Trade Secret Protection for Software

By TAP Guest Blogger

Posted on May 2, 2016


This is the fifth report in the 7-part series from The 20th Annual BCLT/BTLJ Symposium. The reports were written by Kevin Hickey, Microsoft Research Fellow, Berkeley Center for Law & Technology at Berkeley Law School.


A Report from the 20th Annual BCLT/BTLJ Symposium, Part 5


Several panelists at the BCLT/BTLJ Symposium addressed recent changes in trade secret law as applied to software. Although copyright and patent usually get more attention, trade secret has always been a significant means through which technology companies protect their intellectual property. In general, trade secret law protects information that (i) derives independent economic value from not being generally known, and (ii) is the subject of reasonable efforts to maintain its secrecy. In the wake of the Alice decision limiting software patents, as well as Congress’s passage of the Defend Trade Secrets Act of 2016, trade secret stands to become more central to many technology companies’ IP strategy.


Michael Jacobs of Morrison & Foerster LLP spoke some of the key features of trade secret litigation. In general, trade secret tends to be more plaintiff friendly than patent law. There is no need to define the boundaries of a trade secret as rigorously as patent law requires. More power is given to the jury in trade secret, and accordingly judgments are reviewed more deferentially on appeal. Mr. Jacobs highlighted a number of recent judgments in software trade secret cases with jury awards in the tens of millions of dollars.


On April 4, 2016, the Senate unanimously passed the Defend Trade Secrets Act (DTSA), which expands access to federal court in trade secret litigation. The DTSA creates a private, federal right of action for trade secret misappropriation whenever the underlying product at issue was distributed in interstate commerce. The definition of trade secret misappropriation largely tracks that of the Uniform Trade Secrets Act, which applies in almost all states. However, remedies under the DTSA include not only damages and injunctions, but ex parte seizures as well.


In the software context, trade secret has primarily been used to protect source code and other aspects of software hidden from the user. Professor Michael Risch presented a provocative thought experiment wherein a company might seek to use trade secret to protect the visible aspects of the software as well. The idea is that a software company could require all its users to agree to keep software features secret through non-disclosure agreement as part of the software license (often, a click-wrap agreement). Although this was an interesting idea, many at the conference voiced objections that this would not work unless the software has a very limited distribution. For programs with a large number of users, it becomes very difficult to argue that the software feature is “not generally known,” a key aspect of the definition of a trade secret—indeed, the fact that makes it a “secret” in the first place.


Related Resources

Michael A. Jacobs - Trade Secret Damages

Michael Risch, Hidden in Plain Sight, 30 Berkeley Tech. L.J. (forthcoming 2016)


Read more on the BCLT/BTLJ Software IP Symposium


This report is written by Kevin Hickey, the Microsoft Research Fellow at the Berkeley Center for Law & Technology, UC Berkeley School of Law. Mr. Hickey’s scholarship on intellectual property law and innovation policy is available online at SSRN.