Court Revives Raytheon Claims Ex-Workers Stole Secrets

U.S. defense contractor Raytheon Co. won an appeals court ruling that revives claims Flir Systems Inc. (FLIR)’s Indigo Systems unit lured away former workers to steal trade secrets related to infrared cameras.

The U.S. Court of Appeals for the Federal Circuit today said a lower court erred in dismissing the case. It said the trial judge was wrong to rule that Raytheon should have known of any supposed theft before 2004, so it was too late to file the lawsuit in 2007.

“It was for the jury and not for the district court to determine when Raytheon should have first discovered the facts supporting its cause of action,” the three-judge panel wrote.

Unless the Federal Circuit agrees to reconsider its decision, the case will be sent back to a judge in Sherman, Texas.

The decision “allows Raytheon to continue to pursue its claims for significant damages resulting from Flir theft of trade secrets and misappropriation of intellectual property,” Jon Kasle, a spokesman for Raytheon, said. Flir didn’t respond to a request for comment.

Indigo, now known as Flir Commercial Systems, was founded in 1996 by former Raytheon employees and had a consulting contract with the Waltham, Massachusetts-based defense contractor through 2000.

That year, Indigo was chosen over Raytheon for a contract to provide infrared cameras to the U.S. military, the court said. In 2003, it beat out Raytheon again, this time for a subcontract from Northrop Grumman Corp. (NOC) to provide the cameras for the F-35 Joint Strike Fighter program.

Raytheon said it received assurances from Indigo that its employees, including ones hired from Raytheon, weren’t using Raytheon technology.

Camera Evidence

In 2004, Raytheon obtained an Indigo camera, disassembled it and “found what it believed was evidence of patent infringement and trade secret misappropriation,” according to the ruling. The suit was filed in 2007, within the three-year statute of limitations based on that discovery and the patent claims have since settled.

Raytheon had suspicions in 2000 because of the number of employees it lost to Indigo and the contract losses, the lower court ruled. It should have acted then, the judge said.

The appeals court ruled that the judge should have considered that Raytheon relied on pledges from Indigo that Raytheon intellectual property wasn’t being used. The court panel said the purchase of the Indigo camera was a normal competitive gambit, not out of any particular suspicion.

‘Constant Duty’

“The district court essentially concluded that from 2000 on, Raytheon was on permanent inquiry notice and therefore had a constant duty to investigate all acts of competition by Indigo for evidence of misappropriation,” the panel wrote.

Flir, a Wilsonville, Oregon-based maker of night-vision cameras, bought Indigo in 2004.

The case is Raytheon Co. (RTN) v. Indigo Systems Corp., 2011-1245 and 2011-1246, U.S. Court of Appeals for the Federal Circuit. The lower court case is Raytheon Co. v. Indigo Systems Corp., 07cv109, U.S. District Court for the Eastern District of Texas (Sherman).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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