The patenting of computer-implemented inventions is one of the most controversial and hotly debated topics in IP today. Influenced by lobby groups on both sides of the debate, legislators are under increasing pressure to set out a clear and comprehensive approach to protecting software innovations. On one side, companies and their investors seek to protect their investments and manage risk and, on the other, open-source communities try to defend what they consider to be the spirit of the computing revolution. Each side has their opinions on the true benefits of a patent system and why patents should (or should not) be granted for computer-implemented inventions. Although many may consider these questions to be of historical, social and philosophical importance, they are better left to academia. The reality is that most computer-implemented inventions can be, and are being, patented and that these patents are seen as crucial to many companies and their investors.
Patents are pieces of property under law and can be bought and sold like any other piece of personal property. Accordingly, a company’s patent portfolio has a specific monetary value which is influenced by the market. In many cases, these pieces of property act to increase the investment value of a company, as investors can offset investment risk with the market value of the company’s IP assets, including its patent portfolio. Accordingly, an intelligently acquired patent portfolio can significantly increase the net worth of a company, thereby making it more attractive to investors.
Moreover, patents provide a barrier to entry into specific markets. Although this may seem undesirable to many software developers, investors see this as one of the most important aspects of mitigating risk in an investment. This can be seen from two angles. When considering whether to invest in a business which has not yet entered a market, the fewer the difficulties that business will have to enter the market, the lower the risk will be for the potential investor. Conversely, where a business has already entered a market, a lower investment risk exists where it is more difficult for others to compete with that business.
A computer-implemented invention is essentially an invention which has at least one software related component. Although many of these patents protect a mix of new hardware and new software, in some cases these patents are directed to known systems (e.g. networked computers) which are configured in a new way, using innovative software.
A patent for a computer-implemented invention is a strong right, offering broad protection. Unlike copyright, which only protects the specific lines of code in a piece of software, a patent protects the underlying innovative principles, thereby covering multiple implementations. Moreover, the enforcement of copyright requires the right holder to show direct copying, whereas a patent can be infringed without any knowledge of its, or a corresponding product’s, existence.
An important advantage of using a patent to protect a computer-implemented innovation is that the exclusive right which a patent affords its owner can itself be licensed to others in exchange for royalties or for the right to use other protected inventions. Although licensing may not always be practicable, or even desirable, having it as an option can provide a patentee with further leverage in a fiercely competitive market, thereby giving potential investors even more incentive.
Because the patenting of computer-implemented inventions is a controversial subject, it is often difficult to obtain protection for them in certain jurisdictions. Of Europe, the US and Japan, it is most difficult to obtain patent protection in Europe. That is not to say however that this is not possible. There is an increasing tendency towards granting European patents for computer-implemented inventions, provided that the inventions have what is known as a “technical effect”.
Although the European Patent Convention (EPC) prohibits the patenting of computer programs “as such”, recent case law has had the effect of narrowing this exclusion. In order not to fall foul of the technical effect requirement in Europe, one must merely show that the program is solving a technical problem (thereby providing a “technical effect”) and not only a business problem or an abstract mathematical problem. Today, if it can be shown that a computer-implemented invention solves a technical problem in a new and non-obvious way, it will be considered patentable in Europe.
The importance of patents is growing and many companies are now using the patent system to their advantage. Ignoring IP-related risk is no longer an option for companies and investors, as those who may not want to take advantage of the patent system may still be susceptible to infringement of their competitors’ existing rights.
Although some people may not agree with the fundamental principles behind the patenting of software, software patents do exist and many companies are succeeding in using them to their commercial advantage. Well established technology-driven companies place IP at the very centre of their business development strategies and, because investors are looking to minimise risk and maximise reward when investing, it is also important for start-ups to show potential investors that IP-related risk has been thoroughly considered and that an IP strategy has been put in place.
In the increasingly competitive environment of VC and private equity funding, a failure to adequately protect computer-implemented inventions can undermine credibility. In a marketplace where innovation can have truly global consequences, every opportunity should be taken to realise the potential of IP assets. Those who ignore the potential benefits of patenting computer-implemented inventions do so at considerable risk to their business.