In the past few years software patent protection has come under intense scrutiny by the courts and the United States Patent and Trademark Office (USPTO). In that short time, it has become commonplace to see software inventions characterized as an abstract idea and thus not eligible for patent protection under 35 U.S.C. 101. As such, for software patent protection, one must take into consideration of the risk and benefits of seeking patent protection that is unique for software inventions.
1. Benefits of a software patent
The benefit of a patent is that it gives its owner the right to exclude others from making, using, selling, offering for sale the patented invention, or importing the patented invention into the United States. Simply put, the patent gives the owner the right to tell its competitors to stop competing in the marketplace. For the startup or solo inventor, the patent right is crucial because, without the right to exclude, larger companies can develop competing software better than startups and solo inventors. This is especially true for software. Larger companies typically have a better distribution channel thereby being able to out-compete the startup. With a patent, the startup may be able to force the larger company to stop competing in the marketplace and equalize the playing field with larger companies.
Some startups believe that the mere fact that they introduced the product first gives them a first mover advantage over larger companies. That may be so, but the first mover advantage and software patent protection provides different benefits to the startup as one is a market-based advantage and the other is a legal right. Additionally, first mover advantage can also be eroded or neutralized if the startup fails to properly execute its business plan and exploit the first mover advantage so that it lasts long enough to prevent larger companies from making inroads into the new market. Moreover, even if the first mover advantage in the marketplace helps the startup in competing with larger companies, it is generally not a replacement for securing a patent on the software invention which could be used to compel larger companies to stop competing against the smaller patent owner. The best scenario would be to have both first mover advantage and either patent pendency or an issued patent to compete with larger companies and level the playing field.
2. Cost for preparing a software patent application
The cost for preparing and filing a typical patent application for software inventions ranges between $5,000 and $15,000. The cost may even go higher if the software is complex or more work needs to be done in preparing the patent application. There are also downstream costs involved in examining the software patent application, payment of issue fees, and post-grant maintenance fees which can amount to at least a few thousand dollars.
3. Risks of seeking software patent protection
As discussed above, the United States Patent and Trademark Office (USPTO) has been reluctant in granting software patent protection. The USPTO and the federal courts have characterized many software inventions as abstract ideas. Abstract ideas are not eligible for patent protection. Since then, the allowance rate for the technical art unit at the USPTO that examines software applications has gone down from about a 50% allowance rate to about a 10% allowance rate.
The courts have begun to render decisions as to which software inventions are and are not abstract ideas that may help the patenting community decipher which software inventions are and are not likely to be eligible for software patent protection. But, the courts are still in the early stages of working through the issue and the development of the law on software patents is slow. Thus, the low allowance rate for the technical art unit that examines software may increase in the future but as to the exact point when the law will become more settled is unknown.
4. Differences between provisional versus non-provisional applications
Many startups want to file a provisional patent application on their invention because of the preconceived notion that the provisional application is a cheap option for securing patent pendency for their invention. However, a provisional patent application that provides the same level of protection as a regular, non-provisional patent application has a cost that is only slightly lower than the cost of a non-provisional application. The basic reason is that to provide the same level of patent pendency type patent protection in a provisional patent application as a non-provisional patent application, the work required is just slightly less for a provisional patent application. The non-provisional application should include a description of the invention itself, its variants, the minimally viable product or version, and a range of claims directed toward the important aspects of the invention and these things take up the bulk of the time spent in preparing the non-provisional patent application. These same things must also be prepared and attorney time spent in preparing the provisional patent application to provide the same level of patent pendency type patent protection as in a non-provisional patent application.
More information on the misconceptions about a provisional patent application can be found in the link below.
One of the main purposes of a provisional patent application is to delay examination. The provisional patent application is never examined and never becomes a patent. Rather, it remains pending for 12 months before which a nonprovisional patent application must be filed that claims priority back to the provisional patent application. The non-provisional patent application enters the queue for examination and if successful matures into a patent.
5. Next steps
In general, it may still be a good idea to file a patent application to secure patent protection for the software invention because of the significant benefits listed above as long as you understand that there is currently a low allowance rate. However, in seeking patent protection, it may be prudent to minimize upfront patent legal costs and delay the examination costs (such as by filing a provisional patent application) at least until the marketing of the software invention proves that you have a profitable product. Also, delaying examination costs allows the courts and the USPTO to work through the legal issues which are the root cause of the low allowance rate for software inventions. The goal would be to secure patent pendency type patent protection for the software invention and delay examination costs at least until marketing proves that the software is profitable and/or the legal environment for securing patent protection significantly improves.
I invite you to contact me with your patent questions at (949) 433-0900. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego, and surrounding cities.