Software Patents

Patents must be non-obvious, useful, and novel (i.e., something no one did before). So during the patent examination process, the patent clerk must determine if the invention is "novel," . This requires an examination of the current and historical state of the art to be sure that the invention doesn't already exist. Unfortunately, there is simply no way for a patent clerk to do this with 100% certainty. In the case of software, researching the patent database for "prior art" before 1990 is pointless because prior art isn't there. "Software patents," which are a kind of "business process patent," were not recognized by the USPTO or the courts until 1996 (State Street Bank & Trust Co. v. Signature Financial Group Inc.) Since software was not patentable before this time, none of the early pioneering software technology can be found in the patent database. However, many early algorithmic and other non-software patents have been "continued" in ways that attempt to extend them to cover modern software.

The US Patent Office has made efforts to look for software prior art beyond the patent database, but it is impossible - even for skilled patent examiners - to do a really comprehensive search. As a result, many software patent applications are granted for technology that is by no means novel.

Today, any company (or individual) making or using software is exposed to the possibility of a patent infringement suit. In some cases, companies have been formed for the sole purpose of acquiring and enforcing a portfolio of software patents. They approach small or medium sized companies and offer a license. If the offer is declined, a lawsuit is initiated. The accused has the burden of proving non-infringement - a very expensive process. Often, the company pays the license fee, since the cost is less than proving that they don't infringe. Sometimes several smaller companies form a group to defend themselves.

Software patents can surface in various ways:

1. At time of issuance - an inventor can start enforcing a patent as soon as it is issued, which of course may be years after the initial application. Amazon sued Barnes and Noble within 3 months of issuance of the "1-click" patent, and Dr. Michael Doyle, who waited only 10 weeks to sue Microsoft for infringement of his Eolas patent on February 2, 1999.
2. " Submarine Patents" - a patent that has been dormant for years suddenly is prosecuted by the owners. A classic example is the British Telecom hyperlink patent. This patent was filed in 1976, issued in 1989, but not until 2000 did British Telecom start "asking to be reimbursed for the use of the technology."
3. "Continuations" - a recent patent that is a "continuation" of an earlier patent sometimes recasts earlier technology so that it appears to cover recent common practices. An example is the Ziarno patent The original patent described an electronic collection plate, but Ziarno claimed that the continuation covered charitable gifts made over the Internet. Since it was a continuation, the new patent had an invention date of the earlier patent - even though the commercial Internet may not have existed at the time. [Incredibly, Ziarno used this patent to sue the American Red Cross; prior art demonstrated in court by Nuvocom was key to the Red Cross's successful defense].

Innovation in the software industry moves much faster than the patent process, so many people have questioned whether software patents are stifling innovation. Regardless, until the patent process is changed, they are a fact of high-tech life.

Business Process Patents

There are several categories of patents, but the only kind of interest to us is the "utility" patent. Methods of doing business became patentable under the utility category due to changes in patent law in the late 1990's, specifically, State Street Bank & Trust Co. v. Signature Financial Group Inc., mentioned above.

Not all business process patents involve software, but often the terminology "business process patent" and "software patent" are used to describe the same thing. Some early examples are Priceline's 1998 e-commerce patent (sued Microsoft in 1999), and Amazon's 1-click patent (issued in September 1999; Amazon sued Barnesandnoble.com in December).

Nuvocom does not do patent searches for clients, since there are many other good sources for this service. Of course anyone can use the USPTO - http://www.uspto.gov - but effective searching takes much experience. Unless your interest is just casual, we recommend contacting a patent attorney. (Also see USPTO and International links).