Did FLIR Steal Trade Secrets from Raytheon?

FLIR infrared camera
Coast Guard Cutter Bertholf uses forward-looking infrared radar, or FLIR, in pursuit of go-fast vessels. The above image shows Bertholf in night pursuit of a suspect go-fast vessel. U.S. Coast Guard photo.

(Bloomberg) — U.S. defense contractor Raytheon Co. won an appeals court ruling that revives claims Flir Systems Inc.’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, and sent it back for further review. It said the trial judge erred in saying 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.

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

“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. 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).

РSusan Decker, Copyright 2012 Bloomberg