Software Myths and Facts

The debate about the patent system is frequently dominated by rhetoric instead of facts and reasoned arguments. A number of myths have become common among advocates calling for weakening software patent protections. Here are the most pervasive false claims made by opponents of software patents—and the truth about them:

Myth: Software patents discourage innovation.
Myth: Software patents hurt the economy.
Myth: Most software patents are low-quality and abstract.
Myth: Software development is incremental in nature and too trivial for patent protection.
Myth: Software patents are only good for litigation.
Myth: The lifecycle for software development is too short to warrant patent protection.
Myth: Software is just math.
Myth: Copyright protection is sufficient to protect software inventions.
Myth: Investors don’t care about patents.


Myth: Software patents discourage innovation.

Facts:

  • Software is fueling a historically innovative period, not only powering ubiquitous products like smart phones, TVs, and internet applications, but also fueling progress in industries like advanced manufacturing, transportation and health care. The fact that there are patents behind that innovation isn’t slowing the momentum – patents are securing the economic impact.
  • Patent protection encourages modular software architectures and robust programming interfaces (APIs) that can be accessed by other innovators, fostering an innovation ripple effect. Relying too heavily on trade secret protection incentivizes monolithic and closed software architectures since APIs risk providing others with insights into otherwise unprotected innovations.
  • Patents level the playing field by allowing innovators of all sizes, small and large, to compete with others who don’t invest in the risky and difficult process of innovation.
  • Inventors invest the time, labor and capital to create new ideas and prepare them for market. Companies that copy existing work and repackage it in a new “app” face problems with patents because they are not coming to market with a new invention, but trying to “free ride” on the work of others.
  • Patented inventions can be licensed across industries to anyone who would like to implement the technology.


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Myth: Software patents hurt the economy.

Facts:

  • Patent-intensive industries have created jobs at a higher rate since the beginning of the Great Recession than the rest of the economy, making them a critical part of our economic recovery.
  • IP-intensive industries contribute $5 trillion to the U.S. GDP every year and support 40 million jobs.
  • IP-intensive industries account for approximately $1 trillion in U.S. exports, or 74% of all goods exported every year.

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Myth: Most software patents are low-quality and abstract.

Facts:

  • The big push of software patenting that started with the State Street case in 1998 was driven by the idea that software was patentable in the abstract. This has never quite been true, and the courts have spent at least the last 8 years (since Bilski in 2006), restating the prohibition on purely abstract claims and properly refining the scope of what can be considered patentable software to be consistent with more traditional definitions of patentability.
    • Software claims are not patent-eligible if they:
      • Are directed to a mathematical formula or algorithm itself (Benson)
      • Are directed to a mathematical formula or algorithm that is limited to a particular technological environment (Flook)
      • Are directed to an abstract financial concept (Bilski)
      • Incorporate a law of nature and remaining features are well known, routine, conventional activity (Mayo)
      • Claims are patent-eligible if they:
        • Incorporate a mathematical formula or algorithm as part of a new industrial process (Diehr)
  • Due to this refinement, the large majority of software patents are of high quality, consistent with our country’s patent laws. Low quality software patents are actually less likely to make it through the USPTO than non-software patents. Anecdotes from specific lawsuits are not representative of an entire class of patents.
  • Companies across many industries regularly obtain patents for cutting edge software from touch screen technology, to robotic manufacturing, and fly-by-wire to driverless cars.
  • These inventions take years to develop and improve upon, and significantly improve upon existing industries and products – as we saw in 2008 with the advent of the iPad which combined revolutionary new software and hardware into a brand new product.

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Myth: Software development is highly incremental in nature and too trivial for patent protection.

Facts:

  • In all fields, much work is incremental in nature, software is no different from any other field in that regard. Also, important but incremental inventions should be protected by patent law, in any field, as long as they satisfy the requirements of the patent laws.
  • Also, software is no different from other fields in having major innovations taking place. Our cars can now parallel-park themselves because of software innovation. Computers can understand and respond to human speech because of software innovation. Jet engines can operate at far higher efficiency than ever before because of software innovation. Lifesaving medicines that were previously unimaginable are becoming available because of software innovation.
  • It would be disastrous to disincentive the investment needed to create more of these kinds of innovations in the future by denying them access to patent protection because they are based on software.

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Myth: Software patents are only good for litigation.

Facts:

  • Software patent lawsuits accounted for only about 7 percent of all patent litigation matters decided from 2006-2011 which is significantly lower than one would expect given that by 2011 patents related to software made up more than half of all issued U.S. patents. That puts the software industry in a distant sixth place in terms of number of cases — behind consumer products, bio/pharmaceuticals, computer hardware, industrial/construction, and medical devices.
  • In 2012, the value of the American software market was $166 billion, or 48.5% of the global software market. That number is projected to grow by $35 billion in the next three years.
  • The highest approximate cost of ALL patent litigation in the U.S. represents only 3.6% of the value of the software market.
  • Most patent litigation is brought by operating companies, often as a way to determine the ultimate value of their intellectual property and settle on a fair rate for competitors and others to pay to use their inventions.
  • It would be foolish to jeopardize the growing multi-billion dollar American software industry based on the small percentage of costs associated with patent litigation.

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Myth: The lifecycle for software development is too short to warrant patent protection.

Facts:

  • Research has shown that software patents are significantly more likely to be maintained for their full term as compared to other industries like biotech and pharmaceuticals. This clearly demonstrates that software continues to be a valuable, revenue-generating investment for companies that developed these technologies.
  • The microprocessor industry has development cycle times similar to those of the software industry, and famously doubles speed and capacity with each development cycle. No one disputes that the innovations that make these improvements possible are worthy of patent protection. So development process lifecycle time can’t be the measure of whether patent protection is available, or many important industries like semiconductors would be hobbled. There is no evidence that software is any exception.
  • The lifetime of an invention in an industry is not necessarily correlated with its development lifecycle. A fundamental patented advance may enjoy widespread use long past the full term of its patent.
  • Many patents would be granted sooner if the USPTO had the necessary resources. Solving the backlog with the USPTO can be addressed through better funding and training for the USPTO.

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Myth: Software is just math.

Facts:

  • By its nature, software is process-driven. Math may or may not be involved in a particular piece of software. Even in cases where math is included in innovative software, patents on software protect inventive processes, not the math behind them.
  • The most recent case law has matured this field significantly, and current practice requires that patent claims on software go beyond mere abstractions and pure math (which has never been patentable), and require the inclusion of steps that render the results tangible and not merely “mental steps”.
  • For example, a complex new airplane wing is patentable not because the wing is based on a math equation describing aerodynamics, but because it changes how the aircraft flies.
  • In that same way, software must change the way computers operate to carry out new functions, from understanding and responding to human speech, to robotic control, to touch screen keyboards to ABS brakes.

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Myth: Copyright protection is sufficient to protect software inventions.

Facts:

  • Copyright and patent protect different aspects of products like software, and both provide important incentives for creation of software.
  • Just like with music or movies, copyright works best to protect software against copying of the creative aspects of the work, including piracy of identical copies.
  • Patents incentivize and protect the unique functionality of the invention, even where the product embodying the invention is not copied from the inventor’s product.

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Myth: Investors don’t care about patents.

Facts:

  • Both investors and companies looking to expand their businesses through acquisition look at patents and IP as directly influencing the value of the company and a determining factor regarding whether or not to invest.
    • Research has linked patent ownership by software start-ups to larger venture capital investment. Each patent helps start-ups raise an extra $2.7 million on average, or $11 million more than similar companies that own no patents.
    • A French study found that the average U.S. software startup owns just over six patents at its IPO, and that each one leads to an additional $1.9 million raised, for an increased value of more than $12 million.
    • A 2013 study from the Brookings Institute found that both the value and number of IPOs across metropolitan areas are highly correlated to patenting activity.

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The Value of Patents
IP Innovation