Trade Secret and Copyright Claims Are Not Mutually Exclusive in Software Disputes

Companies confronting theft of proprietary software often treat trade secret and copyright claims as mutually exclusive. They are not. The same conduct may support both types of claims. Source code, technical documents, databases, and other proprietary software-related materials may contain original expression protected by copyright while also deriving economic value from their secrecy. Asserting both claims in appropriate circumstances may meaningfully expand procedural and remedial options.

Cases involving stolen source code or departing employees taking proprietary files, for example, may implicate both claims. Motorola Solutions, Inc. v. Hytera Communications Corp. Ltd. illustrates how the same conduct can support both trade secret misappropriation and copyright infringement claims.¹ Motorola accused its former employees of taking proprietary source code protected by both trade secret and copyright law, as well as confidential technical documents, to Hytera, which used the materials to develop competing radios. A jury found Hytera liable for both trade secret misappropriation of the source code as well as copyright infringement. The Seventh Circuit affirmed $407.4 million in damages under the federal Defend Trade Secrets Act (DTSA), including exemplary damages, and left copyright liability intact while remanding the $136.3 million copyright award for recalculation. Motorola thus secured substantial trade secret damages while preserving an additional recovery for copyright infringement. The case illustrates how pursuing both claims can expand potential recovery arising from the same conduct. 

Companies seeking to protect their software or evaluate potential claims should be aware of three additional considerations: (1) copyright registration need not compromise trade secret protection; (2) the Digital Millennium Copyright Act (DMCA) may provide claims that do not depend on copyright registration; and (3) trade secret, copyright infringement, and DMCA claims provide different damages and fee-shifting remedies.²

Copyright Registration Need Not Necessarily Waive Trade Secret Protection

A copyright owner must register a work before filing an infringement action.³ Registration requires the applicant to submit a deposit identifying the work.⁴ For proprietary software, this requirement may raise concerns about disclosing source code containing trade secrets. For source code that does not contain trade secrets, the applicant submits the first and last 25 pages of the code.⁵ The Copyright Office, however, provides alternative deposit procedures for source code containing trade secret material. Among other options, an applicant may submit the first and last 25 pages of source code with the trade secret portions redacted.⁶ For other types of works containing trade secrets, applicants may request special relief from deposit requirements to protect confidential information, subject to the Copyright Office’s discretionary approval.⁷ Done correctly, an applicant can obtain a copyright registration while preserving trade secret status, making it possible to bring both copyright and trade secret claims based on the same material. 

The DMCA Provides Registration-Independent Claims

Beyond ordinary copyright infringement claims, the DMCA provides two additional claims involving unauthorized access to or use of proprietary materials that do not require copyright registration:  

• Circumvention of access controls under Section 1201. Section 1201 prohibits “circumvent[ing] a technological measure that effectively controls access” to a copyrighted work.⁸ The provision may apply when a defendant bypasses authentication measures or other technological controls protecting proprietary software or databases. For example, in MDY Industries, LLC v. Blizzard Entertainment, Inc., 629 F.3d 928 (9th Cir. 2010), the Ninth Circuit affirmed a permanent injunction against a software developer that sold a program designed to bypass anti-bot software controlling access to certain protected elements of an online video game. 
• Removal or alteration of copyright management information under Section 1202. Section 1202 prohibits “provid[ing]” or “distribut[ing]” false “copyright management information,” which includes information identifying a work, its author or copyright owner, or the terms and conditions for its use, and “remov[ing] or alter[ing] any copyright management information” without authority.⁹ This provision may apply when a defendant removes, alters, or falsifies information identifying a work, its author or copyright owner, or the terms governing its use. For example, in Mango v. BuzzFeed, Inc., 970 F.3d 167 (2d Cir. 2020), the Second Circuit affirmed liability under Section 1202 where BuzzFeed published a copyrighted photograph after replacing the photographer’s attribution with a law firm’s name.  

Damages and Fee-Shifting Diverge Across Claims

Each claim has its own damages and fee-shifting framework.  

• Trade secret misappropriation (DTSA). A plaintiff may recover actual damages and profits, or in lieu of both, a reasonable royalty for the unauthorized use.¹⁰ There is no separate statutory damages.¹¹ Where the misappropriation is willful and malicious, the court may award exemplary damages of up to two times the compensatory award.¹² Fee awards require the same willful-and-malicious showing.¹³
• Copyright infringement. A plaintiff may elect actual damages and profits or, where an infringed work is timely registered, statutory damages of up to $30,000 per work infringed or up to $150,000 per work where the infringement is willful.¹⁴ Both statutory damages and attorneys’ fees require that the work was registered before the infringement began, or within three months of first publication.¹⁵ Absent timely registration, a plaintiff is limited to actual damages and profits.¹⁶ Fee awards are discretionary, turning heavily on the objective reasonableness of the losing party’s litigation position.¹⁷
• DMCA claims. A plaintiff may elect actual damages and profits, or statutory damages, regardless of whether the work was registered.¹⁸ Statutory damages are up to $2,500 per act for circumvention under Section 1201 and up to $25,000 per violation for copyright management information violation under Section 1202.¹⁹ Courts may triple the award for repeat violations.²⁰ As with copyright infringement, fee awards are available to the prevailing party at the court’s discretion but may be awarded even absent a registration (unlike fee awards for copyright infringement).²¹

Companies pursuing or defending against software misappropriation claims should assess trade secret, copyright infringement, and DMCA claims together to account for the full scope of potential recovery and exposure under each framework.