Canada: Why Should I Patent My Software?

Whether or not you choose to protect your software with patents, is a business decision: benefits must justify the costs. It is generally known that a patent may be used to prevent others from copying a product that you bring to market, but the degree of protection and other benefits go much further than that. These additional benefits must also be considered as part of the cost-benefit calculation.

Keep in mind that while you are deciding whether to pursue patent protection, others have already decided and are beginning to paper the industry with patents. It is estimated that 15,000 software patents were granted in 1998 in the United States, and that number is growing every year!

So what are the benefits of patent protection? Well, to begin with:

Patents do not just protect specific products, but endeavor to protect functionality. Therefore, a software patent may cover all the products on the market that are the functional equivalent of the invention claimed in your patent.

In Canada and most countries of the world, the first person to file a patent application has rights to the invention. If you come up with the same invention independently, after someone else has already filed an application, you will have no patent rights. Even if you come up with the invention first, but someone else gets to the patent office before you, the other inventor can stop you from exercising your earlier invention! This is slightly different in the United States, where the first inventor has priority, but again, the United States does not provide patent rights for independent creation. The advantage of holding a patent is that you do not have to prove that an infringer copied, or even had access to your patented product. Under copyright law, however, independent creation is a complete defense. If a competitor creates a functionally identical piece of software independently, they will not infringe your copyrights.

If you obtain patents for functionality that the market demands, it may be impossible for others to enter the field. This is true in new areas of technology, where basic patents may be obtainable, but it is also true in mature areas of technology where small incremental improvements may allow a patentee to gain control of a market. You may feel secure because your products and markets took you years to develop, but you never know what resources a new competitor may have at its disposal. Netscape™, for example, may have been surprised at how quickly Microsoft™ became their equal in the Internet browser market. If Netscape™ had a patented invention in their software that gave them a competitive advantage over Microsoft™, they might have prevented Microsoft’s™ entry into the browser market.

In the fast moving high technology industries of today, a company’s products may have great value one day and no value the next. Good patents claim functionality that is independent of a particular platform or product and may hold its value even when a group of products becomes obsolete. Suppose you decide to sell your company. What is your company worth? If your software does not have patent protection, there is nothing to keep a competitor from producing functionally identical products with different code, so your copyrights will not protect you. Alternatively, suppose your software is very popular, but you are unable to access a large market without venture capital financing? Again, if your software does not have the broad protection of a patent, it has no real value and no one will invest in it.

Patents can be bought and sold, or licensed in whole or in part. Trade secret rights are not as flexible as you must demonstrate an effort to keep the technology secure. This effort may be more expensive than the cost of a patent. Sooner or later, other parties may come to your door with accusations of infringement. A strong patent portfolio may give you assets with which to negotiate settlement via a cross-licensing agreement which avoids court, and may allow you to avoid making cash compensation.

The size and strength of a patent portfolio are also considered to be good indicators of a company’s viability and may be valuable tools in negotiating sales contracts and partnerships. A Strong patent portfolio may also deter others from suing you!

The software patents currently being granted are often criticized as being overly broad. This is the result of Patent Examiners’ reliance on prior patents to determine the breadth of a patent application, which overlooks a great deal of prior software and software related inventions. By filing patent applications, you provide the Patent Office with prior art they may use to properly limit the breadth of your competitors’ patents.

The breadth of an issued patent is important because once a patent is granted, it is held in very high regard by the courts. The party attacking the patent must convince the court of its invalidity in spite of the expert assessment of the Patent Office. The courts describe this showing of invalidity as "not an easy one to discharge."

Why face the uphill battle and expense of attacking a patent in court when it could be narrowed by the Patent Office before being granted?

Furthermore, waiting until you are sued to begin challenging the validity of a patent has numerous pitfalls. Because it is clearly in your interest to invalidate the patent, the courts are often suspect of your arguments, evidence and expert witnesses, and give the benefit of the doubt to the patentee who followed due process, in good faith, to obtain a patent.

There is a great deal of misinformation regarding patents, which may leave the reader predisposed against them. We will close by dispelling some of these myths:

A. With the current state of reverse-engineering technology, your code is essentially available to your competitors as soon as your product hits the open market. The use of software encryption may make the reverse-engineering more difficult, but not impossible.

As noted above, software code is not required in a patent. As such, even if you describe our invention in a patent, your competitor will still have to write his own code to bring a similar product to market. Even with his own code, your competitor will still be infringing your patent.

A. As outlined above, patents offer many other benefits apart from their enforcement value. Whether you decide to pursue patent protection and the extent to which you exercise your patent rights, are business decisions, which may be based on cost-benefit analysis or strategic policy. Similarly, your competitor’s handling of an infringement accusation will also be a business decision and they may decide to cease production or negotiate a license with you rather than going to court.

The statistics affirm that no one wants to litigate, and few infringement cases end up in court. Having the patents gives you greater control of the situation and helps you avoid litigation.

A. The cost of obtaining a patent varies with the nature of the invention, the breadth of protection being sought, and the countries in which protection is sought. The cost of maintaining an issued patent varies with the number of countries and the length of time it is to be maintained. These costs are predictable, so decisions on how to manage your patent portfolio can be made with reasonable confidence. The decision to pursue patent protection for your inventions is a business decision which must be made in view of the cost of developing and marketing software, the returns either as direct revenues from sales, royalties from licensees, negotiating power, market position, and the security to exercise your invention without fear of being sued. Clearly, the right to exercise a world-wide monopoly for almost two decades is a tremendously powerful business tool.

A. Firstly, the rate of progress in software may seem fast, but remember that the goal of a patent is to protect a broad concept, and not a specific implementation. Recent software history has shown that many broad concepts have quite long lives, for example, "windows" software, LZW compression and machine code compilers. It would be unfortunate to forego patent protection with the expectation that the technology would have a short life, only to have its use outlast the life of a patent!

Secondly, you are not under any obligation to continue paying maintenance fees. You can abandon a patent once it is of no further use to you.

Finally, since the Internet has made software markets so accessible and distribution so inexpensive, a software product with only a short life may yield tremendous revenues. Although the patentee does not require the full length of the patent term, the only protection sufficiently broad is patent protection. The bottom line is that patent protection has power that goes well beyond the courtroom. It has become a fundamental part of the software business model to include patent protection. Ignoring this fact may put your entire business at risk.

While you are trying to decide whether to obtain patent protection for your invention, remember, the clock is ticking. Every day, hundreds of new software patent applications are filed in the United States. Every day you wait, is another opportunity for a competitor to file an application for your invention, and prevent you from exercising your rights. Of course, there are costs and the system is not perfect, but it is clear that in the new millennium intellectual property will play a significant role. If the cost of broad protection is out of reach, narrower protection can be obtained with generally predictable costs. Of course, you get what you pay for, but some protection is better than none at all.

The development and marketing of software technology costs you time and money, and the only way to obtain proper protection is to obtain patent protection. It is your legal right and you are free to exercise it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.