For Software as a service (SaaS) businesses, a patent is an invaluable corporate asset. Such patents give the owners of software the exclusive right to use the technology.  Moreover, it prevents others from making, selling, or importing the claimed software. 

The ability to have exclusive control over the technology makes the business more valuable and desirable as an investment. Thus, a startup’s patent rights are highly attractive to investors, potential partners, and strategic acquirers, and each patent application can contribute at least six figures to the asset column of a company. If your solution to your ideal customer profile is valuable, read more to learn how to protect it.

Benefits Of Patents

The benefit of software patents is that they allow a software company to protect the functionality of its software from being copied by competitors. Patented software is protected from competitors’ copying efforts, which means that a competing company must spend more time and resources developing their product if they want to avoid infringing on your patent. This often puts a deterrent on large companies from copying your software.

In the case of startups who don’t believe in patents, when trouble comes from big competition, the only tool available is to claim the company collapsed because of the tech giant’s anti-competitive behavior.  This was done in Phhhoto v Meta, and again in Unlockd v. Google.  In the case of Unlockd which was on track for an IPO, Google’s anti-competitive conduct started when Google made a “substantial strategic investment” in startup Glance that operates in the same manner and in the same space as Unlockd.  Unlockd’s complaint stated:

“Rather than complete a successful IPO Unlockd’s capital dried up, its partners severed their ties with the company, and the company was ultimately forced into insolvency proceedings around the world, including in the United States.”

“By eliminating Unlockd from the scene, Google had positioned itself to invest in and partner with a company that does nearly the exact same thing as Unlockd, without Unlockd standing in the way. So much for ‘don’t be evil’. ”

“[Google] has acquired monopoly power in multiple digital markets, in areas ranging from online search engines to mobile application distribution, and it uses its monopoly power to strengthen its dominance and exclude its competitors, always keeping in mind its core profit driver: digital advertising. Google’s history affirms the adage that absolute power corrupts absolutely.”

A patent is an essential tool for a small startup to protect itself from competition. It gives the company the legal right to prevent others from developing similar software and capturing market share. While a patent provides some protection against patent trolls, it is also worth noting that patents are not perfect.

Larger companies typically have better distribution channels and can develop competing software much more easily than startups. Even if you are unable to prevent competitors from copying your software, you must pay the licensing fee and ensure that your startup is not impacted negatively by the patent.

While there are some major disadvantages to software patents such as timeliness and cost, it is clear that software patents have the potential to benefit the majority of innovators. A strong patent portfolio means that successful startups like Unlockd no longer have to be bullied or abused by big companies.

Value Of Software Patents To Increase Investor Confidence

The question is: what is the value of software patents to startups and small firms? In the field of software, a patent is an invaluable corporate asset. It gives owners of software the exclusive right to use the claimed technology, and makes the business more valuable and desirable as an investment.

Moreover, it prevents others from making, selling, or importing the claimed software. The ability to protect one’s patent rights may be attractive to investors, potential partners, and strategic acquirers. If your solution to your ideal customer profile is valuable, it is worth considering how to protect it.

A healthy patent portfolio provides startups with another ammunition in the company valuation discussion with investors.  Patents are company assets that amplify the value of the technology.  The value of IP was documented by Forbes, where Kodak sold its 1100 patents for $525 million, Motorola Mobility with 17k patents was acquired for $12.5 billion.  Microsoft bought 800 AOL patents for more than $1 billion, and the sold 70% to Facebook for $550 million.

Small firms generally have a smaller patent portfolio and thus lack the ammunition, but quality counts over quality when it comes to software patents.  Small firms may win individual patent battles, but they usually lose the war of portfolios. Small firms should consider building software patent portfolios for the long term.

Public and private value propositions differ in their respective natures. The public value proposition is generally related to advancing knowledge or solving societal problems. Private value propositions tend to be focused on cost reduction and productivity.

While public value propositions generally revolve around the improvement of human and animal health, they are not limited to these two categories. As such, it’s important to consider how software patents can enhance the value of technology and societal values.

Before 1997, little attention was paid to software patents. Instead, software producers focused on fighting deliberate copyright violations. Recent hearings on over patenting show that software patents are of high importance to small business owners. The European Patent Office (EPO) has endorsed software patents, which are becoming increasingly common. However, these patents have been the subject of a great deal of controversy, both in the U.S. and in Europe.

In addition to allowing new software patents, the USPTO has recently issued revised guidance. As a result, companies may once again invest in building their patent portfolios. By providing examples of valid software patents, it has rekindled startup interests in building a software patent portfolio. Further, the latest trends in software patent enforcement may also boost investor confidence in companies.

Issues With Software Patents

Many developers do not like software patents, believing that they are obsolete by the time they are granted, and that software patents suppress innovation, kill competition, and generate undeserved royalties.

The solution is not to throw the baby out with the bath. The USPTO and the courts are streamlining the patent process and making it harder to patent abstract ideas and granting patents for only true software innovations.

First, the courts and the USPTO have stressed that the underlying mathematics in a software step cannot be patented due to long-standing Section 101 requirements. Thus, abstract ideas are not patentable, but specific software techniques for improving computer performance are patentable.

Second, the computer must perform an innovative process when enabled by the software. The abstract idea cannot be patented just because of its mathematical algorithm. Therefore, software patents should protect innovative ideas that result in tangible performance improvements, not just any ideas running on generic computers or hardware.

Third, software patents need to teach the public of the tangible improvements with a detailed discussion of how the performance increase is achieved. The patent process for software is different from that of traditional hardware. For example, software must be tied to a machine, be new, and not obvious to an ordinary person in the industry. Likewise, a software patent application must contain detailed disclosures and satisfy the requirements of the USPTO and defining what constitutes a claimed invention can be tricky. However, despite these challenges, software patents are granted and those companies with the foresight to obtain such patents have a large market potential.

Cost Of Software Patents

With the various challenges in patenting software, obtaining a software patent is a time-consuming and expensive process.  As a result, many technology entrepreneurs and founders do not pursue them. According to the Berkeley Patent Survey, two-thirds of software entrepreneurs don’t have a patent.

In addition, regulations surrounding software patents are changing frequently. Moreover, describing your product may be difficult.   While the initial filing costs may be low, the lifetime cost of software patents can easily exceed $50,000. Thus, it is best to hire a patent attorney who has experience in this area of law.

The first step in obtaining a software patent involves preparing a prior art search. A prior art search can cost anywhere from $1,000 to four thousand dollars and will identify existing patents and published patent applications that are similar to your invention. These prior art searches can help you determine which path to take when trying to secure patent protection, and which steps may be ineffective. The cost of a prior art search depends on the complexity of your software invention and the attorney you hire to do it.

The cost of software patents varies according to the type of applicant. Micro-entities and small companies need to budget at least $730 to file a patent. However, the costs can go much higher if the patent holder wants to file many patent claims. The costs of professional drawings may also be high. A complete set of drawings can cost $300 to $500, and this is in addition to the filing fees. These expenses are significant.

A basic utility patent can cost $7,000 to $15,000. However, the cost of lawyer’s fees varies greatly. In addition to filing fees, patent attorneys charge an examination fee of $220. These fees can drive up the overall cost of the software patent application.

If you cannot afford software patents, copyrights can provide a cheaper option. They protect the expression of software, namely the exact implementation and prevent others from copying your code.

However, even if a company builds a patent portfolio, such patents may have reduced value to the company if they are not enforced. Since patent enforcement is expensive, few startups can afford it as the cost of software patent litigation can be staggering.  However, in the case of Unlockd, having patents can provide valuable options when faced with a company shutdown event.  As such, a good patent portfolio provides insurance to investors that they can sell the IP and recoup their investments, or they can fund the patent litigation if the economics favor such a decision.

Using a patent attorney skilled in the software art can speed up the process. The entire process can take weeks or months, so hiring an attorney can save you both time and money.  Thus, if you are patenting AI software, it is crucial to hire a patent attorney who is well-versed in TensorFlow, Keras, Scikit-learn, CNTK, Theano, Caffe, Torch, or Accord, especially if you are unfamiliar with the patenting process.

Strategies For Obtaining A Software Patent

In the case of software methods, it is crucial to describe them from three perspectives: the computer system performing the specifics of the method, the user, and the top-level view. The first perspective is useful because of its context, while the second perspective is useful to capture the sum of the data flows. The top perspective, on the other hand, captures the interaction between users and the system. All three perspectives contain elements that can be patentable.

While there are semi-automatic web tools that enable software inventors to file provisional patent applications, the results have been mixed. To maximize the chances of a successful patent application, it is essential to hire a software patent agent or attorney specializing in software programming. Patent agents can maximize your chances of success by providing guidance, and can help you file a software patent. The cost of hiring a patent agent or attorney is a small price to pay for a successful outcome.

It is important to protect your intellectual property, and many software companies consider their technology as their most valuable business asset. They allocate a significant portion of their R&D budgets to patents. Patented products can be excluded from the market for up to 20 years. This gives the patentee a competitive advantage. However, it’s also important to note that patents are territorial, so a Japanese patent is not of much use if it’s not used in Europe.

Getting A Software Patent

Despite the advantages of software patents, software developers should consider their patenting strategy as part of their long-term revenue planning. In many ways, software engineers do not care about patents. They value innovation and being first to market. This is why software patents are an afterthought for many of them.

A software patent is a great way to protect your work. It protects you from third-party design-around efforts of your code.  If you’re unsure if getting a software patent is worth it for your business, there are many things to consider.  The first thing to consider is the time, knowledge, and monetary cost associated with getting a software patent.

But the benefits of software patents can outweigh the risks. When considering whether a software patent is worth it, remember that your software should be valuable enough to warrant the investment. While a tiny amount of money may not justify the patent investment, a significant income stream from your software can make a huge difference.

While getting a software patent can be a challenge, it can give your business a competitive edge. Startups should understand that the value of their company is based on their IP. Patents help you prove that your technology is unique, which will boost your company’s value. Copyrights, on the other hand, are more affordable and can protect your software’s expression, but not design-arounds based on your particular commercial implementation.

If you’re looking to get a software patent for your own software, you may need the assistance of a seasoned software patent attorney. There are many technical requirements that go into obtaining a patent for software.  For example, if you are working on AI systems, before starting to build a machine learning application, selecting one patent approach from the many options out there can be a difficult task. Therefore, it’s important to discuss potentials options with patent attorneys well versed in AI training techniques and open source libraries before making a final decision.

Now over to you

There are many advantages of software patents for startups. As long as you understand the costs and challenges associated with acquiring a software patent, it will give your startup an edge over their competitors. A software patent portfolio can increase the company’s value and prove your technology is unique. Copyrights are another inexpensive way to protect your software and prevent unauthorized users from copying your software. However, copyrights are not as effective because the competition is too smart to copy your executable.  They can bypass copyright protection by rehashing your idea with perfectly legal reverse engineering. In the end, patents can be your most effective weapon to protect your unique idea!