Undoubtedly, intellectual property (IP) use augments economic growth. Industries that use IP account for more than 40% of U.S. domestic economic output, according to the U.S. Patent and Trademark Office’s report, Intellectual property and the U.S. economy: Third edition. In today’s digital economy, much of the value lies in software to drive this growth.
Today, thousands of software patents are filed each month; they help protect computer programs, mobile apps, operating systems, and more.
In this blog, we discuss the history of software patentability, today’s climate, patent application filing requirements, and the importance of patents in an organization’s intellectual property strategy.
First, what qualifies for a software patent?
Under U.S. patent law, the current understanding is that for a software invention to be patentable, it must meet the same requirements that any other invention must meet.
Novelty, usefulness, and non-obviousness are the three requirements that must be met. First, the software invention must be completely new, and public disclosures prior to filing should be avoided. Next, the software should demonstrate non-obvious characteristics. In addition, the application must include the software’s useful features–designed to fulfill the intended purpose.
Software patents through a historic lens
Intellectual property laws protect an invention’s functionality. However, many countries draw a distinction between hardware inventions, which are patentable, and software inventions, which copyright law protects.
The eligibility of software for patents is not explicitly mentioned in U.S. patent law, and historically has been painstakingly avoided by the courts and in legislation.
The USPTO initially viewed most computer programs as unpatentable “mental steps” and resisted granting software patents in the 1960s. The first widely recognized patent was awarded to Martin Goetz in 1968 for a data sorting algorithm, sparking debate about the legal boundaries of software patents.
Throughout the 1970s and 80s, the U.S. Supreme Court considered several cases related to software patents, gradually shifting towards a more accepting stance, allowing for software patents that were useful.
The landmark Alice decision
Despite increasing acceptance, the patentability of software remained contentious, with concerns about “abstract idea” patents.
The 2014 landmark case, Alice Corp. Pty Ltd v. CLS Bank International, increased uncertainty around patentability. In Alice, the patent owner, Alice Corp., argued that its patent claims directed to a computer-implemented financial settlement system (managing escrow debts) were valid because they did not fall into the patent-ineligible category of “abstract ideas.” The Supreme Court unanimously rejected the patent owner’s arguments, holding that the claims were patent ineligible on the basis that generic computer implementation does not change a patent-ineligible abstract idea into a patent-eligible invention.
In its decision, the Court effectively broadened the scope of ineligible subject matter, increasing uncertainty in patent examination. A retrospective USTPO patent examination of the outcomes of Alice actually found the likelihood of receiving a first office action with a rejection for software patent-ineligible subject matter increased by nearly one-third, and uncertainty in patent examination increased by more than one-quarter.
Then, in the USPTO’s April 2019 Revised Patent Subject Matter Eligibility Guidance (2019 PEG), and its subsequent update in October 2019, the USPTO made two adjustments in the form of guidance for examiners. This guidance effectively reversed the upward trend in subject matter eligibility rejections since Alice, and decreased uncertainty in patent examination by nearly half.
The software industry today: to patent or not?
Fast forward to the software industry today. In a digital world in which the Internet, rather than thumb drives or CDs, are the primary channel for software distinction, many technological innovations rely on software advances.
Today, patents can be obtained to protect a wide range of methods, processes, programs, and codes that runs within a system, games, user interfaces, algorithms, and social media sites. Moreover, a patent can cover any technological aspect that enables a computer to carry out an essential function.
However, the test for software patents is still complex, and slow. It can take three years or more to get a patent from the filing date of the application. It’s common for a patent to finally issue only to find the software is now obsolete.
Further, the length of a patent depends on its type. For example, a provisional patent has a term of one year, which establishes an early claim on the concept while the company finalizes its development, while a utility patent provides exclusive protection for 20 years. (An example is Amazon’s “one-click purchase” feature, which protects the functionality of the process that allows customers to buy products instantly with a single click.)
Thus, some businesses instead use copyrights as part of their IP strategy and software licensing as a commercial means. Others keep software innovation a trade secret, rather than pursue a patent.
Pre-application and application filing considerations
For those seeking to protect software inventions through patents, there are several requirements. Of course, prior to starting the process, the invention must meet the novel, non-obvious, and useful patent criteria. It is also critical to conduct a pre-filing assessment, which typically includes the following:
- Patent landscape analysis to identify gaps, opportunities, and threats for a given software or industry;
- Patentability searching for prefiling insight and analysis to craft strong patent claims;
- Competitive benchmarking to compare patent and product portfolios across an industry or vertical; and,
- Freedom to operate analysis to assess infringement risk and software to market faster.
During the filing process, there are specific requirements which require both legal and technical expertise. These include:
- Successful prior art search strategy to look for an existing patent registration for a similar invention, relevant to the specific software technology that goes beyond the abstract idea of software;
- Technical flow charts and drawings that help highlight the specific and broader technical details of the software, and describe the complete functionality; and,
- Written technical descriptions that clearly define the overall functionality of the software. It may include unique features, intended functions, and user interface elements.
Software patents as part of a larger IP strategy
A software patent can be a valuable part of an IP strategy for developing, growing, leveraging, and monetizing a portfolio of IP assets. These include legal protection, monetization through licensing, marketing positioning, and strategy to defend against infringement lawsuits.
When effectively, efficiently, and strategically executed, from prosecution strategies and IP management to enforcement, patents can help drive successful business outcomes.
This blog focuses on the U.S. For information on software patents under multilateral treaties, see TRIPS Agreement, the European Patent Convention, and the Patent Cooperation Treaty.
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