RAYTHEON COMPANY v. INDIGO SYSTEMS CORPORATION, FLIR SYSTEMS INCORPORATED

Federal Circuit Summary

Before Chen, Newman and Dyk. Appeal from the Eastern District of Texas.

Summary: The Texas Theft Liability Act (TTLA), which awards attorney’s fees to the prevailing party, does not permit the recovery of attorney’s fees for trade secret claims brought under a different state’s trade secret law, even if a favorable decision is issued by a district court in Texas.

Raytheon sued Indigo Systems and FLIR Systems (collectively, Indigo), in the Eastern District of Texas alleging trade secret misappropriation under both Texas and California law.  After the Federal Circuit remanded the case, Raytheon amended its complaint and asserted all 31 trade secret claims under California law only. The jury ruled in Indigo’s favor on all trade secret claims and the district court entered a final judgement in favor of Indigo.  Raytheon moved for judgement as a matter of law with regards to two trade secrets and requested a new trial, while Indigo filed a motion for attorney fees under the Texas Theft Liability Act (TTLA). All motions were denied and both parties appealed.

The Federal Circuit found that while two of Raytheon’s methods for producing equipment for infrared technology were trade secrets, the record held substantial evidence to demonstrate that Indigo did not misappropriate the trade secrets. Since Raytheon failed to establish its entitlement to judgement as a matter of law on its trade secret misappropriation claim, it also failed to establish its entitlement to a new trial.

Despite upholding the ruling in favor of Indigo, the Federal Circuit still refused Indigo’s request for attorney’s fees under the TTLA.  Under the TTLA, the prevailing party is entitled to court costs and reasonable and necessary attorney fees. In order to recover the fees, however, the claimant must establish: (1) it actually prevailed on the merits of a TTLA claim, (2) the other party dismissed the TTLA claim with prejudice, or (3) the other party dismissed the TTLA claim without prejudice to avoid an adverse ruling on the merits.  The Federal Circuit first determined that Indigo was not a prevailing party under the TTLA claim because the trade secret claims were decided under California law. The Federal Circuit then found that even though Raytheon dismissed the TTLA claims without prejudice, it did not do so to avoid an adverse ruling.  Further, all parties understood that Raytheon was going to pursue its trade secret laws under either California or Texas law and Raytheon made its decision after additional discovery.  Accordingly, the Federal Circuit affirmed the district court’s denial of attorney fees.

This case is: RAYTHEON COMPANY  v.  INDIGO SYSTEMS CORPORATION, FLIR SYSTEMS INCORPORATED

Editor: Paul Stewart

Written by: Diana E. Wade and Christie Matthaei