People talk a lot in the information technology business about “intellectual property rights.” But what are they? How do they apply to software technology? Why should you protect them? How do you protect them?
Intellectual property rights are at the foundation of the software industry. The term refers to a range of intangible rights of ownership in an asset such as a software program. Each intellectual property “right” is itself an asset, a slice of the overall ownership pie. The law provides different methods for protecting these rights of ownership based on their type.
There are essentially four types of intellectual property rights relevant to software: patents, copyrights, trade secrets and trademarks. Each affords a different type of legal protection. Patents, copyrights and trade secrets can be used to protect the technology itself. Trademarks do not protect technology, but the names or symbols used to distinguish a product in the marketplace. We’ll save a discussion of trademarks for a later issue.
A patent is a twenty year exclusive monopoly on the right to make, use and sell a qualifying invention. This legal monopoly is considered a reward for the time and effort expended in creating the invention. In return, the invention must be described in detail to the Patent Office, which publishes the information, thus increasing the amount of technological knowledge available to the public.
To obtain a U.S. patent, an inventor must apply to the Patent Office and demonstrate that the invention is new (as compared to prior technology), useful, and “nonobvious.” An invention is nonobvious if it is more than a trivial, obvious next step in the advance of the technology.
Software patents can be extremely powerful economic tools. They can protect features of a program that cannot be protected under copyright or trade secret law. For example, patents can be obtained for ideas, systems, methods, algorithms, and functions embodied in a software product: editing functions, user-interface features, compiling techniques, operating system techniques, program algorithms, menu arrangements, display presentations or arrangements, and program language translation methods.
Since patent rights are exclusive, anyone making, using or selling the patented invention without the patent owner’s authorization is guilty of infringement. Penalties are stiff and include triple damages. Once a patent for an invention is granted, subsequent “independent” (i.e., without access to the patented technology) development of the invention by another inventor is still considered infringement.
While a patent can protect the novel ideas embodied in a software program, a copyright cannot. Copyright protection extends to the particular form in which an idea is expressed. In the case of software, copyright law would protect the source and object code, as well as certain unique original elements of the user interface.
As discussed in last month’s issue, the owner of a copyrighted software program has certain exclusive rights (with some exceptions): the right to copy the software, create derivative or modified versions of it, and distribute copies to the public by license, sale or otherwise. Anyone exercising any of these exclusive rights without permission of the copyright owner is an infringer and subject to liability for damages or statutory fines.
As with patents, the exclusive rights afforded under copyright law are intended to reward the creative and inventive efforts of the “author” of the copyrighted work. The exclusive right to control duplication protects the owner of copyrighted software against the competition that would result from verbatim copying of the program’s code. Copyright law also protects against indirect copying, such as unauthorized translation of the code into a different programming language.
Copyright protection arises automatically upon the creation of an original work of authorship. There is no need to “apply” for a copyright or register the copyrighted work in order for protection to exist. Generally, the duration of a copyright is the author’s life plus fifty years. In the case of software created by an employee in the course of his or her employment, the resulting “work made for hire” would be protected by copyright law for seventy-five years from publication.
In contrast with patents, independent development of a copyrighted work is a defense to an allegation of copyright infringement. Imagine, though, how unlikely it would be for the same thousands of lines of code to be created independently by one not engaged in unauthorized copying. Unlike patents, copyright law affords no protection to the ideas underlying the program. Ideas and concepts are fair game for competitors to the extent they are not protected by patents or trade secrets.
A trade secret is any formula, pattern, compound, device, process, tool, or mechanism that is not generally known or discoverable by others, is maintained in secrecy by its owner, and gives its owner a competitive advantage because it is kept secret. The classic example of a trade secret is the formula to Coca-Cola.
A trade secret can theoretically last forever — for as long as its owner uses reasonable efforts to keep it secret and someone else doesn’t independently create or “discover” it.
Many features of software, such as code and the ideas and concepts reflected in it, can be protected as trade secrets. This protection lasts as long as the protected element retains its trade secret status. Unlike patents, trade secret protection will not extend to elements of software that are readily ascertainable by lawful means, such as reverse engineering or independent development.
Trade secrets are not subject to being “infringed,” as with patents and copyrights, but are subject to theft. Their legal status as a protectable intellectual property right will be upheld if the owner can prove the trade secret was not generally known and reasonable steps were taken to preserve its secrecy.
Maximizing the economic value of a software asset critically depends on understanding the nature of the intellectual property rights involved and how best to use the available forms of legal protection to protect those rights.