Using Trade Secret Protection for AI IP

Artificial intelligence innovations often consist of several elements that would be best protected by trade secret. A trade secret is any business information that gets its economic value from not being generally known, as long as the owner takes reasonable measures to keep it secret. Protection can last indefinitely while the information stays secret. Sometimes keeping information a secret is at odds with the requirements of obtaining other IP protections, meaning that a company must choose between one form of IP protection and another.

For instance, both patent protection and copyright protection generally require that the applicant seeking protection publicly disclose information related to the innovation. As such, securing patent protection and maintaining trade secret protection are mutually exclusive IP strategies for the same information. On the other hand, copyright protection can be sought in such a way that any trade secret information contained in the copyright can be redacted to maintain the secret status of the information (the Copyright Office lets you block out trade secret portions of a source code deposit).

What Aspects of AI Innovations Are Well Suited for Trade Secret Protection?

Several types of information related to AI innovations are well-suited for trade secret protection, including:

• Technological know-how. How your AI innovation works is valuable business information. If your way of getting AI to work or to implement machine learning is better than how your competitors are doing it, your way gives you a competitive advantage. Knowing how to treat data or the most cost-effective way to run AI in a particular application translates into profits. You can protect the know-how behind your AI innovation by keeping your knowledge secret.
• Algorithms. Algorithms are often what sets one AI innovation apart from another. However, an algorithm on its own is generally not eligible for other forms of intellectual property protection: patent law treats it as an abstract idea, and copyright does not protect ideas or methods. A specific technical use of an algorithm can sometimes be patented, but only by publishing it. By keeping your algorithm secret, others will not be able to use your AI algorithm unless they derive it through independent discovery or reverse engineering.
• Mathematical formulas. Key formulas often drive how a machine learning model processes data. Formulas on their own are generally not eligible for patent or copyright protection, which makes trade secret the natural fit.
• Proprietary software code. Copyright protects the literal text of your code but not the functional processes it carries out. Keeping the code confidential protects how it works, not just what it says.

Can You Protect an AI Model as a Trade Secret?

Yes. A trained AI model, including its weights, hyperparameters, curated training data, and training pipeline, can qualify as a trade secret if it gets its value from not being generally known and you take reasonable measures to keep it secret. The federal Defend Trade Secrets Act expressly covers formulas, methods, techniques, programs, and codes.

Two limits matter. Secrecy ends once you publish the weights, for example as an open-weight release. And reverse engineering is a lawful way to acquire a trade secret, so if you offer the model through an API, use terms of service that bar using its outputs to copy the model.

What Reasonable Efforts Should Be Taken to Maintain Trade Secret Protection

Trade secret protection is great for small companies and startups on a tight budget because there is no filing fee to create trade secret protection. All that is required is that the information that is to be protected is kept secret and that reasonable efforts are made to maintain the secret status of the information. A few examples of reasonable efforts to maintain trade secret protection include:

• Keeping a clear record of what AI assets are trade secret information (and, of course, keeping the record secret).
• Requiring employees to sign confidentiality agreements as part of their employment agreement.
• Requiring third parties, vendors, suppliers, etc. to sign confidentiality agreements.
• Imposing company policies that safeguard company trade secret and confidential information.
• Training employees on how to keep trade secret information confidential.
• Encrypting and password protecting any AI software code.
• Keeping the AI software or algorithm asset out of open source.
• Keeping records of who has accessed the protected code (e.g., using a log-in, log-out system).
• Limiting access to the protected AI trade secrets to only employees who need to have access to it or who are working on the AI code.
• Limiting printouts of the trade secret material and marking any physical copies of the AI code with labels like “Confidential” or “Secret.”
• Implementing physical and digital security measures as appropriate.

How Do You Protect Trade Secrets When Engineers Use AI Design and Coding Tools?

Treat an AI tool like any outside party that could see your secrets. Code and design files entered into a tool may be stored or used by the provider under its terms, and sharing secrets without confidentiality protection can undercut the reasonable measures trade secret status depends on. Practical steps:

• Approve specific AI tools whose terms keep your inputs confidential and out of model training.
• Adopt a written policy listing what may never be entered into a tool, such as core algorithms, model weights, and training data.
• Train engineers on the policy and reference it in confidentiality agreements.
• Block or log unapproved AI tools on company devices, and record which tools were used on trade secret projects.

At The Rapacke Law Group, we help clients with AI innovations decide what to patent, what to register, and what to keep secret. Contact us today for a free initial consultation with one of our IP lawyers.