By: Jennifer Gomes
Insulet Corporation, an Acton, MA-based medical device company, filed a trade secret misappropriation and patent infringement lawsuit on August 3, 2023, in the U.S. District Court for the District of Massachusetts against South Korean-owned EOFlow. Insulet is claiming that EOFlow developed their EOPatch insulin pump through the use of Insulet’s protected trade secrets and violated three patents for the Omnipod. Insulet manufactures the Omnipod – a “first-of-it’s kind ‘patch pump,’” that delivers insulin to people with diabetes. Insulet revolutionized
insulin delivery systems, moving away from self-administered insulin injections and bulky multi-faceted pump systems to a small and wearable piece of technology. The pod is used in tandem with a wireless handheld component called a PDM (personal diabetes manager). In 2022, Insulet released the Omnipod 5, which is an automated insulin delivery system.
Medtronic – the world’s largest medical device company – and other medical device companies have tried and failed to develop an insulin pump that performs and manufactures at the caliber of the Omnipod. The key difference that sets Insulet’s Omnipod apart from devices from Medtronic and other companies is the lack of tubing and delivering the insulin through the patch rather than a catheter. The Medtronic pump uses a tubed design that transports insulin from a reservoir to an infusion set attached to the body by a thin cannula.
Newcomer EOFlow has now claimed that they have developed a patch pump that rivals the Omnipod – something even Medtronic has not been able to accomplish through their years of development and vast resources. Since its founding in 2011, EOFlow began developing different iterations of patch pumps that failed to deliver meaningful results. The designs, while unsuccessful, were independent and novel in their own way. But in 2016, EOFlow’s R&D strategy seemed to point to Insulet and their Omnipod technology. They hired former Insulet senior executives and other employees, including individuals who served in roles including Chief Operating Officer, Senior Vice President of Research, Development, and Engineering, Direct of Mechanical Engineering, Senior Development Engineer, and Director of Regulatory Affairs. Two such individuals are named inventors on a combined 67 patents and patent applications, including three patents at issue in the case.
In at most 5 years and at only 3% of the cost that Insulet used in its R&D, EOFlow was able to develop a patch pump to compete with the Omnipod. Their pump is wearable, waterproof, disposable, and can store 3.5 days’ worth of insulin. Dosage control is connected wirelessly to a smartphone – which is one of the Omnipod 5’s newest and best features. EOFlow’s impressive pump has even garnered the attention of industry giant Medtronic. In May 2023, Medtronic announced their plans to acquire EOFlow for $738 million. This acquisition would make Medtronic Insulet’s most formidable rival in the diabetes market.
In addition to EOFlow’s remarkably quick success, they also entered into a business contract with Flex, Ltd. – Insulet’s main contract manufacturer. The lawsuit alleges that through Flex, who “possed every detail of Insulet’s proprietary and confidential manufacturing processes through its own manufacturing agreement with Insulet,” EOFlow was able to obtain Insulet’s trade secrets for its products, manufacturing processes, and patented components of the Omnipod.
Insulet specifically is bringing action against EOFlow and Flex for misappropriation of trade secrets in violation of the Defend Trade Secrets Act, 18 U.S.C. § 1836, breach of contract, and patent infringement under 35 U.S.C. § 271, amongst other claims. Focusing on the trade secret allegations, Insulet cites the similarities between the two patches as countless – including nearly identical exterior appearances and substantially identical pumping mechanisms throughout the devices that could entirely be interchangeable components between the two products. Generally, trade secrets are commercially viable, confidential information that is known only by a limited
group of people and has been guarded by secrecy through reasonable steps. Acquiring or disclosing such information without authorization results in violations of intellectual property rights and is a misappropriation of a trade secret. Under the Defend Trade Secrets Act, owners of a trade secret can sue in federal court if their trade secrets have been misappropriated.
Whether or not trade secrets were misappropriated or patents were infringed is a matter to be left to the courts. However, let us not gloss over the impact that such a lawsuit could have on the consumers of the products up for debate. Individuals with Type I diabetes rely on these technologies to survive, and if one company were to be financially or judicially affected to a substantial degree, it could mean a reduction of available products, cost hikes, or even discontinuation. It is also not an easy task for a consumer to change from one company’s product to another, especially when one product is easier to use and they are accustomed to it. What appears to be petty business deals and a clear grab at stealing Insulet’s technology could change the daily lives of countless diabetes patients if either side’s production were to be impacted.
In May, Insulet’s stock plummeted by 5.7% after Medtronic’s acquisition of EOFlow was announced. Some believe that Insulet filed the lawsuit against EOFlow to squander the acquisition and gain back some market leverage. However, financial analysts support Insulet’s allegations as “plausible” and have seen the red flags that EOFlow’s device has raised. Moreover, with Ozempic and other medications that cause dramatic weight loss, there has been a negative impact on companies that produce insulin pumps and continuous glucose monitors due to a reduced need for insulin. Insulet’s shares have dropped once again, falling by about 12%. If EOFlow’s pump were to reach patients in the U.S., Insulet could lose its hold on the market and slip further below the mark. If Medtronic were to acquire a viable tubeless option via EOFlow, the competition would be made even tighter.
Additionally, Medtronic’s EOFlow deal is put at serious risk by the lawsuit. Insulet currently has a strong market position and a strong customer base. Further, Insulet has nearly a 20-year lead on their competitors in patch pump resource and market availability. Even if EOFlow prevailed in this action, Medtronic would still need to find its place in the patch pump market and acquire some of Insulet’s loyal customer base. No matter the result of the lawsuit, there will be ripples throughout the insulin pump business. Both sides of the suit face potential repercussions – financial instability, market competition, shareholder pressures, and hits to their reputation.
However, the scales seem to be tipping in Insulet’s favor. As recently as October 6, 2023, the U.S. District Court of Massachusetts issued an injunction on EOFlow from “manufacturing, marketing or selling any product designed using Insult trade secrets.” In the twilight of closing its acquisition deal, EOFlow is facing a large hurdle that may continue to wreak havoc as the lawsuit continues.
Student Bio: Jennifer Gomes is a second-year law student at Suffolk University Law School. She is a staff writer for the Journal of High Technology Law. Jennifer received a Bachelor’s of Science in Biomedical Engineering with a minor in Mechanical Engineering from Worcester
Polytechnic Institute (WPI) in 2020. Prior to law school, she worked in the biotechnology industry.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
