Prior to the 1990’s fewer than 20% of new patents were software related. Thus, much existing software was not protected by patents which made it virtually impossible to determine if a new software patent application was patentable. Further, for many years the USPTO ruled that most "methods of doing business" were not patentable. Then with the advent of the Internet in the early 1990’s there was a flood of patent applications for internet or computer-enabled methods of doing business. Because the USPTO had not previously viewed such inventions as patentable, there was no available repository of prior art to help determine if these inventions were unique. This is further complicated by the fact that the USPTO’s position on business method patents has continued to evolve to the extent that many inventions for which patents were granted would not be patentable under today’s interpretation of patent law.

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 or invalidity of the patent - 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].


4. "Patent Trolls" – often patents and other intellectual property are purchased by individuals or firms for the sole purpose of litigation. For example, Soverain Software acquired patents from Open Market that describe electronic shopping carts and used these patents to sue several companies doing electronic commerce on the Internet. [Nuvocom helped invalidate these patent with prior art dating back to 1984.]

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

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.

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).

Patent Research

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.

Nuvocom has helped hundreds of clients identify non-patent prior art in the software, internet and computer-enabled fields. Our expertise comes from personal experience in these fields pre-dating the Internet. We have testified as both fact and expert witnesses and have written expert reports in many patent litigation cases. Nuvocom typically contracts with outside counsel to protect communications from disclosure during the litigation process.