Trade Secret Protection for Source Code

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IPPatentstrade secrets Leave a Comment. In light of recent changes in the law concerning software patents, software startups should more heavily consider trade secret protection to protect their technological and operational advantages.

You know that if you are to have any hope of becoming the next Google, Software trade secret, or Twitter success story, you need to take steps to protect your technology and your brand. Making the choice to invest some resources into obtaining intellectual property protection can be a great decision, but the specifics of how to carry out such a plan might be a little elusive.

The question is what kind of protection do you actually need, and how software trade secret you go about getting it. Two types of IP protection that most startups will want to consider are patents and trade secrets.

What works best will vary from startup to startup depending on each ones own unique circumstances. However, there are several factors that all startups will want to consider when implanting an intellectual property protection strategy. One type of IP protection that most people have heard of but few people fully understand is patent protection. There are several categories of patents, including utility patents, design patents, and plant patents.

Plant patents and design patents give inventors rights software trade secret specific areas as defined by statute. However, the most common type of patent is the utility patent. Patents, utility patents in particular, enjoy popularity for several reasons. First, they grant the rights holders a very strong form of protection. After twenty years anyone is allowed to make and use the invention. When considering whether or not to apply software trade secret a patent, a software trade secret startup should evaluate whether or not the exclusive protection is worth having in exchange for giving up their invention after twenty years.

Software trade secret many instances, this will be a good tradeoff to make given the rapidly evolving world of software and technology. Another benefit of utility patents is that the patent holders will not lose their rights due to the actions of third parties, assuming that they justly received the patent in the first place. This may not necessarily be true with trade secret protection. For example, a person who has trade secret protection in a manufacturing process can not prevent a third party from independently discovering and using such a manufacturing process.

But if the original inventor of that manufacturing process acquired a patent, the third party could not use the process even if they independently discovered it assuming that the patent holder had a valid patent that was not acquired through fraud.

While there are some significant upsides to obtaining a patent, there are costs as well. One downside that was already mentioned is the limited duration of patents. Another potential downside is the cost and difficulty of obtaining a patent. As discussed in our recent postin recent years, it has become more and more difficult for inventors to obtain patents on software, and the scope of granted software patents may be more limited.

Getting a patent can also be quite expensive. Depending on how many jurisdictions i. See our prior post outlining the costs of software trade secret patent protection. Unlike patents, trade secrets are creatures of state law rather than federal law. This means that specific trade secret regimes will vary some from state to state; however, there are generally accepted principles regarding how trade secret law should work. One attempt to compile some of these generally accepted principles is the Uniform Trade Secrets Act.

This document defines trade secrets as follows: They can, however, independently create or reverse engineer it. This software trade secret one of the main disadvantages to trade secrets. There are several benefits to weigh this disadvantage against when considering whether or not to rely upon trade secrets as your chosen form of IP protection.

One benefit is that trade secrets can be software trade secret cheap compared to patents. There are no government filing software trade secret for trade secrets, and the main costs result from taking measures to make sure your secret software trade secret remains secret. Trade secrets also can last forever assuming the information remains secret. This can be advantageous if you believe your invention will have commercial value for a long time to come. One form of protection or the other will not be right for every startup.

The following are some factors to consider when choosing between the two: A software startup has developed a technology that has never been seen before, but as soon as you sell it, everyone will understand how to make it. They believe that this technology will be relevant for years, but are not sure beyond that. Finally, the startup thinks there a lot of potential competitors who will likely be interested using this technology.

In this example, the startup would likely want to obtain a patent because all the factors lean in that direction. The technology will only software trade secret relevant for years, software trade secret less than the time frame protected by patents.

Finally, because there are a lot of potential competitors that might be interested in using the technology, the startup could potentially operate on licensing business model to obtain revenue or cross-licenses. A software startup has made a discovery that they believe is so foundational in nature that they believe it will software trade secret the industry for many years to come.

In this example, the startup will likely choose to rely on trade secret protection. Further, the startup does not have a lot of money to try and convince the USPTO that the discovery is in fact patentable. Finally, it looks like the manufacturing processes for widgets will change, but this will not be detectable in software trade secret final widgets themselves.

Thus, it might be very difficult to tell if a competitor was infringing a patent. Relying on trade secret protection will mitigate these concerns and allow the startup to profit for the discovery for many years to come. It is important software trade secret note however, that deciding between a patent and trade secret does not necessarily have to be an either or proposition.

It might be possible to go the trade secret route at first, and then obtain a patent further down the software trade secret. However, this is a one way street. Once you obtain a patent, you can never go back and rely on trade secret protection. Software trade secret, you can split up various aspects of your business. Certain aspects of the business might be appropriately covered software trade secret patents while other aspects would be great candidates for trade secret protection.

Startups creating an IP protection strategy should make decisions in light of their business model and technology.

If it is not a clear decision to go one way software trade secret the other, the startup will need to make a calculated decision as to what factors are more important to them. Finally, when appropriate, startups should consider using patents and trade secrets in a hybrid form of protection. Software trade secret Protection for Software Startups. Oct 28 By Ryan Teel Tweet. Patent Protection for Software Startups Category: Leave a Reply Cancel reply.

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But is it a trade secret? Software is different than other types of trade secrets because both copyrights and patents might provide additional protection. Protecting software as a trade secret has some advantages to using a copyright or patent. For example, trade secret protection does not require—as copyrights or patents do—an application and upfront filing cost. Trade secrets—perhaps obviously—are much more secret than more publicly available patents or copyrights.

Moreover, trade secrets can protect a broader array of software information than a copyright. Ultimately, using trade secrets to protect software may be most useful to a small software company, as it innovates quickly and competes against larger, well-funded competitors with older, legacy software. Yet, advantages aside, trade secret protection for software can be difficult—perhaps even more so in a growth and sales-oriented environment.

What the cases show is that the entire software package is unlikely to be a trade secret. Of the different parts, the source code is most likely to be a trade secret. But the more visible to a user a part of the software is, the less likely that part is to be a trade secret.

A recent case shows these basics in action. Your company developed a new software product—an automatic ticket pricing product perhaps. A company—after receiving several trial periods and demonstrations—became a customer and licensed your software.

After becoming a licensee, the customer received continuous training from you. While licensing your software, the customer decided to build its own automatic ticket pricing product.

To do so, the customer hired a developer and sent the developer various annotated screenshots of your software. You sued the customer. The law of trade secrets did not protect your software.

In short, because the company gave free trials of its software without confidentiality agreements. One of its customers was NRZ, which was owned by Messrs. Importantly, Broker Genius had no evidence that any of the defendants accessed its source code. The court analyzed three types of information that Broker Genius claimed were trade secrets—information about scaling AutoPricer v.

Generally, to succeed on a claim for trade secret misappropriation, a plaintiff must prove that 1 it had a trade secret, and 2 the defendant used the trade secret improperly.

Improper use of the software was an easy question for the court. First, the Service Agreement prevented disseminating, distributing, and reverse engineering the AutoPricer software.

But the claimed trade secret information was not secret enough to be a trade secret. Broker Genius could not show sufficient secrecy because Broker Genius had disclosed information it claimed to be a trade secret to people under no obligation to protect the confidentiality of the information.

Specifically, the court stated that some highly visible marketing activities—e. But Broker Genius gave customers the full version of its software during a trial period under the Terms of Use, which contained no confidentiality provision. And, because the Terms of Use did not protect confidentiality during a trial period, the terms of the later Service Agreement did not matter. Broker Genius is not unusual.

Georgia cases under the GTSA analyze software similarly. In fact, the law about computer software and trade secrets has not greatly changed in decades. That said, Georgia courts may be less likely than the court in Broker Genius to conclude that parts of software besides source code may be a trade secret. The more visible a part of the software is to users, the less likely it is to be a trade secret. Here are three Georgia examples:.

Ultimately, the Broker Genius case is a good reminder of the steps to increase the chance of being able to protect software as a trade secret. Those steps can include the following:. Zalta , F. Heinemann , Ga. Georgia law on software as trade secrets Broker Genius is not unusual.

Here are three Georgia examples: In Airwatch LLC v. Those steps can include the following: Adopt confidentiality policies that cover documents, that warn employees about what can be discussed publicly including on social media, and that create exit interview procedures; Have employees acknowledge the policies in writing; Have employees sign confidentiality or non-disclosure agreements that create reminders for employees to keep secrets throughout their tenure and that establish a process for keeping new work confidential; Make third parties sign confidentiality agreements before being able to access trade secrets or use the trade-secret-containing software.

Every agreement under which someone gets access to software containing trade secrets should have a confidentiality provision. The confidentiality agreements should mention specific software features, and source and object codes; Supplement written policies with verbal warnings to employees and customers about specific trade secrets; Inventory and identify trade secrets.

Early identification can avoid the difficulty of being in the middle of litigation and trying to claim things as trade secrets that the business treated inconsistently. In software, this probably means to note what parts of the software are trade secrets and treat those parts consistently; Mark the visible parts of the software as confidential; Restrict access to the trade secret parts of the software to those who need to use them; Log who uses the trade secret parts of the software; Monitor how software demonstrations occur; Consider patent and copyright protection; Do not distribute code or software into the open source community; Establish adequate electronic and physical security.

This may mean a code repository with secured access to all confidential materials. In addition, log and monitor any copying. Use firewalls and passwords. Give varying degrees of access. Basically, all employees do not need access to all information; and Be able to estimate how long the software took to create and articulate why others cannot easily create similar software.