Examining and Protecting Trade Secrets in IT Litigation

(Editor’s Note: This article was originally written by Jeff Parmet, DisputeSoft’s Founder, who passed away in 2023.)

The article has been updated by DisputeSoft’s President, Dr. Raj Subbu.

Many software products incorporate trade secrets – algorithms or arrangements of data deriving economic value due to their confidential nature.

Intellectual property disputes thus often involve allegations of trade secret misappropriation. In such disputes, software trade secrets misappropriation  experts play a valuable role in assisting the finder of fact determine whether a plaintiff owns a valid trade secret and, if so, whether the secret has been misappropriated.

In this article, we discuss the issues software experts typically address when supporting litigation in which trade secrets are involved.

Overview of U.S. Trade Secret Law

The vast majority of states have adopted the Uniform Trade Secrets Act (“UTSA”), originally published in 1979 and amended in 1985.[1] The UTSA defines a trade secret as information that “(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”[2]

Trade secrets may exist individually or in combination. A combination trade secret consists of elements that, although independently disclosed in the public domain, maintain economic value once combined.[3]

“Misappropriation” occurs when a trade secret is used or disclosed, without the owner’s consent, by a person who has acquired it through improper means.[4] Examples of improper means include theft, bribery, misrepresentation, espionage, or breach of a duty to maintain secrecy.[5]

Although trade secret law was historically a state matter, in recent years the Federal government has expanded its role in restricting trade secret misappropriation. In 1996, Congress passed the Economic Espionage Act, making trade secret misappropriation a federal crime.[6]

Subsequently, the Defend Trade Secrets Act (“DTSA”) of 2016 created a federal civil cause of action for the misappropriation of trade secrets related to interstate or foreign commerce.[7] The DTSA was heavily influenced by the Uniform Trade Secrets Act and contains similar provisions that a software trade secret expert can use to aid their defense.[8]

Analytical Approaches in Trade Secret Disputes

In evaluating allegations of trade secret misappropriation, software experts have a variety of techniques at their disposal, though the utility of each will vary based upon the individual facts of each case.

Software experts typically focus their analysis on determining if there is a factual basis that might lead an arbiter of fact to conclude that a plaintiff’s claimed trade secret is, in fact, a trade secret.

For example, software experts may conduct analyses to determine that alleged trade secrets are actively in use by the plaintiff, as such a finding may be relevant to determining the alleged trade secrets’ economic value. 

To determine whether an alleged trade secret is present and utilized an expert may start off by examining a plaintiff’s source code and related documentation. Undertaking this analysis may reveal potential problems, such as that the claimed trade secret or certain elements of the claimed trade secret are not present.

Another trade secret analysis technique that may be applicable is to examine a running version of the plaintiff’s software to determine whether all elements of the alleged combination are identifiable. If relevant, an expert may also review user manuals or training documentation to verify that the entire combination is present.

A software expert may also need to investigate what measures a plaintiff took to keep its alleged trade secrets confidential.

For example, if a software developer discloses alleged trade secrets to testers without requiring them to sign a non-disclosure agreement, an expert may conclude that the secrecy of the alleged trade secret may be lost, depending on whether the court finds that use of non-disclosure agreements was a reasonable practice to maintain secrecy. 

Additionally, the software trade secret expert may review publicly-available publications to determine whether the alleged trade secrets were publicly disclosed, generally known, or in common use at the time when any alleged misappropriation occurred.

For example, an expert may review copyright deposit material to determine whether the claimed trade secrets were disclosed in the non-redacted portions of a plaintiff’s source code copyright registration. If a copyright filing describes a claimed trade secret, which remains unredacted in the filing, a software trade secrets expert will likely conclude that the alleged trade secret has been disclosed.

As another example, an expert may review patents or patent filings and determine that any claimed trade secrets described therein have been disclosed due to the publicly-available nature of those filings. 

Similarly, software experts may also review publicly available product documentation, such as user manuals or training materials, to determine if they depict the claimed trade secrets.

If these materials do not explicitly describe the alleged trade secrets, a software expert may need to consider whether the alleged trade secrets were readily ascertainable based upon these materials.

In some cases, an expert may need to investigate whether certain information was disclosed at a certain point in time. To answer this kind of question, an expert may utilize tools such as the Internet Archive’s “Wayback Machine”. This tool allows an expert to search archived websites for product sheets, press releases, and white papers describing the claimed trade secrets.[9]

Evidence of the claimed trade secrets in the public domain may support findings that the claimed trade secrets were generally known, readily ascertainable, or even disclosed by the plaintiff, depending upon the source of the information. 

After an expert has verified that the alleged trade secret elements are present, and further, that those elements have not been publicly disclosed or are not widely known, an expert witness may next determine whether a defendant has inappropriately used the claimed trade secret.

Such determinations will vary with the facts of each case, but typically an expert investigates such a question by conducting comparisons between the alleged trade secret software with the allegedly misappropriated software and examining the similarities and differences between the two. 

For individual trade secrets, the software expert may be looking for just a single instance or example of the trade secret being used in the allegedly offending software, or may be looking for multiple instances or examples.

But, if the plaintiff’s software contains a combination trade secret, software experts may need to examine the defendant’s software to determine whether it contains every element of the combination.

However, if an expert cannot verify that the defendant’s software contains the entire combination, the expert may conclude that the defendant’s software does not make inappropriate use of the plaintiff’s alleged trade secret.

Protecting Confidentiality

Outside the context of misappropriation litigation, intellectual property litigants often desire to maintain the secrecy of valuable information.

Intellectual property computer software expert witnesses must therefore remain sensitive to trade secret considerations even in software disputes not involving allegations of trade secret misappropriation.

For example, trade secret information may be present in the variable names and developer comments contained in the source code, and at other times these variable names and developer comments may be redacted in an effort to protect their secrecy. In software copyright infringement cases, a software expert may be required to analyze source code that has been stripped of these variable names and developer comments.[11]  

But if they remain present, the expert should abide by all measures the parties and the Court agree are necessary to safeguard secret information. For instance, in some cases, it is typical practice to analyze the parties’ hardware and proprietary software under a strict protective order.

Such orders may prohibit connecting computers containing client source code to the Internet, restrict physical access to the premises in which the computers and source code are located, or require computers to be locked so that data cannot be added or removed.

Regardless of a client’s litigation strategy, software experts must take special precautions when handling cases involving trade secrets. In all cases, the software expert should observe appropriate evidence-handling procedures to ensure that confidential information is stored securely and accessed only on a “need-to-know” basis.

Importantly, this includes ensuring that the transmission, receipt, and storage of confidential material, is all conducted in a manner consistent with typical practices for computer security.

Finally, when an investigation is completed, the expert should certify that it has returned or destroyed all confidential information relating to the matter.

Trade Secret Expert Conclusion

A software trade secret expert employs a variety of analytical tools when handling disputes involving individual or combination trade secrets. In particular, the examination of user interfaces, product documentation, and third-party products can shed valuable light on whether a plaintiff owns a protectable trade secret, and it’s the expert’s role to present relevant facts learned through consideration of these sources to the court for consideration in the ultimate legal issue.

The examination of source code in a source code audit, user manuals, and executable software is often critical in determining whether a defendant has misappropriated secret information.

Regardless of whether misappropriation has been alleged in a software dispute, software experts must remain aware of potential trade secret considerations.