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Yield Dynamics, Inc. v. TEA Systems Corp.

Court of Appeal of California, Sixth Appellate District

August 23, 2007, Filed




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.


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  [***4] events leading to this lawsuit commenced while Zavecz was developing a more highly automated lithography product named MAPA. 4 Buckheit testified that [**8]  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 “[a]ll 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.

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154 Cal. App. 4th 547 *; 66 Cal. Rptr. 3d 1 **; 2007 Cal. App. LEXIS 1399 ***

YIELD DYNAMICS, INC., Plaintiff and Appellant, v. TEA SYSTEMS CORPORATION et al., Defendants and Respondents.

Subsequent History: Modified and rehearing denied by Yield Dynamics, Inc. v. TEA Systems Corp., 2007 Cal. App. LEXIS 1586 (Cal. App. 6th Dist., Sept. 21, 2007)

Prior History:  [***1] Superior Court of Santa Clara County, No. CV000690, Leslie C. Nichols, Judge.

Disposition: The judgment is affirmed.


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Civil Procedure, Standards of Review, Substantial Evidence, Sufficiency of Evidence, Harmless & Invited Errors, Harmless Error Rule, Appeals, De Novo Review, Questions of Fact & Law, Trials, Bench Trials, General Overview, Trade Secrets Law, Trade Secret Determination Factors, Definition Under Common Law, Economic Value, Business & Corporate Compliance, Contracts Law, Contract Formation, Tender & Delivery, Evidence, Inferences & Presumptions, Inferences, Torts, Fraud & Misrepresentation, Actual Fraud, Elements, Costs & Attorney Fees, Attorney Fees & Expenses, Remedies, Damages, Costs & Attorney Fees, Preclusion of Judgments, Estoppel, Collateral Estoppel, Reviewability of Lower Court Decisions, Preservation for Review