In December, a Massachusetts corporation won the largest jury verdict ever awarded under the federal Defend Trade Secrets Act (DTSA). The award of $452 million is part of a recent trend of massive awards to trade secret owners.

The Backstory

Roughly 20 years ago, Massachusetts-based Insulet Corporation developed a wearable, everyday insulin pump known as the OmniPod. In 2017, six employees left Insulet to join EOFlow, a South Korean company that was hoping to develop and market its own wearable insulin pumps. EOFlow presented a prototype of its product, the EOPatch, at a conference in 2018. Representatives of Insulet were there. EOFlow’s competing product, EOPatch 2, hit the South Korean market in 2019 and the European market in 2022.

Insulet inspected the EOPatch 2 in February 2023 and concluded that trade secrets related to the OmniPod had been misappropriated. Insulet promptly filed suit in Massachusetts federal court against its former employees and EOFlow, alleging misappropriation of trade secrets including the Omnipad’s product design history, its computer-aided design (CAD) files, and its occlusion detection algorithms.

The Jury Verdict

The jury agreed with Insulet after a month-long trial that saw 27 witnesses take the stand. The jury found that EOFlow and three of the six former Insulet employees misappropriated Insulet’s trade secrets, awarding it $452 million in unjust enrichment damages. The damages award was comprised of $170 million in profit earned by EOFlow from misuse of the trade secrets and $282 million in punitive damages for willful and malicious misappropriation.

The damages number from this verdict immediately catches the eye, but the jury’s role in this case is also worth noting. When trade secret misappropriation is willful and malicious, courts have discretion to add enhanced, or punitive, doubled or trebled damages to the compensatory damages award. The jury in this case was asked to weigh not only on whether EOFlow’s misappropriation was willful and malicious but also what the resulting enhanced damages figure should be. Whether to enhance damages, and by what amount, is often reserved solely for the judge, but it is becoming increasingly common for judges to ask the jury for “advisory opinions.” It will be interesting to see if EOFlow challenges this aspect of case on appeal.

The Question of Notice

The statute of limitations for claims under the DTSA is three years from the date when the theft was, or should have been, discovered. The jury decided that Insulet was not yet on notice of the theft in 2018 when Insulet attended the conference where the EOPatch 2 was demonstrated. Instead, the jury found that Insulet was first on notice of the theft when it inspected the device in 2023.

The question of notice is important not only for determining whether the statute of limitations precludes the trade secret claim, but also for determining the correct timeframe for damages. If Insulet had been found to have been on notice in 2018 without filing suit until 2023, the court could have found that Insulet’s delay warranted a limitation of the period in which damages could be measured. Because the issue of notice is a question of fact for the jury to decide, it will be difficult for EOFlow to reverse this finding on appeal.

Other Massive Trade Secrets Awards

Insulet’s $454 million award is the largest ever under the DTSA, but other huge awards have been won in recent years. The previous record of $407 million resulted from a 2020 jury verdict that we wrote about here. That case is notable for establishing a standard for recovering damages based on sales of infringing products outside the U.S. when “an act in furtherance” of misappropriation occurred in the U.S. There is a pending January 13, 2025, deadline for any writ of certiorari to the Supreme Court, which we will be tracking closely.

The largest trade secret jury award to date arose under state law, not the DTSA. In the Virginia litigation Appian v. Pegasystems, which we wrote about here, the jury awarded $2 billion in damages to Appian under Virginia’s state trade secrets law. Appian alleged that Massachusetts-based Pegasystems misappropriated its trade secrets relating to business process management (BPM) software, which the jury clearly agreed with. The entire $2 billion award was thrown out on appeal and a new trial ordered. The Virginia appeals court ruled that the jury improperly relied on sales in areas where the two companies did not compete to compute damages. This did not satisfy Appian’s “burden to prove causation between the alleged misappropriation and any damages.” This case is currently pending before the Virgina Supreme Court.

Conclusion

The jury verdict in Insulet v EOFlow will surely be appealed. Regardless of the outcome of any appeal, it seems safe to say that the trend toward initial damages awards of unprecedented magnitude in trade secrets cases is not slowing down. Trade secret owners and litigators will want to follow these damages cases closely on appeal to see how often they are upheld and, if reversed on appeal, what pitfalls to avoid at trial to ensure recovery of the entire amount awarded by a jury.