US Supreme Court Decision

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The United States Supreme Court in Alice Corp. v. CLS Bank recently ruled that software which mitigates the settlement risk of non-payment by a debtor fails to qualify for patent protection. This does not mean that all software is non-patentable, but it does mean that other methods of protecting intellectual property will likely now be given greater consideration, such as the use of trade secrets.

Software patents are widely thought to have value and show up as major assets on the books of all corporations in the high tech sector. But patents also have disadvantages. There must be complete public disclosure of the invention, and merely holding a patent does not guarantee that it is valid, as the owners in Alice sadly discovered. They were left without either a patent or a trade secret.

For information to get legal protection as a trade secret, first, it must be kept secret and, second, it must be commercially useful. And unlike patents or copyrights, a trade secret does not have to be novel or original, nor does it have to be registered with a government office.

In a great many intellectual property escrows the materials on deposit with the escrow agent are trade secrets in the form of source code. The manner in which these materials are handled goes straight to the question of secrecy.

Since our very first beginnings almost 50 years ago only Lincoln-Parry has prescribed a strict protocol on the depositing, handling, storing and delivery of escrow materials. Every step from start to finish is done under seal. Then, if any of our clients are ever challenged with a claim that their secret source code has become public, we at Lincoln-Parry can testify under oath that due to our protocol no leak could possibly have come through us.

If you are protecting your source code through trade secrecy, then make sure that your escrow agent hasn’t blown the secret.

Read more about trade secrets and how certain methods of verifying escrow materials carry risks.