According to some estimates, vehicles sold today include an astounding 100 million lines of computer code. The development of autonomous vehicles will likely see that number grow. Many automotive suppliers have traditionally relied on patents to safeguard key software innovations. However, evolving patent standards may suggest that trade secret law offers an alternative avenue for protecting certain software solutions.
Consider, for example, newly developed collision avoidance software. Where the novelty of the underlying source code is apparent, it can make sense to pursue patent protection. Where the software’s value is instead attributable to engineering workmanship, or where its novelty is in doubt, it can make sense to protect the underlying source code as a trade secret.
What is a Trade Secret?
Most states, including Michigan, have adopted the Uniform Trade Secrets Act, which defines a trade secret as any information that (a) derives economic value from not being generally known and (b) is subject to reasonable efforts to maintain its secrecy. Source code can often meet both requirements for a trade secret. For example, software is typically difficult to reverse engineer without source code while retaining independent economic value.
The Uniform Trade Secrets Act prohibits the misappropriation of trade secrets and provides a range of remedies. Misappropriation generally requires acquisition of trade secret by so-called “improper means,” e.g., theft, misrepresentation or not adhering to a duty to maintain its secrecy. Misappropriation also extends to the recipient—provided the recipient had reason to know the trade secret was improperly obtained or was obtained under an obligation of secrecy.
Importantly, however, misappropriation does not include reverse engineering or independent discovery—a significant departure from patent infringement for example.
Computer software accounts for 10% of trade secret misappropriate actions according to a prior study, slightly behind technical know-how, internal business information and customer lists. Remedies can include money damages, injunctive relief and attorney’s fees. Criminal penalties also exist, which can provide trade secret owners with additional leverage when dealing with a potential misappropriation.
Tips for Software Developers
Once the decision is made to pursue trade secret protection, rather than patent protection, software developers should consider the following business practices to protect their technology:
- Adopt an Open Source Policy: A growing number of universities offer open source software for autonomous cars—sometimes with strings attached. An open source policy can provide your engineering team with proactive guidance regarding the extent to which these building blocks can be incorporated into your proprietary solution.
- Maintain Secrecy: Secrecy is essential to trade secret protection. Needless to say, your source code should not be publicly available.
- Mark as Trade Secret or Confidential: Not necessarily the source code, itself, but any documents or emails relating to the source code.
- Obtain Signed Non-Disclosure Agreements: Non-Disclosure Agreements should make it clear that the software may not be shared with others without permission from the software developer and can only be made available to persons within the recipient company having a direct need-to-know. Similar language can be used in agreements with customers for benchmarking and diagnostic testing of the software in question.
- Update the Employee Handbook: Employee handbooks should identify, at least in general terms, the scope of the confidential information and any job duties to ensure the confidential information remains as such. Narrowly tailor any non-compete agreements for CTOs and other employees having a working knowledge of the underlying source code.
- Provide Notice to Employees of Whistleblower Protections: As noted in a previous article, the recently enacted Defense of Trade Secrets Act (DTSA) requires notice in new employment contracts of certain whistleblower protections. By complying with this notice requirement, trade secret owners can recover enhanced monetary damages and attorney fees for misappropriation of company trade secrets.
The above business practices can enhance trade secret protection for software in autonomous vehicles and in other technology spaces. Investors and customers will likely appreciate, and in some cases require, these practices as assurances that the underlying source code retains its intrinsic competitive value in an increasingly competitive marketplace.