Recent California Appellate Decision Finds That Company Failed To Demonstrate That Its Source Code Had Independent Economic Value

A recent California Court of Appeal decision reaffirmed what those who practice trade secret law already knew, but do not always focus upon, in trade secret litigation –the purported trade secret cannot qualify for protection under California’s trade secret statute unless there is a showing that the information has a demonstrated economic value from not being known to third parties who can obtain economic value from its disclosure or use.

The Court’s decision appears to add an additional wrinkle to this proposition by suggesting that to show independent economic value, one must also demonstrate that there is a discrete advantage to third parties who could utilize the information to the disadvantage of the original owner, thereby creating economic value in its secrecy. Secrecy and usefulness alone will not establish independent economic value.

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