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Raytheon Co. v. Indigo Systems Corp.

Replacement of Texas-Law Trade Secret Claims With California-Law Did Not Make Defendant “Prevailing Party” for Texas Law Purposes

Raytheon Co. v. Indigo Systems Corp., __ F.3d __, 2018 WL 3384456 (Fed. Cir. July 12, 2018) (Newman, Dyk, CHEN) (E.D. Tex.: Schell) (2 of 5 stars)

Fed Cir affirms judgment of no liability for trade secret misappropriation and denial of attorney fees. The opinion rejects Raytheon’s argument that one of its trade secrets, as presented to the jury, covered the entire concept of sequential vacuum baking (used in the manufacture of infrared imaging equipment); Raytheon itself had presented the jury with argument that the secret was limited to Raytheon’s specific recipes. The record had sufficient evidence to support the jury’s determination that Indigo did not misappropriate those recipes. As to a second trade secret, the opinion again rejects Raytheon’s claim to a broad scope (manufacturing multiple bolometers simultaneously in a vacuum chamber); Raytheon’s own evidence indicated that the secret included specific time/temperature requirements for the steps in said manufacture. With that scope, the jury had sufficient evidence to conclude that Indigo had not misappropriated Raytheon’s secret. For the same reasons that Raytheon failed to establish that it was entitled to JMOL, Raytheon was also not entitled to a new trial.

The district court did not err in denying Indigo’s motion for attorney fees. The issue was whether Indigo was a “prevailing party” on Texas state-law trade secret claims that Raytheon had initially presented, then withdrew in favor of California state-law trade secret claims. Under Texas law surrounding the Texas Theft Liability Act (TTLA), Indigo could have been entitled to mandatory fees if it were the prevailing party. The district court did not err in finding that it was uncertain whether Raytheon’s withdrawal of the Texas-law claims was to avoid a bad outcome on the merits, or was for other choice of law reasons.

KEYWORDS: TRADE SECRET MISAPPROPRIATION; ATTORNEY FEES; TEXAS THEFT LIABILITY ACT