BLOGS: Trade Secrets Blog

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Wednesday, September 30, 2009, 9/30/2009 10:30:00 AM

Outbound E-Mail Being Vetted for Data Leaks

By Todd is reporting that new data has been reported in a study that claims 38% of large employers in the U.S. are monitoring outbound e-mails for data leaks.

And it's not just inappropriate use of e-mail that has employers scrutinizing employees. Social networking sites like Twitter and Facebook are also compounding data leak fears, companies reported, with 8 percent saying they had fired an employee for misuse of social networks in the past 12 months. Another 17 percent had disciplined an employee for violating blog or message board policies, up from 11 percent the year before.

No surprise, say some employment attorneys, noting the ease with which employees can swipe confidential information or taint a company's image has Corporate America on edge. "It's almost impossible to keep up with what might be walking out of the door or sliding out the door," said Anthony Oncidi, chairman of the labor and employment department in the Los Angeles office of New York-based Proskauer Rose. Oncidi said that employers are smart to have an ongoing monitoring program that includes reading or analyzing e-mails. That makes it much easier to spot suspicious behavior, he said. Plus, if trade secrets are stolen, the monitoring records will give the lawyers the evidence they need to bring a lawsuit.

The Proofpoint study was based on the responses of 220 e-mail decision-makers at U.S. companies with more than 1,000 workers. It was conducted via the Internet in June. Among the study's other findings:

• 33 percent of large companies employ staff whose primary or exclusive job is to monitor the content of outbound e-mail, up from 15 percent in 2008.

• 34 percent said their business had been affected by the exposure of sensitive or embarrassing information, up from 23 percent in 2008.

• 18 percent had investigated a data loss event via a blog or message board in the past 12 months.

• Nearly a third -- 31 percent -- terminated an employee for violating e-mail policies, up from 26 percent in 2008.

Sounds pretty extreme, said veteran employment attorney Christopher Mills, a partner in the Murray Hills, N.J., office of Atlanta-based Fisher & Phillips. Monitoring employee e-mail hurts morale, he said, and it could give employers a bad public image should an employee sue for invasion of privacy. "You don't want to be known as the employer from the pages of 'Mad Men,' who still applies 1960 rules to the 21st century workplace," Mills said.

Moreover, Mills argued that not everything is trade secret material. Monitoring employees to safeguard Coca Cola's secret recipe is one thing. But spying on workers to protect pizza customer lists? "That is just going to be viewed by a court as going overboard," Mills said. "When you really take a look at what is a trade secret, it's really fairly narrow."

Wednesday, September 23, 2009, 9/23/2009 10:38:00 AM

DeLaughter Bribery/Influence Evidence May Impact Eaton Aerospace Trade Secrets Misappropriation Case

By Todd

We've reported about the crazy ups-and-downs of this Eaton Aerospace employee defection case before:

Forbes is now reporting that U.S. District Judge Glen H. Davidson in north Mississippi ruled Monday the secret grand jury testimony and other materials can be handed over to U.S. District Judge William H. Barbour, in the southern district of Mississippi, and Hinds County Circuit Judge Swan Yerger. The latter judge, Judge Yerger, is the civil trial judge assigned to the Eaton Aerospace misappropriation of trade secrets case that involves numerous former Eaton Aerospace employees and their new employer.

You'll recall that the former employees and their new employer are suggesting that Eaton's retention of Ed Peters, a Mississippi attorney who formerly worked with Judge DeLaughter and was one of his close friends, was made to improperly influence Judge DeLaughter's rulings. Eaton, of course, vigorously denies their retention of Mr. Peters was for any improper purpose.

"It's what Ed Peters has said," Frisby attorney Ed Blackmon said Tuesday. "The statements by Ed Peters were taken as credible by the government because they intended to use those in the DeLaughter trial."

Eaton spokesman Don McGrath said Tuesday the company welcomes the ruling about Peters' grand jury testimony to clarify the relationship of Peters and DeLaughter.

"We in no way hired him to influence Judge Delaughter or any other judge on Eaton's behalf," McGrath said. "We feel that our case is very strong, and I think the government's case is very strong."

We'll keep a continuing eye and ear on this one.

Tuesday, September 22, 2009, 9/22/2009 10:38:00 AM

GM's Daewoo Sues to Stop Russian Automaker from Selling Compact Sedan Allegedly Created Using Stolen Trade Secrets

By Todd

The Korea Times is reporting that Daewoo, the South Korean unit of General Motors, said Tuesday it has filed a court injunction to stop a Russian auto maker from selling a compact sedan, which was allegedly built using its stolen technology.

The court action comes nearly two weeks after local prosecutors arrested two former GM Daewoo employees on charges of handing over core information on the company's popular "Lacetti" sedan before getting jobs at the local branch of Russian auto firm TagAZ.

Another former GM Daewoo employee and executive of TagAZ Korea committed suicide as the investigation widened."GM Daewoo will first see the court's decision on the injunction before filing a damages lawsuit against TagAZ Korea," said GM Daewoo spokesman Park Hae-ho.

Prosecutors suspect the former employees of GM Daewoo copied over 6,000 files from their personal computers containing crucial technology details on engine and parts designs to build the Lacetti.

It is believed that the leaks helped TagAZ introduce its latest "C-100" model sedan in Russia.

GM Daewoo officials say it costs around 300 billion won ($245 billion) to develop a model such as the Lacetti.

GM Daewoo's petition is aimed at banning the Russian competitor from developing, manufacturing and selling vehicles that were built with GM Daewoo's technology, Park said. The latest industrial spy case has dealt a blow to the cash-strapped auto maker's brand image and chances of receiving a new loan from South Korea's state-run Korea Development Bank.

GM Daewoo has been in talks with the local lender since early this year after it exhausted a $2-billion credit line. The U.S. parent firm's financial difficulties have troubled the negotiations, but Jay Cooney, GM Daewoo vice president of communications and public policy, told reporters Tuesday at a new car launching event that the talks may be wrapped up in October with the visit of GM CEO Fritz Henderson.

The company unveiled the Lacetti Premiere ID, a revamped model of the Lacetti Premier, at the same event. The compact sedan, equipped with a hydromatic six-speed automatic transmission, will go on sale starting next month.

Avoiding IP Disputes with R&D Employees

Since he won’t want to blow his own horn, let me bring this one to your attention.

This blog’s co-author, Todd Sullivan, is quoted extensively in Technology Transfer Tactics on the subject of intellectual property disputes between research universities and inventors. The article also describes how proactive measures can prevent such disputes from leading to major heartburn.

The article was prompted in large part by a recent court battle between the Mayo Clinic and former employee Dr. Peter Elkin, who developed a software program for bioinformatics. The two sides now battling it out over who controls the rights and revenues from the software.

As Todd so eloquently puts it: "Disputes essentially arise like a phoenix from the ashes of poorly drafted agreements."

Thursday, September 17, 2009, 9/17/2009 10:55:00 AM

Supreme Court of Ohio Says Cincinnati Public School District Exam Questions Are Trade Secrets Exempt from Disclosure

By Todd

The Supreme Court of Ohio ruled today that the questions used in semester examinations administered to all ninth-grade students in the Cincinnati Public School District are not “public records” subject to disclosure under the state’s Public Records Act because they fall within a statutory exception for trade secrets. The Court’s 5-2 majority decision was authored by Justice Judith Ann Lanzinger.

Beginning in 2007 Paul Perrea, a teacher at Cincinnati Hughes High School, filed repeated requests with Cincinnati Public Schools (CPS) under the Ohio Public Records Act, R.C. 149.43, seeking copies of the standardized examinations that are administered to all CPS 9th grade students at the end of each semester to measure their achievement in four different academic subjects. Perrea sought copies of the actual examination questions and other documents related to the creation, administration and grading of the CPS semester exams. His requests specified that he would use the copies only “for criticism, research, comment, and/or education” and indicated his intention to have the content of the exams evaluated by an independent expert for “fairness, accuracy and validity.”

CPS denied the records requests, asserting that the exam questions and other requested documents are exempt from disclosure under exceptions in the state Public Records Act for trade secrets and copyrighted materials. In April 2008, Perrea filed an original action in the Supreme Court of Ohio, asking the Court to issue a writ of mandamus compelling the school district to provide him with copies of the exam questions and other requested documents.
Writing for the Court in today’s decision, Justice Lanzinger noted as a threshold matter that records maintained by school districts generally fall within the statutory definition of public records.

She wrote: “It is unquestioned here that CPS is a public office for purposes of the Public Records Act. In fact, R.C. 149.43(A)(1) defines ‘public record’ to mean ‘records kept by any public office, including ... school district units.’... Under R.C. 149.011(G), records are subject to the Public Records Act if they are documents created or received by the public office that ‘serve to document the organization, functions, policies, decisions, procedures, operations, or other activities of the office.’ In its Strategic Plan 2006-2011, CPS determined that it would assess students frequently on their progress toward meeting the performance standards and that it would provide teachers with common benchmark assessments for each grade and for each subject. The semester exams were created to fulfill these policy decisions. ... Therefore, unless an exception to disclosure applies, the requested ninth-grade semester exams are subject to disclosure under R.C. 149.43.”

In analyzing the school district’s argument that the exam questions fall within a statutory exception for trade secrets, Justice Lanzinger wrote: “The Ohio Uniform Trade Secrets Act, R.C. 1333.61 through 1333.69, is a state law exempting trade secrets from disclosure under R.C. 149.43. R.C. 1333.61(D) defines ‘trade secret’ as ‘any information ... that satisfies both of the following: (1) It derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. (2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.’

“CPS established that it spent over $750,000 on the development of the ninth-, tenth-, and eleventh-grade semester exams. And it is axiomatic that the semester exams would have no or minimal value if they were made public before they were administered. Also, CPS established that it would have to spend a considerable amount of money to recreate the tests every year. Estimates indicate that replacing just half the questions on the ninth- and tenth-grade exams would exceed $270,000. Due to the cost to create new exams, CPS claims that it will no longer be able to administer semester exams if the tests are made public. There is also evidence that CPS has taken steps to maintain the secrecy of the semester exams. Students are not permitted to make copies of the exams or possess cell phones, cameras, or similar devices when the exams are administered. And although the teachers are not required to sign confidentiality agreements, they are instructed that they are not allowed to keep or make copies of the exams. In addition, teachers have only limited access to the exams. The exams are kept in a secure area at a central location until they are administered, and all exams must be returned the week after they are administered. These security efforts are similar to those found sufficient in State ex rel. Carr v. Akron (2006) ...”

“To rebut CPS’s assertion that the exams are trade secrets, Perrea relies on State ex rel. Rea v. Ohio Dept. of Edn., (1998),” wrote Justice Lanzinger. “However, Rea is distinguishable. First, in Rea, we questioned whether public entities could even possess trade secrets. ... We answered that question in the affirmative in State ex rel. Besser v. Ohio State Univ. (2000) ... Second, Rea involved two tests –the Twelfth Grade Ohio Proficiency Test (‘OPT’) and the Ohio Vocational Competency Assessment (‘OVCA’) – that consisted of questions from a question bank. For the OVCA, the question bank contained approximately 14,000 questions. ... Every year, the Ohio Department of Education creates a new OPT using questions that have been used in previous years as well as new questions from the bank that have not previously been used; thus no two tests are identical. The Ohio State University does the same for the OVCA. Here, the CPS administers the exact same tests year after year. There is no question bank, and a question is removed only after it has been determined to be flawed.”

“We further note that ordering disclosure of the semester exams would open the door for students to have access to these tests as well, undermining the tests’ effectiveness in measuring student ability if the test is given in the future. That is why CPS claims that it will no longer administer the test if we order disclosure. Thus, ordering disclosure will reduce CPS’s ability to evaluate student learning. Such a result is not in line with the policy behind Public Records Act. ‘We must ... construe statutes to avoid unreasonable or absurd results.’ State ex rel. Cincinnati Post v. Cincinnati (1996). ... For the foregoing reasons, we hold that Perrea is not entitled to disclosure of these records, because they are trade secrets and thus are not public records.”
Justice Lanzinger’s opinion was joined by Justices Paul E. Pfeifer, Evelyn Lundberg Stratton, Terrence O’Donnell and Robert R. Cupp.

Wednesday, September 16, 2009, 9/16/2009 09:15:00 AM

Sarasota-Based Contact Lens Manufacturer Accuses IT Specialist of Trade Secret Theft

By Todd

Sarasota's is reporting that contact lens manufacturer Benz Research has filed a lawsuit against a former employee, claiming that he stole trade secrets with the intent of selling them to competitors.

The Manatee County-based company's suit targets Neil W. Sturgis, who worked at Benz as an information technology specialist for a little more than a year.

"The misappropriation of Benz Research's trade secrets by Sturgis were done willfully, maliciously and for the purpose of injuring Benz Research," the lawsuit filed in circuit court in Manatee County says. "Benz Research asks that this court award it actual damages and any unjust enrichment caused by Sturgis's misappropriation."

Sturgis has not yet filed a response and could not be reached by the Herald-Tribune for comment.

The 27-page lawsuit against him shows the lengths to which Benz goes to protect its businesses and the swiftness with which it reacts to any perceived breach of trust.

Benz, which produces components and materials used in the manufacture of soft contact lenses, said it has invested heavily in equipment, mechanical design and automation software during the past 20 years.

"The formulae, specifications, sub-processes, procedures and equipment all took years to develop and are valuable trade secrets," Benz said in the suit, emphasizing the security measures it takes at its secure plant in southern Manatee County.

"Even mail delivery and delivery of supplies are restricted to particular areas," the lawsuit states. "In the interior of the facility, key cards are required for entry to particular areas to which only employees working in that area have access."

Computer systems also are protected by access codes and employees are required to sign agreements in which they promise never to reveal Benz's trade secrets.

The problem is that as an IT specialist, Sturgis was one of only two employees on staff who had access to the company's most sensitive information.

"Sturgis had access to every computer at Benz via his administrative passwords," the lawsuit states. "Sturgis also had access to Benz's Windows computer system and all Benz's personnel accounts from his home personal computer via a remote access password. No other Benz employee had such access."

Sturgis had so much access to the company's computer systems, in fact, that he knew he was going to be fired before executives told him.

"On or about June 2, 2009, Sturgis told Staci Blackwell, a Benz employee, that he had been reading the e-mails at Benz and that he knew he was going to lose his job," the lawsuit states.

"On June 3, 2009, Sturgis called in sick and never returned for full-time work."
Sturgis already was on probation with the company at that time. Executives had told him in February that he needed to improve his attitude and productivity, the suit states.

It was after that February evaluation that Sturgis allegedly began downloading trade secrets onto mobile storage devices and taking the devices home, the lawsuit says.

When asked about the downloads, Sturgis said he was just removing "personal" files, the lawsuit says.

Benz executives later demanded that Sturgis return the storage devices. When he did, executives found that they had been scrubbed. A forensic computer expert hired by the company determined that the devices had been connected to Sturgis's work computer for 4.5 hours.

"To copy Sturgis's personal files onto a flash drive would only take a minute or two, not anywhere close to over four and a half hours," Benz's suit says.
This is yet another example of IT professionals who have premiere access to key company information utilizing that access in a manner adverse to the interest of their former employer. That said, we'll predict this case ends with a settlement: a preliminary and permanent injunction consented to by the IT professional. Let's face it - this guy is certainly toxic to the interests of any reasonable competitor. He will likely not obtain an IT job from a company manufacturing contact lenses and this case will fade away. Just our prediction.

Tuesday, September 15, 2009, 9/15/2009 09:29:00 AM

Nova Biomedical Prevails in Major Trade Secrets Trial

By Todd

The AmLaw Daily is reporting that Nova Biomedical has prevailed in a high-profile trade secret misappropriation case filed by Medtronic. The report is as follows:

A federal jury in Los Angeles has dealt Medtronic a defeat in its efforts to prevent former partner Nova Biomedical from selling a line of blood glucose meters that are able to communicate wirelessly with Medtronic insulin pumps.

At trial, Medtronic alleged that Nova misappropriated its trade secrets and sought $30 million in damages and an injunction removing the meters from the market. But an eight-person jury unanimously rejected all of the claims Friday, after three weeks of trial. Bradford Badke, a New York-based partner at Ropes & Gray who was lead counsel for Nova, contends that the case came down to the testimony of expert witnesses.

"They said that the technology incorporated in Nova's meter was trade secret communication technology that only they had the right to use," says Badke. "The testimony of our experts demonstrated that the information Medtronic said was secret was not, because it was in a publicly available product and anyone could ascertain it from looking at the product."

A team at Gibson Dunn & Crutcher led by Los Angeles-based partner Daniel Floyd represented Medtronic MiniMed, a division of Medtronic, Inc. Floyd could not be reached for comment. In an e-mail, a Medtronic spokesperson wrote, "We're disappointed and certainly do not agree with the outcome of this trial. We continue to believe that Nova Biomedical wrongfully misappropriated Medtronic's trade secrets related to our wireless communication technology."

This case is the coda for what had been a mutually beneficial partnership between Medtronic and Nova. Medtronic MiniMed and Nova had teamed up to market and distribute insulin pumps and blood glucose meters in the same package. The meters, made by Nova, were able to communicate with the Medtronic-made pumps. But Medtronic ended its relationship with Nova and began distributing its pumps with meters made by LifeScan, a division of Johnson & Johnson.

According to Badke, Medtronic wanted Nova to stop manufacturing any meters with the ability to communicate with its pumps. Medtronic also wanted Nova to stop providing test strips for meters already in the market. But Nova refused. "Nova decided it had the right to service its preexisting customers with test strips for the meters and it had the right to continue selling it's meter," Badke says.

Thursday, September 10, 2009, 9/10/2009 09:29:00 AM

Say Cheese - Photography Studios in Noncompete and Trade Secret Spat

By Todd

Well - we were not going to cover this story, but - what the heck.

The Las Vegas Sun is reporting that high-end photography companies with galleries at Las Vegas casino-resorts are headed for a legal showdown, with one accusing the other of misappropriating its trade secrets.

Las Vegas-based Peter Lik USA Inc. filed suit last week against The Lough Road Inc. of Happy Valley, Ore.; and Lough Road's national sales director, Robert Scottland.

Peter Lik USA says it has galleries in Las Vegas at the Forum Shops at Caesars, the Venetian and Mandalay Place; and elsewhere around the country and in Peter Lik's native Australia. These showcase the works of Lik, a landscape photographer.

Peter Lik USA charges in the lawsuit that Scottland, a former Peter Lik employee, has violated his noncompete agreement by soliciting the business of Peter Lik customers on behalf of The Lough Road.

The Lough Road has four galleries around the country and is preparing to open its first Las Vegas location, at MGM Mirage's CityCenter complex, in December. The Lough Road sells the works of landscape and wilderness photographer Rodney Lough Jr.

Lough disputed the allegations in the lawsuit.

"It's completely baseless," Lough said of the lawsuit, filed Thursday in Clark County District Court.

Lough confirmed Scottland works for him as national sales director. The lawsuit claims Scottland has been named manager of the CityCenter gallery, but Lough said it hasn't been determined who will manage the Las Vegas location.

Besides accusing Scottland of violating his noncompete agreement by soliciting Peter Lik customers, the lawsuit claims Scottland published disparaging remarks about Lik in e-mails and on an Internet blog and has failed to return to Lik artwork and furniture valued at more than $100,000.

The lawsuit, filed by attorneys with the Las Vegas office of the law firm Littler Mendelson, alleges breach of contract, conspiracy and defamation.

"Defendants wrongfully acquired and/or utilized confidential information regarding Peter Lik USA's customers, business practices and trade secrets that exclusively belonged to Peter Lik USA," the lawsuit alleges.

But Lough, in denying the allegations Monday, said he's considering filing a counterclaim against Peter Lik USA.

Tuesday, September 08, 2009, 9/08/2009 02:45:00 PM

DuPont Terminates, Then Sues, Chinese Employee For Allegedly Stealing Trade Secrets

By Todd

Delaware Online is reporting that the DuPont Co. has filed a lawsuit against -- and fired -- a Chinese-born employee who was allegedly about to leave Delaware and return to China with company trade secrets.

The suit, filed in late August in the Delaware Court of Chancery, accuses Hong Meng of breach of contract and misappropriation of trade secrets -- specifically research into a paper-thin computer display technology called an "organic light emitting diode" or OLED.

The suit alleges Meng was planning to take the proprietary information to his alma mater, Peking University in Beijing, which is involved in research on OLED technology.According to the lawsuit, Meng, while still employed at DuPont, secretly accepted a position at Peking University without informing DuPont or obtaining consent sometime in early 2009, in violation of the terms of an employment agreement that he signed.

At the same time, Meng was scheduled to be transferred from his position in Delaware to one at DuPont's operations in China.

The lawsuit did not specify where in China or which job he was to take.

As part of the transfer process, Meng's hard drive was reviewed by company officials "and his illicit connection to Peking University was discovered."

Furthermore, DuPont discovered that Meng had downloaded confidential company files related to OLED from his company laptop to an external hard drive.

When confronted by DuPont security officials in interviews on Aug. 18 and 19, Meng at first denied, then admitted, downloading the files and surrendered the external hard drive to company officials, according to the suit.

He also agreed to surrender his personal computer, where more confidential files were discovered, according to court papers, as well as details of his dealings with Peking University.

The company claims Meng, who allegedly also admitted his dealings with Peking University after first denying them, was working on a program at the school to "commercialize OLED technology for industrial applications in direct competition with DuPont."

The lawsuit says DuPont's investigation of Meng is continuing, but in the meantime it is seeking a court order requiring Meng to abide by the terms of his employment agreement with DuPont and barring Meng from releasing any confidential DuPont data.

Friday, September 04, 2009, 9/04/2009 01:19:00 PM

Nebraska-Based Elections Software Company Sues Two Former Employees

By Todd

The Chicago Tribune is reporting that Omaha-based Election Systems & Software is suing two former employees, alleging they've illegally used the company's software and disclosed trade secrets. The company operates election services in 39 states and overseas.

The lawsuit alleges James Dalton, of Indiana, and Mark Allison, of Texas, are soliciting the company's customers. It also says Dalton and Allison had agreed not to disclose confidential information. The lawsuit, filed Thursday in U.S. District Court in Omaha, seeks unspecified damages on the basis of copyright infringement, misappropriation of trade secrets, breach of contract and other claims.

Our general question is: why would solicitation of an election software company's customers be improper? Surely the identities of the local, state and federal customers are not secrets. We'll keep an eye on this one for you.

Thursday, September 03, 2009, 9/03/2009 02:38:00 PM

Federal Reserve Fighting FOIA Case With Trade Secret Jargon a Federal Judge Ain't Buying

By Todd

While not technically a straight-down-the-line trade secrets discussion, we find the recent piece in The Atlantic by Daniel Indiviglio quite interesting. He is reporting about the Fed's stringent opposition to releasing information about which banks received emergency funding in the FOIA case known as Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York. Chief U.S. District Judge Loretta Preska said on Aug. 24 that the Fed had until Aug. 31 to disclose daily reports on borrowing by banks and other financial institutions. The Fed wants Judge Preska's ruling stayed until it can appeal its case to the United States Court of Appeals for the Second Circuit.

Mr. Indiviglio picks up from there:

"First, what's the Fed's argument for keeping this information secret? Bloomberg explains the Fed's reasoning given to the judge:

Preska's Aug. 24 ruling rejected the Fed's argument that the records should remain private because they are trade secrets and would scare customers into pulling their deposits.

The trade secret argument seems a bit of a stretch. Are there really banks out there claiming that the secret to their success is getting loans from the Federal Reserve? That seems highly unlikely.

The other argument, however, is relevant and important. I see it as the crux of the Fed's case. Let's imagine your bank needed an emergency loan from the Federal Reserve. Currently, you'd never find out, since it's secret. But if the Fed ultimately loses the case, then imagine if its emergency loan balance listing by bank became published daily for public consumption. You could see your bank on there. That might, and probably should, cause some alarm to those banks' customers.

The Fed's argument is essentially that disclosing this information will cause bank panics. Ignorance is bliss. If people never find out about these loans, then assuming the bank pays it back, everything will turn out fine. Why scare the public for no reason?

I get that argument. I'm even sympathetic to it. It still bothers me. I don't need to know if my bank got a loan from Goldman Sachs, but since the Fed is a lender of last resort, that means something much different. As a shareholder of the bank, I'd probably want this information too."

This is a fascinating topic and discussion. At this blog, one of the authors (Sullivan - er, me) is a libertarian. We are watching this case and Representative Ron Paul's "Federal Reserve Transparency Act of 2009" bill with much interest. More as we learn more.

Wednesday, September 02, 2009, 9/02/2009 11:14:00 AM

Raytheon's Trade Secret Theft Claims Tossed By Federal Judge in Texas

By Todd

Raytheon had alleged that in March of 1996, a high-level Raytheon executive quit and started a company called Indigo, allegedly to provide consulting advice to companies like Raytheon. Raytheon claims that instead of consulting with Raytheon to develop infrared cameras and detectors, Indigo planned to become a competitor of Raytheon and intended to use Raytheon's research and development in the process. The suit alleged "Indigo embarked on a calculated course of action to jump to market by undertaking a systematic effort to hire away key scientists and technicians from Raytheon in each of the critical research and design disciplines where Indigo lacked the knowledge necessary to compete." Flir Systems acquired Indigo Systems in 2004.

Forbes is reporting that the federal court in which the trade secret theft and unfair competition claims are pending has now dismissed all of those claims. In an e-mailed statement, Raytheon said, "This procedural ruling does not address the merits of the case. We will continue to actively pursue our claims against Indigo and FLIR in this litigation for their systematic misappropriation of trade secrets and patent infringement."

Obviously, FLIR had a different take on the court's ruling: "This significant court ruling moves us one step closer to putting these baseless and competitively motivated allegations behind us and gives our customers reassurance that FLIR's world class technology and products are not subject to the intellectual property claims of others," said Earl R. Lewis, President and CEO of FLIR Systems.
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