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Who cares about software patent protection in the US? Answer: we all should

Jan 29, 2014

The US Supreme Court is to rule on what kinds of software are eligible for patent protection in the USA.

At the end of 2013, the US Supreme Court gave an order which said that it would hear a case concerning the validity of a patent for a computer system that facilitates financial transactions (Alice Corporation v. CLS Bank, U.S. Supreme Court, No. 13-298).

The case will give the US Supreme Court an opportunity to consider when a patent should be granted for software.  This is likely to be an important case for technology focussed businesses globally not just those based in or trading in the USA.
 

Why is this news?

Big technology companies including Google, Hewlett-Packard and Facebook have previously contacted the US courts to signal their interest in the issue.  However, this is not just a “big-tech” problem.

Even for an SME whose primary market is the UK it is extremely difficult to isolate itself from a connection with the USA (and thereby a risk of infringing a US software patent).  To give three common examples, if a company:

– routes data through the servers based in the US;

– has clients in the US; or

– launches an app through Apple or Androids

It may unwittingly find itself falling within the claims of a US patent.

The damage to companies hit by patent litigation can be huge.  A report from 2011 estimated that litigation by so-called “patent trolls” between 2006 and 2010 wiped $320 million USD from the value of the defendant companies (much of this litigation related to software patents). Recent figures from a US government agency (reported here) showed that software patent litigation accounted for most of the increase in patent litigation between 2007 and 2011.

US software patents pose an increasingly expensive and problematic risk for technology companies on both sides of the pond and of all shapes and sizes.
 

When can software be patented in the US?

This is not a US legal blog but, the take away point is that, currently in the USA it is easier than in the UK to obtain a software patent, including one that enables the computation of a mathematical formula which had previously been done through another method, such as by hand.
 

What risk management options exist?

Typically, three choices, none of which are cheap or assure a company of victory:

1. Commission extensive searches of the US patent registers to try to identify and evaluate any potentially relevant patents and the risks posed. The costs of these searches can be exorbitant, often far beyond the budget of most SMEs.  Even if the cost is affordable for your business these searches are never 100% complete.  No matter how competent the searcher, there may always be a relevant patent which was not returned by the search. Sometimes because there is a lag between a patent application being made and being recorded in the various databases.

2. Attempt to register a patent for your own software.  This will help to give some of your own fire power but it will not protect against other parties with earlier patents.

3. Finally, have a budget for litigation “just in case” and dive in to the market.
 

The future…

Commentators have said that US patent law needs reform and there is some pressure to exclude previously patentable inventions, including at least some software.  This case offers hope that the judge’s will take the opportunity to provide greater clarity on when software will be patentable.

In the meantime if you are concerned that you might need assistance or want further advice on how US software patents may impact your blog please do contact us.

We will blog again as and when there are further updates on this issue.