Business Planning: Software Patents

Up until the last few years I have not been a fan of software patents. My rationale for my disdain of software patents was purely pragmatic.

  1. Developing approvable patent applications takes significant time from senior engineers which distracts them from their critical responsibility – getting products out the door with which to compete in the market.
  2. Securing market-share is what drives revenues, value to the customer drives sales to gain market-share. Patents do not contribute to success in the market.
  3. Patents do not significantly positively contribute to the valuation of a company with private or public investors.
  4. Software technology changes so quickly and the patent process takes so long, that often the patent is irrelevant by the time it is awarded.
  5. Because software was largely distributed as binary executables, monitoring for and identifying patent violations was impractical.
  6. Many, if not most, “new” ideas in software are not new, just rediscovered by younger engineers with a poor understanding of computing history. Significant prior art should be a barrier to receiving a patent on an idea.
  7. Many of the ideas that could be patented are ideas that your company needs to make ubiquitous in the market so that you can sell value-added solutions across the entire market, not just to a niche proprietary market.

I have had a change of heart. Each of the points above is still true. But reality in the software world is that if you don’t patent your idea, someone else will. Then where will you be?

  1. A patent in the hands of a competitor can undermine your success in the market. (e.g. NTP vs. RIM)
  2. While patents do not positively contribute to the valuation of a company, they may contribute to the willingness to invest in your company.
  3. Lack of patents, in the face of a patent challenge (e.g. RIM), can negatively affect the company valuation and willingness to invest.
  4. Patents are an important part of your “trousseau” if a merger or acquisition partner comes courting.
  5. Patents are an important part of your “war chest” when threatened with a patent suit. (Mutual assured destruction, e.g. IBM vs. Microsoft)
  6. Software technology changes quickly, but often ends up looping back around to re-use or re-purpose old ideas.
  7. New technology allows binary executables to be monitored and eases identifying patent violations.
  8. Apparently, prior art is no longer a barrier to being awarded a patent.
  9. To ensure an idea becomes ubiquitous you need to ensure that someone else doesn’t patent the idea and throttle its acceptance in the market.
  10. You may wish to patent an idea just so that you can throttle a competitor’s solution in the market.

I make these assertions based solely on the pragmatic reality of the software industry, not based on my personal principles and ethics. We live and work in an extremely competitive world. To stand on principle to the exclusion of reality is a sure path to failure.

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