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Software: To Patent or Not To Patent?

Author: Saleit Shahar, Attorney at Law and Partner in the Hi-Tech Practice of the Reinhold Cohn Group

When developing technology, especially in the Hi-Tech field, the question arises as to whether the technology development should be patent protected. The short answer is yes. The longer answer is more complex, and involves several considerations, including the limited financial and human resources startups usually have.

One should bear in mind that patent protection starts with filing a patent application, which is a business tool in its own right, and which should be undertaken in the initial stages of the startup. Entrepreneurs often hold some common misconceptions of patent protection, specifically for software related inventions. This article addresses some.

1. Can software inventions be patented?

If the software invention involves a technological solution to a technological problem, then the answer would be yes. Many areas, such as Big Data, machine and deep learning, cybersecurity and Blockchain, concern a technological solution to a technological problem, and hence can be patented (provided that the application meets the other legal requirements). It may become more challenging if the invention is a simple application which does not involve a complex technological solution. Protecting software inventions and products with patents is considerably important given the potential ease it takes to develop a competitive product, once it gets published.

2. Can apps be patented?

The criteria for patenting software apps are not different from those relating to patent protection for other software products. For simple apps that do not address any technological problem, obtaining patent protection will be challenging (most apps are indeed not patented).

3. Are there other non-patent ways to protect apps?

Yes, through design copyrights and trade secrets. New UI designs can be protected by designs, alongside patents. Such protection is of great value in apps where users develop UI dependency, which reduces the switching to a competing app. The software code itself is protected by copyright, yet not the algorithm. Along with the above, some technology aspects may be kept as trade secrets.

4. Applying for a patent is a great financial expense. The limited financial resources should be invested on technology development

Patent filing is friendly in cash-flow management terms. The first application involves a relatively low initial expense. This first application can serve as a basis for obtaining patent protection around the world. In a one year term, one has to decide in which countries to file the patent application. Using international filing route, this decision (and costs) are postponed for an additional 18 months, without losing the rights of the first filed date.

5. Once investment is obtained, part of the investment will fund the patent application

The risk: Exposure to investors eliminates patent protection. One of the requirements to obtain patent protection is that the technological invention was not published. Any advertising, including prototype distribution, or pitching to an investor, could rule out any possibility of patent protection. Applying for a patent allows the technology to be disclosed with low concern.

In many cases, an investor wants to ensure that a patent application has been filed for the innovative technology in order to avoid investing money in a venture that can easily be copied by competitors. A patent application indicates the serious commitment of the startup founders.

Yet another consideration concerns collaborating with companies. In many cases, the startup develops a complementary product to a product developed by a multi-international company, resulting in collaborations with the multi-international company. Protecting the technology with a patent application guarantees that the rights on the technology belong to the startup and reduces the risk that the multi-international company avoids the collaboration with the startup, and invest some of its available resources to develop a competitive product.

6. Technology is constantly changing; why should it be protected now, if may become irrelevant?

A patent strategy, which is a business tool for advancing a company’s development and business goals in its current stage, should also be updated to reflect the changes the company is undergoing. Developments and improvements along the way can be protected by additional patent applications, and, in turn, build a quality patent portfolio. Research shows that a wide portfolio of patents significantly increases the likelihood of an M&A event, thereby raising its value; it is therefore important to develop the portfolio and adapt it to the changing needs of the startup.

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