Risks and Benefits of Securing Software Patent Protection

Risks and benefits of securing software patent protection

In recent years, the courts and the United States Patent and Trademark Office (USPTO) have placed software patent protection under close scrutiny. During this short period, it has become common to categorize software inventions as abstract ideas, thereby rendering them ineligible for patent protection under 35 U.S.C. 101. As a result, those seeking software patent protection must carefully weigh the risks and benefits unique to this field.

1. Advantages of a Software Patent

The primary benefit of a patent is that it grants the owner exclusive rights to prevent others from making, using, selling, offering for sale, or importing the patented invention into the United States. In essence, a patent allows the owner to demand that competitors cease their activities in the marketplace. For startups or solo inventors, patent rights are crucial because, without the power to exclude, larger companies can outperform them in software development. This is particularly true for software, as larger companies usually possess superior distribution channels, granting them a competitive edge over startups. By securing a patent, a startup may compel the larger company to withdraw from the market, leveling the playing field.

Some startups believe that being the first to introduce a product provides them with a first mover advantage over larger companies. While this may be true, it is important to understand that a first mover advantage and software patent protection offer distinct benefits to startups. The former is a market-based advantage, while the latter is a legal right. Furthermore, a first mover advantage can be weakened or nullified if a startup fails to execute its business plan effectively, allowing larger companies to make headway into the new market. Even if the first mover advantage helps the startup compete against larger companies, it is generally insufficient on its own. Securing a patent on the software invention is essential as it empowers the smaller patent owner to compel larger companies to halt their competition. Ideally, a startup should seek both a first mover advantage and either a pending patent application or an issued patent to compete on equal footing with larger companies.

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2. Cost of Preparing a Software Patent Application

The cost of preparing and filing a typical patent application for software inventions typically ranges from $5,000 to $15,000. If the software is complex or additional work is required in the application’s preparation, the costs may be even higher. Additional costs are also incurred during the patent application examination, such as payment of issue fees and post-grant maintenance fees, which can amount to several thousand dollars.

3. Risks of Pursuing Software Patent Protection

As mentioned earlier, the USPTO has been hesitant to grant software patent protection, often considering many software inventions as abstract ideas, which are not eligible for patent protection. Consequently, the allowance rate for the USPTO’s technical art unit responsible for evaluating software applications has plummeted from approximately 50% to a mere 10%.

While the courts have started issuing decisions to help decipher which software inventions qualify as abstract ideas, the evolution of software patent law has been slow, and the courts are still in the early stages of clarifying the issue. Thus, although the allowance rate for software patents may increase in the future, it remains unclear when the law will reach a more settled state.

4. Distinctions Between Provisional and Non-Provisional Applications

Many startups consider filing a provisional patent application due to the perception that it is a cost-effective option for securing patent pendency. However, a provisional patent application that offers the same level of protection as a regular non-provisional application incurs only slightly lower costs than its non-provisional counterpart. This is because, to achieve equivalent patent pendency protection in a provisional application, slightly less work is required compared to a non-provisional application. The non-provisional application should include a description of the invention, its variants, the minimally viable product or version, and a set of claims addressing the crucial aspects of the invention. These elements constitute the majority of the time spent preparing a non-provisional patent application. However, the same elements must also be included in a provisional patent application to provide the same level of patent pendency protection as a non-provisional application, resulting in similar attorney fees.

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For more information on misconceptions about provisional patent applications, refer to the link below.

Misconceptions of provisional patent applications

The main purpose of a provisional patent application is to delay examination. Unlike a non-provisional application, a provisional application is never examined and does not become a patent. Instead, it remains pending for 12 months, during which a non-provisional application claiming priority to the provisional application must be filed. The non-provisional application then enters the examination queue and, if successful, matures into a patent.

5. Next Steps

In general, it is advisable to file a patent application to secure patent protection for a software invention, considering the significant benefits outlined above, despite the current low allowance rate. However, when seeking patent protection, it may be prudent to minimize upfront legal costs and delay examination expenses (e.g., by filing a provisional patent application) until the software invention proves its profitability in the market. Additionally, delaying examination costs allows the courts and the USPTO to address the legal issues contributing to the low allowance rate for software inventions. The ultimate goal is to secure patent pendency protection for the software invention while deferring examination costs until the software demonstrates profitability and/or the legal environment for patent protection improves significantly.

Feel free to reach out to me at (949) 433-0900 with any patent-related questions or concerns. Don’t hesitate to share this article with your friends. As an Orange County Patent Attorney, I proudly serve Orange County, Irvine, Los Angeles, San Diego, and surrounding cities.