IP Law Daily, TRADE SECRETS—Fed. Cir.: District court erred in ordering preliminary injunction against EOFlow in trade secrets case, (Jun 17, 2024)

By George Basharis, J.D.

The U.S. Court of Appeals for the Federal Circuit has lifted a preliminary injunction that blocked medical device manufacturer EOFlow from manufacturing and selling its insulin pump patches, finding that Insulet Corp. failed to establish a likelihood of success on its trade secrets misappropriation claims.

The U.S. Court of Appeals for the Federal Circuit has reversed a preliminary injunction that prohibited South Korean company EOFlow from manufacturing, marketing, or selling its EOPatch insulin pump products. The injunction had been granted by the U.S. District Court for the District of Massachusetts in October 2023 at the request of Insulet Corp., which alleged that EOFlow misappropriated Insulet’s trade secrets related to its OmniPod insulin pump (Insulet Corp. v. EOFlow, Co. Ltd., No. 24-1137 (Fed. Cir. June 17, 2024)).

Insulet and EOFlow are both medical device companies that manufacture wearable insulin pump patches. Insulet began developing its OmniPod product in the early 2000s and launched several generations of the device over the following years. EOFlow was founded in 2011 and developed its EOPatch insulin pump, receiving regulatory approval in South Korea in 2017. Around that time, four former Insulet employees joined EOFlow.

In early 2023, after reports surfaced that Medtronic was considering acquiring EOFlow, Insulet sued EOFlow in the District of Massachusetts alleging misappropriation of trade secrets under the Defend Trade Secrets Act (DTSA). Insulet sought a preliminary injunction to block EOFlow’s communications with Medtronic about the potential acquisition. The district court granted a temporary restraining order in August 2023 and then a preliminary injunction in October 2023 enjoining EOFlow from manufacturing or selling any products developed using Insulet’s alleged trade secrets. EOFlow appealed the preliminary injunction to the Federal Circuit.

The Federal Circuit held that the district court abused its discretion in granting the preliminary injunction, finding multiple errors in the lower court’s analysis. Most significantly, the appeals court determined that Insulet failed to establish a likelihood of success on the merits of its trade secrets claims under the federal DTSA.

Statute of limitations. One key issue was the statute of limitations. The DTSA imposes a three-year limitation period for bringing a civil action, running from when the misappropriation was discovered or should have been discovered. However, the district court did not address EOFlow’s argument that Insulet’s claims might be time-barred under this provision. The Federal Circuit held that the statute of limitations was a material factor deserving significant weight in the likelihood of success analysis, and the district court abused its discretion by ignoring it. If Insulet’s claims were brought more than three years after the alleged misappropriation was discovered or should have been discovered, they would be time-barred and unlikely to succeed.

Identification of trade secrets. The Federal Circuit also faulted the district court’s analysis of what constituted protectable trade secrets. The appeals court explained that the district court relied on an overly broad definition of “trade secret” that encompassed any confidential information, without assessing the specific information at issue. The Federal Circuit emphasized that the DTSA requires trade secrets to be subject to reasonable secrecy measures and not readily ascertainable through proper means like reverse engineering. The district court’s failure to properly evaluate Insulet’s alleged trade secrets under this standard was another abuse of discretion impacting the likelihood of success determination.

Irreparable harm. In addition, the Federal Circuit found that the district court erred in its analysis of irreparable harm to Insulet and the public interest. The appeals court held that the district court’s finding of irreparable harm was based on the mere possibility that EOFlow might be acquired by Medtronic, which would provide EOFlow with additional resources and expertise to compete with Insulet. However, the Federal Circuit deemed this alleged competitive injury too speculative to support a finding of irreparable harm.

The Federal Circuit noted that EOFlow had represented during the appeal that the potential acquisition by Medtronic was no longer happening. Without the prospect of the acquisition, the primary basis for the district court’s irreparable harm finding evaporated. The Federal Circuit reiterated that irreparable harm must be based on more than mere conjecture or unsubstantiated fears about future competition.

Public interest. Moreover, the Federal Circuit found that the district court failed to meaningfully assess the public interest factor, offering only a cursory statement that it saw little impact either way. The Federal Circuit held that this type of superficial analysis of an important equitable factor was inadequate under Supreme Court precedent requiring careful consideration of the public interest before granting injunctive relief.

The Federal Circuit stressed that it was not deciding the ultimate merits of Insulet’s trade secrets claims, only that Insulet had not established a likelihood of success and the other factors required for a preliminary injunction at this stage.

The Case is No. 24-1137.

Judge: Lourie, A.

Attorneys: Robert Carroll (Goodwin Procter LLP) for Insulet Corp. Adam Gershenson (Cooley LLP) for EOFlow, Co Ltd.

Companies: Insulet Corp.; EOFlow, Co Ltd.

MainStory: TopStory TradeSecrets FedCirNews MassachusettsNews GCNNews