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Protecting Your Digital Innovation as a Trade Secret | FFS Insights

by Arash Beral and Kelsey L. Vasko

Technology has made its way into every aspect of our lives – even the most unimaginable facets, and, to think, there is still endless room for development.  Indeed, a demanding market spawns the most innovative ideas.  The more interesting the idea – for instance, source code and algorithms used to develop autonomous vehicle technology – the more susceptible it is to being stolen.  Now, in come laws concerning the protection of a “trade secret”, defined as secret information that derives independent economic value by virtue of the fact that it is secret.

The United States District Court for the Northern District of California recently analyzed whether a party’s source code and algorithms used to develop autonomous vehicle technology constitutes a trade secret. In ultimately granting a preliminary injunction in favor of WeRide Corp., the Court went to great lengths to guide tech companies looking to ensure their proprietary source codes are protected against intruders.

The case involved technology adapted from publicly-available source code developed over 18 months at a cost of $45 million.  Even though the technology was based on publicly-available resources, WeRide established that the end product itself was “not common knowledge in the industry, nor reflected in publically available code.”  WeRide next demonstrated that it treated its source code as a confidential secret by restricting its access “to employees who are either on-site or have logged into the WeRide network” using a username and password.  Employees need a unique username, password and token just to decrypt the source code, and are all required to execute an agreement providing that the source code is considered WeRide’s own, confidential information.

After showing that the source codes were a trade secret, the Court determined that WeRide’s former Director of Hardware Engineering, along with two newly-formed and nearly synonymous companies formed by WeRide’s former CEO, had likely misappropriated them.  The finding was premised on several factors: the defendant’s knowledge that the source code was WeRide’s confidential information, his downloading of WeRide’s data to a personal storage device immediately prior to his departure, his deletion of electronic files and a hard drive, and his clearing of browser history all supported a showing of misappropriation.  Furthermore, his leadership role in the two companies he joined thereafter, their shockingly rapid “development” of certain advanced capabilities of an autonomous car only weeks after he joined them, and certain technology mechanisms suspiciously similar to WeRide’s vehicle further demonstrated that the entity defendants, too, had misappropriated WeRide’s source code.

The Court’s order is a useful roadmap for any technology company currently developing its own computer programming.  Of utmost importance, companies must ensure that any aspects of a proprietary technology product is treated as a company secret by limiting access to the source coding to only the necessary employees; by requiring their use of usernames, passwords and tokens; and by ensuring all employees acknowledge, in writing, that the company’s proprietary information is confidential and belongs only to the company.  Further active measures taken by a company reflecting its intent to protect its source coding and other developments from the general public include encryption, warnings when files are downloaded to an external source, or even retinal or fingerprint access.  These components may further support a company in a dispute involving trade secret misappropriation.  Provided that its source code is a valuable asset, any and all measures taken today which actively reflect their secrecy are pivotal to a company’s success in such a future dispute.

The Court in WeRide confirmed that source code is protectable in California even if it is drawn from publicly-available sources; the onus is on your company to take reasonable steps to ensure its secrecy in order to give itself the highest chance of success in a future potential dispute.

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This article is made available for educational purposes and to provide general information on current legal topics, not to provide specific legal advice. The publication of this article does not create any attorney-client relationship and should not be used as a substitute for competent legal advice from a licensed professional attorney.

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