## Facts

- Yield Dynamics, Inc. developed and marketed software used in semiconductor fabrication and yield enhancement.
- Terrence Zavecz developed several lithography-data software applications before joining Yield and later sold certain software rights and source code to Yield under an asset purchase agreement; he then became a Yield vice president.
- Yield treated the acquired software products and underlying source code as confidential and asserted they were trade secrets.
- After leaving Yield, Zavecz (through TEA Systems Corp. and related entities) developed a new application, “Weir,” and reused some code that Yield claimed it owned and had purchased.
- Evidence at the bench trial included that Zavecz, as original author, could have recreated the code with limited incremental effort; the record did not clearly quantify how much of Weir incorporated disputed code; and Zavecz’s post-departure products were not shown to compete with Yield’s products.
- Yield sued for, among other claims, trade secret misappropriation and breach of contract (including alleged failure to convey code and violation of a noncompetition obligation).
- The trial court entered judgment for defendants, finding Yield failed to prove the disputed code was a trade secret, and failed to prove damages or unjust enrichment; it awarded defendants attorney’s fees under a contractual fee clause and denied or limited sanctions sought by Yield.

## Issues

1. Whether Yield proved the disputed source code was a “trade secret,” including that it derived independent economic value from not being generally known or readily ascertainable.
2. Whether Yield proved misappropriation and resulting damages or unjust enrichment.
3. Whether Yield proved a material breach of contract and contract damages caused by any breach.
4. Whether defendants were entitled to attorney’s fees under the asset purchase agreement’s fee provision, and whether sanctions rulings were an abuse of discretion.

## Decision

- The Court of Appeal affirmed the judgment for defendants in all material respects.
- The court upheld findings that Yield did not prove the source code had independent economic value from secrecy and therefore did not establish a trade secret.
- The court also upheld findings that Yield failed to prove compensable harm or unjust enrichment from any alleged use of the code.
- The court affirmed rejection of the contract claims for failure to show a material breach causing damages.
- The court affirmed the award of attorney’s fees to defendants under the agreement’s fee-shifting clause and found no reversible error in the sanctions rulings.

## Legal Principles

- Under California’s trade secret statute, information is a trade secret only if it derives independent economic value from not being generally known or readily ascertainable, and is subject to reasonable secrecy measures.
- A plaintiff must prove the secrecy-driven economic value of the specific information; courts will not presume that nonpublic source code in a sophisticated product is a trade secret solely because it is confidential.
- Trade secret recovery requires proof of misappropriation and a viable monetary remedy theory (damages or unjust enrichment) supported by evidence tying use of the information to measurable economic benefit or loss.
- Breach of contract requires proof of breach, causation, and damages; showing an alleged deviation from contractual duties without proof of resulting damages is insufficient.
- A broadly drafted contractual attorney-fee clause covering actions “arising out of” or “concerning” an agreement may extend to related claims litigated between the contracting parties, and fee awards are reviewed for abuse of discretion.
- Sanctions rulings are reviewed for abuse of discretion and generally require an adequate record demonstrating error.

## Conclusion

The court affirmed a defense judgment after a bench trial because Yield did not prove that the asserted source code derived independent economic value from secrecy or that any alleged use caused damages or unjust enrichment, and it upheld defendants’ contractual attorney’s fee award and the trial court’s sanctions determinations.


Yield Dynamics, Inc. v. TEA Sys. Corp., 154 Cal. App. 4th 547 (Cal. Ct. App. 2007)