Software Protection . . .

refers to the fact that copyrights, trade secrets and, in certain circumstances, patents protection can be used to prevent others from misappropriating valuable company software. Often, this software is essential to the success of the company, and protecting it adequately is not only prudent but necessary to convince an outsider to invest his money in the company. Venture investors expect companies to take reasonable steps to protect their proprietary software and other valuable secrets from being misappropriated by their competitors.

Copyright and trade secrets protection each protects a different aspect of computer software, and both require the company to take certain actions to secure their protections. Copyrights protect the expression of ideas rather than the ideas themselves. That is, copyrights can prevent someone from using (copying) a program but not from using the ideas expressed in the program to produce a new program that does the same thing.

Patents provide a government-sanctioned monopoly to the holder to commercialize the patented invention. Software can be patented, however, only when it meets the strict standards of novelty required of patents. Because patents are published, the option of claiming trade secrecy protection is lost when software is patented. A more complete description of patents appears in the Patent entry earlier in this book.

Copyright protection is governed by federal statute and protects both published and unpublished works. To secure full copyright protection, a company must follow prescribed rules and file with the Federal Copyright Office within five years after the program is developed. Filings with the Copyright Office can be done in object code or source code, and there is a procedure that permits companies to file the first twenty-five and last twenty-five pages of a program printout. This procedure can help a company preserve its trade secrets in a program while obtaining copyright protection as well.

By contrast, trade secret protection protects ideas themselves rather than the expression of them. Trade secrets protection is governed by state law and protects only ideas that are kept secret. Protecting a trade secret through litigation involves proving that the trade secret exists, that it was disclosed only in confidence, and the use or disclosure of the information complained about was obtained in violation of a confidence and to the injury of the company.

The existence of a trade secret is a matter of fact. The factors courts generally consider to determine whether a trade secret exists include

• the extent to which the information is known outside the company’s business,
  

• the extent the information is known to employees and others involved in the business,
  

• the value of the information to the company and its competitors,
  

• the amount of money and effort expended to develop the information, and
  

• the ease or difficulty with which the information can be properly acquired by competitors.

In other words, the more valuable the information and the more safeguards the company takes to protect that information, the easier it will be to prove to a court that a given software program should be treated as a trade secret. Both trade secrets and copyrights protection can provide a company with rights to money damages and to enjoin a competitor from using its misappropriated software.

The differences between copyright protection and trade secrets protection are not well understood by all software entrepreneurs. Some, particularly those whose software is a big-ticket item that is licensed to a relatively small number of licensees under contract, forgo copyright filings and rely solely on trade secrets protection to guard their rights in their programs.

This course of action can be dangerous, however, because it ignores some of the substantial advantages copyrights offer for protecting software. A better strategy is usually to claim the protection of both trade secrecy and the copyright laws. Securing both gives a company more ways to stop infringers from stealing its software and gives it access to the federal courts to pursue its claims. In many situations, copyright infringement cases are easier to prove in court than are trade secret infringement cases, giving the company that obtains copyright protection a significant advantage over one that relies solely on trade secrecy.

A good practice when claiming copyrights or trade secrets protection is to mark the software medium (diskette) and program the software to display at sign-on a message identifying the rights claimed by the company. A sample notice claiming both protections follows:

© 2000 by Software Company
All Worldwide Rights Reserved.

This work contains trade secrets of the Software Company.
Any unauthorized use, copying, compiling, decompiling,
or reverse engineering is strictly prohibited.

Care must be taken, however, whenever both copyright and trade secrecy protection are sought, to preserve the confidentiality of the software during the copyrighting process. The careless filing of materials with the copyright office or over-reliance on copyright protection in the wrong situation can lead to the loss of important trade secrecy rights in a computer program. A qualified attorney can advise management on the best strategy to follow to obtain the most protection available under both laws. See: Copyrights, Patents, Trade Secrets.