Statute of limitations is a key issue in Delaware trade secret dispute

The decision to patent an innovation – or to protect it as a trade secret – tends to be binary. Either patent protection is sought, which requires disclosure, or reasonable efforts are made to ensure that the secret sauce stays secret. Once a patent or patent application has been published, its contents cannot be the subject of trade secret protection (see Accent Packaging Inc v Leggett & Platt Inc, 707 F3d 1318, 1329 (Fed Cir 2013). For that reason, and to avoid any missteps, it is best to confirm that all internal stakeholders are aligned with your company’s IP strategy.

Such alignment may be impossible when a key employee decamps. In a current dispute in the United States, Illumina Inc v Guardant Health, et al (D Del, no 22-00334, DI 1, 17 March 2022), Delaware corporation Illumina is grappling with having had its (alleged) trade secrets published in Guardant’s patents. The alleged sources are two former employees who now serve as Guardant’s CEO and COO. According to Illumina, it had only learned about the possible misappropriation in 2019 while responding to third-party discovery requests in patent cases between Guardant, Foundation Medicine and Personal Genome Diagnostics. Nearly three years later, it filed a trade secret misappropriation case against Guardant and a claim to correct inventorship on 35 Guardant patents relating to cancer diagnostics.

Guardant moved to dismiss Illumina's trade secret claims on the basis that they were time-barred. Guardant argued that Illumina had constructive notice of the misappropriation by 2015 and 2016 when the relevant patents were issued. Illumina’s claims were, therefore, time-barred by a three-year statute of limitations.

On 31 January 2023, Guardant’s motion to dismiss was denied in part by the magistrate judge, whose report and recommendation was adopted by the district court judge in March. The court rejected the idea that there is a per se rule that patent or application publication starts the ticking of the trade secret statute-of-limitation clock in every instance. In this case – based on the pleadings’ allegations – Illumina’s trade secret case survived. Even if Illumina was on notice of Guardant’s patents and applications when they were published, it is plausible that they may have believed that Guardant obtained the content through independent discovery.

Illumina's claim survived the motion to dismiss for an additional reason. Its complaint also alleged facts sufficient to support the applicability of the fraudulent concealment doctrine, which tolls the statute of limitations. The former employees had taken care to conceal their activities with regard to Guardant, including by anonymously incorporating the company when they were still Illumina employees. Moreover, Guardant had removed the names of one of Illumina’s former employees from certain applications prior to their issuance as patents.

Lessons for trade secret owners

First, if you are concerned about what former employees might be doing – specifically whether they or their new employer are filing patents covering your technology – it is advised to monitor their filings. Public disclosure in a patent cannot be undone; a published trade secret is one that is lost. However, knowing about it early on puts you in the best position to try and mitigate that loss.

Second, US trade secret owners should be cognisant of the applicable statute of limitations. Conduct a pre-suit investigation to determine when a defendant is likely to argue that you discovered – or, with reasonable diligence, should have discovered – the alleged misappropriation.

Last, in a trade secret misappropriation complaint, carefully plead any facts that are available to support tolling the statute of limitations or otherwise delaying when it begins to run.