Kurt Kappes and Robert Milligan Published in New Matter, the Official Publication of the California State Bar's Intellectual Property Section

"Recent California Appellate Decision Highlights Additional Arrow in the Trade Secrets Litigator's Quiver: Attacking the Independent Economic Value Element of a Trade Secret Misappropriation Claim"

Kurt Kappes and Robert Milligan’s article, "Recent California Appellate Decision Highlights Additional Arrow in the Trade Secrets Litigator's Quiver: Attacking the Independent Economic Value Element of a Trade Secret Misappropriation Claim," was published in the November 2008 issue of New Matter, the Official Publication of the California State Bar's Intellectual Property Section. In their article, they discuss a recent decision, Yield Dynamics, Inc. v. Tea Systems Corp., where the Court of Appeals for the Sixth Appellate District upheld a trial court's decision granting the defendant's motion for nonsuit. In their decision, the court dismissed "a company's trade secret misappropriation claim against its former employee--on the basis that the company had failed to demonstrate that the source code that was alleged to have been misappropriate had independent economic value. The decision indicates that if a defendant can demonstrate that the information taken lacks value to anyone beyond the parties themselves--namely that the defendant cannot exploit the information to the disadvantage of the original owner to gain a competitive advantage--then, despite its secrecy, a plaintiff is unlikely to prevail on a trade secret misappropriation claim."

According to the authors, "The Yield Dynamics decision demonstrates that to establish the independent economic value element to maintain a trade secret misappropriation claim, one must prove more then secrecy and usefulness. One must demonstrate that there is a discrete competitive advantage to persons who could utilize the information taken to the disadvantage of the original owner, thereby creating economic value in its secrecy." They concluded that "Accordingly, Yield Dynamics highlights and provides additional support for a trade secrets litigator to defend trade secrets misappropriation claims where the facts demonstrate that the information taken lacks value to anyone beyond the parties themselves and provide no genuine competitive advantage."