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Are Businesses Ignoring Software Patents?

There are thousands of software-related patents in existence, with about 40,000 new ones issued each year. Some have argued that it is nearly impossible to effectively do all the legal research necessary to figure out whether your new invention infringes upon previous software patents (i.e. a freedom-to-operate search). There’s too many patents, not enough patent attorneys, and it just costs too much for start-ups and other small businesses. As a result, many software firms and even bigger companies simply ignore the patent system.

Due to the nature and requirements of the patenting process, the vast majority of patents are narrow in scope. Generally, a software developer will be unlikely to accidentally infringe on a patent, unless that patent is one of the few that are very broad. This used to be the case. But now, given the incredibly large number of software-related patents out there, software companies and businesses are likely constantly infringing each other’s patents by accident. While patents are spread across all industries, a large percentage is concentrated in the information technology, computer, and biotechnology industries. Large companies like IBM, Sony, and Microsoft, with patent portfolios in the thousands, can easily and credibly threaten almost anyone else in the software industry.

The result is ignorance. Parties often simply do not conduct the necessary freedom to operate searches with a tacit agreement that neither will sue the other. Yahoo recently broke this supposed silence, when it sued Facebook. Yahoo has a modest patent portfolio of about 1000 patents, and without a doubt, was able to find 10 patents to assert against Facebook. Facebook similarly counter-sued, arguing that Yahoo has violated 10 of Facebook’s own patents.

In an ideal world, business can spend $30,000-$50,000 to do a freedom-to-operate search, and the core innovative concepts of the new software design can be researched. The business can then design around the previous patents and obtain its own patent protection. For most software start-ups, they simply do not have the funds for this type of search. They need the funding prior to obtaining the patent, but many investors only invest in the company after the company already has patents, creating a bit of a problem.

There is no clear solution. Changes do have to be made, from creating greater certainty in patent rights to allowing some form of independent invention defense. Many business obtain patents, but do not actively search for infringers upon obtaining the patent. For now, ignoring software patents is the norm, but that leaves everyone vulnerable to lawsuits at anytime. With the economic downturn, many businesses (like Yahoo) may turn to patent litigation as a source of revenue and start to break this tacit silence.

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