Failures are valuable IP: Protect your startup’s negative trade secrets; TechCrunch via JDSupra, January 23, 2023

Eugene Y. Mar, Thomas J. Pardini, TechCrunch via JDSupra; Failures are valuable IP: Protect your startup’s negative trade secrets

"Technology companies and start-ups are familiar with protecting inventions with patents, and protecting their secret formulas, source code, and algorithms as trade secrets. But tech companies may not be aware of another powerful form of IP protection in California known as “negative trade secrets,” which are intended to protect a company’s secret know-how gained from extensive research investment about what does not work."

Can Trade Secret Laws Protect Algorithm-Based Intellectual Property? 6 Steps for Employers to Consider; FisherPhillips, December 16, 2022

FisherPhillips ; Can Trade Secret Laws Protect Algorithm-Based Intellectual Property? 6 Steps for Employers to Consider

"Trade Secrets Can Offer Protections to Guard Algorithm-Based Intellectual Property

Algorithm-based AI is well-suited for trade secret protections. It can be difficult to reverse engineer AI. Additionally, protections afforded by patent law are not necessarily the best option due to the length of time required to achieve protections. Rather, consider trade secret protections. They last as long as the secret remains a secret. Simply put, a license can continue indefinitely without an expiration date so long as the conditions of the license remain a trade secret. 

Certain aspects of algorithm-based AI, such as raw data, is not patent eligible. Similarly, information and data sets used for machine-based learning or training models is also not protectable under patent law. The information may, however, be protected as trade secrets. Trade secret laws can protect your company’s data and models and also protect how the company intends to use the information.

You may also be able to protect knowledge about what does not work. Companies create a valuable base of knowledge from failed actions. Notably, failed knowledge is not eligible for patent protection, but it is eligible to be protected under trade secret as a “negative trade secret.” Think of a negative trade secret as the knowledge of what does not work. If another company were to obtain and utilize such knowledge, it would allow them to potentially omit years of research and development, as the correct path of what works would be readily available to the competitor.

Trade secret protections also take immediate effect. There is no lengthy process or specific amount of time or expense required to protect a trade secret. So long as there are “active actions” — rather than passive actions — taken to protect a trade secret, that trade secret can take effect immediately. “Active actions” could include obtaining a non-disclosure or non-compete agreement, but it may be as simple as marketing in a way that prevents disclosure."