Failing to Prepare Is Preparing to Fail

A recent case from the Federal Circuit upholding a jury’s finding in favor of defendant offers lessons to both defendants and plaintiffs on preparing for trade secrets misappropriation actions. Both plaintiff, Raytheon, and defendant, Indigo, are companies in the infrared imaging equipment business. Of the four Indigo founders, three of them were former Raytheon employees, causing Raytheon to accuse Indigo of misappropriating its trade secrets. Specifically, Raytheon accused Indigo of using Raytheon’s sequential vacuum bake recipes and in situ solder seal package assembly process taken by the former Raytheon employees to develop Indigo’s recipes and processes.

At trial, however, the jury found that Indigo did not misappropriate either of Raytheon’s trade secrets based on evidence that it developed its recipes and processes independently. This evidence included:

  1. Testimony that the former Raytheon employees used well-known practices and experimentation in developing the technology;
  2. Testimony that the Raytheon employees involvement in the development of Indigo’s technology was limited;
  3. Notes from the former Raytheon employee involved in the development of the sequential vacuum bake recipes corroborating his testimony that he adhered to well-known practices, experimentation, and discussions with vendors of materials to develop the process;
  4. Testimony that an Indigo employee who had never worked at Raytheon developed Indigo’s in situ solder seal package assembly process; and
  5. Extensive documentation of the development efforts of the non-Raytheon employee in developing Indigo’s in situ solder seal package assembly process.

On the flip side, the Federal Circuit also found that the scope of Raytheon’s trade secrets were narrower than claimed. Specifically, at trial, Raytheon’s witnesses admitted that vacuum baking of subassemblies at the highest temperature for the longest time was well known, and the trade secret was only as to what the specific temperature each individual part could withstand. This was much narrower than Raytheon’s claim that the trade secret was a sequence of cascading bakes.  Similarly, although Raytheon claimed that its other trade secret was the use of a batch process to allow for the manufacture of multiple bolometer packages simultaneously in a vacuum chamber, its witnesses once again admitted that the trade secret was tied to a particular time and temperature of each step in the process, as well as the choice of metals and solders.  Therefore, the Federal Circuit limited the Raytheon’s two trade secrets to the admissions by its witnesses.

This case offers two important lessons:

  1. It is a reminder that independent development is always a defense to trade secrets misappropriation. Therefore, it is essential to document in detail all steps taken in the development of technology. Additionally, keeping employees who may have knowledge of trade secrets from prior employers away from development of related technologies is another great way to avoid liability for trade secrets misappropriation. Indigo did both, which is why the Federal Circuit upheld the jury’s finding.
  2. Plaintiffs can also learn from this case that its witnesses must be prepared to testify regarding the full scope of its trade secrets. Raytheon’s witnesses made admissions which substantially narrowed the scope of its trade secrets making it difficult for it to claim that Indigo stole and used Raytheon’s trade secrets.