Top 10 Software Patent Myths and How to Free Yourself from Them

The first software patent was granted in 1968. It’s now been three decades since the “Year of the Algorithm” in 1994, when cases such as In re Allapat, In re Lowry, and In re Beauregard initiated a wave of software patents. Well over half of U.S. patents granted annually are at least “software-related,” and even a cursory search of U.S. patents reveals software patents in fields ranging from encryption to speech recognition to network security.

Why, then, do so many people continue to think that software cannot be patented at all? What explains the stark contrast between the long-standing legal reality and the beliefs of otherwise well-informed engineers, high-tech business people, and even some lawyers?

Demystifying (and Demythifying) Software Patents

One cause of the confusion around software patent eligibility is the inconsistent and unclear rulings issued by the U.S. Court of Appeals for the Federal Circuit (CAFC) and the U.S. Supreme Court. Their attempts to clarify Section 101 over the years often imply that software is not patentable, at least to the casual reader. This misconception is then amplified by oversimplified media reports written by journalists who aren’t familiar with the nuances of the law of patent-eligibility.

Another contributor to misunderstanding is a lack of understanding of the difference between patent eligibility (satisfying Section 101) and patentability (meeting all requirements of Sections 101, 102, 103, and 112). Loose use of “patentable” by the media to refer to both patent eligibility and patentability doesn’t help.

The belief that software can’t be patented is not only incorrect but harmful. Many tech leaders mistakenly forgo patent protection, opting instead to rely exclusively on copyright, trade secrets, and market strategies for protection, leaving their arsenal devoid of crucial weapons.

Hopefully, by the end of this article, you will have a more nuanced understanding of software patents, some of the myths about them, their importance for protecting innovation, and their practical benefits for individuals and technology businesses.

Myth: No Software is Patentable

Myth at a Glance: Patent law does not permit inventions implemented in software to be patented.

The Grain of Truth: Software was challenging to patent until the mid-1990s. Legal developments, such as SCOTUS’ Alice decision, have injected uncertainty into the patent eligibility of software. The USPTO’s patent-eligibility guidance is far from clear.

The Cost of Misbelief: Innovators forgo patent protection for their software-implemented inventions, leaving them vulnerable to competition, as they lack legal recourse against competitors who make, use, or sell those inventions.

Debunking the Myth: The U.S. has granted hundreds of thousands of software patents. Numerous court cases have affirmed that software is indeed patent-eligible under certain conditions. The USPTO’s patent-eligibility guidance includes examples of patent-eligible software and includes pathways under which software can be patent-eligible.

Leveraging the Truth: Obtaining patents can provide significant leverage against larger competitors, enhance a company’s appeal to investors, increase its valuation, pave the way for a successful business exit, and create revenue streams from licensing.

Myth: Software Can Only Be Patented in Combination with Patentable Hardware

Myth at a Glance: Software can only be patented when combined with patentable or otherwise non-generic hardware. Software alone is always patent ineligible.

The Grain of Truth: Including hardware in a software patent claim can help to satisfy the requirements of Section 101, such as by demonstrating an improvement to computer technology. It can be more difficult to obtain an allowance of a claim in which the only hardware recited is generic.

The Cost of Misbelief: Companies that develop purely software-based solutions might erroneously think they can’t obtain patents. This leaves them vulnerable to competition, as they lack the means to legally defend their innovations against copying or infringement by others.

Debunking the Myth: Pure software can be patented if it is new, useful, and nonobvious, and if the claims either are not directed to an abstract idea or integrate that abstract idea into a practical application.

Leveraging the Truth: Understanding that pure software can be patented opens up broader protection options, offering more comprehensive defense against infringement than copyright and trade secret protection.

Myth: Copyright is the Only Form of IP Protection for Software

Myth at a Glance: Software, being protectable by copyright, cannot also be protected by patent. This view stems from the traditional mutual exclusivity of copyright and patent protection in other domains, leading to the misconception that software is only eligible for copyright protection.

The Grain of Truth: Until the mid-1990s, copyright was the primary form of protection for software. Furthermore, software that does not meet the stringent requirements for patentability may still be eligible for copyright protection, making it true in some cases that software can be copyrighted but not patented.

The Cost of Misbelief: Companies often settle for the narrower protection of copyright, which only guards the specific code of a software product against literal or near-literal copying. They miss out on the broader protection offered by patents, which can cover the methods and processes executed by software, irrespective of the code used.

Debunking the Myth: Copyright and patent protection are not mutually exclusive for software. Copyright can safeguard the code itself, while patents can protect the underlying methods and processes performed by the software.

Leveraging the Truth: By understanding the complementary nature of copyright and patent protection, companies can secure both types of protection for their software, thereby receiving the mutually-reinforcing benefits of both.

Myth: Software Products Must be Built Before They Can be Patented

Myth at a Glance: A patent application can only be filed for a software invention once a working version of the invention has been built and tested in software.

The Grain of Truth: Building and testing a software product can make it easier to satisfy the written description and enablement requirements.

The Cost of Misbelief: Companies delay filing patent applications, risking the loss of a critical early filing date.

Debunking the Myth: A patent application for a software invention can be filed as soon as the invention can be described in sufficient detail to meet the written description and enablement requirements. Often this “constructive reduction to practice” can be achieved long before the software is built or tested.

Leveraging the Truth: By filing patent applications as soon as constructive reduction to practice can be achieved, companies can file patent applications and obtain crucial priority dates much earlier than would otherwise be possible.

Myth: Software Patents Are Too Easy to Design Around

Myth at a Glance: Even legally robust software patents are not valuable because competitors can easily design around them, i.e., create alternative solutions that perform similar functions without infringing the patent.

The Grain of Truth: Crafting software patents that are difficult to design around requires meticulous planning, insight, and expertise in both the relevant technology and the art of drafting broad and encompassing patent claims.

The Cost of Misbelief: Companies neglect the opportunity to secure valuable patent protection, leaving them without legal recourse against competitors whose products or services infringe on what could have been an enforceable software patent.

Debunking the Myth: Software patents can be drafted with sufficiently broad claims to cover a wide array of implementations, extending well beyond the inventor’s original design. Such patents can cover not just a specific embodiment but a range of implementations that perform the same function.

Leveraging the Truth: Strategically crafted software patents with detailed specifications and wide-ranging claims can significantly hinder competitors from designing around them. Continuing applications can further broaden and deepen the moat.

Myth: Software Patents Are a Game of Kings

Myth at a Glance: The high cost of obtaining and enforcing software patents makes them unattainable for small and medium-sized enterprises (SMEs).

The Grain of Truth: Patents require a larger investment than copyrights and trademarks.

The Cost of Misbelief: The SMEs that stand to benefit the most from protection against their much larger competitors leave their innovations exposed to poaching and infringement without recourse.

Debunking the Myth: Patent costs, when viewed as an investment, can produce a return that is far in excess of the original expenditure, as reflected in protection against competition, increased company valuation, and revenue.

Leveraging the Truth: SMEs can strategically invest in patents for high-return innovations, using mechanisms like cost spreading over time and focused geographic protection. Options like contingency fees and third-party financing also make patents more accessible even to companies with limited resources.

Myth: Software Patents Are Obsolete by the Time They Are Granted

Myth at a Glance: Software patents are already obsolete by the time they are granted as a result of the rapid pace of software innovation and the lengthy process of obtaining a patent.

The Grain of Truth: The patent process can be slow, and in some cases, specific software innovations may become outdated during the time it takes to secure a patent.

The Cost of Misbelief: When companies generalize this myth across all software inventions, they risk overlooking the value of patents for those innovations that remain relevant and valuable well beyond the time required to obtain a patent.

Debunking the Myth: Some software innovations, like the RSA encryption algorithm, have long-term value, remaining in high demand even after their 20-year patent term comes to an end. Expedited examination procedures, such as the USPTO’s Track I, can reduce time to patenting, sometimes to under a year.

Leveraging the Truth: Each software invention should be assessed for its potential longevity so that innovations with long lives ahead of them can be patented. Expedited patent examination procedures can help to further align the enforceable lifespan of a patent with its time of maximum commercial value.

Myth: Infringement of Software Patents Can’t Be Proven

Myth at a Glance: Even if a valuable software patent is granted and it is infringed, proving such infringement is impossible.

The Grain of Truth: Certain software algorithms that are hidden from view can present significant challenges in detecting and proving infringement.

The Cost of Misbelief: Companies that accept this myth as gospel miss out on the benefits of patenting software whose functionality is visible on the surface or otherwise easy to detect.

Debunking the Myth: Infringement can be detected relatively easily when the functions performed by a software product can be identified or reverse engineered by using the product. Other techniques can be used to detect infringement as well.

Leveraging the Truth: Companies can analyze each new software invention to estimate the ease of detecting infringement of a patent on that invention. Inventions with high infringement detectability can be given a higher priority for patenting.

Myth: We Can Patent Our Software Ourselves

Myth at a Glance: Because a software patent requires only an accurate technical description of the invention, the inventor is in the best position to write and obtain patents for that invention.

The Grain of Truth: A software patent requires a comprehensive and accurate description of the invention, and benefits from close involvement of the inventor(s).

The Cost of Misbelief: In most cases, a software patent drafted solely by the inventors is so narrow that it fails to cover infringing activities. As a result, such patents often have no commercial value.

Debunking the Myth: A valuable software patent requires not only a technically accurate description but also broad claims that cover commercially significant infringers. The patent’s specification must support a variety of present and future claims. Inventor-written patents typically lack these critical features.

Leveraging the Truth: Obtaining strong, broad, defensible, and commercially valuable software patents typically requires collaboration between the inventors, the assignee, and patent counsel with experience in obtaining and enforcing infringed claims over the lifetime of the patent family.

Myth: Market Dominance Moots Software Patents

Myth at a Glance: Software patents are redundant at best because market dynamics, such as first mover advantage and network effects, offer ample protection against competition.

The Grain of Truth: Some industry leaders, like Amazon and Meta, effectively utilized market dynamics to achieve early dominance and edge out competitors.

The Cost of Misbelief: Companies whose technology and/or business models are not suited to being protected solely by market dynamics leave themselves exposed to being outmaneuvered by larger or more agile competitors, without any recourse.

Debunking the Myth: Market dynamics alone effectively protect only certain technologies and business models. Groundbreaking technologies that are easy to replicate may even be disadvantaged by being first movers; subsequent entrants can often copy and capitalize on these innovations at a lower cost than the initial innovator.

Leveraging the Truth: A holistic approach that combines market dynamics with intellectual property rights can provide maximum protection for your software innovations.

What We’ve Learned

Understanding and dispelling common myths about software patents is not just an academic exercise – it’s a crucial step for innovators and companies seeking to defend themselves against competitors and to leverage patents for fundraising, revenue, and successful exits. By dissecting 10 widespread myths, we’ve highlighted that understanding and strategically applying patents can provide significant benefits to innovators for both defense and growth.

The continually evolving landscape of software patents reflects the dynamic nature of patent law and the ever-changing nature of technology itself. Staying abreast of legal developments is essential for maintaining a competitive edge. In this context, a strategic, informed, and adaptive approach to patenting software will provide maximum benefits. By considering the patentability, market potential, and the broader impact of your software innovations, a well-considered patent strategy can be a critical part of your overall business plan.

In dispelling these myths, my goal has been to illuminate the path to effective software patenting – a path that, when navigated wisely, leads to recognition, protection, and commercial success.

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