Should Your Internet-Based Business Apply for a Software or Internet Patent?

Some types of software or internet business methods  may qualify for a patent. However, this doesn’t necessarily mean that you should apply for one. There are several reasons to hesitate.

Internet-based businesses often rely heavily on their intellectual property. Indeed, some types of software or Internet business methods may qualify for a patent. However, a patent is not the right way to protect your intellectual property in every situation. There are some circumstances when you might not qualify, or when a patent would cost you more time, money, and trouble than it is worth.

Factors Weighing Against a Patent

Here are some reasons to potentially skip the process of obtaining a patent:

  • Time horizon. By the time you get a patent, your invention may be worthless. It generally takes two to three years to obtain a software or business-method patent. Given the incredible pace of change in the software and online spaces, your invention may be obsolete and worthless by the time you receive your patent. For a patent to add real value to your business, you need to feel confident that the it will not soon be outdated by newer technology.
  • Uncertainty of software and Internet patents. Because the U.S. Patent and Trademark Office (PTO) has had problems deciding what kinds of software and Internet business methods really are patentable, patents on these inventions are somewhat suspect. Even the fact that the PTO issues a patent does not necessarily mean the patent is valid. It means only that a particular examiner has decided that a patent should issue on your invention. If you should later go to court to enforce the patent, the infringer may be able to successfully prove that the patent never should have issued in the first place. In other words, a judge can (and often does) second guess the patent examiner and—assuming your adversary appeals—an appellate judge can second guess the first judge. This second-guessing routine, which is potentially a problem for all patents, is especially troublesome for software and internet business methods patents. This is primarily because the PTO lacks both sufficient personnel who are qualified to examine software-related applications and comprehensive information about previous software developments (the prior art in this particular field). Simply, it’s well known that many software and Internet business methods patents have been and continue to be improperly issued. The fact that you get such a patent may be little more than an invitation to spend piles of money on lawyers and courts in an unsuccessful effort to enforce it against attacks on its validity. In addition, passage of the America Invents Act has created further confusion in legal circles about the strength of business method patents.
  • Costs and expenses of patents. Seeking and then enforcing a patent can cost a large amount of money. The cost depends on several factors, including the subject matter of the patent, the complexity of the examination process, and lawyer's fees. Unless you do it yourself, you can expect to pay between $3,000 and $15,000 to acquire a software or Internet business method patent. After a patent is issued, the owner must pay maintenance fees to the PTO after 3.5, 7.5 and 11.5 years. Of course, if the patent is challenged, as many are, the costs can skyrocket. Therefore you will want to conduct a cost-benefit analysis, weighing the costs of obtaining and maintaining the patent over its up to 17–19-year life against the probability that you really will be able to commercially profit from it.

Factors that May Lead You to Apply for a Patent

Seeking a patent is not always a bad idea. As a general rule, seeking a software or Internet business methods patent is unwise unless you are reasonably sure that your invention deserves a patent, and at least one of the following is true:

  • You and your company are economically strong enough to fund patent litigation should the need for it arise (patent litigation is expensive because you must hire specialized lawyers, with costs commonly adding up to in excess of $100,000).
  • You are stubborn and savvy enough to take time to understand how the patent system works and willing to do some or all of your own legal work (a good-sized hill to climb, but others have done it, creating significant savings).
  • The innovation is sufficiently important to another company to cause it to come to terms with you if you have the patent (by purchasing your patent rights or paying you for a license to use the innovation).
  • You own a lot of patents and are a big enough player in the industry to wheel and deal with other patent holders by trading them the right to use your patents in exchange for your being able to use theirs.
  • You know your idea will change the course of a particular field, and without a patent on it you risk forfeiting the credit and profit from the idea to others, who may then obtain their own patent and freeze you out.
  • You think the patent will impress prospective financial backers that your business really is special (venture capitalists have been known to tell start-ups to come back and see them after they have obtained a patent).
  • You are looking ahead to possibly selling your business and want to increase its value.
In short, while patents on software and business methods are not always the right solution for businesses, particularly new businesses, they are occasionally critical in order to ensure IP protection.

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