KEY DEVELOPMENTS IN THE UNITED STATES
Federal Circuit Overrules Preliminary Injunction Order for Failure to Identify Any Trade Secret with Sufficient Particularity
Insulet Corp. v. EOFlow, Co. Ltd., 104 F.4th 873 (Fed. Cir. 2024)
Insulet Corp. ("Insulet") sued EOFlow, Co. Ltd. and EOFlow, Inc. (collectively "EOFlow") for, among other things, misappropriation of trade secrets under the Defend Trade Secrets Act ("DTSA") after Insulet learned that four of its employees joined EOFlow and that EOFlow was considering being acquired by another company.1 Insulet sought a temporary restraining order and preliminary injunction enjoining all technical communications between EOFlow and its potential buyer.2 The district court granted Insulet's request for a preliminary injunction and enjoined EOFlow "from manufacturing, marketing, or selling any product that was designed, developed, or manufactured, in whole or in part, using or relying on the Trade Secrets of Insulet" with some limited carve-outs.3 EOFlow appealed.4 Notably, the Federal Circuit issued an order one day after oral argument staying the preliminary injunction pending its thenforthcoming opinion.5
The Federal Circuit's ultimate opinion reversed the district court's grant of a preliminary injunction, including because it failed to appropriately consider EOFlow's statute of limitations defense, the irreparable harm and the public interest of the preliminary injunction, and whether the asserted trade secrets were protectable in the first place or misappropriated.6 On the topic of identification, the Federal Circuit held that the district court abused its discretion when it broadly defined the trade secrets in its preliminary injunction order. That definition was "severely overbroad" because it defined the term "trade secret" for the preliminary injunction to include "any and all Confidential Information of Insulet" and "any information that contains, derives from, or incorporates such Confidential Information."7
In reaching this conclusion, the Federal Circuit rejected the district court's position that "it would be unfair to require at this stage perfection as to the precise number and contours of the trade secrets at issue" and instead reaffirmed that at the preliminary injunction stage, a trade secret plaintiff is required "to establish the likelihood of its success on the merits for least one, specifically defined, trade secret."8 Insulet had not done so. "Rather, it advanced a hazy grouping of information that the court did not probe with particularity to determine what, if anything, was deserving of trade secret protection."9
The Federal Circuit also held that the district court's lack of a tailored analysis as to what specific information actually constituted a trade secret undermined other aspects of the district court's analysis. This included the district court's analysis of whether Insulet took reasonable measures to protect its alleged trade secrets, whether the alleged trade secrets were generally known or readily ascertainable, whether the alleged trade secrets possessed independent economic value, and whether EOFlow misappropriated the purported trade secrets and knowingly benefited from them.10
On remand, this case ultimately proceeded to trial in November and December 2024. The jury found that EOFlow misappropriated several of Insulet's asserted trade secrets, and awarded $452 million in damages—$170 million in compensatory and $282 million in exemplary damages.11 The jury also found that the statute of limitations did not bar Insulet's trade secret claims12—a key issue at trial that related to whether Insulet was on notice of the misappropriation in 2018, when EOFlow presented a prototype of its product at a conference, or in 2023, when Insulet acquired, disassembled, and inspected the product.13
Federal Court Grants Summary Judgment in Favor of Defendant Based on Plaintiff's Failure to Identify its Trade Secrets with Specificity
Danieli Corp. v. SMS Group, Inc., 21-cv-1716, 2024 WL 3791894 (W.D. Pa. Aug. 13, 2024)
Danieli Corporation and Danieli & C. Officine Meccaniche S.p.A (collectively "Danieli") sued SMS group Inc. and SMS group GmbH (collectively "SMS") alleging that SMS misappropriated aspects of its steel caster technology in a competing bid for a potential customer.14 Danieli asserted trade secret misappropriation claims under the DTSA and Pennsylvania Uniform Trade Secrets Act and brought a claim for unjust enrichment.15
The court granted summary judgment in favor of SMS on all of Danieli's trade secret claims because Danieli "failed to identify its trade secret(s) with the requisite specificity."16 The court recognized that, in the course of the litigation, Danieli had "taken multiple positions as to how SMS allegedly misappropriated its secret(s)," but that "[u]ltimately, it does not matter because Danieli is unable to sufficiently identify what trade secret(s) it contends SMS misappropriated."17
During discovery, SMS sought and the court ordered Danieli to provide a written description of its trade secrets to which Danieli would be bound absent compelling cause.18 The court found the resulting 30-page "Trade Secret Statement" "identified a number of features of [Danieli's] technology and processes that may be included in its trade secret(s) but avoided being pinned down by never unequivocally stating that any specific technology or process is /are its trade secret(s) pertinent to its claims."19 The Trade Secret Statement offered a "less than clear articulation of what Danieli claim[ed] to be its trade secret(s)" and was, as the court described it, "as clear as mud and every bit as malleable."20 The court held the Trade Secret Statement did not identify a trade secret with sufficient particularity to survive summary judgment.21
The court also found that Danieli deviated from its Trade Secret Statement, both in its summary judgment briefing and during oral argument, without seeking leave to modify the Trade Secret Statement. These belated shifts in position only "emphasized" the "malleable nature of Danieli's identification of its alleged trade secret(s)" and undermined Danieli's assertions that it provided a specific identification of its alleged trade secrets.22 Those late deviations, even if permitted, still failed to specifically identify any Danieli trade secret.23
Ultimately, the court concluded, "the only thing clear about Danieli's trade secret misappropriation theory is that it is unclear and remains evasive."24
Reasonable Measures and Protectability
Sixth Circuit Addresses Importance of Pleading Reasonable Measures and Explicitly Requesting Leave to Amend
In re Island Indus., Inc., 23-cv-5200, 2024 WL 869858 (6th Cir. Feb. 29, 2024)
Plaintiff Sigma Corporation ("Sigma") sued Island Industries, Inc., its president, CEO, and principal owner (collectively, "Island"), alleging that Island obtained Sigma's confidential supplier list, among other information, from a former employee. Sigma alleged trade secret misappropriation claims under the DTSA and the laws of both Tennessee and New Jersey.25 The Western District of Tennessee dismissed Sigma's claims with prejudice, in part because Sigma failed to adequately allege that it took reasonable steps to protect its trade secrets.
The Sixth Circuit affirmed, despite acknowledging that "the question of whether a trade secret holder took reasonable measures to protect its trade secrets is fact-intensive, often rendering dismissal inappropriate."26 The court agreed with Sigma's position that company policies providing for dissemination of information on a "need-to-know" basis, and the imposition of confidentiality agreements, can establish reasonable measures to protect trade secrets.27 However, Sigma's failure to allege these facts in its complaint was fatal to its case.28
The court further emphasized that: (i) the mere existence of a common law fiduciary duty to maintain confidentiality does not circumvent the requirement that Sigma impose protective measures to maintain the secrecy of its trade secrets; (ii) the "fact that information is confidential reveals nothing about the measures taken to ensure it is not disclosed"; and (iii) vague allegations of a "partial restriction" of trade secrets is insufficient to state a claim for trade secret misappropriation."29 The court further held that Sigma had forfeited the opportunity to amend its complaint by failing to request leave to amend in the district court.30
Circuit Courts Evaluate Protectability of Trade Secrets Related to Customer Information
James B. Oswald Co. v. Neate, 98 F.4th 666 (6th Cir. 2024)
Plaintiff James B. Oswald Company ("Oswald") sued several former employees who left for a competitor. Oswald sought a preliminary injunction and asserted trade secret misappropriation claims under both the DTSA and Ohio Uniform Trade Secrets Act, as well as a breach of contract claim.31 The United States District Court for the Northern District of Ohio granted Oswald's motion for a preliminary injunction, in part because Oswald was likely to succeed on its trade secret claims.32 Defendant Dennis Neate appealed. Neate argued that, as to Oswald's trade secret claims, the district court erred when it found that the client information at issue was protectable as a trade secret.33
The Sixth Circuit agreed with the district court's analysis of Oswald's trade secret claims.34 Neate argued that "key . . . workforce and personnel contact information, customer contact information, needs and preferences, and other customer-related information" were not protectable trade secrets because: (i) Neate had known this information for years before his employment at Oswald; and (ii) the information could be gleaned from the clients themselves.35 However, these arguments did not persuade the Sixth Circuit that the district court made a clear error.
The court found that the information at issue was not publicly available or readily ascertainable by proper means, and thus was distinguishable from the cases Neate relied on for support.36 This information was protected, including through password-protected systems and firewalls.37 Further, the information had "evident economic value" because Oswald spent a significant amount of money buying Neate's book of business and helping him to further develop client contacts and relationships.38 Therefore, the Sixth Circuit affirmed the district court's findings that Oswald was likely to succeed on the merits of its trade secret claims.39 Thus, while the case was vacated and remanded for reconsideration of the reasonableness of the noncompetition agreement between Neate and Oswald, and the impermissibly vague injunction issued by the district court, the Sixth Circuit affirmed the district court's conclusions as to Oswald's trade secret claims.40
Jacam Chem. Co. 2013, LLC v. Shepard, 101 F.4th 954 (8th Cir. 2024)
Plaintiff Jacam Chemical Company 2013, LLC ("Jacam") sued its former employee, defendant Arthur Shepard Jr. ("Shepard"), and a competitor, GeoChemicals, LLC ("GeoChemicals"), after Shepard convinced some of his former coworkers to send him Jacam's customer proposals and pricing information, which he and GeoChemicals used to underbid Jacam and obtain its customers.41 Jacam brought trade secret misappropriation, breach of contract, and tortious interference claims under North Dakota law.42
The District Court of North Dakota granted summary judgment in favor of Shepard on Jacam's trade secret misappropriation claim because Jacam did not take reasonable efforts to keep its information confidential.43 Under North Dakota's version of the Uniform Trade Secrets Act, much like the DTSA, reasonable efforts to maintain secrecy "need not be overly extravagant, and absolute secrecy is not required."44 The district court found that Jacam did not take reasonable measures because customer-pricing information was not branded as "confidential," and Jacam did not produce any confidentiality agreement between its customers.45
The Eighth Circuit affirmed.46 The court reasoned that it is not enough to show that Jacam's employees—but not customers—were required to keep information confidential.47 It also concluded that Jacam failed to show there was an implied obligation within the industry to keep information secret.48
Acquisition Through Improper Means
Eleventh Circuit Affirms Bench Trial Ruling on Misappropriation
Compulife Software, Inc. v. Newman, 111 F.4th 1147 (11th Cir. 2024)
Plaintiff Compulife Software, Inc. (“Compulife”) sued four individuals with a competing website that generates life insurance quotes.49 Compulife asserted trade secret misappropriation claims under the DTSA and Florida Uniform Trade Secrets Act (“FUTSA”), and a copyright claim.50 After a bench trial, the Southern District of Florida ruled in favor of Compulife
The defendants “did not take innocent screenshots of a publicly available site,” but rather engaged in “deceptive behavior” through a “scraping attack that acquired millions of variable-dependent insurance quotes.”
on its trade secret claims but against Compulife on its copyright claim.51 The Eleventh Circuit addressed both claims on appeal, as well as the district court's determination of joint and several liability.
The Eleventh Circuit analyzed Compulife's trade secret claim under the FUTSA but acknowledged that doing so also amounted to an analysis under the DTSA, given that the statutes are so similar.52 The court confirmed that Compulife's database constituted a trade secret based on law-of-thecase doctrine.53 A prior ruling already concluded that the district court's trade secret finding was not clearly erroneous, and the defendants failed to demonstrate that an exception to the doctrine applied.54 The Eleventh Circuit also found no error in the district court's determination that defendants used improper means to acquire the trade secret.55 The defendants “did not take innocent screenshots of a publicly available site,” but rather engaged in “deceptive behavior” through a “scraping attack that acquired millions of variable-dependent insurance quotes.”56 Indeed, Compulife's revenue declined after the scraping attack, and the defendants obtained so much of the database that they posed a competitive threat to Compulife.57
The Eleventh Circuit also affirmed the district court's joint and several liability ruling, given that “[j]oint and several liability is the standard for trade secret claims, and that sort of liability ignores different degrees of wrongdoing.”58 However, the court ultimately reversed and remanded the district court's noninfringement ruling on Compulife's copyright claim because it failed to consider the copyrightability of the code's arrangement.59 The petition for writ of certiorari is pending
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Footnotes
1. Insulet Corp. v. EOFlow, Co., 104 F.4th 873, 877–78 (Fed. Cir. 2024).
2. Id.
3. Id. at 878.
4. Id.
5. Insulet Corp. v. EOFlow, Co., 2024-cv-1137, 2024 WL 2115888 (Fed. Cir. May 7, 2024).
6. Insulet, 104 F.4th at 880–884.
7. Id. at 881.
8. Id.
9. Id.
10. Id. at 881–83.
11. Jury Verdict at 4–5, 10–11, Insulet Corp. v. EOFlow, Co., 23-cv-11780 (D. Mass. Dec. 3, 2024), ECF No. 833
12. Id. at 4.
13. Summ. J. Order at 12, 19–21, Insulet, 23-cv-11780 (D. Mass. Oct. 31, 2024), ECF No. 753.
14. Danieli Corp. v. SMS Group, Inc., 21-cv-1716, 2024 WL 3791894, at *1 (W.D. Pa. Aug. 13, 2024).
15. Id.
16. Id. at *13.
17. Id. at *2.
18. Id. at *1, *7.
19. Id. at *12 (emphasis removed).
20. Id.
21. Id. at *12 (citing Mallet & Co. v. Lacayo, 16 F.4th 364, 381 n.19 (3d Cir. 2021)).
22. See id. at *11.
23. Id. at *10–13.
24. Id. at *13.
25. In re: Island Indus., Inc., 23-cv-5200, 2024 WL 869858, at *2 (6th Cir. Feb. 29, 2024); 18 U.S.C. § 1836(b);.N.J. Stat. ann. § 56:15-1, et seq.; tenn. Code ann. § 47-25-1701, et seq.
26. Id. at *3, 6 (recognizing that "sister circuits in recent years have affirmed dismissal for failure to adequately plead reasonable measures of trade secret protection.").
27. Id. at *4.
28. Id.
29. Id. at *5.
30. Id. at *6.
31. Id.; 18 U.S.C. §§ 1836–39; Ohio Rev. Code Ann. § 1333.61.
32. James B. Oswald Co. v. Neate, 98 F.4th 666, 671–72 (6th Cir. 2024).
33. Id.
34. Id. at 677.
35. Id. at 675–76.
36. Id. at 676 ("[W]hen Neate quotes Gallagher saying 'customer information' is not a trade secret if it is 're-creatable from public sources on the internet or from customers themselves,' . . . this assertion only applies directly to publicly available information." (citation omitted)).
37. Id.
38. Id.
39. Id. at 677.
40. Id. at 679.
41. Jacam Chem. Co. 2013, LLC v. Shepard, 101 F.4th 954, 960 (8th Cir. 2024).
42. Id.
43. Id. at 965.
44. Id. at 964.
45. Id. at 965.
46. Id. at 966, 969.
47. Id. at 965.
48. Id.
49. Compulife Software, Inc. v. Newman, 111 F.4th 1147, 1153 (11th Cir. 2024).
50. Id. at 1153, 1160 n. 1.
51. Id. at 1154.
52. Id. at 1160 n.1.
53. Id. at 1161–62.
54. Id.
55. Id. at 1162.
56. Id. at 1163.
57. Id.
58. Id. at 1154.
59. Id.
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