The US Court of Appeals for the Third Circuit reversed in part and affirmed in part a district court’s decision that a trademark owner’s infringement claims were time-barred, finding that Pennsylvania applies a separate accrual rule to continuing trade secret misappropriations. Heraeus Medical GMBH v. Esschem, Inc., Case No. 18-1368 (3d Cir. June 21, 2019) (Krause, J).
Heraeus develops and produces Palacos, a bone cement used to anchor artificial joints in joint replacement surgeries. To make Palacos, Heraeus developed its own process to manufacture two key components known as copolymers R262 and R263. Heraeus holds trade secrets related to the “overall specifications for the . . . bone cement,” including “specifications for [the] copolymers.” Biomet is Heraeus’s competitor in the bone cement market and uses the same copolymers. Biomet buys its copolymers from Esschem, a Pennsylvania company.
In 2004, Biomet gained access to Heraeus’s trade secrets and launched its own competing bone cement. Suspecting that Biomet was using its trade secrets, Heraeus acquired and analyzed samples of Biomet’s bone cement in 2005 and discovered that it was virtually identical to Heraeus’s and that Esschem was manufacturing the copolymer components for Biomet.
In 2008, Heraeus brought discovery suits against Esschem and Biomet. In March 2011, Esschem produced email chains between employees of Biomet and Esschem in which they discussed the development of the copolymers and the Heraeus trade-secret-protected copolymers. Discovery against Esschem ended sometime between August and December 2011. Discovery against Biomet continued, and in December 2011 a Biomet employee corroborated the Biomet and Esschem email chains.
Heraeus filed a lawsuit against Esschem on September 8, 2014, for misappropriation of trade secrets under the Pennsylvania Uniform Trade Secrets Act (PUTSA) and five counts of common law claims. Esschem moved for and was granted summary judgment on the basis that the entirety of Heraeus’s claims were time-barred under PUTSA’s three-year statute of limitations period since Heareus learned of the misappropriation in March 2011 but did not file its lawsuit until September 2014. Heraeus appealed.
The Third Circuit agreed in part with the district court’s decision, finding that Heraeus knew of Esschem’s potential infringement after Esschem’s production of the email chains in March 2011 and that any information Heraeus learned in December 2011 related to the email chains was duplicative. Therefore, any misappropriation prior to March 2011 and any that occurred between March 2011 and September 2011 was time-barred since the misappropriation occurred more than three years before the filing of the lawsuit.
The Third Circuit, however, reversed the district court’s decision related to Heraeus’s claims that Esschem continued to use Heraeus’s trade secrets between September 2011 and September 2014. The Court rejected the district court’s finding that all of the misappropriation claims should be viewed as part of one violation that was time-barred entirely. The Court examined the PUTSA and compared it to the Uniform Trade Secrets Act (UTSA) regarding continuing misappropriation. The UTSA provides that, for the purposes of the three-year statute of limitations period, “a continuing misappropriation constitutes a single claim.” The Court found that because the PUTSA omits this sentence from the same section, the PUTSA treats continuing misappropriation as separate violations subject to the separate accrual rule. As a result, the PUTSA preserves the Pennsylvania common law accrual rule, and Heraeus’s alleged injuries suffered because of Esschem’s use of its trade secrets after September 2011 were actionable under the PUTSA.
Practice Note: It is important to analyze a state’s intellectual property statutes and the language they use or omit.
