We’re past the point when tangible assets held most of a company’s value. Most of a company’s value these days is found in its intellectual property (IP). If we look at the S&P 500 companies, 90 percent of their total value consisted of intellectual property and just 10 percent consisted of tangible assets in 2020 according to the study by Ocean Tomo.
Losing rights to intellectual property can mean the end of an early-stage technology startup. Tech companies often acquire legal protections such as patents and trademarks before they release a product to market, but developers have access to their software before the product itself is released.
How to protect intellectual property
Intellectual property protection for IT companies can take various forms:
- Trade secrets
Depending on the nature of the software product, what’s considered intellectual property can be found in databases or embedded in code. To plan the most efficient strategy for protecting your project’s intellectual property, you should answer two main questions:
- What does my IP consist of?
- How is my IP protected legally?
In the world of software development, we mostly talk about three types of intellectual property protections: copyrights, trade secrets, and patents.
Copyrights, patents, and trade secrets
Let’s figure out the difference between copyrights, patents, and trade secrets and how these types of IP protection apply to IT products.
A copyright is what you need to protect the way your software solves a certain problem. A copyright doesn’t protect the idea behind your product but rather the way this idea is implemented in software. Copyright protection applies best to source code, object code, and user interfaces.
A patent protects the idea behind a particular product but not the execution of the idea in the form of code. Patents often protect software architectures and proprietary algorithms. Another factor that companies should consider before settling on their IP protection strategy is cost. Applying for a patent is a complex and often costly process, which means that it might be prohibitive for smaller tech companies with limited budgets. Companies that deem it worth the effort tend to hire law firms that specialize in patent law to navigate all the complexities of patent acquisition.
Trade secrets have to do with proprietary information that a software development company discovers and works with; trade secrets do not require publication and can be maintained indefinitely until they’re discovered by another company. For example, a tech startup develops a business architecture that’s optimal for its product. This business architecture will be the company’s trade secret until somebody else discovers (on their own) the same exact way to do the same exact thing.
Protecting source code and making sure that information about business ideas – together with all proprietary algorithms – aren’t disclosed to third parties are the two biggest concerns most clients voice when they come to Yalantis.
In this article, we want to focus on two types of intellectual property – copyrights and trade secrets – since they’re most applicable to our clients’ needs in terms of IP protection.
How copyrights apply to source code and how to protect your source code
There are two major aspects of protecting source code:
- Product owners have to make sure that source code is their intellectual property and not the developer’s.
- Product owners have to make sure that all details about the technical side of their product are considered confidential.
How does copyright protection apply to source code? Creating source code is a creative process, which means that the result of such work can be protected by copyright law, as code can be seen as an original work of authorship. At the same time, nobody would argue that creating code involves hundreds of smaller tasks that are repetitive and cannot be classified as unique, and thus are not protected by copyright.
This seeming contradiction is often resolved by the so-called “merger doctrine”: whenever it’s understood that there are a limited number of ways a task can be completed, developers or product owners are prohibited from using copyright to prevent others from using the same methods in their work.
How can you acquire copyright protection for your source code?
A copyright is the only type of intellectual property protection that is acquired automatically whenever source code is written or a program is compiled.
It’s possible, however, to protect your code from other companies’ making unauthorized copies. To do so, you need to register your copyrightable work with the United States Copyright Office (or any other copyright office in a country where you intend to use the work).
The duration of a particular copyright may vary. It’s important to remember that though an application for copyright may be completed online, the processing of this application will take about four months.
Sometimes, a company decides to release parts of a product’s source code as open-source code; other times, they maintain all of it as a trade secret. Either way, copyright protection can be applied to all code. As part of the copyright application process, you as the owner of the product are able to designate certain parts of source code as your company’s trade secrets, whereas other parts you can make available within open-source libraries.
If you want to find out how you can file a copyright registration for your source code, check out these guidelines from the United States Copyright Office on copyright registration for computer programs.
Nondisclosure and confidentiality agreements as ways of protecting trade secrets
On top of protecting their source code, many clients we work with focus on protecting the business logic of their projects. When they come to us to implement their idea, they ask questions about how we’ll protect their trade secrets.
A trade secret is a very wide notion that encompasses anything from a new, more efficient way to run your business to a unique app architecture.
The easiest way to protect your trade secrets (as well as ideas, procedures, methods, systems, processes, concepts, principles, discoveries) is to sign a non-disclosure agreement with your software development partner. A well-drafted NDA or confidentiality agreement means that you don’t have to worry about entrusting information about your project to a team of developers. Trade secrets are cheaper than utility patents and do not have expiration dates.
The non-disclosure agreement (NDA) that we typically sign at a client’s request contains a provision stating that the Disclosing Party (the client) owns the rights to all objects we receive in the framework of cooperation (i.e. to all code, ideas, and other information they share with us).
How does Yalantis protect your intellectual property?
Yalantis follows legal best practices defined by Estonian laws and by European Union laws on IP protection – in particular, Directive 2009/24/EC on the legal protection of computer programs.
We will sign an NDA at the request of our clients. We either provide a customizable NDA template or work with your lawyer to amend the agreement that is perfectly tailored to your business needs.
An NDA can be signed at the very initial stage of cooperation. This means you don’t have to worry about disclosing any technical details and commercial information as we’re legally bound to keep all this information strictly confidential.
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