Complex or Not Written Description Is Evaluated Against Claims
The US Court of Appeals for the Federal Circuit reversed a district court’s ruling of invalidity for lack of written description, finding that the district court erred in its analysis of written description because patents must be evaluated based on the claims themselves, not on their construction. In re Entresto, Case No. 23-2218 (Fed. Cir. Jan. 10, 2025) (Lourie, Prost, Reyna, JJ.)
Novartis owns an approved new drug application (NDA) for a combination therapy of valsartan and sacubitril that Novartis markets under the brand name Entresto®. The term “combination therapy” is used to describe pharmaceuticals where two or more active pharmaceutical ingredients are combined in a single method of treatment. Entresto® is protected by several patents, including the patent at issue. Several generic pharmaceutical manufacturers, including MSN, filed abbreviated new drug applications (ANDAs) seeking to market generic versions of Entresto® prior to the expiration of Novartis’ patent. Novartis sued for infringement.
A unique property of Entresto® is the specific form taken by the active pharmaceutical ingredients, valsartan and sacubitril. The valsartan and sacubitril in Entresto® are present in what is known as a “complex,” meaning the two drugs are bonded together by weak, noncovalent bonds. At issue before the district court was the construction of the claim term “wherein said [valsartan and sacubitril] are administered in combination.” The inquiry focused on whether “in combination” required the valsartan and sacubitril to be chemically separated molecules (not in the form of a complex). The district court adopted Novartis’ proposal to give the term its plain and ordinary meaning because the intrinsic record was silent as to whether the molecules must be separate and not complexed. The complexed form of valsartan and sacubitril was not developed until four years after the priority date of the patent.
After the district court declined to adopt MSN’s “complexed” claim construction, MSN stipulated to infringement. The case proceeded to a bench trial on the issue of validity. The district court found the patent not invalid for obviousness, lack of enablement, and indefiniteness. However, the district court ruled that because the patent did not disclose the complexed form of valsartan and sacubitril, it was invalid for lack of written description. Novartis appealed.
Novartis argued that a complex of valsartan and sacubitril was an after-arising invention that need not have been enabled or described. The Federal Circuit agreed, finding that because the patent did not claim the complexed form of valsartan and sacubitril, those complexes need not have been described. The Court cited its “long-recognized” rule that “the invention is, for purposes of the written description inquiry, whatever is now claimed.” All that was required to meet the written description requirement was a disclosure sufficient to show that the inventors possessed a pharmaceutical composition comprising valsartan and sacubitril administered in combination. The Federal Circuit found that by considering what the claims were “construed to cover,” the district court improperly conflated the distinct issues of patentability and infringement. The Federal Circuit reversed the district court’s finding of invalidity for lack of written description.
Having found no reversible error, the Federal Circuit affirmed the district court’s finding that the patent was not invalid for obviousness or lack of enablement. The parties did not address definiteness on appeal.
New York State Proposes Bill That Would Place Restrictions Noncompetes and Other Restrictive Covenants
With the Federal Trade Commission’s Noncompete ban essentially dead, state legislatures, as expected, are taking restrictive covenant lawmaking into their own hands.
We previously reported that in 2023, while the FTC Noncompete ban was pending, New York Governor Kathy Hochul vetoed a bill that sought to ban all noncompetes in the State of New York, stating that a “balance” was needed instead of a strict ban on all noncompetes. On January 9, 2025, the New York State Assembly introduced NY A01361 (the “Bill”) to the Assembly Labor Committee that, if passed, would allow “employers to request or require a prospective or current employee to execute a restrictive covenant not to engage in specified acts in competition with the employer after termination of the employment relationship as a condition of employment, continued employment, or with respect to severance pay,” but only subject to certain requirements (discussed below).
The Bill would amend New York Labor Law to add Section 191-d: “Restrictive covenants.” Under this section, an Employee is defined as “any person employed for hire by an employer in any employment,” including “in a supervisory, managerial, or confidential position.” An Employer includes “any person, corporation, limited liability company, or association” as well as “the state[,] . . . political subdivisions, governmental agencies, public corporations, and charitable organizations.” The Bill also defines restrictive covenant as an agreement between an employee and an employer concerning existing or prospective employment, or an agreement between employee and employer with respect to severance pay.
The Bill outlines that for a restrictive covenant to be enforceable it must meet the following requirements:
If the covenant is a condition to commence employment, the employer must disclose the terms and conditions of the covenant in writing at the time of offer or thirty days prior to commencement of employment;
If the covenant is a condition to existing employment or severance pay, the terms and conditions must be disclosed in writing at least thirty days before covenant takes effect;
The agreement, whether a condition to commence or continue employment or for severance pay, must be signed in writing by both parties and must expressly state that employee has the right to counsel prior to signing;
The agreement cannot be more restrictive than necessary to protect an employer’s “legitimate business interests” and “shall be limited to protecting the employer’s trade secrets;”
The agreement must be reasonable in scope and limited to the services provided by the employee within the last two years of service; and
The agreement does not waive other legal rights under any other law, rule, regulation, or common law, and does not penalize an employee for challenging the validity or enforceability of the agreement.
Furthermore, the Bill would also bar non-service agreements, including agreements that prohibit employees from accepting business from clients or providing services to clients without solicitation by the employee. The Bill would also prohibit agreements that restrict employees from working with former colleagues, whether through use of no-hire agreements or other related restrictions.
In addition to the above-outlined requirements, the Bill provides that for the restrictive covenant to remain enforceable, an employee must voluntarily resign his or her employment or be terminated for good cause, defined as “a reasonable basis related to an individual employee for termination of the employee’s employment in view of relevant factors and circumstances.” A written document outlining what constitutes good cause must be provided to all employees. Should an employer violate any provisions of the section, the Commissioner of Labor can impose a civil fine up to $5,000.
While it is too early to tell if this Bill will advance, its introduction shows that there is still interest in the New York State legislature (as there is in other state legislatures) in regulating the use of noncompetes and other restrictive covenants.
The 2025 Bill on the state level follows at least three bills introduced in the New York City Council in 2024 that seek varying restrictions on noncompetes, from a complete ban on noncompetes to a ban on the use of noncompetes for low-wage earners only. The New York City Council bills were all referred to the Committee on Consumer and Worker Protection (the “Committee”) and have remained in the Committee without further action.
We will continue to monitor and provide updates on this topic.
Gianna Dano, a Law Clerk in Epstein Becker & Green’s Newark Office (not admitted to practice), contributed to the preparation of this piece.
No Co-Inventorship Absent Corroborated Conception
In a patent case concerning cryptocurrency data mining, the US Court of Appeals for the Federal Circuit affirmed a district court’s grant of summary judgment and its ruling that a state law conversion claim was preempted by patent law of inventorship. The Court also affirmed the denial of a correction to the inventorship claim. BearBox LLC v. Lancium LLC, Case No. 23-1922 (Fed. Cir. Jan. 13, 2025) (Stoll, Chen, Bryson, JJ.)
BearBox was an entity founded by Austin Storms that developed and designed mobile cryptocurrency data centers. It operated a half-megawatt data center but was unprofitable as a consequence of the high cost of electricity and the data center’s high energy requirements. Lancium was an entity that aimed to co-locate data centers at wind farms to use the highly variable power generated for data mining but sell excess electricity to the grid when electricity cost was high. BearBox and Lancium met in 2019 at a cryptocurrency mining summit. At that time, BearBox was looking to find customers for its newly developed BearBox containers, and Lancium was in the market for those containers. Both BearBox and Lancium had developed similar software to detect profitable time periods for cryptocurrency mining. Their systems aimed to mine cryptocurrency during periods when electricity prices were low, while selling the energy to the grid when prices were high. Lancium disclosed these concepts in an international patent application filed 15 months before Storms met anyone at Lancium.
BearBox’s system was discussed over dinner at the summit and in a single email exchange afterwards. However, BearBox never disclosed any source code associated with the BearBox system to Lancium. The email exchange was the last communication between the two parties. About five months after the meeting, Lancium filed a patent application that related to a set of computing systems configured to perform computational operations using electricity from a power grid and to a control system that monitored a set of conditions and received power option data based at least in part on a power option algorithm. After that application matured into a patent, BearBox filed suit asserting sole or joint inventorship of the patent and conversion under Louisiana state law.
Lancium moved for summary judgment on the conversion claim. The district court granted the motion, noting that federal patent law preempted the claim. However, the district court denied Lancium’s motion for summary judgment on the inventorship claims – claims that were then heard at a bench trial. At trial, the district court concluded that BearBox failed to prove by clear and convincing evidence that BearBox’s founder, Storms, conceived any part of the claimed invention. BearBox appealed.
The Federal Circuit began by assessing the ruling on preemption of BearBox’s conversion claim. Relying on its 2005 decision in Ultra-Precision Mfg. v. Ford Motor, the Court noted that although the state law of conversion does not squarely implicate federal patent law, the way a conversion claim is pled may “[stand] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Thus, a conversion claim cannot offer “patent-like” protection that would otherwise not garner protection under federal patent law. Based on this reasoning, the Court affirmed that BearBox’s state law conversion claim was preempted by federal patent law because, as pled, the claim was “essentially an inventorship cause of action and infringement cause of action.”
The Federal Circuit next addressed the district court’s decision denying BearBox’s inventorship claims. BearBox argued that the district court erred in “analyzing individual claim elements (rather than a combination of elements) [and] . . . comparing them, element-by-element, to Mr. Storms’s corroborating documents,” and by “applying the rule of reason by evaluating corroborating documents in isolation.”
An omitted inventor seeking to have their name listed on a patent must prove their inventorship by clear and convincing evidence. In its 1998 decision in Ethicon v. U.S. Surgical Corp., the Federal Circuit held that “an alleged joint inventor’s testimony alone is insufficient to establish inventorship by clear and convincing evidence.” Instead, the alleged joint inventor “must supply evidence to corroborate his testimony.” As the Ethicon court explained, “[c]orroborating evidence may take many forms,” including “contemporaneous documents” or physical evidence, “[c]ircumstantial evidence about the inventive process,” and “oral testimony of someone other than the alleged inventor.”
To corroborate its testimony, BearBox used the four attachments in the one-time email exchange with Lancium, none of which evidenced inventorship or patented subject matter. While a rule of reason standard is applied to the corroboration evaluation, clear and convincing evidence is required to prevail on the ultimate inventorship issue.
The Federal Circuit saw no issue with the district court’s limitation-by-limitation analysis. The Court went even further and determined that regardless of approach, BearBox could not prove that Storms had introduced the subject matter of the patent claims prior to Lancium’s independent conception.
As the Federal Circuit explained, an alleged joint inventor “must show that he contributed significantly to the conception – the definite and permanent idea of the invention – or reduction to practice of at least one claim.” These contributions must also arise from “some element of joint behavior, such as collaboration or working under common direction” with the other inventor(s).
Thus, the Federal Circuit affirmed that BearBox did not and could not prove by clear and convincing evidence that Storms was the sole or joint inventor of the patent claims.
Sarah Mezini also contributed to this article.
Battle of the Oranges: U-Haul vs. Public Storage in a Trademark Showdown Over the Color Orange
To be eligible for trademark registration, a color must have acquired distinctiveness and must not be functional. Recently, the Federal Circuit discussed the importance that a color mark not be functional. A new lawsuit filed by U-Haul against Public Storage will turn on whether non-exclusive use can ever be distinctive.
U-Haul International filed suit against Public Storage arguing for Public Storage’s continued use of the color orange and the word “orange” in connection with its self-moving and storage business. The lawsuit arises from a cease-and-desist email sent by Public Storage, alleging that use of the color orange caused consumer confusion and infringed on Public Storage’s trademark rights to the color orange.
In its complaint, U-Haul alleged that Public Storage is attempting to improperly monopolize the color orange and the term “orange” by fraudulently maintaining trademark registrations with the U.S. Patent and Trademark Office (USPTO). According to U-Haul, Public Storage falsely represented it had exclusive rights to these marks in its trademark applications, thereby excluding competitors such as U-Haul and hundreds of independent moving and storage businesses from using the color orange or related terms.
U-Haul alleges that it has been using the color orange in association with its moving and storage services since its founding in 1945, predating Public Storage’s recent claims. U-Haul contends that Public Storage’s assertion that the color orange has acquired distinctiveness for its services is baseless. In April 2024, U-Haul filed letters of protest with the USPTO, seeking the cancellation of Public Storage’s trademark registrations for “ORANGE STORAGE,” “ORANGE IS THE NEW SIZE,” and “ORANGE DOOR STORAGE INSURANCE.”
U-Haul also alleges Public Storage, in efforts to monopolize the use of color orange, has moved away from predominantly using the color purple in combination with color yellow and orange to solely using the color orange like U-Haul’s branding. Through its lawsuit, U-Haul is asking the District Court of Arizona to declare that its use of the color orange and the term “orange” do not violate Public Storage’s alleged trademark rights. U-Haul also seeks the cancellation of Public Storage’s disputed trademarks.
In response to U-Haul’s complaint, Public Storage filed a motion to dismiss for failure to state a claim and questioning the suit as a publicity stunt and an anticompetitive maneuver. Public Storage further asserts U-Haul created a website, which shows no affiliation with U-Haul, in order to produce evidence for the USPTO. Through its response, Public Storage reaffirms its intention not to intervene with U-Haul’s use of the color orange in relation to its moving and storage services.
Rupa Bandi also contributed to this article.
When Life Gives you Lemons….Thatchers Successful as Court of Appeal Finds Aldi Copycat Products Amount to Trade Mark Infringement in the UK
On 20 January 2025, the English Court of Appeal handed down its judgment in a highly anticipated appeal by Thatchers Cider Company, concluding that Aldi had infringed Thatchers’ registered trade mark under section 10(3) of the Trade Marks Act 1994, by taking unfair advantage of Thatchers’ packaging trade mark (see comparison below).
In February 2024 we reported on the High Court judgment in the case of Thatchers v Aldi, where Thatchers took action for trade mark infringement and passing off in relation to its ‘Cloudy Lemon Cider’ product (see our original post here). The Intellectual Property Enterprise Court (IPEC) held that there was no trade mark infringement or passing off by Aldi in respect of its ‘Taurus Cloudy Cider Lemon’ product.
The decision surprised many commentators and brands and left the future of trade mark law in the UK with respect to ‘copycat’, ‘dupe’ or ‘look-a-like’ products in a state of uncertainty. Thatchers appealed the decision on a number of grounds and brand owners and innovators will be pleased that the Court of Appeal unanimously allowed the appeal with respect to trade mark infringement for “unfair advantage”.
The Appeal
The Court of Appeal considered each aspect of Thatchers’ appeal in turn and noted in addition that Aldi had invited the Court to depart from the leading European case on unfair advantage, L’Oreal v Bellure, a point which Arnold LJ considered in detail in the conclusion of his judgment.
The key aspects of the Court of Appeal judgment were as follows:
The IPEC judge had incorrectly assessed the similarity of the signs.
In the first instance proceeding, counsel for Thatchers argued that Aldi had tried to ‘sail as close to the wind as they could’ when engaging designers for the Taurus product. In the appeal, the Court held that the overall ‘Sign’ of the Thatchers product included both the cardboard packaging used on a multipack of ciders, and the image on an individual can, agreeing with Thatchers that the first instance judge was wrong to hold the two-dimensional versus three-dimensional nature of both products as a ‘point of difference’.
Thatchers argued that the judge was correct to consider the distinctive and dominant elements of the marks for the purposes of assessing likelihood of confusion, but extending that conclusion to the analysis of the section 10(3) argument was incorrect. Although the Court of Appeal held that it can be commonplace for tribunals to make a single assessment on similarity, when looking at additional factors LJ Arnold concludes at [86] that the judge should have “assessed the similarity as being somewhat greater than she did”.
The similarity of the signs was intended to create a link with the Aldi product and convey to consumers that the product was “like the Thatchers product, only cheaper”.
The Court of Appeal held that the sign used by Aldi for the Taurus Cloudy Cider Lemon represented a ‘manifest departure’ from the house style used by Aldi in its Taurus range of products. The Taurus range was usually presented with white text on a black background with coloured ‘swooshes’. However, the Taurus Cloudy Cider Lemon product used black text on a pale yellow background, including prominent images of lemons and leaves.
This in conjunction with evidence presented of the Aldi design process using the Thatchers product as the only ‘benchmark’, led the Court to the ‘inescapable conclusion’ that the Aldi product was intended to remind consumers of the Thatchers product and that “this can only have been in order to convey the message that the Aldi Product was like theThatchers Product, only cheaper” [99].
The Aldi product achieved significant sales without any promotion; Aldi unfairly benefitted from Thatchers design and development of its own product.
The Court deemed this to be significant, as Aldi made no attempt to prove that the impressive sales of its Taurus Cloudy Cider Lemon product would have occurred with branding closer to its Taurus ‘house style’ or as a result of Aldi’s own marketing efforts.
The Court concluded that it was clear that Aldi intended for its product to remind consumers of the Thatchers product, taking advantage of the trade mark in order to increase sales. The matter at hand was deemed to fall within the issues considered in the leading case of L’Oréal v Bellure, namely the issue of “riding on the coat-tails” of a registered mark by transferring the image of the mark to the infringing product packaging.
Comparing instances of real consumer comparisons and the volume of sales, the Court concluded that there was an unfair advantage, as Aldi was able to profit and benefit from the investment that Thatchers had made in developing, designing and promoting its product, rather than simply competing with Thatchers on the basis of the quality, price and promotional efforts of Aldi’s own product.
It was clear to the Court that Aldi intended its product to remind consumers of the Thatchers trade mark and obtained an advantage from doing so. In a swift blow to ‘copycat’ brands, the Court concluded that “Aldi’s use of the Sign was not in accordance with honest practices in industrial and commercial matters because it was unfair competition”[141].
Although not a key factor in this conclusion, LJ Arnold also mentioned the lower quality of the Aldi product as it did not contain real lemon juice, a point which Thatchers submitted was misleading in the presentation of Aldi’s product.
Key Takeaways
The decision marks the end of a line of recent cases in the UK where brand owners have struggled to enforce their rights against similar packaging and logos. It will serve as a helpful precedent for future cases against ‘copycat’, ‘dupe’ and ‘look-a-like’ products across a number of industries, and bring the UK in line with European and other jurisdictions where claims against these products for unfair advantage, dilution and unfair competition have historically faced stronger prospects of success. Whether the case represents a “watershed” or “landmark” moment in trade mark law remains to be seen, and it will be important for brand owners to recognise that claims against ‘copycat’, ‘dupe’ and ‘look-a-like’ products in the UK will continue to present challenges.
It is noteworthy that there was evidence in the case that the Thatchers packaging and trade mark was fairly unique in the market for cider products, and that the products had only been launched in 2020. Thatchers had registered packaging trade marks shortly after the launch, a decision which served them well considering that registered trade mark infringement was the basis of the only successful claim against Aldi. Based on the evidence, the Court was prepared to find that the Thatchers packaging trade mark was “well known” even though it had only been in the market for a few years. The challenge for brand owners seeking to rely on this decision will be to show that they too have unique and well-known trade marks, and we expect that trade mark claims relating to more generic packaging and marketing assets, or products that are part of a market flooded with similar designs, will continue to face difficulty in the absence of strong evidence of benchmarking or copying.
Nevertheless, we expect there to be a renewed focus on challenging look-a-like products in the United Kingdom as a result of the decision, as well as an evolution of the approach taken by sophisticated copycats and retailers producing such products, and increased enforcement and litigation involving trade mark registrations for packaging and marketing assets in the coming years. Brand owners are likely to re-assess their pan-European and international enforcement efforts with a greater focus on the United Kingdom, and not only the more brand-owner friendly jurisdictions such as Germany, the Netherlands and France.
This case should be considered by brands in both offensive and defensive contexts going forward, and highlights the need for registered trade mark protection for packaging, logos and marketing assets. Passing off, unfair competition and trade mark infringement claims based on confusion remain difficult in this space, but the Court of Appeal has given a (measured) green light to claims of trade mark infringement for unfair advantage or detriment where a ‘copycat’, ‘dupe’ or ‘look-a-like’ product is clearly intended to remind consumers of the brand owner’s original product by transferring their image and reputation to the accused product, and the evidence points to an intention to do so.
The IP of IP Urban Legends | The IP of Everything Podcast – Episode 26 [Podcast]
Is everything you’ve heard about IP true—or just a myth? Join our hosts as they delve into the world of intellectual property urban legends, separating fact from fiction. From the truth behind the “poor man’s copyright” to whether Sierra Mist changed its name due to a social media influencer, we’ll uncover what’s real and what’s not in the ever-evolving landscape of IP.
EU Files Second Request for Consultations at WTO re China’s Patent Enforcement Practices
On January 20, 2025, the European Union (EU) has filed a second request for consultations at the World Trade Organization (WTO) aiming to remove allegedly “unfair and illegal trade practices by China in the sphere of intellectual property.” Specifically, in DS632, the EU states that Chinese courts have set worldwide royalty rates for standard essential patents (SEPs) without consent of both parties. The Request cites a November 28, 2023 decision setting worldwide licensing rates in the Nokia/Oppo case. Not mentioned in the Request was that China also provided itself with a discount by setting Chinese royalty rates lower than U.S. royalty rates.
This is the second EU request for consultations regarding IP rights. On December 7, 2022 the European Union (EU) requested the World Trade Organization (WTO) to establish a panel to examine China’s anti-suit injunctions (ASIs) in patent cases. Chinese courts have issued these injunctions blocking patent holders from enforcing their foreign patent rights outside of China (i.e., in Europe and Japan) with extensive daily fines for violators. The EU initiated the case on February 18, 2022 by making a Request for Consultations with China. Those consultations were held with China on April 6, 7, and 12, 2022 but failed to settle the dispute.
The Request also states that China violated transparency requirements by not providing a copy of the decision (a redacted copy of which I provide here).
Excerpts from the Request follow. The full Request is available here.
According to China’s law, Chinese courts have the authority to determine, without the consent of both parties, worldwide licensing conditions, and in particular royalty rates, for portfolios of standard essential patents (SEPs) which include non-Chinese SEPs. In accordance with China’s law, a legally effective decision determining such conditions is binding on both parties and is enforceable in China including with respect to the non-Chinese SEPs.
Chinese courts have interpreted and applied the law in this manner. On 28 November 2023, China’s Chongqing First Intermediate People’s Court took a decision against the objections of the patent owner setting worldwide licensing conditions, including royalty rates, for SEPs.1 The Court set the rates Chinese phone manufacturer OPPO has to pay worldwide for using Nokia’s patented technology in 2G, 3G, 4G and 5G “smart terminal products”, such as mobile phones. Based on China’s law, other courts can take decisions setting licensing conditions without the consent of both parties, notably the patent owner, for worldwide licences covering non-Chinese SEPs, which are binding on both parties and enforceable in China. There are substantiated indications that other courts accepted similar requests to decide worldwide licensing conditions.
Having regard to the above, the measure at issue in this consultations’ request comports the legal instruments giving Chinese courts the authority to take, without the consent of both parties, decisions setting the conditions for worldwide licences for SEPs, which are binding on both parties and enforceable in China, including with respect to non-Chinese SEPs. This measure appears to curtail the ability of the parties, SEP owners and implementers, to enforce their rights and ensure the respect of obligations with respect to non-Chinese SEPs in the courts of the jurisdictions where the non-Chinese patents were granted and curtails the ability of the courts of the jurisdictions where the non-Chinese patents were granted to adjudicate actions relating to those patents in the respective jurisdictions.
…
On 20 December 2023, the European Union sent an official request for information pursuant to Article 63.3, second sentence, of the TRIPS Agreement requesting China to supply the Chongqing First Intermediate People’s Court Civil Judgment in OPPO v Nokia of 22 November 2023 (sic), which it stated it had reason to believe affected its rights under the TRIPS Agreement. That specific judicial decision was in the area of intellectual property rights as it concerned the conditions for a patent licence, including royalty rates. China’s response appears to be inconsistent with its obligations under Article 63.3, second sentence, of the TRIPS Agreement.
5 Trends to Watch: 2025 Trade Secrets
Large Damage Awards May Face Scrutiny. In 2024, courts issued several significant decisions concerning damages awards in trade secret misappropriation cases. Three recent federal court decisions overturned exceptionally large damages awards on the ground the plaintiff failed to prove causation between the proven misappropriation and the claimed damages. These cases illustrate that plaintiffs seeking recovery for misappropriation still have powerful tools at their disposal, including the potential for large damages awards and injunctive relief. But plaintiffs should consider taking care to show the causal nexus between the claimed damages and the proven misappropriation at trial.
Noncompete Enforceability Limited. The Federal Trade Commission (FTC) under President Trump’s nominee, Andrew Ferguson, may well rescind the FTC ban on noncompete agreements and withdraw appeals in the Fifth and Eleventh Circuits. This action may prompt states that have allowed their own proposed noncompete legislation to languish (e.g. New York, Illinois) to refocus on narrowing the ability of employers to impose such restrictions. The health care space is expected to see more states narrowing the enforceability of noncompetes as well (such as Rhode Island, Pennsylvania, Maryland, Iowa). Within this unpredictable and inconsistent landscape concerning the enforcement of noncompetes, it is critical for companies to protect and defend their trade secrets.
Plaintiffs Prevail in Trade Secret Trials. A recent analysis of federal trade secret cases that go to trial may be either alarming or heart-warming, depending on which side clients find themselves (see Stout’s “Trends in Trade Secret Litigation Report,” Nov. 4, 2024). The report’s findings include that out of 271 federal trade secret cases that went to verdict since 2017, 84% went in favor of the claimant. This may mean that more trade secret misappropriation filings will occur, and perhaps settlements before verdict will also be likely. Such settlements may reach higher amounts, further ratcheting up filings. As more cases are tried to verdict, the odds may stabilize toward more even outcomes, but clients and counsel should take note of these numbers.
The AI Revolution Could Dramatically Affect Trade Secrets. AI may create innumerable systems, algorithms and other material that constitute trade secrets, raising a host of issues, like who owns them and how to protect them. AI also poses a threat to owners of trade secrets that can be reverse-engineered by AI but perhaps not nearly as easily (or at all) by a human. We expect the law to evolve to address ownership of trade secrets created by AI and to bolster protection against AI-generated reverse-engineering.
Foreign Damages Are Available for Trade Secret Misappropriation. In 2024, the Seventh Circuit held that the federal Defend Trade Secrets Act (DTSA) has extraterritorial reach. This was the first circuit court in the country to find this explicitly. In so holding, the Seventh Circuit affirmed a nine-figure compensatory damages award that consisted entirely of the defendant’s foreign sales. All that is necessary to obtain foreign damages is an “act in furtherance” of the misappropriation in the United States, such as advertising products at a trade show that make use of the misappropriated information. Importantly, proximate causation between the act in the United States and damages is not required. The Seventh Circuit’s decision is likely to lead to an uptick in discovery battles over foreign damages and has the potential to increase damages in trade secret cases.
Bryan Harrison also contributed to this article.
Spilling Secrets: Trade Secret Litigation – Lessons from High-Stakes Group Exits [Podcast, Video]
This week, on our Spilling Secrets podcast series, our panelists discuss how to navigate “group lift-outs,” in which one company hires multiple employees from another company at or about the same time.
Trade Secret Litigation: Lessons from High-Stakes Group Exits
Group lift-outs are among the most challenging circumstances to navigate in the trade secrets and non-compete space. While possible in virtually every industry, they have become increasingly common in industries such as financial services, insurance, technology, and even design and apparel.
In this episode of Spilling Secrets, Epstein Becker Green attorneys Peter A. Steinmeyer, A. Millie Warner, Alexander C.B. Barnard, and Haley Morrison explain the myriad of complications that can arise in these scenarios, ranging from trade secret and non-compete violations to work-related emotional and abandonment issues.
Listen to Our Full-Length Podcast
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Jury Awards $452 Million After Trade Secrets Trial
On December 3, 2024, a U.S District Court for the District of Massachusetts jury awarded Plaintiff Insulet Corporation $452 million in compensatory and punitive damages after finding Defendants willfully misappropriated Insulet’s trade secrets. Insulet Corp. v. EOFlow Co. Ltd., et al., Case No. 1:23-cv-11780 (D. Mass.)
Insulet is a manufacturer of tubeless insulin pump patches with its Omnipod brand of products. Insulet Omnipod products have been FDA approved since 2005. Defendant is a competitor of Insulet, manufacturing its own line of insulin pump patches, first with the EOPatch in 2011 and then the EOPatch 2 in 2018.
In its complaint, Insulet claimed that the original patch Defendant developed starting in 2011 employed “different pumping technology to deliver insulin,” and “early prototypes of [Defendant’s] product … looked nothing like Insulet’s Omnipod products.” But, in 2018, only two years after Defendant hired multiple former Insulet senior executives and other employees and entered into a joint development and collaboration contract with Insulet’s primary contract manufacturer, Defendant launched a redesigned version of its product that allegedly was nearly identical in look and function to Insulet’s Omnipod products.
Insulet alleged that through these actions, Defendants willfully and maliciously misappropriated Insulet’s trade secrets. Specifically, the former employees that had access to and knowledge of Insulet’s trade secrets as a result of their positions at Insulet allegedly stole Insulet’s trade secrets and Defendant allegedly misappropriated them by hiring those former employees. Doing so allegedly allowed “[Defendant] to use the Insulet Trade Secrets to design the EOPatch as an Omnipod clone and implement the manufacturing and commercialization processes for the EOPatch that each [Insulet employee] knew would work as it did for the Omnipod product.” According to Insulet, this was further compounded by Defendant’s contract with Insulet’s primary contract manufacturer as the contract manufacturer had access to Insulet’s design specifications which further allowed Defendant to copy the Omnipod products.
After a four-week trial, the jury found that all but one defendant misappropriated Insulet’s trade secrets, and at least some of the misappropriation was willful and malicious. It then awarded Insulet $170 million in compensatory damages and an additional $282 million in exemplary damages for willful and malicious misappropriation, for a total damages award of $452 million.
The sheer size of this award is in line with a recent trend we have seen in the trade secret misappropriation arena.
EV Trade Secrets Litigation Series: Tesla and Rivian Resolve High-Stakes Legal Clash Over IP
After getting the green light to proceed to a trial in March of 2025, Tesla and Rivian have reportedly reached an agreement to settle their trade secret dispute out of court. Tesla and Rivian officially filed for dismissals in mid-December and the Court subsequently close the case. This will mark the end of one of the highest-stakes EV battery trade secret battles between two major competitors in the industry.
Tesla filed the trade secrets lawsuit against Rivian, one of Tesla’s main competitors in the EV industry, back in July of 2020. Telsa alleged that Rivian recruited and subsequently employed Tesla employees who divulged Tesla’s proprietary information concerning Tesla’s EV battery technology. According to Tesla, Rivian encouraged these employees to steal Tesla’s trade secrets and confidential documentation and bring that information directly to Rivian.
Over the past four years, Rivian has been fighting to dismiss Tesla’s allegations, arguing that the trade secrets allegations lack merit and Tesla is using the lawsuit to tactically disadvantage its competitor. Rivian’s repeated legal attempts to dismiss Tesla’s allegations, however, have been unsuccessful, culminating in the court’s most recent decision. Rivian’s failed in its attempts to have the lawsuit dismissed, and in August, the California state court determined there was enough evidence to proceed to trial in March 2025. Now, the parties appear to have reached an agreement to settle their dispute prior to trial, however, the details of the potential settlement have not been released to the public.
Tesla has been at the forefront of EV trade secrets litigation, aggressively enforcing its intellectual property rights against competitors. As Proskauer has reported in its EV Trade Secrets Litigation Series, Tesla has filed trade secret misappropriation lawsuits against its equipment supplier, Matthews International Corp., former employees who started a competing company, and this case against Rivian.
Despite a recent trend in increased EV trade secrets litigation, the case between Tesla and Rivian would have been one of the first major EV cases between competitors to proceed to trial. While it appears the trial will no longer be going forward, Tesla’s enforcement efforts underscore the importance for EV companies to be vigilant in their approach to trade secret management. This includes implementing rigorous internal policies to protect sensitive information, regularly training employees on confidentiality obligations, actively monitoring for any signs of intellectual property theft, and being prepared to take immediate and decisive legal action when breaches occur. Proskauer’s extensive legal and technical expertise can help EV companies navigate these complex issues, ensuring they are well-prepared to protect their own intellectual property or defend against potential allegations.
Enforcing Soft IP in Germany – Featuring Maximilian Kinkeldey and Holger Gauss from Grünecker Patent- und Rechtsanwälte PartG mbB
Enforcing Soft IP in Germany – Featuring Maximilian Kinkeldey and Holger Gauss from Grünecker Patent- und Rechtsanwälte PartG mbB. In today’s fast-paced digital economy, intellectual property (IP) is a prized asset for businesses and innovators alike. But with the rise of imitators, safeguarding your creations has never been more crucial. In this exclusive interview, we […]