FLIR Sys., Inc. v. Parrish, 174 Cal. App. 4th 1270 (2009)

FLIR Systems purchased Indigo Systems, which manufactures and sells microbolometers (a device used in connection with infrared cameras, night vision and thermal imaging), for $185 million in 2004. William Parrish and Timothy Fitzgibbons were shareholders and officers of Indigo before the company was sold to FLIR; after the sale, they continued working for Indigo. In 2005, Parrish and Fitzgibbons decided to start a new company (Thermicon) to mass produce bolometers, and they gave notice to Indigo that they would quit their employment in January 2006. When Parrish and Fitzgibbons entered into negotiations with Raytheon to acquire licensing, technology and manufacturing facilities for Thermicon, they assured FLIR that they would not misappropriate any of Indigo’s trade secrets and that the new company would use an intellectual property filter similar to the one used at Indigo to prevent the misuse of trade secrets. In response, FLIR sued for injunctive relief on the theory that Thermicon could not mass produce low-cost microbolometers without misappropriating FLIR’s trade secrets. The trial court found no misappropriation of FLIR’s trade secrets and determined that the action had been brought in bad faith on a theory of “inevitable disclosure” – a doctrine not recognized by California courts because “it contravenes a strong public policy of employee mobility that permits exemployees to start new entrepreneurial endeavors.” The trial court awarded Parrish and Fitzgibbons $1,641,261.78 in attorney’s fees and costs pursuant to Cal. Civ. Code § 3426.4 (misappropriation of trade secrets claim made in bad faith). The Court of Appeal affirmed and further awarded respondents the costs and attorney’s fees they incurred in connection with the appeal.