The Takeaway
If you want your code to be protected by trade secret law, keep it a secret. There are times when you need to share ideas and design with third parties in order to integrate your systems, look to a strong contract to protect your ideas because the more you give away voluntarily, the weaker your trade secret claim becomes.
The Need
It’s obvious that when my software integrates with your software our customer can get functionality and ease of use that neither package could deliver on it’s own. So there are good reasons for developers to work with other developers to integrate their software and even go out to market together with powerful, feature-rich packages rather than trying to sell more limited stand-alone systems. But sometimes arguments flare-up when the integration and subsequent sales pipeline don’t materialize as planned. In particular, what happens when your partner ends the agreement and goes out to market with someone else or with a product that has some of the functions that you were providing?
This gets very messy even when your integration is handled through an API (Application Programming Interface). Fundamentally the problem is that in order for two systems to work together, one of them has to know something about the other. And once you start talking about how your system works, once you open up and let someone take a peek, even if it is at the top-most layer, they begin to learn about how you have done things and how your system works. If they gain that knowledge properly, if you freely give it up, then your ability to protect that knowledge rights gets weaker and your risk increases.
A case in California that was decided last year points out some of the issues you need to look out for. In Agency Solutions.com LLC v. TriZetto Group, Inc., Agency Solutions claimed that in the process of integrating the Agency Solutions and TriZetto products, TriZetto had learned trade secrets from Agency Solutions and had incorporated those trade secrets into 8 integrated functions that TriZetto was then going to use with Agency Solutions competitors. Agency Solutions had voluntarily given TriZetto information about their product in planning sessions, and in responses to email and phone requests. The court looked at four ways Agency Solutions could have protected this information, confidentiality, contract, trade secret and patent, but didn’t find anything strong enough to warrant an injunction that would stop TriZetto from going to market alone with their enhanced product.
In the end, the court found that background information, features and functions, high-level design specifications, and business requirements that become evident when the software is run are not trade secrets. In other words, those things that are made obvious when you use the software, like the function that makes these words italic, reveals itself publicly when it is used so “italicizing” can not be a trade secret, though the actual specific method used to create the italics deep down in your code, could be a trade secret.
This becomes important when you provide an API to an integration partner. You cannot depend on trade secret law to protect yourself against your partner using what he has learned from that API in building his own product. If you want to protect yourself, you need to work language into your contract that stops your partner from using that knowledge without your permission.
The Issues & A Few Ideas
Trade Secret
- The best way to protect a trade secret is to keep it secret. An API is a great way to keep the bulk of your system a “black-box” as far as your integration partner is concerned but in order for it to be useful you need to share it with others. Don’t be caught by surprise and look for other ways to protect your API.
- Understand that your protection under trade secret law is weakest when you share your secret. It is strongest when someone improperly takes something from you.
Contract
- A strong contract is still the best way to ensure you get what you expect in your relationship with an integration partner. You have a number of tools, like confidentiality, exclusivity, obligations to destroy materials and rights in derivative works to go beyond the default protection the law will give you. Of course, you may have to negotiate these terms with your partners but, if you watch for the things that are important, its more likely you will be the one benefiting from your hard work.
- Don’t ignore the confidentiality provisions. You can change how trade secrets are protected through a confidentiality clause and you can change the definition of trade secret itself to have it cover much more than the standard definition.
Afterword
- The court in this case was looking only at the question of an injunction. There were other contractual issues in the case that have not yet been decided and I wouldn’t be surprised if Agency Solutions ultimately wins on the claim that TriZetto breached their promise to work exclusively with Agency Solutions.
