The California Court of Appeals ruled that simply using executable machine code does not qualify as trade secret misappropriation if the source code was not acquired, disclosed or used. Silvaco Data Systems v. Intel Corp., Case No. H032895 (Cal. Ct. App., Apr. 29, 2010) (Rushing, J.).
This case focuses on the differences between source code and executable machine-readable code. Essentially, source code is human readable code that is written by a programmer. It can then be converted to executable machine code by undergoing transformation(s) after compilation and linking processes. Silvaco Data Systems develops electronic design automation (EDA) software that companies such as Intel use to develop and simulate their products.
In 2000, in a suit against Circuit Semantics, Inc. (CSI), the court ruled that CSI had misappropriated Silvaco’s trade secrets and that CSI had incorporated them in its own product. After that judgment, Silvaco brought an action against Intel alleging that by using CSI’s software for simulations, Intel had also misappropriated the same Silvaco trade secrets.
California trade secret misappropriation law requires that a trade secret be acquired by improper means, disclosed without the owner’s consent or used without the owner’s consent.
The court ruled that acquisition of a trade secret requires that the acquirer affirmatively “secure dominion over the thing” and not merely passively receive it. The court found that Intel had not acquired the trade secret, because Intel never came into possession of CSI’s underlying source code; instead, it only executed CSI’s machine-readable code.
The court also quickly dismissed the argument that Intel had disclosed the trade secret, noting that since Intel had never acquired the source code, “there [was] no evidence that it ever had the source code to disclose.”
The court, noting that use of a trade secret requires direct exploitation of the secret, also ruled that Intel did not use Silvaco’s trade secret merely by executing CSI’s software because simply executing object code was not considered “use” of the underlying source code. In general, the use requirement is not met when the conduct consists “entirely of possessing, and taking advantage of, something that was made using the secret.” In this regard, the court observed that if every purchaser of a software product was considered a user of trade secrets, it would stunt software sales and serve as a disincentive to innovation.
Finally, the court analogized the difference between knowledge of source code and possession of executable code to a “customer in [a] pie shop who is accused of stealing the secret recipe … [but] does not, by buying or eating the pie, gain knowledge of the recipe used to make it.”