Wednesday, January 27, 2016

Getting A Software Patent Is Valuable But Frustrating

US_Patent_coverFor a software startup, a patent can be the intellectual property providing the key competitive advantage, or it can be an expensive non-defensible bureaucratic nightmare -- or both. I still generally advise software startups to file a patent as a barrier to entry from competitors and to increase their valuation by investors, but every entrepreneur needs to understand the tradeoffs.

Most experts agree that the software patent process is in disarray, and you can find a long Wikipedia article on the debate, as well as many strong views from key industry players. Some argue to simply eliminate software patents, while others put their hopes in U.S. patent reform legislation and an international Patent Cooperation Treaty to mitigate the challenges.

  1. Every business is global, but patent rules differ around the world. There is no such thing as a world-wide patent. There are at least five major international jurisdictions, and the protection you receive in each depends on meeting the unique required rules and on whether that jurisdiction has any meaningful enforcement mechanism or intent.

  2. The patent application and approval process is expensive and slow. Even if you start with the U.S. and the European Union to cover the largest opportunities, startups who can’t do the work themselves should count on spending $10,000 per patent per area and up to four years for final approval. That’s more than a lifetime in today’s technology.

  3. Patent offices can’t keep up with software technology. It’s impossible for any patent jurisdiction to keep staff up to speed and qualified to validate significant innovations in a complex and rapidly changing technology, where trivial innovations are not obvious. The standard issue patent duration is 20 years, which is far too long in the software business.

  4. The patent application process has become a legal negotiation. The reason that lawyers get large fees for patent filings is that legal negotiation and strategy have become more important than technical merit. Patent lawyers know how to frame claims broadly, with legal wording, to negotiate the success of some at the expense of others.

  5. Patents can become a commodity for buying and selling. Some companies called patent trolls purchase or license software patents to build a portfolio that they can sell to the highest bidder or use to hold startups hostage due to limited resources through royalties and litigation. Rather than protection, this can be seen as a tax on innovation.

  6. Patents are counter to open source initiatives and free software. The free and growing open source software community, which covers most mobile and web apps, oppose software patents as impeding or prohibiting the distribution of free software. By definition, patents limit the commercialization rate and range for a new innovation.

  7. All patents require public disclosure. This is positive, in educating the public by making them aware of an unknown or non-obvious software invention. On the other hand, it can be negative to an entrepreneur inventor who needs more time to capitalize on a competitive advantage or wants to benefit from licensing or sale of the patent.

  8. Unlike hardware, software is already covered by copyright. Copyright intellectual property protection is already given automatically and immediately without the need to register the copyright with a government. Copyright, on the other hand, only protects expression which can be reworked substantially to hide theft without changing function.

In any case, I believe maximum protection for your intellectual property should always be sought by entrepreneurs to increase their sustainable competitive advantage and increase their valuation to investors and potential acquirers.

The smart ones continue to judiciously apply for patents but only in the jurisdictions where the opportunity is greatest, using their own resources to keep the costs down and limiting their claims to only the most defensible and valuable. It pays to understand the tradeoffs, but it doesn’t pay to let an emotional debate stand in the way of your business success.

Marty Zwilling

*** First published on on 01/15/2016 ***



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