The obscure nature of trade secrets theft adds a layer of complexity to the issues of when companies must sue and what they need to allege when they do, dividing appeals courts.

The statute of limitations in federal trade secrets law turns on the discovery rule: the clock starts when a party discovered or should have discovered a violation. But key information indicating whether a rival stole secrets often lies within the competitor’s walls, making it difficult to ascertain in the absence of discovery, obtained from a rival during the early stages of litigation.

As a result, courts have had to engage in a balancing act between encouraging litigation that’s timely, but not suspicion-driven fishing expeditions—and doing so in a manner predictable to litigants.

Even without that clarity, attorneys need a handle on what their corporate clients know about perceived threats, and that sitting on even unverified—or unverifiable—concerns until better information becomes available can prove costly.

That was the case for Insulet Corp., which recently lost a $59.4 million award after the US Court of Appeals for the Federal Circuit said the company waited too long to sue over insulin pump trade secrets. Dissenting, Judge Sharon Prost warned the decision will induce a “rush to the courthouse based on mere suspicion.”

“The dissent raised a valid concern,” IP attorney Agatha H. Liu of Duane Morris said. “Because of the secretive nature of trade secrets cases, often times the actual proof cannot be uncovered until you are in discovery.” [...]

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