Software intellectual property is the set of legal rights that protect software as a work, an invention and confidential information. Three regimes apply to most commercial software. Copyright protects the way a program is written. Patents protect inventions that a program implements, if they meet the statutory tests. Trade secret law protects information, such as source code, that its owner keeps confidential. A software licence is the instrument by which the owner permits acts that each regime would otherwise reserve to the owner, and by which the owner adds contractual limits that go beyond those regimes.
This article describes each regime by reference to United States and European Union statute and to leading decisions covered in this wiki, then describes what a licence grants and withholds under each.
Copyright
Subject matter and limits
In the United States, copyright “subsists” in “original works of authorship fixed in any tangible medium of expression”, and the statute lists “literary works” among the categories.[1] Section 102(b) limits the scope: “In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.”[1] For software, this separates the code as written from what the code does.
The EU takes the same approach by directive. Directive 2009/24/EC requires Member States to protect computer programs “by copyright, as literary works within the meaning of the Berne Convention”. Protection applies to “the expression in any form of a computer program”, while “Ideas and principles which underlie any element of a computer program, including those which underlie its interfaces, are not protected by copyright”. A program is protected “if it is original in the sense that it is the author’s own intellectual creation”.[4]
Rights the owner holds
US copyright gives the owner exclusive rights, among others, to reproduce the work, to prepare derivative works and to distribute copies to the public by sale, rental, lease or lending.[2] For works created on or after 1978-01-01 the term is, in general, the life of the author plus 70 years.[3] Under the EU Directive the restricted acts are reproduction “permanent or temporary”, translation, adaptation and any alteration, and distribution to the public including rental. The first sale of a copy in the Union by the rightholder or with consent exhausts the distribution right for that copy, other than rental.[4]
Because running a program makes copies in memory, the reproduction right is central to licensing. The Directive treats loading, displaying, running, transmission and storage as acts that require authorisation where they necessitate reproduction, and then provides that, “in the absence of specific contractual provisions”, these acts do not require authorisation where they are necessary for use by the lawful acquirer “in accordance with its intended purpose”.[4] A licence therefore defines the scope of the permitted reproduction, and exhaustion of the distribution right is the subject of UsedSoft v Oracle and, in the United States, Vernor v. Autodesk.
What copyright does not cover
Three decisions in this wiki show where the boundary lies.
- Functionality and languages. In SAS Institute v World Programming, the Court of Justice held that “neither the functionality of a computer program nor the programming language and the format of data files used in a computer program in order to exploit certain of its functions constitute a form of expression of that program”, and that accepting otherwise “would amount to making it possible to monopolise ideas, to the detriment of technological progress and industrial development”.[6] See SAS Institute v World Programming.
- Non-literal copying. In Computer Associates v. Altai the Second Circuit adopted the “abstraction-filtration-comparison” test for deciding whether a program’s structure has been copied, a method of separating protected expression from ideas and from elements dictated by external constraints.[7] See Computer Associates v. Altai.
- Interfaces and fair use. In Google LLC v. Oracle America, Inc. the Supreme Court assumed, “for argument’s sake”, that the Java SE declaring code was copyrightable and held that Google’s copying of about 11,500 lines of it was a fair use. The Court stated that “computer programs differ to some extent from many other copyrightable works because computer programs always serve a functional purpose” and that fair use therefore “has an important role to play for computer programs”.[5] See Google v. Oracle. The opinion did not decide whether the code was copyrightable, so the point remains open at that level.
Limits on contract terms
Copyright statutes limit what a licence can take away. The EU Directive permits observation and testing of a program by a person entitled to use it, and decompilation for interoperability on stated conditions, and provides that contractual provisions contrary to Article 6 or to the exceptions in Article 5(2) and (3) “shall be null and void”.[4] See Reverse-engineering clauses in software licences.
Patents
A patent protects an invention and not a work of authorship. In the United States, “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”[8] The patent grant is for a term ending “20 years from the date on which the application for the patent was filed in the United States”, subject to fee payment and to earlier filing dates claimed.[9] Without authority, whoever “makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent”.[10]
Three differences from copyright matter for licensing.
- Independent creation is no defence. Patent infringement under section 271(a) depends on making, using, selling or importing the claimed invention, whatever its source, so a patent can reach what copyright leaves free, such as functionality.
- Registration is required. Copyright arises on creation, while a patent must be applied for, examined and granted, and in the United States whether software-implemented inventions meet section 101 is a recurring question in litigation. This article does not describe the case law applying section 101 to software.
- Shorter, fixed term. The patent term is counted from filing, and the copyright term in a work runs for the author’s life plus 70 years in the general US case.[9][3]
The EU Directive on computer programs states that it is “without prejudice to any other legal provisions such as those concerning patent rights, trade-marks, unfair competition, trade secrets, protection of semi-conductor products or the law of contract”.[4] Patents and copyright can therefore apply to the same product at once. In Google v. Oracle, Oracle’s complaint alleged both copyright and patent infringement; the jury rejected the patent claims and they “have since dropped out of the case” before the Supreme Court’s decision on copyright.[5]
Licences address patents expressly where the vendor wants to limit them. Microsoft’s Product Terms for software state that “Rights to access the software on any device do not give Customer any right to implement Microsoft patents or other Microsoft intellectual property in the device itself or in any other software or devices.”[11] A licence to use software does not, without more, license the patents that cover a customer’s own implementation.
Trade secrets
United States
The Defend Trade Secrets Act of 2016 gives “an owner of a trade secret that is misappropriated” a federal civil action “if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce”. Remedies include injunctions subject to limits protecting employee mobility, and in extraordinary circumstances a civil seizure order on ex parte application.[12]
The statute defines a trade secret as information of the listed kinds, expressly including “programs, or codes”, where “the owner thereof has taken reasonable measures to keep such information secret” and “the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person”.[13] Misappropriation covers acquisition by improper means and disclosure or use in breach of a duty of secrecy or a duty to limit use. “Improper means” “does not include reverse engineering, independent derivation, or any other lawful means of acquisition”.[13]
European Union
Directive (EU) 2016/943 defines a trade secret as information that is secret, has commercial value because it is secret and “has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret”.[14] Acquisition is lawful by “independent discovery or creation” and by “observation, study, disassembly or testing of a product or object that has been made available to the public or that is lawfully in the possession of the acquirer of the information who is free from any legally valid duty to limit the acquisition of the trade secret”. Use or disclosure is unlawful where the person is “in breach of a confidentiality agreement or any other duty not to disclose the trade secret” or “in breach of a contractual or any other duty to limit the use of the trade secret”.[14]
Relationship to copyright
Source code can be protected by copyright and be a trade secret at once. Trade secret protection lasts only while secrecy is kept and the information is not independently developed or lawfully reverse engineered, so it fails once the secret is public. Copyright continues for its term regardless of secrecy. The Altai litigation shows both regimes in one dispute: the Second Circuit applied copyright analysis to the rewritten program and remanded the trade secret claim.[7] See Computer Associates v. Altai.
Vendors’ licences build the confidentiality element into the contract. Autodesk’s General Terms state that the “source code of the Offerings and the APIs constitute proprietary and confidential information of Autodesk”, and that the user will not disclose it or use it for any purpose other than ordinary-course use. Autodesk also reserves “all rights under trade secrets, copyrights, trademarks, patents, and any other intellectual property or proprietary rights” relating to the Offerings.[15] Adobe’s General Terms state that “Certain elements of the Services and Software constitute our (or our licensors’) confidential information”.[16]
What a licence grants under each regime
| Regime | Default position without a licence | What a licence typically grants | What a licence typically withholds |
|---|---|---|---|
| Copyright | Owner holds the exclusive rights to reproduce, adapt and distribute | Permission to install, run and copy within defined limits; sometimes the right to modify or redistribute | Redistribution, derivative works, source code access; rights not expressly granted |
| Patent | Anyone who makes, uses, sells or imports the invention without authority infringes | Express or implied permission to practise the claims in the licensed software | Rights to implement the vendor’s patents in other products (Microsoft Product Terms example) |
| Trade secret | Owner may stop misappropriation; reverse engineering and independent discovery are lawful | Access to confidential material under a duty of confidence | Disclosure, use beyond the licence, and, by contract, reverse engineering |
Open-source licences use the same copyright rights to grant broad permissions on stated conditions; see Open-source software licensing.
Why the distinction matters in practice
- A clause may reach what the statute does not. Copyright excludes methods of operation and functionality, but a licence can still forbid replicating functionality or training AI systems on output, as several vendor terms now do. Whether the clause is enforceable depends on contract law and, in the EU, on Articles 5, 6 and 8 of the Directive.
- Secrecy is a precondition for trade secret protection. The statutes in both jurisdictions require reasonable steps to keep the information secret, which is why licences label internals as confidential and restrict access to them.
- A dispute often pleads several regimes. A single complaint may combine copyright, patent, trade secret and contract claims. See Software licensing litigation.