Don’t Wait to Investigate: Lessons from the Federal Circuit’s Insulet v. EOFlow Trade Secret Reversal

By Zachary Schroder and Jared Marrs¹

In a precedential but divided decision, the Federal Circuit recently erased Insulet Corporation’s trade secret victory against EOFlow, holding that the company filed suit too late. The panel reversed a $452 million jury verdict — previously reduced to $59.4 million by the district court judge — after concluding that the three-year statute of limitations under the Defend Trade Secrets Act (“DTSA”) had expired before Insulet filed its complaint, barring the claim entirely.

Insulet Corporation sued EOFlow Co. Ltd. and its CEO Jesse Kim in the District of Massachusetts in August 2023, alleging trade secret misappropriation under the DTSA and patent infringement. The dispute centered on Insulet’s Omnipod, an adhesive, wearable insulin patch pump, and EOFlow’s similar second-generation EOPatch 2. To develop the EOPatch 2, EOFlow hired several former Insulet employees, including engineer Steve DiIanni, who between March and May 2018 shared proprietary files and information about the Omnipod’s design and manufacture. The district court bifurcated the trade secret and patent claims, and the DTSA claim proceeded to trial. The jury found that EOFlow had misappropriated four of Insulet’s trade secrets and awarded $452 million in damages. However, the district court reduced the jury award to $25.8 million in compensatory and $33.6 million in exemplary damages to avoid double recovery with a permanent injunction.

On appeal, the central question was when Insulet’s trade secret misappropriation claim accrued. The DTSA requires suit within three years of when the misappropriation “is discovered or by the exercise of reasonable diligence should have been discovered.” Courts use two different tests to decide when that three-year clock starts. One test starts the clock when a company first has reason to suspect a problem and should begin looking into it; the other waits until the company actually learns, or reasonably should have learned, that its secrets were taken. The majority did not choose which test was correct because it found that Insulet had waited too long under either test. The Court also explained how much a company needs to know before it can sue: it is enough to show that a competitor had access to the secrets and that the competitor’s product looks substantially like the company’s own, even if the company does not yet know every technical design detail. As Judge Dyk wrote for the majority, “the relevant question is ultimately whether Insulet had sufficient knowledge to state a claim for trade secret misappropriation before the critical date, not whether it had sufficient evidence to prove misappropriation of its trade secrets.”

Measured against that standard, the panel found that Insulet had the facts it needed well before the critical date of August 3, 2020 (three years before filing). By March 2019, internal emails showed that Insulet knew former employees with access to its trade secrets were working on the EOPatch 2, satisfying the access prong. And as early as the 2018 American Diabetics Association conference — where Insulet personnel photographed EOFlow’s booth and afterward visited its website some twenty times — Insulet had observed striking similarities between the EOPatch 2 and the Omnipod. Because Insulet knew or should have known these facts more than three years before suing, the Court held its claim was time-barred.

Judge Prost dissented, arguing that the majority substituted its own view of the evidence for the jury’s and effectively disregarded the DTSA’s text mandating the statute of limitations clock start “when a reasonably diligent person discovered (or should have discovered) the misappropriation.” She warned that it cannot be correct that the limitations clock starts whenever a former employee joins a competitor that makes a “superficially similar product,” as such a rule encourages litigation based on mere suspicion. Emphasizing that “the jury’s role as fact-finder lies at the heart of our judicial system,” she would have deferred to the jury’s finding that Insulet did not, and reasonably could not have, discovered the misappropriation before the critical date.

Insulet may seek rehearing en banc or petition the Supreme Court for review. For now, the decision is a cautionary reminder that trade secret owners must act promptly: once a company has reason to know that a former employee with access to its secrets is working on a strikingly similar competing product, the limitations clock may begin to run — well before the company obtains detailed proof of misappropriation.