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Feb 202125
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IP Gotchas: Protecting Software IP

Software is enormously valuable. Of the top 10 largest companies today, only Saudi Aramco and Berkshire Hathaway are not in the software business, but even they could not survive without it. The others – Apple, Microsoft, Amazon, Google, Tencent, Facebook, Tesla, and Alibaba – not only rely on it, but also specialize in it. As the digital revolution continues into the era of expanding data science, machine learning, and artificial intelligence, the value of software continues to increase exponentially. Whether you are a small startup, or one of the tech giants listed above, your software is worth protecting, and giving some thought to the possible pitfalls involved is important.

Copyright protection is enough: It is true that copyright protection for software is a powerful deterrent. A copyright registration is cheap, easy to obtain, does not require a long examination process, and lasts about a century. Best of all, the damages are baked right into the statute meaning you don’t have to show monetary harm to recover up to $150,000 for each unauthorized copy. This is helpful if your source code, training materials, forms, graphics, videos, or other artistic works might be copied by others without your permission. However, copyright protection does not stop competitors from creating their own system that copies what your system does or copies how it works. In other words, others are still free to reverse engineer your system or create a clone that mimics its behavior using their own graphics and source code.

Patent protection isn’t available for my software: Maybe. Software systems that merely solve business problems or replicate common activities that can be performed by a person with a paper and pencil face a tough battle in the Patent Office – in the US or abroad. Software that solves a technical problem, performs a new process that has no manual analog, or controls an existing machine in a novel way has a much better chance of success. It is true that patent protection is relatively expensive to obtain, and is only limited to a 20 year term, and you will have to tell the world how your system works. More detail is better than less, particularly when it comes to describing not only what the system does, but more importantly, how it achieves those results. The value in having an issued patent is that it gives you the option to push back against competitors who have created a system that works like yours. Just having an application on file can be enough to scare off potential competitors.

I’ll just keep it as a trade secret: This is an excellent choice in those situations where the innovation is occurring in house and is never released into the public in any form. For example, if your business model is provided online using a “Software-as-a-Service” (SAAS) model, trade secret protection is a good option. Google enjoys market dominance in the search engine arena because the “secret sauce” in the Google search engine has never been made public, and never will be. The secret never leaves a Google server farm, so the risk of losing it is low. But for any products shipped out the door, the danger of losing control of the secret is very real, because to maintain trade secret protection, the secret has to be kept, well, secret. If the secret is released to the public, is reverse engineered, or is independently developed by others, then you have no recourse. To be effective, trade secret protection must be a central aspect of the corporate cultural. Access to the documents, source code, formulas, manufacturing processes, client lists, or other aspects of the “secret sauce” must be kept secret from the public, and all employees must understand and agree in writing that they have a duty to keep the proprietary information in-house, and that it cannot be disclosed if they leave. Any breach of these protocols can mean the secret is lost, and with it valuable market share.