Three years after entering into an oral subscription agreement relating to a specially designed, copyrighted internet-based computer software program, the subscriber stopped paying the required monthly fees. The reason, according to a 10-count federal court complaint, is that the subscriber modified the source code by copying it onto the subscriber’s own server and thereafter used the unauthorized version. This allegedly constituted, among other misconduct, breach of contract (Count VII), copyright infringement (Count VIII), and a violation of the Missouri Uniform Trade Secrets Act (Count IX). The subscriber moved for summary judgment with respect to the trade secrets misappropriation count because (a) the source code had been disclosed to two of the plaintiff’s employees neither of whom had signed confidentiality agreements, and (b) it had been partially revealed to the U.S. Copyright Office. A similar motion was filed concerning the alleged breach of contract which the subscriber contended was preempted by the Copyright Act and, consequently, was encompassed within Count VIII. As explained below, both motions were denied.
A source code that is not publicly disclosed can be a trade secret. So, the principal issue concerning Count IX (trade secret misappropriation) was whether reasonable efforts had been made to maintain the code’s secrecy. The court observed that only the first 50 pages of the code, out of 80,000 lines, had been revealed to the Copyright Office and that, in any event, the Copyright Office limits access to deposited materials. Also, according to the court failure to require two employees to whom the code was disclosed to execute confidentiality agreements, while relevant, is not dispositive since a party need only take reasonable steps (not all possible measures) to protect its trade secret information. Here, those employees’ computers were password-protected and were not freely accessible, and the code was not disclosed to customers. Accordingly, there was a question of fact as to whether the requisite protection of the trade secret occurred.
Preemption of breach of contract. The source code indisputably was copyrighted. The court held that the breach of contract claim was not preempted unless the contract rights were “equivalent to any of the exclusive rights within the general scope of copyright.” Here, the court explained, the contentions were different because to recover for breach of contract, the plaintiffs had to prove both the existence of a valid agreement and contract damages neither of which were necessary in order to establish copyright infringement.
This case, Two Palms Software, Inc. v. Worldwide Freight Management LLC, Case No. 4:10-CV 1045 (CEJ) (E.D.Mo., June 26, 2012), teaches that the owner of a trade secret should provide access to it only to persons with a need to know and should disclose no more of it to governmental bodies than absolutely necessary. Further, the opinion discusses the differences between copyright infringement on the one hand and on the other breach of a contract which relates to copyrighted material.