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Trade Secret, Reverse Engineering and Patentability of Computer Software

Mrs. Manirani Dasgupta*


I. Introduction
Today Intellectual Property is internationally recognised creation of intellectual faculty or brain of
human beings after intensive study and research. Intellectual properties are non-obvious, novel
and original creation of intellectual faculty of human beings; these are classified as patent,
trademark, copyright, industrial design, trade secret etc. Some of these are also industrial
property e.g. industrial design, trade secret, patent, trademark. These intellectual creations are
protected and regulated by Intellectual Property Laws. Intellectual Property Laws protect those
inventions or creations which are published, registered or are registerable, except in exceptional
circumstances, and are protected by existing laws.
Ideas are not protected under the Copyright law due to non-publication; patentable inventions
are supposed to be published subject to official secret, secrecy or non-disclosure for defense
purpose under section 35 of the Patent Act in India and trade secret in a few countries such as
the USA, the UK etc. Not only that, copyrights, patented computer software, trade secret, design
rights are also subject to fair use and reverse engineering for Governmental purpose, public
interest, educational and research purposes. Inventors are the first owners of intellectual
creation unless and until it is transferred, assigned or licensed to others.
The inventor has the right to exploit the creation with the exclusion of everyone else. He can
use, sell or enjoy it in any way he wishes and no other can use it without his prior approval.
These intellectual property rights are exclusive, statutory, invisible, intangible and absolute
bundle of rights of creators which may be related to intangible or tangible objects. These rights
are protected by several laws such as the Patent Act 1970, the Trade Mark Act 1999, the
Copyright Act 1957 and the Industrial Design Act 2000 in India. However, these must be
published or communicated to the public because generally any unexpressed idea is not
protected. Exception to this rule is trade secret or confidential information subject to reverse
engineering. In the contemporary liberalised and globalised era of communication convergence
and new multimedia technology, business world is in fierce competition and intellectual property
rights are in digital dilemma. Computer programmes or software have now become patentable in
the contemporary dynamic communication convergence scenario like the USA and the UK.
Indian legal scenario too has changed to some extent in the year 2004-2005 to meet dynamic
needs and desires of the technology oriented society; that in India, computer programme per se
is not patentable but when it includes machine work or process to perform certain machine i.e.
computer hardware or related device, then it is to be treated as patentable subject matter if it
fulfills all requirements of novelty, utility, originality, non-obviousness, inventive step and
industrial application. Law of Trade secret is not very clear in India and therefore, trade secret of
computer programme or software is a challenging problem.
This article is divided into VII parts including introduction. Part II deals with Concept of Trade
Secret, part III deals with Trade Secret of Computer Software, part IV deals with Trade
Secret and Reverse Engineering of Computer Software, part V deals with Patentability of
Computer Software, part VI contains Conclusion and Part VII Suggestions.
II. Concept of Trade Secret
When any patent related invention is not published and not registered, rather remains secret or
confidential for business purpose, we can call it trade secret or undisclosed and confidential
information.
There are, however, several ways by which trade secret can be disclosed. These are as follows:
(i) published by owner, (ii) disclosure of the secret by owner selling a commercial product
package with inside secret information, (iii) may be disclosed by some one other than the

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owner who independently innovated the same product, (iv) may be disclosed for
Governmental purposes by employees.
Trade secret is protected under the Intellectual Property Law indirectly in India. In contemporary
communication convergence scenario, business world has changed and has become technology
oriented. Every one wishes to win the competition in the business world by whatever means
even applying the concept of trade secret, confidential information. For example, recipe or
formula for the product of Coca-Cola, blend of Barista coffee, formula of Nokia cell phone
software, formula of certain computer software are kept secret because their success in business
depends upon that particular and unique formula. These formulas, methods or processes remain
only with the proprietors or their employees who are trustworthy. The code name of Coca-Cola
formula i.e. "Merchandise7x" is known to some persons who signed the agreement for nondisclosure and it was kept at Vault Bank in Atlanta, Georgia. In the year 2006, three accused,
Edmund Duhaney of Decatur (GA.), Ibrahim Dimson of New York and Joya Williams were
arrested with the help of Federal Bureau of Investigation (FBI), USA. Joya William was a former
Secretary in Coca-Cola. In 2007, a Federal Court Jury in Atlanta found her guilty for conspiring
to sell trade secrets (sensitive marketing materials and test product sample) to an undercover
FBI agent for $ 1.5 million from Atlanta, the company's headquarter, and she was sentenced
upto 10 years in federal prison.1
Here a question may also arise about breach of trust and confidence. In the U.S.A., the Trade
Secret Law (1985) protects against theft, bribery or hiring of employees with the internet, fraud
and misappropriation or improper action. Sections 3 and 4 of the Uniform Trade Secret Act,
1979, provides that "When one company acquires another company's trade secret, the affected
company may seek injunctive relief, damages, punitive awards, costs and attorney fees". The
Act defines 'trade secret' as information including formula, pattern, compilation, programme,
data, device, method, technique or process that has independent economic value available from
only one source; and is the subject of reasonable efforts to maintain its secrecy. In Kewanee Oil
Co. v. Biran Corp2 the Supreme Court of USA explained that trade secret may consist of several
devices, method, compilation of information used in business to give opportunity to obtain
advantage in a competitive business oriented scenario over those who do not use it or who do
not even know it. The owner may disclose the confidential information to persons for the
purpose of business confidentiality i.e., to employees so that he will use it for expected purpose
or as licensee.3
The European Community
The European Patent Convention, referred "trade secret" as know-how, which means a body of
technical information which is secret, identified, substantial in any appropriate form and not
generally known or easily accessible. According to the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS), trade secrets must not be readily accessible or generally
known to people who are related to it, it must have commercial value as a secret and proprietor
must take reasonable steps to maintain secrecy.
III. Trade Secret of Computer Software
Trade secret is Intellectual property but not similar to copyright, patent, design and trademark.
Generally, for protection of intellectual creation, it is required to be published or expressed to
public, but this is not so in the case of trade secret. In trade secret a proprietor keeps secrecy
for economic gains. However, the proprietor can disclose the same to a few individuals with a
condition not to disclose the same to others.
Other intellectual properties are protected during prescribed periods e.g., copyright for life of the
author plus sixty years, patent for twenty years, but trade secret is protected till its discloser to
public. Trade secret is applicable to any secret formula, process, method, technique, computer
device or computer programme. Computer software or programme consisting of source code and
object code which are in totality called as binary code. It is the process of arrangement of 0s and

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1s. This arrangement or programme is protected as "literary work" in India under Section 2 of
the Copyright Act, 1957 as amended in the year 1999.
Application of trade secret and patentability of computer software has raised complex problem
worldwide. Some say that the trade secret or confidential information and patentability of
invention both are relevant and applicable in case of computer software. Computer includes all
information processing devices under Section 2 of the Copyright Act, 1957. Therefore, trade
secret is applicable in case of mobile phone software, wireless software, laptop software and
related devices.
According to Steven Frank, "trade secrecy might well be the best method of protection for many
artificial intelligence programmes because these are generally produced for a single user or a
small group of users, which would make it practical to issue licenses and identify any violators."4
Stacey L. Edger says that trade secret laws vary from state to state and country to country, but
generally they enforce strict penalties for violation of trade secrecy agreements. The problem to
protect software is that the product (programme) is the idea itself. The purchaser of software
package purchases only a working copy of programme on a disk along with some instructions
about how to use it. The programme may be in binary code or machine code,5 but the idea of
operation is revealed in the programme operation and documentation. Computer programme
compact disks or floppy disks are usually sold with terms and conditions of license printed on the
sealed box that breaking of seal means acceptance of those terms and conditions. This process
of license is usually used in mobile phones boxes for packaging software products e.g., Nokia
very often uses this process while selling mobile phones showing to purchasers that this is to
maintain security and confidentiality of the product itself. This is a process of trade secret which
is also applicable for computer software or any information processing device. Not only that,
sometimes software are available and accessible to download from World Wide Web or internet
with terms, conditions and licensing process protecting trade secret through agreement and
logon password system.
IV. Trade Secret and Reverse Engineering of Computer Software
Trade secret and reverse engineering are problematic issues in digital era. Reverse engineering
may be called the process or method to access a device or a computer6 software programme
and analyse it to create a new device or computer software programme or to develop it for
research purpose without actually copying from original invention. This process of reverse
engineering will come under the garb of fair and honest use allowed by law.
There are several objectives of reverse engineering such as (a) in case source code is lost, this
process can be used to remine the code; (b) to know and study how certain programmes
perform or operate certain device; (c) to improve or develop the performance of computer
programme and interoperability of computer software; (d) to correct error in the computer
programme, if any, when source code is not available; (e) to identify computer virus, worms,
Trojan horse; (f) to achieve interoperability of computer programme, are good grounds to allow
reverse engineering.7
Reverse engineering is the method of recompilation or dissimilation of source code and object
code which is called binary code of computer programme or software. Binary code is useful to
operate other computer programmes as well as for interoperability of other computers or
computer programmes. In case of Patent, this operability or software to perform operation may
be disclosed or kept as confidential and undisclosed method or process as a trade secret.
Sometimes in the patent application, specification list or list of information about work and utility
of devices also may be mentioned. It may even be mentioned on the package box of the product
without disclosing source code because source code is that part of software which has
information about method / process to operate certain programme or certain device. Without
this information there may be a possibility of non-performance of certain programme or device
e.g. there is a software Compact Disk (CD) to run a particular printer and it is not available on
the internet to download or even the patent application with specification does not disclose

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process or method of its operation i.e., source code to perform printer, in this case that
particular printer will remain inoperative as such. However, it may be given within the sealed
product box to keep trade secret and breaking the seal will be treated as consent to buy that
particular product with those terms and conditions as written on the product or package box.
Reverse Engineering is a best way to disclose and discover the method, process or technique of
popular product. Therefore, Reverse Engineering is a strong defence which may be taken by a
Defendant. But a prosecutor on behalf of the proprietor, to win the case, has to find out whether
access to trade secret and object of reverse engineering was illegal or unlawful.
V. Patentability of Computer Software
A. Legislative approach in India: The term "Patent" has been defined in Section 2(m) of the
Patent Act, 1970 as "Patent means a patent for any invention granted under this Act." Under
Section 2(j) of the said Act "invention" is a new product or process involving an inventive step
and capable of industrial application. The word "inventive step" means a feature that makes the
invention not obvious to a person skilled in the art. Therefore, when a computer programme
fulfills all the above requirements, it may be treated as patentable invention.
Before 2005 amendment,8 computer programme was not recognised as patentable invention.
However, by the amendment in the year 2004,9 Section 2 clause (k) now provides that "a
computer programme per se other than its technical application to industry or a combination
with hardware is not patentable invention for the Patent Act, 1970 in India" i.e., only software or
computer programme is not patentable invention. But "literary work" includes computer
programme and is protected under Section 52(a) to (d) of the Copyright Act, 1957 in India as
amended in the years 1994 and 1999. However, when computer programme is combined with
hardware or when it will have technical industrial application then it will be treated as patentable
invention under the Patent Act.10 Section 11A, Sub-section (1) provides that "save as otherwise
provided, no application for patent shall ordinarily be open to the public for such period as may
be prescribed." This means that generally patent applications of invention including computer
software will be disclosed or open to public but there is also scope of protecting it under trade
secret. That inventor or applicant who desires not to disclose the specific and competitive
information of invention may apply to the controller for not disclosing it if (a) it falls under
Section 35, where secrecy direction is imposed for defense related subject matters, or (b) the
application has been abandoned under sub-section (1) of Section 9 or (c) the application has
been withdrawn three months prior to the period specified under sub-section (1).11
For defence purpose, under Section 35, all Orders of the controller giving directions as to secrecy
as well as all Orders of the Central Government under Chapter VII of the Patent Act, 1970 shall
be final and shall not be called in question in any court on any ground whatsoever as provided
under Section 41 of the said Act. Under Section 42 of the Act, the controller has the ultimate
authority even to disclose information concerning an application for patent or a specification filed
in pursuance thereof to the Central Government. As Section 42 provides "nothing in this Act
shall be held to prevent the disclosure by the controller of information."
However, Section 118 of chapter XX of the said Act imposes penalties for contravention of
secrecy provision relating to certain inventions. This section runs thus: "if any person fails to
comply with any direction given under Section 35 or makes or causes to be made an application
for the grant of a patent in contravention of Section 39, he shall be punished with imprisonment
for a term which may extend to two years or with fine or with both".
We can say that there is no clear provision of trade secret in the Indian patent law or any other
relevant law, though the Information Technology Act, 2000 under Section 65 prohibits tampering
with computer source documents knowingly and intentionally. When source code is used for a
computer, computer programme, computer system or computer network which is necessary to
be kept or maintained according to law, if any one conceals, destroys or alters it or causes
another to do the same, it will be treated as tampering source documents. The tampering
includes concealment or destruction or alteration of any computer source code or causing

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another to do these. Therefore, even abettors are to be punished for this offence. This section
prescribes punishment with imprisonment up to three years, or with fine which may extend up to
rupees two lakh or with both.
Section 65 runs thus: Tampering with computer source documents: Whoever knowingly or
intentionally conceals, destroys or alters or intentionally or knowingly causes another to conceal,
destroy, alter any computer source code used for a computer, computer programme, computer
system or computer network, when the computer source code is required to be kept or
maintained by law for the time being in force, shall be punishable with imprisonment up to three
years, or with fine which may extend up to two Lakh rupees, or with both.
Explanation: For the purposes of this section, 'computer source code' means the listing of
programmes, computer commands, design and layout and programme analysis of computer
resource in any form.
Section 43(b) of the Information Technology Act, 2000 provides that when any person without
authorisation from the owner or any competent person (who can give permission); access,
downloads, copies, extracts any data, data base or information from any computer, computer
network, computer system, computer data or data base or data stored in removable medium
(CD, Floppy, DVD P etc.); or causes similar damage then he shall be liable to pay damages not
exceeding one crore rupees by way of compensation. Therefore, these two sections may be
applicable for the protection of computer software and trade secret of patentable software in
cyberspace.
Cases: In February, 2007 in Mumbai, an employee of Tata Group leaked and passed on some
sensitive information to an employee of Reliance Communications for Rs. 40,000 in cash. Tata
and Reliance were trying for acquisition of Srilanka's fifth GSM-based mobile operation service
where VSNL has been in operation since 2003. The stolen data were of new business model and
decisions of VSNL for Srilanka. The alleged accused was a former employee of VSNL and
presently associated with Tatas.12
These are examples of cyber fraud and infringement of the right to confidential information. In
Chennai cyber fraud case,13 the accused downloaded confidential information from internet to
commit ATM robbery and was arrested by Chennai police though he was released thereafter.
After Karan Bahrees case of cyber fraud in June-July 2005, Dr. Manmoham Singh, Indian Prime
Minister, directed NASSCOM to amend and adopt more effective data protection laws, security
measures and to increase penalties for cyber crime in tune with the UK, the USA and the rest of
the World. In Pune Cyber fraud,14 about 16 accused were arrested under Section 65 of the
Information Technology Act, 2000. The accused were authorised to access the confidential
information of Citibank account holders as the bank was e-banking service provider. The accused
accessed password/Pin information of about 5 account holders. The accused were arrested while
they were about to check the fund transfer in a Co-operative Bank in Pune.15 These instances
show that India needs clear trade secret laws especially while it is related to patentability of
computer software and reverse engineering.
B. Scenario in the USA: The US Patent Code (35 U.S.C.) provides that " 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 thereof, subject to the conditions and
requirements of this title". In Gottschalk v. Benson16 the US Supreme Court discussed the issue
of computer programe and patent law. The purpose of computer programme was to solve
problem which was very much mathematical i.e., to convert binary coded decimal numbers into
binary. The Supreme Court denied granting patent to Benson's computer programme showing
reasons that to grant patent means to grant monopoly on a general mathematical technique and
its application, which are also basic tools for scientific research. However, in Diamond
Commissioner of patents and Trade marks v. Diehr,17 where Diehr had requested a patent on a
computer programme and Court decided 5:4 in favour of Diehr. Judgment was delivered by
Judge Rehnquist as such "... a subject matter otherwise statutory does not become non-

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statutory simply because it uses a mathematical formula, computer programme or digital


computer". In the year 1995, the U.S. patent and trademark office accepted patentability of
computer programme. In Stale Street Bank v. Signature Financial group18 the Court affirmed a
lower court's decision that software enabled business methods and processes are patentable as
long as they are novel, non-obvious and produce tangible results.
C. International scenario: The Bern Convention, Trade Related Intellectual Properties (TRIPs)
and GATT provide for protection of undisclosed information following the Paris Convention
(1967). The United Nations is taking initiatives to recognise patentability and trade secret of
computer software world wide. The European Union has accepted the same views after 2005.
VI. Conclusion
Prohibition of reverse engineering of computer software with trade secrets must not be
permissible because it will create monopoly in idea without patent protection and it must be
treated as opposed to public policy. If there is prohibition of reverse engineering in case of
computer software, it is to be treated as opposed to public policy contract and it will be treated
as void under Section 23 of the Indian Contract Act, 1872 which reads "the consideration or
object of an agreement is unlawful, unless...or the court regards it as immoral or opposed to
public policy". Every agreement of which the object or consideration is unlawful, is void.
Therefore, reverse engineering for fair use or honest use of computer programme is also
protected by contract law under the caption of public policy. On the other hand, a computer
progarmme per se is copyrightable but not patentable invention. But a process or method
utilising a computer programme may be patentable invention under Section 2(k) of the Patent
Act in India. A computer as a machine with computer programme when it creates novel, original,
non-obvious method or process to operate any computer or related devices or produces related
devices, it will be patentable if it signifies a systematic method or process which has inventive
steps and industrial application in the era of strong competitive liberalised and globalised ebusiness. Computer programme per se is not patentable. Computer programme with something
else i.e., device, mechanical portion is patentable. When source code of software indicates and
includes the process or help to achieve interoperability of other computer programmes then it
will be patentable as these are disclosed. But, most of the times source codes are not disclosed
i.e. process of application or operation or how devices work to maintain trade secret are not
disclosed. If it is not disclosed, reverse engineering is required for several purposes as
mentioned earlier in this article. In other words if the source code is disclosed, then reverse
engineering is not required.
So, reverse engineering and trade secret are opposed to each other. And where there is trade
secret, there must be scope for reverse engineering to control it, to develop and progress, to
achieve interoperability, to improve computer software.
VII. Suggestions
1. The patent law needs to be altered to include clear provision regarding trade secret along with
its clear definition and penalties for contravention in natural as well as cyber world. Where
inventors of computer software wish to keep their inventions secret to win competition in global
computer software related business fulfilling all legal requirements, in such a situation, trade
secret must be allowed to inventors or so called proprietors subject to reverse engineering.
2. Naturally, people may like to keep secret and confidential, any new and useful innovations,
concepts, ideas relating to certain research or development etc. To keep it secret is one strong
mode of protection from theft of invention, innovations or intellectual creation. Therefore, in
case of trade secret the owner does not have exclusive right to exploit the subject-matter or
prevent others to independently innovate the same process or discover it or reverse engineer
the same to learn more about it because in trade secret novelty is not the essential requirement.
3. There is need to develop trade secret programme for their employees and officials.

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4. There is need of proper control over employees and others who have access to computer,
computer system and network of company and related information.
5. Precaution to be taken while dealing with other companies through multimedia technology in
the era of communication convergence.
6. For trade secret the proprietor has to alert that information must not be known to outsiders in
any way. It must only be disclosed to trustworthy employees with undertaking that they shall
not disclose it to outsiders.
7. The proprietor has to impose restrictions on the access to secret information by standard
security measures and by limiting individuals who may know it under a written agreement.
8. Standard of protection has to improve giving heavy efforts e.g., (a) stamp over information
such as "confidential", (b) maintaining-login system with secure passwords, (c) destroying or
erasing information after reading, (d) encrypt documents before sending, (e) restriction for
downloading or printing, (f) using non-discloser agreements with receivers of information.
9. The Economic Espionage Act 1996 in the U.S.A provides that misappropriation of trade
secrets is a federal criminal offence subject to forfeiture of property, fines and imprisonment.
India too must recognise it as crime by precise legal provisions.
_______________
1. Secretary guilty in Coke trade secret case, Atlanta, Feb. 2 (UPI), Copyright 2007 by
United Press International, the Atlanta Journal Constitution reporter cited in
http://www.DailyIndia.com, 2nd Feb. 2007.
2. 416 U.S. 470 SC.
3. For details see Lewis C. Lee. J, Scolt Davidson, Managing Intellectual Property Rights,
(Wiley Law Pub,) NY 1993 pp.123 - 125.
4. Frank, 1998, p.73 cited in Stacey l. Edger, Morality and Machines perspectives on
computer ethics, (J&B pub.)1997, p. 113.
5. Ibid.
6. The term 'Computer' is defined in section 2 of the Copyright Act, 1957 as all
information processing devices.
7. Justice Yatindra Singh, Cyber Laws, 2nd ed. (ULP),2005, p.54.
8. The Patent (Amendment) Ordinance, 2004; (w.e.f. 1-1-2005), sec.3 (b).
9. Came into force on 1st January, 2005, .
10. The Patent Act,1970; Chapter IV deals
application in which the word "publication" was
and by the same amendment section 11A was
applications by the controller. This section
(Amendment) Ordinance 2004.

with publication and examination of


inserted by Amendment Act 38 of 2002
inserted which deals with publication of
was again changed by the Patents

11. For details see Section 11A of the Patent Act, 1970.
12. For detail see http://www.naavi.org;
http://www.telegraph.in on 9th Feb, 2007.

wwww.ciol.com

etc.

1993.

See

also

13. For details see http://www.ciol.com, news, Thursday, May 8, 2003, Advertis
14. For details see http://www.naavi.org; wwww.ciol.com etc. See also the times of
India, Kolkata, on June 30, 2005.

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15. For details see http://www.ciol.com, June/July, 2005/news.


16. No. 409 US 63 (1972)
17. Et al 1981, p. 326
18. 149 F. 3d. 1368 (1998) cent. Denied 119 S.ct. 851 (1999) cited in F.L.R.A.S. "Cyber
law Text and cases" 2001 (Sw college pub.) p. 84.
* Lecturer, Department of Law, University Of Calcutta. Formerly Faculty of Law, the W.B.
NUJS, Kolkata, SCLC (Kolkata) and YC Law College (Pune). LL.M.(Pune University),
Pursuing Ph.D. programme in Cyber law under Prof. I.G. Ahmed, Dean of Faculty of Law,
University of Calcutta. Author is grateful to Professor I.G. Ahmed, Dean of Calcutta
University for going through this article.
Copyright (c) Manirani Dasgupta.

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