Intellectual Property Protection For Software

Co-written by Kathi Finnerty

Many high tech companies and independent software programmers are faced with the challenge of ensuring that their proprietary software programs are sufficiently protected such that a non-permissive use of the software either can be prevented or effectively prosecuted. For years, the law has been in a state of flux regarding the appropriate intellectual property protection available to software programs. Fortunately, recent developments in the law have added more guidance on this subject.

There are four bodies of law that exist to protect developers of intellectual property: patent law, which protects, new, useful and "non-obvious" inventions and processes; copyright law, which protects original "works of authorship"; trademark law, which protects words, names and symbols used by manufacturers and businesses to identify their goods and services; and trade secret law, which protects valuable information and ideas, both patentable and unpatentable at the time of their inception, which are not generally known, have economic value, and that have been kept secret by the owner. Three of these concepts are addressed herein: patent, copyright and trade secret.

A patent is granted by the United States Patent Office and confers a legal right to exclude others for 20 years after the date of application from making, using or selling the patented invention throughout the United States. Utility patents are given for new, useful and non-obvious products and processes. 35 USC §101. A patent is conferred on one who " . . . invents or discovers any new and useful process, machine, manufacture or composition of matter, or any new improvement thereof." In order to obtain a patent one must show: (1) patentable subject matter, (2) novelty, (3) usefulness, and (4) non-obviousness. 35 USC §§101-103. Patentable subject matter covers the full range of technological information as physically implemented in a product or process. In addition to the more familiar patents covering mechanical, electrical and chemical products or processes, patents have been granted for inventions in biotechnology (e.g. man made microbes) and processes using computer software. See Diamond v. Diehr (1981) 450 U.S. 175, 101 S.Ct. 1048.

Only novel products or processes are patentable. One cannot patent a pre-existing natural substance. Nor can one patent a product or process which is already patented in another country or described in a printed publication. 35 USC §102(b). Lack of novelty will preclude patentability if the invention is known, used, or sold in the United States by third parties before the patent applicants claimed date of invention. Moreover, an invention is not novel if an application for it is not filed in the patent office within one year from the time the invention is used, sold or described in a printed publication by third parties or the inventor. Pfaff v. Wells Electronics, Inc. (1998) 525 U.S. 55, 119 S.Ct. 304, reh. denied (1999).

The notion of usefulness or utility means that the invention must work as described in the patent application. Utility also means that the invention must confer some benefit upon mankind. As applied to software, a patent protects the underlying idea of the software itself, not just the owner's specific expression of it. Thus, patent protection is superior to copyright protection if the basic concepts are valuable and are capable of being expressed in several ways, provided they can satisfy patent requirements.

If an inventor desires to pursue patent protection, inventions that are implemented at least partially on a computer raise difficult questions with respect to the statutory subject matter requirement. Laws of nature and mathematical equations are not patentable; patent laws cannot be employed to pre-empt the use of general truths. Historically, a patent claim to a pure or mathematical algorithm not associated with any machine or process is also not within the statutory class of useful inventions. Gottschalk v. Benson (1972) 409 U.S. 63, 93 S. Ct. 253. A formula for converting binary coded decimals into pure binary numbers is not patentable. However, a claim to a method for changing the state of a material or thing, portions of which are implemented on a computer, may be patentable. A claim to a computer system or process that is novel in its use of a particular formula or algorithm is patentable if the claim as a whole defines a machine or process within the meaning of 35 USC §101. (Diamond v. Dieher (1981) 450 U.S. 175, 101 S.Ct. 1048.

In recent times, the Patent and Trademark Office has more readily granted computer software related patents, taking a more expansive view of a patentable claim as opposed to a forbidden claim for formulas or mathematical algorithms. The landmark decision of State Street Bank & Trust Company v. Signature Financial Group, Inc. (Fed. Cir. 1998) 149 F.3d 1368, cert. denied (1999), clarified the confusing status of software patents brought about by long-standing judicial application of the mathematical algorithm and business methods exception. That opinion emphatically reaffirmed an earlier holding by the court that the mathematical algorithm exception does not apply to software as long as the software produces "a 'useful, concrete and tangible result' [through] the transformation of data . . . by a machine through a series of mathematical calculations. " Thus, the State Street Bank case established the viability of the current patent system as a vehicle to protect software.

While it has recently become quite clear that software may be patentable, whether models for software not yet developed are patentable is not as clear. Software can be sufficiently disclosed within the patent by merely describing the function of the software, rather than the actual source code. This has been confirmed by the courts, in part because writing the code for software, once its functions have been disclosed, is within the "skill of art" of those who write code and therefore does not require undue experimentation. Fonar Corp. v. General Electric Company (Fed. Cir. 1997) 107 F.3d 1543, reh. denied, cert. denied (1997).

Even if the subject matter is new, patentability is precluded if the invention would be obvious to one with ordinary skill in the art of writing software programs. In other words, the invention sought to be patented must be non-obvious. Determination of obviousness is a question of law based upon several factual conclusions. First, the scope and content of the prior "art" must be determined. Second, the differences between the prior art and the claim must be ascertained. Finally, the level of ordinary skill of the practitioner in the pertinent art must be resolved. A detailed analysis of the basic factual inquiries was enunciated by the Supreme Court in Graham v. John Deere Co., (1966) 383 U.S. 1, 86 S.Ct. 684. While there is an analytical structure for determining the obvious, it is often extremely complicated, involving battles between technical experts over whether a certain invention is obvious or not.

It is increasingly important to strategize a means of fixing new concepts into a tangible medium which can create a patentable object sufficient to pass muster at the patent office. This is significant to overcome the existing authority that imparts a belief that the government should grant a patent monopoly only for inventions that produce a useful physical manifestation and not simply for innovative ideas. The court's concern seems to emanate from the Constitution's limitation of patent protection to the "useful arts". Today, "useful arts" are legitimately considered to encompass applied technology and inventions and are eligible for patent protection.

When applying for patent protection, inventors traditionally have characterized their software-related claims as processes. Conceptually, this characterization makes sense: software is simply a set of instructions that directs a machine (usually a computer) to perform a series of steps to accomplish a desired result. However, for more certain patent protection, recent patent applicants have often characterized their software-related inventions as machines by employing the "means-plus-function" style of drafting. "An element in a claim . . . may be expressed as a means or step for performing a specified function without recital of the structure, material or acts in support thereof and such claims shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalence thereof." 35 USC §112. Similarly, in the last few years, patent applicants have begun to claim their software-related inventions as articles of manufacture. For example, the disputed claim in In re: Beauregard (Fed. Cir. 1995) 53 F.3d 1583, describes the invention as "a computer useable medium in which a program code is embodied." It is possible that in the face of the recent State Street Bank court's elimination of the mathematical algorithm exception, such artful draftsmanship is now unnecessary. However, it has not yet been litigated and conservative crafting of a software patent claim is still warranted.

It should be noted that although the issuance of a patent provides a higher level of protection for ideas and concepts underlying the computer software application, it is often a time-consuming and expensive process. Filing a patent application can cost in excess of $10,000, and the process can take several years before a patent is actually obtained.

Copyright protection applies to original works of authorship fixed in any tangible medium of expression that can be perceived, reproduced or communicated whether directly or with the aid of a machine or device. 17 USC §§102(a), 302-303. For works created after January 1, 1978, the copyright endures for a term consisting of the author's lifetime plus 70 years. 17 USC §302(a).

Copyright protection attaches automatically upon the fixing of the work of authorship in any tangible medium of expression regardless of whether the work is published or unpublished. The copyright act also protects the structure, sequence and organization of computer programs as well as the programs, source and object codes. Whelan Associates v. Jaslow Dental Lab, Inc. (3d Cir. 1986) 797 F.2d 1222, reh. denied (1987); Apple Computer, Inc. v. Formula International (CD Cal. 1983) 562 F.Supp. 775, affirmed (9^th Cir. 1984) 725 F.2d 521.

The distinction between a protectable expression and an unprotectable "idea, procedure, process, system, method of operation, concept, principle or discovery" (17 USC §102(b)) has become increasingly important in the analysis of the protectability of aspects of computer programs and, in particular, graphical user interfaces. For example, menu command hierarchy (i.e. a set of menu commands in the menu structure) is an uncopyrightable method of operation. Lotus Development Corp. vs. Borland Int’l, Inc. (1^st Cir. 1995) 49 F.3d 807.

The standard copyright application contemplates registering computer programs. The question often presented is whether the underlying schematic or model used to demonstrate the workings of the software is a work of authorship sufficiently fixed in a tangible medium. Beyond the protection of program code, the scope of copyright protection in a computer program remains a matter of heated debate among commentators and a matter of extreme confusion in the courts.

Copyright protection extends to a description, explanation or illustration of an idea or system, assuming that the requirements of the copyright law are met. Copyright law in such cases protects the particular literary or pictorial expression chosen by the author. However, it does not give the copyright owner exclusive rights in the idea, method or system involved. Suppose, for example, that an author writes a book explaining a new system for food processing. The copyright in the book, which comes into effect at the moment the work is fixed in a tangible medium, will prevent others from publishing the text and illustrations describing the author's ideas for machinery, processes and merchandising methods. It will not, however, give the author any rights to prevent others from adopting the ideas for commercial purposes or from developing or using the machinery, processes or methods described in the book.

A patent may be contrasted with a copyright in several important ways. A copyright typically covers only the expression of the work and as described above, does not preclude people from appropriating clever ideas embodied in that work. In contrast, a patent can sometimes be used to stop someone who looks at a copyright work, extracts the clever ideas from it and creates a new system embodying those ideas. As a general rule, if it is the idea that underlies the software that is sought to be protected, a copyright is insufficient protection.

There are also common law copyright protections for works of authorship that are not fixed in a tangible medium of expression or do not otherwise come within the subject matter of federal copyright statutes. While these may create some state law remedies and other fallback positions, they are not sufficiently strong to protect the magnitude of many software concepts and should not be relied upon. Cal. Civ. Code §980(a)(1).

In California, the Uniform Trade Secrets Act has been adopted in the Civil Code at §§3426-3426.10. That statutory scheme defines a trade secret as information, including a formula, pattern, compilation, program, device, method, technique, or process that: (1) derives independent actual or potential economic value from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Crucial for legal protection is that the item or data must in fact be "secret." Thus, once a trade secret is disclosed to the public, without adequate protections in place, it becomes a matter of public domain and is no longer a trade secret. Specific designs and plans (e.g. blueprints, schemas and circuitri charts) have been found to contain protectable trade secrets when the plans are not known outside the business. Various computer software and databases, to the extent that they are secret and not merely general concepts, may qualify for trade secret protection. Data General Corp. v. Digital Computer Controls, Inc. (Del.Ch. 1975) 357 A.2d 105; Nimmer On Copyright (1990, rev. ed.), §2.04(C). Hence, trade secret protection is most likely available only in a situation where the software would only be used in-house and not distributed to others without the execution of a confidentiality agreement preventing reverse engineering and disclosure.

Intellectual property law is a work in progress. It takes years for the courts to determine the necessary refinements for addressing current economic and intellectual development. Recent progress has been made toward providing adequate intellectual property protection for software developments. Nevertheless, careful strategizing and proactive steps continue to be necessary factors if one hopes to derive economic value from unique software products.