Publications: A More Valuable Software Patent
Drafting stronger license agreement protects both parties - Intellectual Property Developments Affecting Software Companies - Software Piracy

This article was published by the Austin Software Council in the Austin Software Leader

For most software programs, a patent usually provides the strongest and most comprehensive intellectual property protection. Because a patent protects the idea behind the invention and not simply its expression, it is now preferred over any other single type of intellectual property protection, including copyrights. This is true for at least three basic reasons. First, the scope of copyright protection has been diminished by recent court cases. Second, the United States Patent and Trademark Office (PTO) has produced software guidelines that make it easier to understand how to write a software application. Finally, the recent State Street Bank & Trust Co. v. Signature Financial Group, Inc. case(149 F. 3d 1368 (Fed. Cir. 1998)), decided in July 1998, makes any software program eligible for patent protection if the program produces "a useful, concrete and tangible result", even if it does not perform some physical transformation outside the computer. The State Street decision makes even business method software, which was previously excluded, now eligible for patent protection. This expands the type of patentable software to include banking, insurance, and financial programs. But State Street affects much more than just those industries: any useful computer algorithm is now eligible for patent protection.

However, being eligible for patent protection doesn't mean a patent will be granted: the software still needs to be new. The software also must not be obvious, that is, the software program cannot readily be deduced from publicly available information by a person of ordinary skill in the particular software technology area. But lately it appears that the Patent Office has been issuing software patents with claims that are very broad and appear to cover software programs that may not be new and nonobvious.

To understand why this is happening, one has to understand the patent examination process for software. Even though software for controlling the operation of a manufacturing machine was held patentable by the courts in the early eighties, it has taken a long time for the PTO to be convinced that software actually is subject matter eligible for patent protection. Until a few years ago, examiners with computer science degrees were not even hired by the PTO and there is currently a shortage of software patent examiners. In general, a patent examiner is allowed about thirty minutes for reviewing the application after it is filed and about six to ten hours for searching prior art.

Traditionally, most prior art searches conducted by the PTO are done by searching the centralized US patent database. This approach is fine for seasoned disciplines (for example, semiconductor hardware or wireless communication systems) where there is a long history of patent filings and issued patents. However, the vast majority of software patent applications have only been filed in the last few years, so searching the US patent database does not usually produce the most relevant prior art for a software invention.

The most relevant prior art for software is found in nonpatent references such as technical journals, computer science and software engineering books and product user manuals that describe software functionality. Since these types of references are not located in a central database like the patent database, performing a thorough patent search in the limited time the examiner is given is much harder. Because the PTO often does not find the best references, the claims in software patents are sometimes not restricted to their proper scope and may be overly broad-that is, they cover more subject matter than they should. The claims are the part of a patent that defines the technology that is the exclusive property of the patent holder. Overly broad claims are subject to challenge by an infringer that locates relevant references and can result in the patent being declared invalid.

How can you be sure your software patent is valuable? Perform an extensive prior art search prior to filing a patent. An informed inventor is a good source of information about the state of the art in the field. Using the information from the inventor, an extensive prior art search can be performed to locate relevant subject matter in technical journals, textbooks, and system manuals from competitors' products and other patents.

A patent is a legal and technical document, but its value is in protecting your software invention in the commercial marketplace. Before a patent application is written, make sure your patent attorney understands your software, your market and your competition. Knowing these details can be the key to a strong software patent with the right amount of coverage to protect your invention.

Before filing a patent application, think about how a competitor could enter your market. When you review your patent application, also consider how a competitor could design around your patent claims. The patent should be written so that the coverage of the patent makes this difficult. It should also claim and emphasize the important functions of the software that have value in the marketplace. The claims should be written so as to claim only the scope of your invention, not more and not less. The results of the thorough prior art search, along with the knowledge of the inventor and the market, can aid this process.

If you want to expedite getting your software application to issue, make sure that the claims are for only one invention. Many inventors try to put too much in a single patent application. If there is more than one invention, substantial delays can result. Other ways to expedite the patent process include informing the PTO of the results of the prior art search so as to educate the examiner in your software technology area. If your software product is about to be manufactured and your company is awaiting funding, or if your product is being copied, a petition can be field to request special expedited status.

Software should be patented early? A software invention usually exists when the development team understands fully what the software should do. As you continue the design process and find other ways to implement your invention, file more patents to develop a strategic patent portfolio. Do this even if you don't intend to use the new design or implementation to keep your competitors out. Don't let your competitors get patents in these areas instead of you. Remember: without patent protection anyone can copy your ideas and immediately begin competing with your company's products. What's even worse, if you choose not to seek patent protection and a competitor gets a patent on your invention, the competitor may prevent you from producing and selling your own invention. If in doubt, evaluate your market and patent inventions that give you a competitive edge in the marketplace.

Having an intellectual property portfolio with a set of patents that are market driven makes your software invention more valuable. It helps exclude competitors from your market and lets you sell better products than your competitors. The stronger the patent portfolio, the greater the value of your business. This will allow your company to be in a good position to attract investors, plan an initial public offering or be acquired by another company. Licensing or sale of the patents can also be an option to increase company revenue. Licensing one or more of your patents can be a way to settle litigation if your company is accused of infringing another's patent.

Following these strategies can help make your software patent a valuable investment that protects your invention and is a barrier to competitors in your market.