In a recent trade secret case, the court reduced damages to avoid double recovery.
In Insulet Corporation v. EOFlow Co., Ltd. et al., the court noted that Insulet and EOFlow are medical device manufacturers that make insulin pump patches.
Insulet began developing the wearable insulin pump OmniPod® in the early 2000s. The FDA approved the first OmniPod product in 2005, and a next-generation product, the OPI-2, came onto the market in 2007. Insulet then began work on its next-generation Eros product, which obtained FDA approval in 2012 and commercially launched in 2013.
EOFlow began developing its own insulin pump patch called the EOPatch®, soon after the company’s founding in 2011.
Around 2017, four former Insulet employees joined EOFlow.
In early 2023, Medtronic reportedly started a diligence process to acquire EOFlow. Soon after, Insulet sued EOFlow for alleged violations of, among other things, the Defend Trade Secrets Act (DTSA), seeking a temporary restraining order and a preliminary injunction to enjoin all technical communications between EOFlow and Medtronic in view of its trade secrets claims.
In 2023, the district court temporarily restrained EOFlow from “disclosing products or manufacturing technical information related to the EOPatch or Omni[P]od products.”
Later, the court granted Insulet’s request for a preliminary injunction, finding that:
- “there is strong evidence that Insulet is likely to succeed on the merits of its trade secrets claim at least in part,”
- there was “strong evidence of misappropriation” because EO Flow hired former Insulet employees who retained “Insulet’s confidential documents” that “fall within the statutory definition of trade secret,” and
- that irreparable harm to Insulet crystallized when EOFlow announced an intended acquisition by Medtronic, which “would be a source of capital for EOFlow” and increase competition with Insulet.
The preliminary injunction 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.”
The case went to trial, and a jury awarded Insulet $170 million in unjust-enrichment damages and $282 million in exemplary (punitive) damages, totaling $452 million.
Insulet then filed a motion to permanently prohibit EOFlow from selling the insulin patch pump that it created based on Insulet’s proprietary technology.
EOFlow argued that this would overlap with the damages awarded by the jury which, in part, were intended to compensate Insulet for EOFlow’s future profits from the insulin patch.
The court agreed allowing both an injunction and the full damages award would be an impermissible double recovery. The court then allowed Insulet to elect which remedy it wanted.
Insulet elected a combination of a permanent injunction and a damages award that was not duplicative of the injunction.
The court then reduced the damages award from $452 million to $59.4 million, concluding that $25.8 million in unjust-enrichment damages represented the costs EOFlow avoided by not developing the stolen technology itself.
With respect to the exemplary damages, the court noted that punitive damages must be reduced to $33.6 million to comply with the DTSA, which states,
a court may . . . if the trade secret is willfully and maliciously misappropriated, award exemplary damages in an amount not more than 2 times the amount of the [unjust-enrichment] damages awarded.
18 U.S.C. § 1836(a)(3).
Thus, an award of punitive damages under the DTSA may not exceed two times the unjust-enrichment damages ultimately entered for the plaintiff and not (as in this case) the higher amount initially awarded by the jury.
The reduction of large damages awards in trade secrets cases appears to be something of a trend.
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