In today’s software-centric economy, software patents can provide an invaluable asset to any business. The rapid integration of software, Artificial Intelligence, and Machine Learning has increased efficiency and production in nearly every industry. Software patents protect businesses from infringement and arm patent holders with a competitive advantage over their marketplace and provide short and long-term monetization strategies. This article will provide you with all the information you need to know about how best to protect your software and whether a patent is right for you.
How Can Software Be Protected as Intellectual Property?
Software can be protected as Intellectual Property (IP) in several ways:
1. Patents: Software is patentable subject matter if properly drafted and claimed in your patent application.
2. Copyrights: Software code can be copyrighted, which protects the specific expression of the source and object code.
3. Trademarks: Trademarks protect the name, logo, slogan, and branding associated with your software platform to ensure consumers can identify the source of your software and not be misled by confusingly similar products.
4. Contracts and Licenses: Software companies can dictate the terms and conditions of their software use through proper software licenses and agreements.
5. Digital Rights Management: Software companies can employ digital rights management to restrict how their software can be used or modified.
6. Trade Secrets: If your company has proprietary software that you do not wish to publicly disclose, a trade secret may be the best option.
Can Software Be Protected with a Patent?
Absolutely! Software and software-related inventions are patentable subject matter if properly claimed in your software patent application. According to the United States Patent and Trademark Office (USPTO), a software process refers to an act or series of steps your software executes. Thus, the patentability of your software-related invention stems directly from how the patent application is drafted and how the process or method is described. To ensure your software is patent-eligible subject matter, your software application must be directed to the process or method of execution of the software on a computer or mobile computing device and include all accompanying hardware or components where the software is implemented.
Consider The Advantages of a Design Patent for Your Software
Design patent applications can provide significant legal protection for your software. They can provide faster prosecution time, higher allowance rates, and lower attorney costs and USPTO filing fees, as compared to utility patent applications. Design patents can be drafted to protect the Graphical User Interfaces (GUI), loading screen changes, and other ornamental elements of your software. Your GUI may be patentable and may meet the “article of manufacture” requirement if your GUI’s two-dimensional image is shown on a computer screen, tablet, or mobile device.
Your GUI design patent application may include multiple embodiments if those embodiments relate to a single GUI design. Design patent applications should include figures with at least one area in dashed or broken lines, and an outer boundary of the device should be shown in broken lines. A broken line statement is essential in defining what portions of the GUI are claimed.
Why Startups Should Consider Software Patents
While it may seem expensive for any startup to file a patent application on its software platform, a strategic patent portfolio will enable a company to license its technology and immediately collect a royalty, ultimately retaining ownership of the intellectual property. While startups are often more concerned with marketing and advertisement budgets, a wise patent strategy can be its best long-term investment.
For most startups, their proprietary software, whether it’s SaaS, AI, IoT, Cloud Computing, BC, Big data analytics, and Mobile Apps, bases their entire valuation around their proprietary technology and software within these systems. While most startups will raise and spend millions of dollars on software development, they often forget that a patent is the legal barrier that will keep competitors from copying and replicating their platform.
Software Patent Monetization Strategies
Software patents have the potential to provide more value than merely serving as legal protection. Strategically monetize your software patent, and you’ll reap the rewards in due time. Your software patent provides you with the sole right to use, make, and sell this proprietary tech for two decades. Instead of strictly using the software for functional purposes, consider its merits as an asset that entices investors, creates opportunities for licensing, and allows for mergers and acquisitions.
One of the best strategies to monetize your patent rights is through licensing. A patent license is an agreement permitting another entity to market and sell your software patent for a defined duration. This licensing agreement not only generates immediate revenue for both parties but also ensures you ultimately retain ownership of the software innovation after the licensing agreement expires.
Through licensing, you benefit from consistent royalties throughout the duration of the licensing agreement term and maintain ownership after the expiration of the agreement. Such licenses can also expose your software to a broader domestic and international audience, leading to future exclusive and non-exclusive licensing and acquisition opportunities. For example, Qualcomm, Nokia, and many IP giants look to licensing patents as a key avenue for return on investment when they license them out both to competitors and companies in neighboring industries.
Patent Purchase Strategies
In addition to licensing opportunities, patents can be acquired through alternative methods such as a purchase/sale of a single patent, acquisition of a patent portfolio, mergers and acquisitions of company IP assets, and joint ventures. Remember that a patent acquisition strategy may apply to an individual patent or a family of patents related to a specific AI platform or industry.
Regardless of the end goal of any company, acquiring patent protections yields both short-term and long-term benefits and may provide both offensive and defensive strategies. In the short term, the inventor would see an immediate financial return and mitigate any future costs that come with potential litigation or maintenance fees. In the long term, the sale of a successful patent may bring future licensing or resale opportunities for up to 20 years.
The most recent examples can be found in the numerous acquisitions of smaller AI and technology companies by the Big 4 companies: Amazon, Apple, Google, and Meta. While Amazon once started out as an online bookstore, they have continuously evolved to expand the scope of their marketplace dominance by acquiring companies and their related patent and intellectual property portfolios over the past two decades. For example, Amazon has expanded its home security footprint with the blockbuster acquisition of both Ring and Blink in 2018. Not only did these companies instantly receive a massive financial return but were able to see their patented products showcased on a global scale.
Can Software Be Copyright-Protected?
Yes, as the Northern District of California held in 2008 in Penpower Tech. Ltd. v. S.P.C. Tech., software is a “proper subject matter for copyright protection.” So, what is exactly “copyrightable” when it comes to software? Per the U.S. Copyright Act, software can be protected with a copyright as “a set of statements or instructions to be used directly or indirectly in a computer to bring about a certain result,” and further, because the code can be fixed in any electronic, print, or other medium. (17 U.S.C. § 101).
This form of legal protection safeguards code that is read by computing machines. A software copyright is obtained by software owners and developers to prevent competitors from stealing the proprietary source and object code of their underlying software platform.
Copyright law centers on the legal right of a party to determine which parties are allowed to obtain and distribute the software, along with the right to prosecute those who use that software in an unauthorized manner. A copyright precludes another party from reproducing the software, sharing it, copying it, or using it in an unauthorized manner.
Copyright vs. Patent: Key Differences
There are substantive differences between copyrights and patents. Copyrights safeguard the invention’s expression, including sequences and structuring, and are commonly obtained for the source code of software. Patents, on the other hand, afford much broader protections as copyrights would not stop someone else from creating their own code that implements the same method.
A patent ultimately precludes competitors from using algorithms or processes in an unauthorized manner or creating a program that similarly performs the same function, regardless of how the code is written. If you are curious as to which form of intellectual property protection is ideal for your unique software, don’t attempt to piece together this complicated legal puzzle on your own as it might be optimal to obtain both forms of protection. Our intellectual property attorneys are here to help.
Maintaining Intellectual Property Rights When Hiring
Employee and contractor contracts and agreements can be a first line of defense in preventing software and trade secret misappropriation. Although many people only skim contracts and agreements, you should actively encourage new hires to take their time and digest the words they are agreeing to sign and ask questions should something seem ambiguous or unclear. This moment of pause and reflection can be a good practice because when a new employee signs a contract or agreement, they are affirming their intent to be bound by its terms.
The action of signing will create a conscious impression in their mind about their obligations, while the actual reading and review of the terms may have a longer subconscious impact that reverberates for a longer period. This can foster and instill a sense of duty and obligation in the signee that may otherwise not be underscored if document preparation and execution is not a ritualized and formalized procedure. (For more information about protecting work product when using contractors, check out our article here.)
Non-Disclosure Agreements (NDA) and Non-Compete Agreements serve an important part of IP protection if properly drafted and have become a staple in our culture, from tell-all books, settlements, business deals, and even to protect a family member’s “baggage” from being aired. However, growing resentment towards restraints on trade and restrictions on labor rights have moved some courts to disqualify Non-Compete Agreements and even some NDA’s.
However, a narrowly drafted NDA between parties that is not overly broad or too restrictive will always remain a valuable legal shelter. Employers need to ensure they don’t simply draft a “cookie cutter” or “one size fits all” NDA and should periodically perform checks on former employees to see where they are working. In the event your SaaS business has reason to believe the former worker is engaged in similar or identical work for a competitor contrary to the provisions in an NDA, following up and filing a lawsuit against them may be your best option.
Invention assignment agreements guarantee that the value created by employees, including software, belongs solely to the business as opposed to employees. Moreover, it is in your interest to protect your human capital investment along with your software by creating and enforcing non-solicitation and non-competition agreements. Such agreements prevent employees from departing to potentially greener pastures at competing businesses within your niche or industry. To be more specific, non-solicitation provisions ensure employees do not hire staffers from your business.
How To Stop Competitors from Stealing Your Software Features
If you find that your company’s intellectual property has been infringed upon by a competitor, there are a few steps that you can take to protect your rights. The first thing that you should do is talk to an attorney to assess the situation and determine whether legal action is necessary. Depending on the situation, some options may be more appropriate than others. For example, a cease-and-desist letter may be sufficient to persuade an infringer to stop infringing in some cases, while a patent reexamination or a lawsuit might be more warranted in other cases.
Avoid venting your grievances publicly or on social media, especially before speaking with an attorney, as you might be disclosing confidential information, making admissions that could be used in court against you, and even exposing yourself to a defamation lawsuit. Ultimately, every situation is different, so it is important to carefully consider your options and make an informed decision about how to proceed. Whatever course of action you choose, it’s essential that you act quickly to protect your company’s interests and safeguard your intellectual property from further infringement.
Work With an Experienced Patent Attorney to Get Your Software Patented
Patents are invaluable assets that will bring your company strategic value. Patents will not only protect your proprietary software from infringement, increase the valuation of your company, provide a competitive advantage in the marketplace, but will provide both short-term and long-term monetization strategies. The Rapacke Law Group is a fixed fee (no billable hour) patent and intellectual property firm designed for software and technology companies looking to protect their most valuable intellectual property assets. Our firm provides one transparent fixed fee for all patent and trademark matters without the hassle of surprise costs or nickel-and-dime billing used by traditional law firms.
In addition to a fixed-fee billing approach, RLG offers a money-back guarantee on all prior art searches, trademark applications, provisional patent applications, and design patent applications. To be clear: should our team determine that your invention is not patentable considering the prior art, a full refund will be provided. If patentable, we will credit the cost of your search towards your new application. For the trademark and design patent applications, this means that if your application does not receive a notice of allowance for any reason, we will provide a full refund.
Our trademark and design patent application packages include all search, preparation, office action, USPTO correspondence, and filing fees. Please schedule a free IP strategy call or take our Intelligent IP Quiz to see what protection is best for your invention.
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