As an IP Strategist, the benefits of patenting for software-based companies have always been tough for me to see; however, recently it has become even more clear that entrepreneurs with businesses based on software processes and, more specifically, data processing-related business models, need to re-think patents as a value creation mechanism. In short, as a result of a recent Supreme Court Case, the US Patent Office is putting forth stringent guidelines for patent examiners that caused a leading patent commentator to state: “It appears that applications whose inventive features are found in software or information processing will now have a difficult time being patented.” Anecdotally, I have also heard that those who buy and sell patents have substantially pulled back on their activities related to patents that “look and smell” like they cover software in one form or another. This definitely signals a perception that software-related patents have experienced a decline in market value.
We should not expect the imminent demise of software-related patents, however. There will certainly be significant push back from large companies like IBM, Microsoft etc., that regularly generate patents with software-like features as an element of their business strategies. This is especially true since the SCOTUS case retroactively applies to patents already obtained by them that are currently incorporated into their market valuation and the attendant loss of patent value will dramatically influence their bottom lines. Moreover, the many patent professionals who earn their livings obtaining and enforcing patents in the software space also will not readily accept what will become greatly diminished value for their very lucrative professional services if software patents fall by the wayside. As a result, the “powers that be” will probably be successful in keeping software patents viable over the long-term.
The current uncertainty will nonetheless greatly affect smaller companies that seek to obtain patents as part of their business strategies. Start ups by definition must expend their limited resources on bets that will most likely allow them to reach business success. Thus, for start up companies, the currently unsettled nature of software-type patents validity could result in considerable risk that money and time expended today for patent protection will, at a minimum, fail to create realizable business value over the short term. More significantly, the back and forth regarding the appropriateness and viability of software-type patents between corporate America, their lawyers and the 3 branches of the US government will likely not be resolved for many years. Because most start ups do not have the resources to wait out this battle, their leadership must instead focus on strategies that are more likely than patents to allow them to create and maximize the value of their validated business models.
Should software entrepreneurs elect to go forward with patents even in the face of the current uncertainty, they should do so with the expectation that the patent filing may end up being more trouble than it is worth as the process drags on and they should be ready to abandon their efforts when cost gets too high or the scope of the resulting patent claims will not provide relevant business value. Additionally, they should take great care to ensure that their attorneys do not file claims that have the characteristics that will make the case fall into the realm of “unpatentable subject matter,” a space where data-processing features in claims will definitely be suspect. And, even if a start up is able to obtain a patent on a software-type invention, uncertainty regarding its value in the market will be sure to continue until the various US courts lay down clear cut guidelines on patentability. Given the glacial speed that cases wend their way through the courts, it should be apparent that software patent validity will be unsettled for many years to come. In short, software-related start up companies should understand that patents can comprise only a single “tool in their strategy toolbox,” and that they must work diligently to identify, capture and leverage other ways to maximize their business value.
In future posts on this blog, I will be discussing how start ups can work with their patent counsel to create more valuable patent protection. Some of these suggestions will be useful to assist software companies that wish to try their hand at obtaining patents even in view of today’s challenging legal environment keep away from clearly problematic subject matter. In short, all potential patent filers, and software companies especially, must take a strategic approach in order to obtain patent protection that “makes it cheaper to go through them than around them.” I look forward to sharing these viewpoints with you. In the meantime, feel free to contact me at jhutter@leanlegalteam.com or review the extensive archive of IP Strategy information at my IP Asset Maximizer Blog.
(photo credit: http://www.tricountyrecycle.com/managing-my-materials/rethink)
