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Trade Secret Protection of Software has Limits

Developers of proprietary software typically rely copyright and trade secret protection of their works. A recent California case (Silvaco Data Systems v. Intel Corporation) illustrates how far trade secret protection does, and does not, go.

Silvaco develops and markets electronic circuit design software. Silvaco won a suit against Circuit Semantics, Inc., claiming that CSI, with the help of two former Silvaco employees, misappropriated Silvaco trade secrets, in the form of source code, by incorporating them into CSI’s software. Silvaco obtained an injunction against continued use of the technology incorporating its trade secrets.

Silvaco then sued several CSI customers, including Intel, alleging that by buying CSI software, Intel misappropriated Silvaco’s trade secrets. The Court of Appeal for the Sixth Appellate District disagreed.

Intel never used the source code in question – it merely used executable code that CSI compiled from that source code. The court provided the following analogy: One might misappropriate a trade secret recipe by using it to bake a pie, but a person who eats the pie does not misappropriate the recipe.

Comments:

  • The gist of the Silvaco case is that trade secret protection does not cover products made pursuant to the trade secret.
  • Silvaco might have prevailed had it alleged copyright infringement by Intel, in that executable code is a derivative work (akin to a translation) of the underlying source code from which it is compiled. It is not clear why copyright infringement was not alleged – perhaps Silvaco did not register its copyright on a timely basis.

Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
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