PROTECTION FOR SOFTWARE UNDER U.S. LAW
By Marc S. Friedman, Esq.
and Lindsey H. Taylor, Esq.
The United States is probably the worlds largest market for software. Software developers from outside the U.S. should know the intellectual property protections given to software, so they can take steps to ensure that others do not take advantage of their work, while, at the same time, avoiding conflicts with other developers selling similar software.
Copyright gives the most basic protection for computer software. Under U.S. copyright law, software is considered to be a "literary work" and is, thus given all of the protections of literary works, such as novels or poems. The owner of the copyright of a literary work has the exclusive right to make and distribute copies, and to create derivative works. The rights to make and distribute copies of the copyrighted work is obviously the most important, since those rights are the strongest weapons against pirates. The right to create derivative works gives the owner of the copyright in software the right to create updates, new versions and translations of the copyrighted work.
Under U.S. law, the author of a work is automatically the owner of the copyright in the work. If an employee creates a work as part of his employment, the employer is considered to be the "author" for copyright purposes. The author acquires a copyright in a work as soon as it is "fixed in a tangible medium of expression", which, in the case of software, means as soon as it is written down on paper, or electronically on the computer, in some readable form. Copyrights last for the life of the author plus 50 years if the author is a natural person, or for 150 years if the author is a corporation.
The author of software can exercise the rights granted to him or her under copyright law themselves, or they can sell or license those rights to others. The rights granted under copyright law may be transferred individually, or all of the rights may be transferred together. For example, the author of software may want to sell or license his right to make and sell copies to another person, but retain the right to create derivative works. The rights may be licensed on a non-exclusive basis, i.e., other licensees may also have the opportunity to exercise the licensed rights, or on an exclusive basis, i.e., the licensee will be the only person allowed to exercise those rights. Under U.S. law, a transfer of a right under copyright law, or an exclusive license of a right, must be in writing in order to be valid (1).
Unlike in most European countries, in the U.S., once a copy of a copyrighted work has been sold, the copyright owner has no further distribution or sale rights with regard to that particular copy of the work. This is known as the "first sale doctrine". Thus, the initial purchaser of copyrighted work is free to sell or give away his copy of the work at any time, regardless of the wishes of the copyright owner. In the case of commercial software, which can involve sales of tens or hundreds of thousands of dollars, this can be a large loss of potential revenue. Because of the first sale doctrine, most commercial software transactions in the U.S. are in the form of licenses, rather than outright sales, with the "buyer" of the software being restricted from transferring the software to others.
Copyright law not only gives the owner of the copyright the ability to prevent others from making exact copies of his work, but it also gives the owner the right to prevent others from creating and selling works that are "substantially similar" to the copyrighted work. There is no ready-made yardstick as to what constitutes a "substantially similar" work. Basically, the test to determine whether a work is "substantially similar" is whether a person looking at the two works would believe the two works were the same. This protects a copyright owner from another person changing a few words here or there in a work and claiming it to be his own.
One of the weaknesses, however, of copyright law is that it only gives the copyright owner protection against copying, i.e. a violation of the rights granted by copyright law by someone who has had access to the copyrighted work and either consciously or unconsciously has reproduced the copyrighted work. If a person independently creates a work that is substantially similar to a copyrighted work, that independently copyrighted work is not an infringement and the owner of the copyright in the first work has no recourse. Indeed, careful software developers can minimize the chances of copyright infringement through a technique known as a "clean room".
In addition, copyright protects only "expression". It does not protect facts, mathematical formulas, etc. Copyright law was designed to protect the creativity of the author, his or her unique way of expressing himself or herself. In the case of complicated software, which might have millions of lines of code, there are may ways of approaching problems and reaching a solution. The authors approach, the creativity put into the coding to make the software perform the required tasks, is what is protected by copyright law. Another programmer, approaching the same problem, may use a different approach to the problem and reach a different solution. Each of those different approaches would be entitled to copyright protection and the respective programmers would not infringe on the rights of the other.
In order for U.S. author to bring a suit for copyright infringement in a U.S. court, it is necessary for the author to have registered the work with the U.S. Copyright Office. It is not necessary for non-U.S. authors to have registered their work with the Copyright Office in order to file an infringement suit, but there are still advantages for non-U.S. authors to register their works. First, the registration is prima facie evidence as to the ownership of the copyrighted work. It is, in a way, a certificate of title for the work. In addition, U.S. copyright law gives persons who register their works the option of recovering "statutory damages" for infringements which occur after the registration of the work, in the place of the actual damages the copyright owner can prove he has suffered. Statutory damages, which can be from between $500 to $10,000 per infringed work, or up to $100,000 in the case of willful infringement, are damages which the court can award without regard to the amount of damages which the copyright holder has suffered, or could prove he has suffered. In addition to an award of damages, a successful copyright infringement plaintiff may also obtain an injunction against further infringement by the defendant and, in appropriate circumstances, obtain the destruction of infringing copies of the copyrighted work.
Patent law gives much stronger protection for software, but it is much harder to obtain and lasts for a much shorter period of time. A patent gives the owner the right to prevent anyone from using, creating or selling devices or processes which fall within the terms of the patent, or perform equivalent functions, even if the other person created the device or process independently, without knowledge of the patent.
Unlike copyright and patent protection, which is created by Federal statutory law, trade secret protection comes from contract law. While the laws regarding trade secrets may vary somewhat from one U.S. state to another, trade secret law protects any secret process, technique or information which gives the owner a competitive advantage. It is not necessary that the elements of the process or technique be original, unique, or secret, so long as the combination is secret. While a patented process cannot be a trade secret because of the public disclosure requirements, a copyrighted work may also be a trade secret if proper procedures are followed (2).
It is a truism that a secret known by more than one person is no longer a "secret", and a trade secret that cannot be sold or otherwise exploited is useless. The owner of a trade secret can exploit his trade secret through confidentiality agreements, both with his employees and with his customers in order to protect the confidentiality of the trade secret. It is not necessary that the owner of the trade secret take steps to maintain absolute secrecy. All that is necessary is to take reasonable steps to maintain secrecy, which will depend upon the circumstances. As a general proposition, the owner of the trade secret should limit access to the trade secret to those who have a need to know the secret in order to perform their duties and have those persons sign a confidentiality agreement where they agree that they will not disclose the secret to anyone and that they will also take steps to maintain secrecy of the trade secret. The same would hold true for customers to whom the owner might license or sell the trade secret.
There is no set time duration for a trade secret, unlike patents or copyrights. Trade secret protection remains so long as the secrecy remains. Thus, in the case of a carefully protected trade secret, such as the formula for Coca-Cola, the protection can last indefinitely. However, where the owner of a trade secret is careless or unlucky, the protection could be lost almost immediately.
If the owner of a trade secret fears that his trade secret is being used by a competitor or by an employee or customer in an improper manner, he can bring suit to enforce his rights under the applicable contracts and, under appropriate circumstances, obtain an injunction preventing use of the trade secret and requiring that all matters pertaining to the trade secret be returned to the owner.
1. In addition, a person transferring a right granted under copyright law has the opportunity to rescind the granting of the right between 35 and 40 years after the transfer. However, given the rapid development of software, this option would be practically useless in the case of software, but could be extremely valuable in the case of music, motion pictures or literature.
2. In the case of copyright registration with software which is also a trade secret, the Copyright Office allows the author to submit only a few lines of code from the beginning and end of the software, sufficient to allow the Copyright Office to determine that the work is appropriate for copyright protection. There have been instances, however, where an author registering their work in this manner have run into problems in proving copyright infringement, since there was difficulty in proving that the portion of the software which was omitted was really part of the work claiming to have been infringed.