Updated: Sep 3, 2021
Pursuing software patents can be a tricky process. But when done right, software patents can give your business a competitive edge.
1. ATTRACT VENTURE CAPITAL FUNDING
If you’re a startup or otherwise plan to raise funding for your business, whether through venture capital or other sources, you need to understand where the value is in your company. Having a solid patent portfolio can increase your company’s valuation and prove that you have unique technology on your hands.
2. PROTECT THE FUNCTIONALITY OF YOUR SOFTWARE
As mentioned earlier, copyrights are a more affordable option for protecting your software. But keep in mind that copyrights cover only the expression of your software (i.e., code). So copyrights prevent people from copying your code.
But if a competitor develops their own competing software (without copying your code), copyright would not protect you — even if they reverse engineered your product.
By contrast, patents protect the functionality of your software, allowing you to exclude competing products that perform the same algorithm or computation.
3. GAIN A COMPETITIVE ADVANTAGE
If you have a patent on valuable software, your competitors will have to expend additional resources to deal with the risk of infringing your patent. And even if they manage to code around your patent rights, they might end up with a lower-quality product.
These barriers to entry can be especially useful for deterring large companies that would otherwise have the resources to copy your work and bring a similar product to market first.
4. LICENSING REVENUE
Patents give you leverage to negotiate licenses, which allow other companies to use or sell your software in exchange for royalty payments. Licensing can help generate significant revenue for your business.
It’s a cliche to say that software is ubiquitous in our economy. Virtually every industry relies on software in their products, customer service, or back-end operations. Automotive, airline, oil and gas, banking… even groceries, just to name a few!
You might be able to license your software to businesses in these other industries. But in most cases, entering a new industry requires partnering with a company who already has a customer base and assets within that industry (why did Amazon acquire Whole Foods?).
If you don’t have patents, big players in another industry won’t have much incentive to pay you for your software solution. For example, they probably have the resources to develop their own software if you haven’t created any IP obstacles.
5. PATENT APPLICATIONS THEMSELVES HAVE VALUE
Your business could benefit simply from filing a patent application — even if the application doesn’t mature into a patent, or you never actually enforce its claims.
For example, your patent application might prevent another company from getting their own patent on the algorithm you developed.
Besides, if you don’t want your patent to issue or last for the full 20-year term, you can always abandon it; you won’t be responsible for subsequent costs.
(But if your goal is to obtain an enforceable patent quickly, the USPTO does offer several options to speed up patent prosecution.)
6. GET ACQUIRED
Are you hoping that your startup will get acquired or adopted by a major software company?
All major software companies are filing patent applications to protect their inventions. If you want to attract the big players, it always helps to follow industry best practices.