Understanding the relevance of software patent for IT businessesNovember 30, 2020 By Dinesh Parmar
Protection of intellectual property, in the form of patents, trademarks or copyright, gives your products and services a unique identity in a crowded marketplace. It sets you apart from your competition, helping drive traffic and sales, keeping customers loyal to a brand and in turn influencing the purchasing decisions of potential customers.
Since technology can be considered as the backbone of the digital economy, much of its value lies in software. Especially in the IT industry, patent registrations are incredibly important in safeguarding the future of a tech business. They play a key role in increasing revenues, secure reasonable returns on research & development investments and creating healthy competition in the industry, thus providing adequate incentives for investments and festering technological innovations.
Softwares can easily be replicated and knocked off the shelves by competitors, making it incredibly important to get a patent registered for your intellectual properties in the IT industry. Software patents give original ideators a competitive advantage over other creators who will then have to expend additional resources to deal with the risks of infringing on existing patents. These barriers to entry can be incredibly useful for deterring large companies that would otherwise have the resources to copy ideas and bring similar products to the market first.
In case of startups or individual creators who plan to raise funding for their businesses, a granted patent adds value to a business in the long term, which can help attract investors and venture capital funding. A solid patent portfolio can significantly improve the company’s valuation and prove that the business has unique technology on hand. By drafting and filing strong patent applications, the original creators can stop third parties from commercially exploiting their invention or infringing upon its patents. Patents further give original creators a leverage to negotiate licenses, allowing other companies to use or sell the software in exchange for royalty payments, helping the businesses generate significant revenues for themselves.
Holding a unique, patented technology also gives the business more value at exit if the creators are looking to exit the business eventually, or create liquidity through another route such as IPO.
While filing for a patent, it is mandatory for the inventor(s) to disclose sufficient information regarding the patented invention to the public in return for exclusive rights. This allows others, the public and competitors, to access and work on further technological developments in the industry.
Despite the fact that technical functionality is progressively migrating from hardware to software, IP laws for software-related inventions are still unclear in a lot of countries. While some jurisdictions have a very limited scope of protection for software-related inventions, some do not qualify them for intellectual property protection at all.
Based on the differing intellectual property laws in different countries, a distinction is made between patent-able inventions and those that require a copyright in the IT industry. Inventions implemented in hardware are often considered patentable and inventions implemented in software (i.e. computer programs) are protected by copyright law in many countries. While copyrights only cover the expression of softwares (i.e., code), software patents also protect the functionality of the software, preventing competing products from using the same algorithm or code.
Although India was the first nation to provide statutory protection to softwares, it has significantly lagged behind in the area of software patenting. The legal system and regime to deal with IP protection for softwares and computer programs is not clearly defined yet. As a result of this, softwares can, as of now, be protected through copyright, patent and sometimes as trade secrets in India.
After the amendments in Patents Amendment Act, 2003, some inventions were excluded from patent protect; some of which are:
- Innovations including mathematical formulas or business method
- Innovations involving computer programme per se or algorithms
- Creations related to art, drama, music, cinematography or television
- Presentation of information and topography of integrated circuits
- The idea behind doing this was to ensure that only those products and innovations which are capable of use in the industry or are inventive/part of an innovation can be patented.
For many software companies, their strongest assets are their brand, user base and industry adoption. This makes it important to understand that software patents are not just tools to prove how innovative the work is, but that they are business assets that should be pursued only if they can add value to the overall business strategy. In such situations, you can also choose to file a patent or legally protect your intellectual property for a shorter, limited time-frame or use less costly options. To gain maximum benefits from your patent, you should systematically evaluate your inventions for patentability, filter through patentable inventions and pick only those that are most worth pursuing.
At such complicated junctions, the guidance of a software patent attorney or a patent law firm could be beneficial in creating solid patent portfolios that will serve for years to come.
Software patents are thus extremely important to IT businesses for building recognition, generating revenues and fostering innovation.