Patenting Software: The Business Responsible Thing to Do
|Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: August 9, 2010 @ 6:31 pm
The Ramifications of a Political Patent System
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Those who are in favor of open source frequently become near apoplectic at the thought that open source software can be, and in fact should be, patented. The reality is that forward thinking companies that operate in the open source space do make use of the patent system. A quick search of Freepatentsonline.com shows that Red Hat, Inc., one of the preeminent open source companies in the world, is named as the assignee on some 263 US patents or US patent applications. So if you are about to make an enormous mistake and listen to the “open source means free” community, ask yourself why a highly successful company like Red Hat uses the patent system and acquires patents. If patents are good for Red Hat, an open source company not at all enamored with the existence of software patents, then why are software patents bad for you? Shouldn’t you model your business off successful companies?
Whether the “open source means free” community ever chooses to acknowledge it, the truth is that a patent is a business tool; an asset. If you are serious about being in business in the software space you absolutely must have patents. Yet, there are those in the “open source means free” community, which simply a naive anti-patent sector, would have those throughout the open source community incorrectly think patents are evil. They complain that patents shouldn’t be protected by patents and copyrights are enough. They claim it is too hard to figure out if you are infringing. What they are really saying is that they choose not to operate their business affairs in a business appropriate fashion and in order for them to succeed while ignoring best practices and being responsible like every other business and industry they need patents on software to cease. This chicken little approach proves only that they are not business savvy, and that they aren’t paying attention to developments in the industry.
A study conducted by the University of California at Berkeley Law School finds that patents are viewed as essential by investors, finding: that “many potential investors… said that patents were important to their investment decisions.” See Patenting by Entrepreneurs: The Berkeley Patent Survey (Part III of III). In fact, the study revealed that “[o]f companies negotiating with VC firms, 67% report that these firms indicated that patents were an important factor in their investment decisions.” The Study also revealed that the importance of patents was not limited by industry, finding that patents are an important factor with VC firms as follows: “60% for software companies, 73% for biotech, and 85% for medical devices.” The survey of respondents also found “that substantial percentages of other types of investors, such as angels, investment banks, and other companies found patents important to their investment decisions.” So if investors on every level are interested in whether you have a patent portfolio or one in the works, why would you handicap yourself right out of the gate?
Let’s be perfectly honest. If there were proof that showing up to a meeting with a VC or Angel wearing a polka-dot tie would be more likely to result in a deal being reached then everyone would be wearing polka-dot ties to such meetings. So why then with proof that investors value patents would you ever consider walking into such a meeting without a patent strategy? Talk about acting in irresponsible ways! This anti-patent ideology merely gets in the way of doing the business responsible thing. Letting ideology get in the way of doing what is right and responsible is nothing short of breathtakingly stupid!
Even an anti-software patent article by Vivek Wadhwa, which relies on the aforementioned Berkeley Study as well, explains that while an entrepreneur he needed to raise funds. He honestly writes: “I needed to raise financing, and VCs wouldn’t give me the time of day unless I could tell a convincing story about how we, alone, owned the intellectual property for our secret sauce.” He then goes on to explain that those in the software community don’t view software patents as contributing to innovation and, therefore, they should be abolished. So despite the fact that software patents are prized by investors they are evil and unnecessary? That type of ideological buffoonery would be amusing if it weren’t for the reality that it will influence others and start them off on a course destined to result in business failure.
First things first, a reality check. Software patents are not going to be abolished. The Supreme Court had a chance to do just that in Bilski v. Kappos, and 8 out of the 9 justices clearly felt that software should be considered patent eligible. Given that Congress cannot enact patent reform that virtually everyone in the industry has agreed upon, there is exactly a 0% chance they would ever abolish software patents given that would significantly and negatively impact the United States economy and touch a wide array of industries that are increasingly relying on software, a simple example is the biotechnology industry and bioinformatics.
Second, exactly how many large, successful, technology companies do not have a patent portfolio? Those who are predisposed to disagree with whatever I write won’t take my word for it, but why not take 5 or 10 minutes and go to Freepatentsonline.com and search to find out. Here is the search to do — an/”COMPANY NAME”. This will search the assignee field. Be sure to check and search for both issued patents and patent applications. After you confirm that every large, successful technology company you thought of has an interest in patents then ask yourself this question: If it works for them whey wouldn’t it work for me and my company? All of these companies started off small and grew, and they did it with exclusive rights protecting their innovations. So don’t model yourself after companies that fail, and don’t pretend that investors don’t care about patents. All of the evidence is to the contrary. Don’t let ideological buffoons convince you to do what you know doesn’t make sense and isn’t business responsible.
But what about the fact that software patents don’t foster innovation? Yes, there are those against software patents because they claim they stand in the way of innovation. They offer absolutely no proof, yet we are supposed to believe them. They cite the anecdotal evidence of those in the industry who complain they cannot innovate because of patents, but the truth is that if patents stand in your way you were not at all likely to have innovated anyway. Furthermore, most in the anti-software community don’t do patent research and urge others in the industry not to do it out of some ridiculous notion that not knowing will be to their benefit. Not knowing only makes it more likely you will do something that infringes, because there is no innocence or independent creation defense to patent infringement. It also means you won’t innovate because innovation requires finding open spaces and advancing. Reinventing the wheel is not innovative. It is copying!
The truth is that if you are in the software business you are likely to at one point in time or another to infringe a patent owned by another, or at least to be so accused. This is for many reasons, not the least of which is that many of your programmers, even the ones you employ and particularly the ones whom you hire as independent contractors, will be lifting code from wherever they can find it. Even if they are not lifting code from others, many computer programmers show complete and total indifference to the intellectual property rights of others. This means they take no time to determine whether what they are about to do is going to violate the rights of another, or they intentionally ignore patents out of some kind of moral righteousness. Whatever the case, it is really only a matter of time before you have some kind of patent issue on your hands.
So a critically important aspect of software patents is that they offer a form of insurance to the owner. If you have one the likelihood is there are others infringing your patent the same way that there is a likelihood you are infringing patents owned by others. So by having a patent portfolio you can hold others at bay because do they really want to engage in a patent war? No. Not even Microsoft wants to engage in patent wars, which is exactly why they have for years claimed that open source software widely violates their patent rights. They know full well that if they launch a patent infringement lawsuit then the Red Hats of the world will launch back because it is virtually guaranteed that Microsoft is infringing at least some of the rights of the various open source collectives, which operate as patent pools.
The trouble with software patents is in not having them. Without a software patent or a growing portfolio it is harder to attract investors and you are a target for others with software patents rather than an adversary that needs to be respected. We all know it is already hard to attract investors. Do you really need to make it any harder? We all know that in the United States it is easy to launch a lawsuit. Do you really want to take away the mutually assured destruction calculus and let a big bully of a Mega Corporation to see suing you as a no-lose situation?
Those who dominate most of the so-called debate, which is really little more than unenlightened vitriolic criticism, simply do not want patents period. They choose to ignore the benefits of the patent system and counsel inventors and businesses to forgo patent protection out of ideology, not as a result of any well considered and developed business plan or strategy. They also like to pretend that the software industry is different, but it is not. Business is business and a patent is an asset like any other, with the difference being that is is more valuable than virtually any other assets you might possess. But that presupposes you seek to possess a patent.
The software industry is not isolated and is not different. The “software inhibits innovation” argument is ridiculous and wouldn’t be worthy of even giving it the time of the day if it weren’t such a widely held misconception. The truth is every industry could say that, at least once you realize that the software definition of “innovation” is not what anyone in the scientific community would consider innovation. To those in the “open source means free” or anti-software patent communities the term “innovation” means “independent creation.” The trouble, however, is that those who independently create might not only not be innovators, but they are at least somewhat likely to be infringers.
Finally, let’s assume for a moment that software patents do stand in the way of innovation, which is to ignore all historical evidence to the contrary and to buy into a paranoid fiction. WHO CARES? Do you as a business owner care whether software patents stand in the way of innovation? Of course not. What you care about is making enough money to keep the lights on, employees working and a profit going into your pocket or the pocket of your investors. Whether software patents foster or harm innovation doesn’t matter in the least from a business standpoint. The reality is investors by and large demand software patents and they offer insurance through a deterrent effect, which is enough in and of itself to lead responsible businesses to pursue them.
By all means, if sand surrounding the extremity above your shoulders is to your liking be against patents and for ideological reasons put your company at a severe disadvantage. There is no remedy for an irrational hatred, and no cure for those who choose to engage in business while ignoring sound business practices.- - - - - - - - - -
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.