Hiring Away Employees May Look Bad, But Plaintiff Still Must Show Missappropriation

In Raytheon Company v. Indigo Systems Corporation, [2016-1945, 2016-2050] (July 12, 2018), the Federal Circuit affirmed the judgment of no liability for misappropriation of trade secrets, and the denial of attorneys fees.

At issue on appeal was  whether the jury’s verdict that Indigo did not misappropriate Raytheon’s Trade Secrets was supported by substantial evidence; whether the district court abused its discretion in denying Raytheon’s motion for a new trial; and whether the district court abused its discretion in denying Indigo’s motion for attorney fees.

The Federal Circuit found evidence at trial showed that Indigo employees independently developed Indigo’s technology without using Raytheon’s, and further that Indigo’s technology was “significantly different” from Ratheon’s. The Federal Circuit found that the jury reasonably found that Indigo did not misappropriate trade secrets, and the district court did not err in denying Raytheon’s motion for judgment as a matter of law regarding this claim.

As to Raytheon’s motion for a new trial, the Federal Circuit said that Raytheon’s failure to establish its entitlement to judgment as a matter of law on the trade secret  mis- appropriation issue also means it has failed to establish its entitlement to a new trial. Thus, the district court did not abuse its discretion in denying Raytheon’s alternative
motion for a new trial.

As to Indigo’s challenge to the district court’s denial of attorneys’ fees, the Federal Circuit noted that an award of attorney’s fees to the prevailing party is mandatory when the statutory requirements under the TTLA are met.  While Indigo argued that Raytheon’s dropping of its claim under Texas law made it the prevailing party, the Federal Circuit held that it had to establish: (1) it actually prevailed on the merits of a TTLA claim; (2) Raytheon dismissed the TTLA claim with prejudice; or (3) Raytheon
dismissed the TTLA claim without prejudice to avoid an adverse ruling on the merits.  , and that . Texas courts have noted that such an award may be based on a
court decision on the merits for either party.  The Federal Circuit held that none of these applied.  The Federal Circuit noted that dismissing the TTLA claim without prejudice in favor of the CUTSA in this context appears to represent a preference by Raytheon to pursue its trade secret misappropriation claims under one state’s laws over another’s. The Federal Circuit agreed with the district court that it is far from clear that Raytheon’s focus on California law over Texas law was taken “to avoid an unfavorable ruling on the merits.”