that the activities complained of did not occur “primarily and substantially” within Massachusetts, as required by the statute.  This language requires a holistic, fact-based analysis of whether the “center of gravity of the circumstances giving rise to the claim” occurred largely in-state.  Insulet’s 93A claim was based on the trade secret misappropriation claim.  Misappropriation requires the improper acquisition, disclosure, or use of confidential information.  Here, the misappropriation was alleged to be the improper disclosure to EOFlow of information lawfully obtained by then-employees of Insulet.  It is the disclosure that forms the first instance of impropriety, and that disclosure occurred in Korea, where EOFlow is located and where it actually made the accused products.  Judge Saylor discounted the locus of the harmful effects of the misappropriation, as it is the conduct of the defendant that matters and not the harm suffered by the plaintiff.

The remainder of the case underwent an 18-day trial in  November.  Six of the defendants were found liable for trade secret misappropriation, with the jury determining that all but one of the defendants had misappropriated the trade secrets and that the statute of limitations did not bar the claims.  Some being deemed willful and malicious, leading to punitive damages being awarded, with the total award set by the jury  at $452 million.

The verdict arose in part because Judge Saylor found that one of the individual defendants had intentionally destroyed evidence after the litigation arose, and he gave an adverse inference instruction that applied against many of the defendant corporations, as the individual was an executive at these businesses at the relevant time.  Judge Saylor awarded Insulet just under $92,000 in fees and costs connected with investigating and pursuing the spoliation motion.

The $452 million award was the largest ever damage award under the DTSA.