Yield Dynamics, Inc. v. TEA Systems Corp.

California Court of Appeal9/21/2007
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Opinion

RUSHING, P. J.

Plaintiff Yield Dynamics, Inc. (Yield), brought this action against a former employee, Terrence Zavecz, two business entities of which he is a principal, and others, alleging among other things that Zavecz breached a contract to convey certain computer code to Yield and not to compete with it, and that he and other defendants misappropriated certain trade secrets by using some of the code to create competing products. After a nonjury trial, the court entered judgment for the defendants, finding among other things that Yield had failed to establish that the code constituted a trade secret. On appeal Yield mounts a broad attack on the judgment and associated orders.

We detect no error, and will affirm the judgment.

Background

I. History 1

All of the parties are involved in developing or marketing software products designed to facilitate the fabrication (manufacture) of microchips (integrated circuits). According to Jonathan Buckheit, Yield’s founder and chief executive officer, Yield develops and markets software for “yield enhancement,” i.e., monitoring and controlling the fabrication process so as to increase the proportion of microchips that perform satisfactorily. 2 Essentially *552 this involves monitoring the fabrication process in order to detect, analyze, and correct manufacturing errors.

Defendant Zavecz is the founder and, as relevant here, sole employee of defendant TEA Systems Corporation (TEA). He developed two software applications, OASnt and FPAex, which he marketed to microchip manufacturers. These products were designed to facilitate the analysis of lithography data, i.e., measurements of the photolithographic stage of fabrication, in which an image of the circuit is imprinted onto a silicon wafer by the projection of light through a reticle, which is an optical mask somewhat analogous to a photographic slide. 3

The events leading to this lawsuit commenced while Zavecz was developing a more highly automated lithography product named MAPA. 4 Buckheit testified that Zavecz sought assistance in developing MAPA so that he could fulfill an existing contract with National Semiconductor, a microchip manufacturer. This evolved into a written agreement in May 1999 (the asset agreement) under which Zavecz and his wife, as president and shareholders of TEA, sold to Yield TEA’s interest in OASnt, FPAex, MAPA, and “[ajll of Seller’s software . . . relating in any way” to these products. In exchange TEA received forgiveness of $73,457.15 in debt plus 100,000 shares of Yield common stock. 5 The agreement also contemplated that Yield would employ Zavecz as Vice President of Lithography Applications at a base salary of $100,000 per year, with stock options and commissions. The agreement included a covenant by Mr. and Mrs. Zavecz not to compete for three years from its effective date.

Zavecz commenced employment with Yield in June 1999. This apparently entailed his coming to California while leaving his family behind at their Pennsylvania home. In connection with his employment he executed two additional agreements. An “Employee Inventions and Proprietary Rights *553 Assignment Agreement” (the invention agreement) provided that Zavecz would not disclose certain of Yield’s information, which was deemed confidential; that inventions made by him in the course of his employment belonged to Yield; that he would disclose and assign any such inventions to Yield; and that inventions made within a year after his separation of employment would be presumed to have been conceived during employment, and thus the property of Yield. A “Confidentiality Agreement” reiterated his duty not to disclose Yield’s “Confidential Information” as there defined.

In mid-2000 Zavecz threatened to resign and proposed, among several alternatives, “unwinding]” the parties’ existing agreements. He was invited instead to develop a business plan under which Yield would open an engineering office in Pennsylvania. He developed such a proposal, but Buckheit did not approve of it because it would create a separate division under Zavecz’s semiautonomous control. Buckheit made a counterproposal which Zavecz refused, again offering to “unwind the deal.”

In late 2000, Yield undertook to convert OASnt and FPAex from the RPL programming language, in which they had been written, into the C programming language. 6 This became necessary, Buckheit testified, because after Yield added some automation routines to OASnt and installed the resulting product for a client, the software exhibited “glitches that we literally could not fix” due to “a bug in the RPL programming language itself.” Yield decided to convert the entire product from RPL to C “in order to be able to fix the bug and save the customer.” Buckheit asked Zavecz to assist in this project, but Zavecz said that “[i]t was not one of his priorities” and that he expected it to be addressed by his separate division, for which he was then “making plans.” Buckheit reminded Zavecz that his plan for a separate division had been disapproved, though Zavecz remained free to appeal that decision to the Yield board of directors. Zavecz never did so.

In December 2000, Zavecz went to Pennsylvania. In late January 2001, after he refused a directive to return to California, Yield terminated his employment. In April 2001, Yield filed an action in Pennsylvania to accelerate and collect upon a promissory note reflecting a loan of $50,000 it had made to Zavecz. In August 2003 Yield brought an action on the note in California. This produced a stipulated judgment in Yield’s favor. Disputes over execution of the judgment generated two appeals to this court. (Yield Dynamics, Inc. v. Zavecz (Dec. 21, 2005, H028585) [nonpub. opn.]; Yield Dynamics, Inc. v. Zavecz (Dec. 21, 2005, H028146) [nonpub. opn.].) Their substance need not concern us here.

*554 Meanwhile, sometime in 2001, but after the termination of Zavecz’s employment, Buckheit learned that Zavecz was proposing to make a presentation at the conference of a professional organization identified at trial as SPIE, which according to one of the Pennsylvania decisions in a related case stands for Society of Photolithographic Instrumentation Engineers. Zavecz apparently intended to include in the presentation “screenshots,” or images of a computer display, that Buckheit believed were “directly taken from [Yield] marketing presentations . . . .” The convention hosts acceded to Yield’s demands that these materials be removed from the presentation and returned to it.

In February 2003, Buckheit learned that Zavecz had developed a new product, Weir, which Buckheit considered similar to the products he had sold to Yield under the asset purchase agreement. In July 2003, Yield brought this action against TEA, Zavecz, and five other defendants, including Sub-Lambda Systems, Inc. (Sub-Lambda), another entity apparently founded by Zavecz. In August 2003 Zavecz petitioned to compel arbitration, pursuant to an arbitration clause in the employment agreement, of so much of the dispute as concerned that agreement. In the course of the ensuing arbitration, Buckheit saw slides from which he concluded that Zavecz had conducted a professional presentation using “screenshots” “that had been generated by the OASnt software and were labeled as OASnt” but “were now being generated by . . . Weir.”

In April 2005, Yield filed its first amended complaint setting forth seven causes of action: (1) misappropriation of trade secrets, including source code, by Zavecz and other defendants; (2) breach of the asset agreement by Zavecz and TEA, in that they failed to turn over all intellectual property transferred under the agreement, attempted to sell competing software, and created and sold software based on intellectual property sold to Yield under the agreement; (3) breach by Zavecz of the invention and confidentiality agreements, in that he failed to return confidential materials upon termination of his employment, and used and disclosed confidential information after termination; (4) fraud by Zavecz and TEA in the inception of the asset agreement, in that they entered into that agreement without intending to perform their obligations under it; (5) breach by Zavecz of his fiduciary duties as an employee, apparently based on the foregoing misconduct; (6) declaratory relief with respect to the dispute between the parties; and (7) unfair competition by Zavecz in violation of Business and Professions Code section 17200 et sequitur, in that he taught a course using “screenshots” of products sold to Yield and developed by it, while representing them as products of TEA. 7

*555 In the period 1999 to 2001, Yield offered OASnt, FPAex, and MAPA for sale, as well as its own preexisting product, Genesis. In 2001 or 2002, it stopped offering FPAex as a stand-alone product. By 2004 it was no longer offering OASnt for sale by itself. However MAPA had been integrated into a new product, EnTune. 8 As of 2004 Yield was offering EnTune for sale to a number of companies. As of trial no copies of that product had sold.

II. Trial Proceedings

Early in trial Yield settled with four defendants whom it had accused of helping Zavecz, TEA, and Sub-Lambda to misappropriate trade secrets. Later Yield withdrew its declaratory relief claim and dismissed with prejudice its claim for breach of fiduciary duty. The case proceeded against Zavecz, TEA and Sub-Lambda on theories of misappropriation of trade secrets, breach of contract, fraud, and unfair competition.

Yield waived its right to jury trial, but defendants did not. In pretrial colloquy the court raised the possibility of trying the case without a jury, but defendants stood on their right to jury trial. The court raised the possibility of conducting a nonjury trial of equitable issues, followed by a trial of any remaining legal issues. Yield filed a memorandum conceding the court’s power to try equitable issues first and thereby obviate a jury trial if its findings disposed of all causes of action. With matters in this posture, and with no jury seated, counsel for Yield delivered his opening statement to the court. At its conclusion, defendants moved for nonsuit, contending principally that (1) Yield had presented no basis for a monetary award on the trade secrets claim, i.e., for compensatory damages, unjust enrichment, or a royalty; (2) Yield had received the benefit of its bargain and had suffered no damage as the result of any breach of contract or fraud; and (3) there could be no wrongful competition because Yield had stopped selling the products in question before defendants sold any product claimed to have been derived from them.

The court deferred a ruling on the motion for nonsuit and elected to “proceed day-by-day for several days hearing the case in equity and attending to all of the issues that the court can properly attend to on equity claims.” *556 Alluding to prior discussions, the court affirmed that Yield was “going to submit evidence, what evidence there is, and be prepared to then comment upon that at the end of the entire presentation ... in aid of the court’s continuing consideration of the motions for nonsuit.” Yield’s attorney agreed to “put in all of [his] evidence.” He presented evidence over the course of five days. He then answered affirmatively the court’s question, “[D]oes the plaintiff rest in its case-in-chief?” The court stated that, having heard “evidence on the plaintiff’s entire casĂ©,” it would now hear defendants’ motion to dismiss under Code of Civil Procedure section 631.8. Yield’s attorney assented in the court’s recital that he had “agree[d] to put in all of the evidence on all of the claims that you [had].” 9

After taking the matter under submission, the court issued a written “Ruling on Motion for Judgment” in which it found for defendants on all claims. Yield filed a four-page request for statement of decision propounding 32 questions to the court. Writing that the request was “overbroad and makes requests ... to which the court is not required to respond,” the court directed defendants to prepare a statement of decision. Defendants submitted a proposed statement of decision. Yield filed 12 pages of objections. Defendants submitted an amended proposed statement of decision. Yield filed 15 pages of “renewed” objections. The court signed the revised proposed statement, incorporating by reference its written ruling on the motion for judgment. The court rendered judgment. Yield immediately appealed from the judgment, an award of attorney fees to defendants (see pt. VI., post), and the denial of a motion by Yield for terminating discovery sanctions (see pt. VII., post).

Discussion

I. Standard of Review

California appellate courts are generally constrained by three principles of appellate review: First, the trial court’s judgment is presumptively correct, *557 such that error must be affirmatively demonstrated, and where the record is silent the reviewing court will indulge all reasonable inferences in support of the judgment. (Schnabel v. Superior Court (1993) 5 Cal.4th 704, 718 [21 Cal.Rptr.2d 200, 854 P.2d 1117]; Border Business Park, Inc. v. City of San Diego (2006) 142 Cal.App.4th 1538, 1550 [49 Cal.Rptr.3d 259]; Blasiar, Inc. v. Fireman’s Fund Ins. Co. (1999) 76 Cal.App.4th 748, 757 [90 Cal.Rptr.2d 374].) This means that an appellant must do more than assert error and leave it to the appellate court to search the record and the law books to test his claim. The appellant must present an adequate argument including citations to supporting authorities and to relevant portions of the record. (Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 865 [64 Cal.Rptr.2d 324]; City of Lincoln v. Barringer (2002) 102 Cal.App.4th 1211, 1239 [126 Cal.Rptr.2d 178].) Of course this also means that during trial, the parties must ensure that an adequate record is made of errors by which they are or may be aggrieved; ordinarily, errors not reflected in the trial record will not, and indeed cannot, sustain a reversal on appeal. (See Estate of Davis (1990) 219 Cal.App.3d 663, 670, fn. 13 [268 Cal.Rptr. 384]; Ward v. Litowsky (1970) 5 Cal.App.3d 437, 440 [85 Cal.Rptr. 278]; but see Code Civ. Proc., § 909 [authorizing appellate courts to receive evidence and make findings].)

Second, findings must be sustained if they are supported by substantial evidence, even though the evidence could also have justified contrary findings. (He llman v. La Cumbre Golf & Country Club (1992) 6 Cal.App.4th 1224, 1229 [8 Cal.Rptr.2d 293]; Key v. McCabe (1960) 54 Cal.2d 736, 738 [8 Cal.Rptr. 425, 356 P.2d 169].) When combined with the foregoing principle this means that an appellant who challenges a factual determination in the trial court—a jury verdict, or a finding by the judge in a nonjury trial—must marshal all of the record evidence relevant to the point in question and affirmatively demonstrate its insufficiency to sustain the challenged finding. (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 409 [58 Cal.Rptr.3d 527].)

Third, even if error is demonstrated it will rarely warrant reversal unless it appears “reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.” (People v. Watson (1956) 46 Cal.2d 818, 836 [299 P.2d 243]; see Cal. Const., art. VI, § 13.) This means the appellant must show not only that error occurred but that it is likely to have affected the outcome.

Yield contends that the first two principles are at least partially inapplicable here, and that we should review the entire judgment de novo, i.e., without deference to the trial court’s judgment, for three reasons: (1) “the principal errors are ones of law,” (2) the trial court’s issuance of a statement of decision limits appellate deference to those matters expressly found in the statement, and (3) the evidence on some issues was “undisputed.”

*558 It is of course true that we will not defer to a trial court’s determination on a question of law. (JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046, 1058 [48 Cal.Rptr.3d 563]; San Bernardino Valley Audubon Society v. City of Moreno Valley (1996) 44 Cal.App.4th 593, 600 [51 Cal.Rptr.2d 897].) As will appear, however, Yield’s claims of legal error depend on insupportable readings of the record, which disperse like a veil of smoke when exposed to the breeze of logical scrutiny. Nor does the presence of “undisputed” facts open the case to wholesale de novo review. It is a rare case in which all facts are disputed. The relevance of “undisputed facts” depends entirely on the context in which they are considered. Their presence does not automatically exempt an entire case from the principles noted above. If it did, those principles would rarely if ever apply.

This leaves us with Yield’s claim that deficiencies in the trial court’s statement of decision preclude indulging inferences in favor of the judgment on issues not affirmatively resolved by the trial court. This argument invokes the statutory rule that where a request for a statement of decision properly specifies an issue for resolution by the court, and the court fails after objection to address that issue in the statement of decision, a reviewing court “shall not. . . infer[] on appeal. . . that the trial court decided in favor of the prevailing party as to those facts or on that issue.” (Code Civ. Proc., § 634 (section 634).) Operation of this rule, however, is conditioned on (1) an initial request that adequately “specifies]” the “principal controverted issues” as to which the requesting party seeks a statement of decision (Code Civ. Proc., § 632 (section 632)); (2) a failure by the statement to “resolve” the “controverted issue” thus specified, or an ambiguity in its resolution (§ 634); and (3) a record showing that “the omission or ambiguity was brought to the attention of the trial court” (ibid.).

Here it is doubtful that any of these conditions are present. Yield’s request for a statement of decision posed 32 questions. Many of them are queries on purely legal issues, e.g., “The legal test the court used to determine which elements [Yield] was required to prove . . . .” Most of the rest are intolerably compound, argumentative, tendentious, or vague, reading more like interrogatories of the “when did you stop beating your wife?” variety than like specifications of principal controverted issues as to which an express ruling is sought. For example, the request asked, “Given the testimony of Jonathan Buckheit and Terrence Zavecz . . . , whether the Court found, as part of its determination that there were no trade secrets, that the contents of any source code at issue was [svc] generally known, and if so, which facts support that finding . . . .” While the first part of this question is presented in a form calling for a yes or no answer, it obviously cannot be adequately answered in that manner; indeed it must be deciphered, and the translated version set out, before any meaningful answer can be given. The second part of the question, *559 demanding “which facts support that finding,” is wholly beyond the scope of the statutory procedure and warranted no response at all.

We do not suppose perfection can fairly be required in the framing of a request for a statement of decision, but neither do we suppose that a trial judge can be required to sift through a host of improper specifications in search of the few arguably proper ones. A party cannot be prevented from using the request as a way of arguing with the court rather than clarifying the grounds of its decision. But neither should a party who makes that choice be entitled to rely on the resulting document to insulate the judgment from the presumption of correctness.

Here only three of the 32 questions approximate nonargumentative specifications of factual issues. 10 It is doubtful that even these three raised “principal controverted issues.” (§ 632, italics added.) While we have found no existing definition of that phrase, it is settled that the trial court need not, in a statement to decision, “address all the legal and factual issues raised by the parties.” (Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1124-1125 [94 Cal.Rptr.2d 579].) It “is required only to set out ultimate findings rather than evidentiary ones.” (Ibid.) “ ‘ [Ultimate fact[]’ ” is a slippery term, but in general it refers to a core fact, such as an element of a claim or defense, without which the claim or defense must fail. (See Black’s Law Dict. (8th ed. 2004) p. 629 [“A fact essential to the claim or the defense.—Also termed elemental fact; principal fact.”].) It is distinguished conceptually from “evidentiary facts” and “conclusions of law.” (See 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 339, pp. 436-437.)

The statement of decision here, while going well beyond a recital of the ultimate facts found by the court, clearly disclosed that it had decided the trade secret claim, for instance, based on its determination that Yield had failed to establish two facts essential to its claim: that the information identified by Yield as trade secrets possessed independent economic value, and that defendant’s use of that information injured Yield or otherwise gave rise to grounds for relief. Since the statement adequately disclosed the court’s determination on these ultimate facts, it was sufficient as to that cause of action and the rule against inferences favorable to the judgment cannot come into play. A similar analysis applies to the other causes of action; at least, Yield makes no attempt to show otherwise.

*560 Finally, even if the proposed statement of decision had failed to adequately address some principal controverted issues as to which Yield had requested a statement, the modified standard of review invoked by Yield would come into play only if “the omission or ambiguity [had been] brought to the attention of the trial court. . . .” (§ 634.) Yield’s objections to the proposed statement of decision failed entirely to perform this function. They may be broadly summarized as (1) requests to correct or clarify recitals concerning the procedural history of the case, including the contentions of the parties; (2) challenges to certain recitals on grounds that they were mutually inconsistent; (3) attacks on legal premises that Yield considered implicit in the statement of decision; (4) claims that certain recitals were irrelevant; (5) assertions that recitals were unsupported by evidence; (6) further interrogatories into the details of the court’s reasoning process; (7) claims of inconsistency with the court’s “tentative decision”; (8) assertions of new questions of evidentiary fact (i.e., not specified in the original request); and (9) assertions of at least one issue that appears not to have been raised during trial, though it was alleged in the complaint. Nowhere did Yield point to a principal controverted issue that was set forth in the request for statement of decision and that the trial court had left unresolved, or resolved ambiguously, in the proposed statement of decision. After defendants nonetheless submitted an amended proposed statement of decision, Yield filed “renewed” objections which were, literally, more of the same—the number of objections had grown to 34 and the length of the document had grown by two pages, to 14 pages. Still, not a single objection conformed to the manifest purpose and effect of sections 632 and 634.

Given this history we emphatically reject any suggestion that the standard of review is affected by supposed deficiencies in the statement of decision. None of the statutory conditions for a modified standard of review is present. We will therefore apply the principles first noted above.

II. Misappropriation of Trade Secret

A. Independent Economic Value

1. Background

Yield’s first cause of action boiled down at trial largely to the premise that Zavecz tortiously misappropriated eight segments of source code that he had sold to Yield. 11 The segments, variously referred to as import functions, routines, or procedures, effected or facilitated the importation of metrology *561 data into the program in which they were used. 12 The misappropriation consisted of defendants’ supposed copying of those segments in their Weir product.

The trial court rejected this claim primarily on the ground that Yield had failed to establish that the eight routines possessed the independent value necessary to constitute a trade secret. By statutory definition, a trade secret is information that “[djerives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use . . . .” (Civ. Code, § 3426.1, subd. (d)(1).) The court found “no credible evidence” that the eight procedures at issue satisfied this test. It provided a lengthy recital of pertinent evidence—or more precisely, lack of evidence—on this subject. 13

*562 Yield attacks this ruling on two broad grounds: that the trial court misconceived the law governing what constitutes “independent economic value,” and that the record contains ample evidence of such value, some of it acknowledged in the statement of decision. Neither ground withstands scrutiny.

2. Errors of Law

As noted above, Yield contends that the trial court was laboring under numerous misconceptions of the governing law, as supposedly reflected in its statement of decision. Yield’s arguments on this point all follow the same unsound pattern. First it culls out a statement by the trial court to the effect that Yield failed to prove a specified fact. From this Yield extracts the proposition that the trial court considered the identified fact to be an invariable prerequisite to finding a trade secret. Yield then asserts that the identified fact is not necessary to such a finding. From this it concludes that the court erred on a question of law. The error, of course, is in the second step: the court’s observation that Yield failed to prove fact X does not justify a supposition that the court considered X an invariable prerequisite for a finding of independent economic value.

For example, the trial court noted Yield’s failure to show that the routines at issue “involved any new or innovative advances in software programming.” Yield assumes that this reflects a belief by the trial court that “a trade secret must be ‘unique’ or ‘novel’ in order to be protected.” We join Yield in doubting that California law imposes any such categorical requirement. (See Rest.3d Unfair Competition, § 39, com. f, p. 431 [“Although trade secret cases sometimes announce a ‘novelty’ requirement, the requirement is synonymous with the concepts of secrecy and value as described in this Section and the correlative exclusion of self-evident variants of the known art.”]; cf. O’Grady v. Superior Court (2006) 139 Cal.App.4th 1423, 1477 [44 Cal.Rptr.3d 72], quoting DVD Copy Control Assn., Inc. v. Burner (2003) 31 Cal.4th 864, 878 [4 Cal.Rptr.3d 69, 75 P.3d 1] [Supreme Court “declared the primary purposes of California trade secret law to be ‘to promote and reward innovation and technological development and maintain commercial ethics’ ”].)

However, the record provides no foundation for the supposition that the trial court held the view thus imputed to it. In alluding to the absence of “new or innovative advances,” the court appeared not to be applying some categorical rule of law but striving to flesh out its conclusion that Yield had failed to *563 establish the requisite independent economic value. This was a subsidiary element of Yield’s prima facie case, and Yield therefore bore the burden of proving it. (See Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1668 [3 Cal.Rptr.3d 279].) The trial court was attempting to explain its determination that Yield had not carried this burden, which placed it in the awkward position of substantiating a negative. This it undertook to do by identifying ways in which Yield might have, but had not, proven its claim. So viewed there is nothing about the trial court’s statements that suggests reliance on erroneous legal principles.

Similarly, Yield seizes upon the court’s statement that the procedures in question “did not perform any of the applications which make these programs commercially attractive.” Yield’s expert Smith had testified on cross-examination that users buy programs for their “applications,” meaning “[w]hat the user is going to use it for . . ..” Yield does not deny that the eight allegedly purloined routines were subsidiary to the ultimate function (application) for which a customer would purchase the software products involved here. 14 Rather Yield denounces the quoted recital as irrelevant because the routines did not have to constitute the heart (or “engine”) of Yield’s software to constitute trade secrets. Again we have no quarrel with the legal premise, but again the record fails to show that the court believed the allegedly copied routines could possess value only if they provided the same “application” as Yield’s products. Rather the court recognized that another way Yield might have proven the requisite element was to show that the routines were intrinsically valuable to the end user. The court’s acknowledgment of Yield’s failure to establish value by this means does not betray any misapprehension about the governing law.

In a similar vein, Yield writes that the court erroneously supposed “that the information at issue could not be a trade secret because Defendant Zavecz had experience in the industry and the people testifying about value did not have extensive information [jzc] in the industry .... [A] s a matter of law, the status of potential defendants cannot define independent economic value.” Assuming that a valid legal premise inheres somewhere in this statement, we see no basis for Yield’s interpretation of the statements alluded to. The court did not suggest that Zavecz’s experience categorically deprived the routines of value. The gist of its comments about experience was that anyone with comparable experience could have written the routines, perhaps quite easily—or more precisely, that Yield had failed to show otherwise. The reference *564 to the lack of relevant experience on the part of Yield’s programmer witnesses apparently reflects doubts about the weight to which their testimony was entitled, not some mistaken notion about the effect of a misappropriator’s expertise.

3. “Findings” Contrary to Judgment

Yield also contends that the statement of decision “recites sufficient findings to support economic value.” The argument appears to proceed as follows: (1) The court wrote that the eight routines “would provide ‘some help’ to a programmer in creating new routines or a similar function or save time in programming”; (2) such a finding is “alone sufficient for a finding of independent economic value”; (3) therefore the court erred by finding that there was no evidence of value.

Every step in this argument is flawed. The first premise is a classic example of quoting out of context. The court did not write that the routines would in fact provide “some help.” That phrase appears as follows: “The testimony on this point from Elena Dehtyar (who was a percipient witness and not an expert) was that the source code procedures in question would provide ‘some help’ to a program[m]er in creating new routines or a similar function or save time in programming: Ms. Dehtyar was unfamiliar with the formatting of the data produced by the metrology devices in question. As a result, she used [Yield]’s source code to assist her in formatting the data. The data formats are not trade secrets of [Yield] as they are the result of the particular vendor’s design of their product. There was no credible evidence that creating import functions to import data formats that have been and continue to be available to any one purchasing the vendor’s products is a trade secret.” This language does not constitute a finding that the routines were helpful, but an acknowledgment of testimony to that effect and an explanation of why the court found that testimony insufficient to establish the requisite value. The court was pointing out holes in Yield’s case, not making “findings” in its favor.

Second, it is not true that evidence of “some” helpfulness or usefulness, if credited, would compel a finding of independent economic value. The Restatement defines a trade secret as business or technical information “that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.” (Rest.3d Unfair Competition, § 39.) The advantage “need not be great,” but must be “more than trivial.” (Rest.3d Unfair Competition, § 39, com. e, p. 430.) Merely stating that information was helpful or useful to another person in carrying out a specific activity, or that *565 information of that type may save someone time, does not compel a fact finder to conclude that the particular information at issue was “sufficiently valuable ... to afford an ... economic advantage over others.” (Rest.3d Unfair Competition, § 39.) The fact finder is entitled to expect evidence from which it can form some solid sense of how useful the information is, e.g., how much time, money, or labor it would save, or at least that these savings would be “more than trivial.” (Rest.3d Unfair Competition, § 39, com. e, p. 430.) Here the court’s decision plainly rested on the absence of such evidence, e.g., “the length of time that it would take a program[m]er familiar with metrology devices and experienced in the lithography industry to create such functions.”

Third, the trial court did not, as Yield asserts, find that there was “no evidence of independent economic value.” The court actually found “[n]o credible evidence showing that the information in question had an independent economic value.” (Italics added.) There is of course a difference. By ignoring it, Yield seeks to sidle around the question whether the court was entitled to find that Yield’s evidence lacked sufficient probative value to carry its burden. Without addressing that question, it cannot possibly demonstrate error in the judgment actually rendered.

4. Evidence Contrary to Judgment

Yield asserts "that the record contains other evidence, 'not acknowledged in the statement of decision, supporting a finding of independent economic value. Of course this proposition by itself cannot establish reversible error. As pointed out above (see pt. I. of the Discussion, ante), the trial court’s resolution of factual issues will generally survive appellate review so long as substantial evidence supports it. The presence of evidence supporting contrary inferences is at best remotely pertinent. Yield asserts that the court “disregarded” evidence supporting a finding of value, but we see no basis whatever for this assertion. Perhaps it rests on the trial court’s failure to refer in its statement of decision to all of the facts Yield now cites. But the court was not required to mention every arguably pertinent item of evidence before it, let alone explain in minute detail its view of each item. So far as the record shows, the court listened attentively to all of the testimony—often questioning witnesses or seeking clarification from counsel—and carefully weighed and considered everything before it in reaching a decision.

Yield asserts that “[á\s a matter of law, th[e] evidence supports a legal determination of trade secrecy.” (Italics added.) If the phrase “as a matter of law” means anything in the present context, it is that the evidence was so *566 overwhelmingly one-sided that no reasonable fact finder could find against the complaining party. (See Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 637 [54 Cal.Rptr.3d 735, 151 P.3d 1151], quoting Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1666 [26 Cal.Rptr.3d 638] [reasonableness of reliance on defendants’ statements “ ‘may be decided as a matter of law only if the facts permit reasonable minds to come to just one conclusion’ ”].) But while Yield cites a long list of facts that might support a finding of reasonable value, it points to, and we have found, no evidence that would compel a reasonable fact finder to reach such a finding. The trial court was entitled to find each of the cited facts equivocal, vague, or otherwise lacking in probative force.

Thus Yield asserts than an inference of independent economic value arises from the parties’ own conduct, starting with the fact that Yield maintained these routines in confidence, and toward that end entered into nondisclosure agreements with Zavecz and other employees. But Yield’s protection of its code from general disclosure could hardly show that the eight routines at issue possessed independent economic value. Apparently it kept all of its code confidential, even though some of it came from outside sources, including public ones. 15

A company thus mixing original and potentially valuable information with public or otherwise less valuable information will have an obvious incentive to err on the side of nondisclosure, since there is generally no risk in that course, and certainly none sufficient to counterbalance the obvious risks of allowing truly valuable information to be freely disclosed. A decision to view information as confidential thus reflects at most an

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Yield Dynamics, Inc. v. TEA Systems Corp. | Law Study Group