Tweet

Software Patents: Time for a Change

Written by: Martin Zwilling

Article Overview: I always advise software startups to file patents to protect their “secret sauce” from competitors, and to increase their valuation. I don’t have much conviction that it really does stop competitors, but I do know the rule of thumb that every patent will add $1M to your startup valuation for investors, or for M&A exits (merger and acquisition). Yet the software patent process is a mess. I say this with conviction even after I survived the process, and have a software patent pending.

Software Patents: Time for a Change

I always advise software startups to file patents to protect their “secret sauce” from competitors, and to increase their valuation. I don’t have much conviction that it really does stop competitors, but I do know the rule of thumb that every patent will add $1M to your startup valuation for investors, or for M&A exits (merger and acquisition). Yet the software patent process is a mess. I say this with conviction even after I survived the process, and have a software patent pending.

It’s obvious to me that the patent office has been overwhelmed by both the volume of applications and the technology for software patents, and as a result they've made a lot of mistakes. First, the process is onerous, expensive, and takes a lifetime in today’s technology (2-5 years). More seriously, it routinely grants patents that shouldn't be granted. To be patentable, an invention has to be more than new. It also has to be “novel” and non-obvious. This, especially, is where the USPTO has been dropping the ball. Consider one of the first software patents, the Amazon one-click patent by Jeff Bezos.

The problem with Amazon's notorious one-click patent, for example, is not that it's a software patent, but that it's obvious. Any online store that kept people's shipping addresses would have implemented this, and has done so in a slightly different form ever since. The reason Amazon did it first was not that they were especially smart, but because they were one of the earliest sites with enough clout to force customers to log in before they could buy something.

Applying for a patent is a negotiation. You generally apply for a broader patent than you think you'll be granted, and the examiners reply by throwing out some of your claims and granting others. So I don't really blame Amazon for applying for the one-click patent. The big mistake was the patent office's, for not insisting on something narrower, with real technical content.

A lot of companies (Microsoft and IBM, for example) have been granted large numbers of over-broad software patents, and they keep them mainly for defensive purposes. Like nuclear weapons, the main role of big companies' patent portfolios is to threaten potential competitors who sue with a counter-suit.

So what’s the answer? I would argue to simply eliminate the software patent – since software is already covered by copyright and trademark law anyway. The argument is that software by itself is information, not physical. This doctrine already holds sway in Europe, where software is--in theory, whatever national patent offices may do—not patentable. It is in the jargon not “technical.” It is like a piece of music that is loaded into an iPod, or a record placed on a record player.

Others argue that we should fix the problem by eliminating the litigation intensive model, by integrating institutional competition, and by reforming the internal Patent Office processes. To me, these all sound like band aids, rather than a real solution to the problem.

I’d like to hear some actual experiences from the real world of startups and software patents, either positive or negative. I’m a big supporter of nurturing your portfolio of intellectual property, and maximizing your startup’s valuation, but it shouldn’t be just a game.

P.S. Some of the specifics here were condensed from a more extended essay on this subject, “Are Software Patents Evil?” by Paul Graham, 2006.

Related Articles
  Let's Make Software Patents "Defensive Only"
  Bye Bye Business Method Patents
  Weekend Books
  A Patent Search in 7 Steps
  Wikipedia for Patents

Article Tags: 1m, amazon, applying for a patent, clout, conviction, dropping the ball, first software, invention, jeff bezos, merger and acquisition, negotiation, patent office, patent pending, rule of thumb, shipping addresses, software patent, software patents, software startups, technical content, uspto



Related Forum Posts
Re: UPDATES: New Campaign! New Layout! New Ideas! - We've also expanded the list for Contest and All-Time Leaders. It's great to now see David and Yinka on the All Time list and recognize the contributions they've made to the forums!
No B.S. Time Management - A great book I read on Time Management is No B.S. Time Management for Entrepreneurs by Dan Kennedy.
Seek Venture Capital & Funding - Hello, Greetings from India. I am Seeking Venture Capital for Offshore Software Company Start-up. Need advise along with Business Model Sample. I have a basic outline for an offshore company. 1. Technology - like Microsoft Dot Net, Java, LAMP 2. Talent Team - Found Good Technology Developers. 3. Where I can get the leads/potential customers - Leads have been identified who are willing to move forward offshore projects. 4. I do not have resources like funding. It is a very critical factor to me Industries: Manufacturing, Real Estate, Retail, Insurance, Distribution & Logistics, Healthcare, Industry Associations and Software Product Development, Agricultural Industries and Etc. Services: Offshore Software Development Company. Offices to be located: Hyderabad, Andhra Pradesh, India and USA. Products/Services/Applications in areas like POS & Billing, Sales & Distribution, Production Planning, Material Management, Inventory Control, Plant Maintenance, Purchasing, Accounting and Logistics. Dynamic Web Programming with Database Driven Content Management Systems, Online Stores for E-Commerce, B2B Solutions, Community Portals, Website Redesign and Development, Custom ERP with Enterprise Wide Functional Modules such as Marketing, CRM, Accounting, Inventory Control, Sales & Distribution, Production Planning, Purchase & Stores, Logistics and Supply Chain. Seek your further questions and help. Thank you, Best Regards, Jayapratap.
Patent Pending - Patents aren't really my forte - but when you file for a patent, don't they research to find if your product infringes on other patents that are already registered? There are many similar products on the market in all categories. Why do you think that your product infringes on other patents? Have you talked to anyone at the patent office? Or, their website should offer a kinds of information about patents, infringements etc. Chris
Re: How Do You Check Google Ranking? - I often sign out all Google account before checking Google Ranking and i use "Grease monkey" Software which make it very easy by giving the SERP's in serial order.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Why SEO is important for your online success

The Importance of Master Data Management (MDM)

B2B PR – Planning for Success

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.