How To Protect Software IP: Copyrights, Patents, or Trade Secrets?

By: Jim Dossey, MS, MBA, JD (Registered Patent Attorney) -

What is the best way to protect my software intellectual property? The short answer is that it depends on the nature of the software and how it will be used.

Copyrights

A copyright is a legal concept that gives the creator of an original work an exclusive right to use and distribute the work for a limited period of time. Copyrights arise automatically when a work is created and fixed in tangible form; however, federal registration of the copyright with the federal government makes enforcement easier and the potential damages larger. Generally, in the U.S., copyright protections extend up to 70 years after the death of the creator.

Federal registration is easy and inexpensive, but the main reason to copyright software is that it enables the creator to sue infringers in federal court. Additionally, federal registration enables one to collect damages for attorney's fees and statutory damages up to $100,000; without registration, a creator can only sue for actual damages, which may be very difficult to quantify and prove.

Whereas obtaining patents may cost $10,000-15,000, federal copyrights can be obtained for less than $500. However, copyright protection is very narrow, only protecting the actual software source or object code. Copyright protection does not protect against the independent creation of similar works. Patent protection, on the other hand, is much broader, protecting "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Additionally, if someone else wants to get a patent on their software, they must show that it is not an obvious variation of the patent.

If your software is a significant advance in software engineering and meets the requirements for obtaining a patent, you should strongly consider patent protection. All other software should be copyrighted.

Patents

As mentioned above, patents provide much broader protection than copyrights, but are also much more expensive. Patents protect the idea and function, not just the original expression of the creator.

According to the USPTO, a patent is an intellectual property right granted by the US government to an inventor to "exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States." This property right is only granted for a limited time (20 years from the filing date for a utility patent). Additionally, the grant of the property right is in exchange for public disclosure of the invention.

Recently, there has been much debate over whether software is even patentable. In 1996, the USPTO issued guidelines stating that "A practical application of a computer-related invention is statutory subject matter." In recent years, patents have been granted for business methods implemented in software. (See my previous post on the Supreme Court's recent decisions regarding software patentability)

Two key issues must be considered when deciding to pursue software patents. First, software patents are quite expensive and time consuming to write. The inventor must justify the benefit of having the software patent to cost of obtaining and maintaining it. Second, the inventor must be willing to make the software program publically available. All patents are listed in the Official Gazette and can be searched very easily. If the software is internal to the company (i.e. not public facing) and is seen as a competitive advantage in the marketplace, then it may make more sense to keep the program a trade secret (discussed below).

Trade Secrets

Trade secrets are secrets kept within a company that are economically valuable. To have a trade secret, it must actually be a secret and the company must take steps to maintain that secrecy. Trade secrets are maintained through Non-disclosure Agreements (NDA) and Confidentiality Agreements, Employment Agreements, and Licensing Agreements.

Unlike patents, there is no public publication of trade secrets. In addition, there is no up-front cost of obtaining a trade secret. Another advantage of a trade secret is that it is infinite if maintained properly, whereas copyright and patent protection is time bound.

On the other hand, the hidden costs of maintaining trade secrets can be significant (i.e. the agreements noted above, computer security systems, etc.). In addition, if the program is public facing and can easily be reverse engineered, trade secrets provide no protection. In these cases, the inventor must obtain patent and copyright protection to keep competitors from copying their programs.

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