Dana Finberg, The Recorder
Imagine your client calls you one day and tells you they have developed a great new idea for a software product and, because you are their trusted advisor, they want your help in devising a legal strategy for protecting this valuable intellectual property.
As you listen to them describe this great new idea, because you are a diligent IP practitioner and familiar with the U.S. Supreme Court's June 19 decision in Alice Corp. v. CLS Bank International, 573 U.S. __ (2014), it begins to sound suspiciously like what they have come up with is an "abstract" idea—an idea constituting a category of patent ineligible subject matter, including algorithms, mathematical concepts, chemical elements, naturally occurring biological products and methods that can be carried out in a person's head.
Since it appears your client cannot obtain a patent for their bright new idea for a software product, do they have any options for attempting to protect the fruits of their hard work?
Fortunately for your client, you have also been keeping up with recent developments in trade secrets law. In a decision filed in May, the California Court of Appeals held that ideas, if kept secret, can constitute information protectable by trade secret law. By so holding, the court in Altavion Inc. v. Konica Minolta Systems Laboratory Inc. went a long way in clearing up confusion created by a 2010 decision, Silvaco Data Systems v. Intel Corp., which stated that "[t]rade secret law does not protect ideas as such" and trade secret protection only extends to information tending to communicate or disclose ideas to another.
Keep it secret, keep it safe
In Altavion, the dispute arose when the defendant took the plaintiff's overall concept and specific design implementations for digital stamping technology—which it had received under a non-disclosure agreement executed in the course of business negotiations between the parties—and covertly incorporated them into patent applications in its own name. The trial court found for Altavion on its claims of trade secret misappropriation, and on appeal Konica Minolta Systems Laboratory (KMSL) argued that, under Silvaco, Altavion's concept was not protectable because "[g]eneralized ideas and inventions are protectable by patents and thus cannot be trade secrets."
The California Court of Appeals rejected this argument, relying on earlier precedent explaining the overlap between trade secret law and patent law, explaining that "a trade secret in the broad sense consists of any unpatented idea which may be used for industrial and commercial purposes." The court unambiguously declared "it is clear that if a patentable idea is kept secret, the idea itself can constitute information protectable by trade secret law" and "trade secret law may be used to sanction the misappropriation of the idea the plaintiff kept secret."
The trade secret ideas at issue in Altavion were ultimately embodied in at least eight patents obtained by the defendant, so the information constituted patentable subject matter, at least before the recent U.S. Supreme Court decision in Alice Corp. However, the Court of Appeal's detailed explanation of the interrelationship of patent and trade secret law made clear trade secret law extends to inventions which, for whatever reason, may not be patent-eligible.
As the court explained, "[P]atentability is not a condition precedent to the classification of a trade secret. Thus it has been said that a trade secret may be a device or process which is clearly anticipated in the prior art or one which is merely a mechanical improvement on a machine or device. Novelty and invention are not requisite for a trade secret as they are for patentability."
As long as a company's ideas and information meet the general requirements for trade secret status under the Uniform Trade Secrets Act, then trade secrets law will provide protection and powerful remedies for misappropriation. Those requirements include that the ideas and information are not generally known; derive independent economic value from their secrecy; and are the subject of reasonable efforts under the circumstances to protect their secrecy.
To read the complete article published in The Recorder, click here.