One of the worst kept secrets is the experienced and expected growth in healthcare IT. In 2013, over $650 million was invested into healthcare IT companies, and the trend is continuing to grow. Combined with the fact that healthcare is never going away and will more than likely be one of the biggest industries in light of the aging population, companies traditionally not in this technology space, like Apple and Google, have taken notice. Not only is there intense competition for customers, but there will be significant battles over talented personnel. The question facing companies now is: what are the options for protecting their innovative products from these challengers? There are several options available, but the most important point is that implementation of more than one strategy is the best option for any innovative company.
The most commonly considered protection is obtaining a patent on the innovative idea. However in recent times, patents directed at software ideas have come under significant judicial and administrative scrutiny. In Alice Corp. Pty. Ltd. v. CLS Bank International, et al, the United States Supreme Court articulated a new standard for determining if software ideas are even eligible to be patented.1 The aftermath of this decision is that courts have been more willing to invalidate software patents because the patents were directed at abstract ideas that have been around for a long time but are simply being implemented on a computer or in a computer environment. Indeed, after the Alice decision in 2014, district courts invalidated 32 software patents while only three were found valid. Not only have patents that have already issued been subject to intense scrutiny if enforced, but obtaining patents in this technology field has also become increasingly difficult.
Now, all is not lost for obtaining and enforcing software patents to protect one’s innovative and ingenious product. One must utilize creative and thoughtful approaches in drafting claims and describing the invention in the patent. Such approaches could include focusing the claims to cover ideas related to problems that only occur on the Internet, claiming specific hardware beyond a general computer that implements the idea, and claiming functions or features that increase the efficiency of the computer or network implementing the idea. One should consider providing detailed discussions in the patent about the problems that were being faced, how the innovative idea overcame those problems, and the benefits to the machines and users that are derived from the idea. In the end, one should not consider patent protection as the sole method to protect the innovation of the company.
Another protection that innovative healthcare IT companies should consider is obtaining federal copyright registration for their software programs. Obtaining a copyright registration for a software program is relatively simple and inexpensive. A person must submit an application, a fee, and a deposit of the code to be copyrighted.2 For code to be deposited, one can provide the first 25 lines of code and the last 25 lines of code such that a company does not have to provide the entire source code. The Copyright Office even allows a party to obtain copyright protection for software that does contain trade secrets.
Copyright protection offers several benefits. First, one may be able to seek statutory damages and attorneys’ fees for the impermissible use of copyrighted material. Second, if the registration is obtained within five years from first publication, the accused infringer will have to prove that the registration is not valid. This burden shifting is a significant cost and challenge for the accused infringer to overcome. Third, registration is considered notice to the world of one’s work, making it more difficult for an accused infringer to claim that they innocently used the copyrighted work. These benefits and others, combined with the relative ease of obtaining registration, makes copyright protection an attractive option for software companies.
Another method for protecting the crown jewels of a company’s innovation is the use of trade secret protection. What is a trade secret and what remedies are available for misappropriation of trade secrets is dependent on state law. Nevertheless, common elements are present. A trade secret must derive its value from not being generally known to the public. Moreover and most importantly, a trade secret must actually be a secret. Once the secret has been disclosed to the public, it is no longer a secret. Thus, one must make sure that protections and procedures are put in place and followed by the company.
These procedures can include making sure to mark software confidential; drafting and enforcing confidentiality policies; conducting employee training related to confidentiality; requiring employee and third-party confidentiality agreements; identifying and segmenting confidential / proprietary source code; and dedicating resources to physical security. Obviously, the software must be kept out of open source repositories.
Requiring employees to sign confidentiality agreements provides an additional benefit beyond just providing more support that the company took actions to protect its trade secrets. It also helps to minimize the impact of an employee leaving the company, especially if the former employee is going to a competitor. A well-crafted confidentiality agreement may preclude the former employee from using any of the confidential information he or she obtained while employed with his or her former company. This provides extra protection to dissuade the former employee from using any confidential information, and more recourse options if the former employee does utilize the company’s confidential information.
Now, these options are best used in combination. They each have upsides and downsides that need to be carefully considered. It is almost certain that any one of these options alone is not sufficient to provide the necessary protection a company needs to stay competitive in healthcare IT. Companies should really consider what separates their products from their competitors, and tailor the options to maximize the protections while having the smallest impact on the company’s ability to serve its customers. In addition, having the appropriate protections will put the company in a better position to tap into the substantial investments being made in healthcare IT as investors want comfort that what separates the company from its competitors cannot be easily taken by the competitors.
1 134 S.Ct. 2347 (2014).
2 See Copyright Registration for Computer Programs, available at http://copyright.gov/circs/circ61.pdf
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