Are There Software Trade Secrets?

The Second Circuit today found that there can be software trade secrets under the Defend Trade Secrets Act (DTSA), including executables, code, and all types and forms of information. Thus, in this trade secret dispute between Arcesium and SS&C in the fintech industry, the Second Circuit found that Arcesium can bring a case based on its software executable, its interfaces, and its integration layer being trade secrets. There is often a debate in cases about what level of granularity must be pleaded on software trade secrets, and this case certainly suggests it can be a very broad range from the entire program to certain layers or lines of code.

In addition, the Second Circuit rejected the argument that the executable program could not be a trade secret because third parties could access it. Instead, the Second Circuit stated that whether "reasonable measures" have been undertaken to protect trade secrets depends on "whether there is an understanding of confidentiality" between the trade secret holder and the third party. This, in turn, suggests that whether sufficient reasonable measures exist is a heavy factual issue.

In remanding the case back to the Southern District of New York, the panel said SS&C has adequately alleged the existence of trade secrets relating to the Geneva program, including an executable version of the product and its integration layer, among other things.

The panel also said Arcesium took too narrow an interpretation when it argued that SS&C did not do enough to protect its trade secrets. Arcesium argued that SS&C did not take "reasonable measures" to protect its information since all licensed users can access the program's executable version, but the panel said that view might "create a near-blanket rule that any information shared with a third party cannot be a trade secret."

www.law360.com/...