Software Trade Secrets
The precise language that legally defines a trade secret varies
by jurisdiction, as do the particular types of information that
are subject to trade secret protection. In the United States, different
states have different trade secret laws. Most states have adopted
the Uniform Trade Secrets Act, and those that don't, have laws that
only differ by subtle differences.
There are three factors that are common to all definitions; a trade
secret always has these three specific characteristics:
- It is not generally known to the public.
- It confers some sort of economic benefit on its holder, where
the benefit is due to the fact that it is not known to the public.
- The owner of the trade secret makes reasonable efforts to maintain
With regard to software trade secrets, algorithms that are known
to the public usually cannot be trade secrets, though some jurisdictions
require not only that the information be public but that it be "readily
ascertainable," meaning easily to find. For example, a sorting
algorithm found in a well known textbook or in an application note
on a high traffic website is, or can be, known to the public and
There must be an economic benefit, so a sorting algorithm that
can be easily replaced with a well-known sorting algorithm with
comparable results is not a trade secret. Similarly if your company
develops a program, perhaps as a side project, but does not sell
it or incorporate it in any products, then it's not a trade secret.
If the owner of the source code allows programmers to share code,
or does not put notices of confidentiality in the source code, or
does not take reasonable steps to insure that employees do not take
the code home with them, then that source code cannot be a trade
secret. This third point is a particularly important reason to take
precautions to ensure your software does not go somewhere it shouldn't.
Make sure your employees, investors, and partners sign nondisclosure
agreements (NDAs). Make sure you have written policies about how
to handle source code. And make sure you treat all individuals and
companies equally. You don't want to be in court, defending a trade
secret, and have to explain why one "trusted employee"
or "trusted friend" was allowed to take home source code
while others were not. That doesn't look like "reasonable efforts
to maintain secrecy."