Software Patents: An Inventor’s Perspective

Protecting intellectual property benefits not only the developer but also society

13 December 2017

I have defended the purpose of software patents more than once. Some contend that patenting harms society by restricting new ideas. They argue it increases the cost of technology. I strongly disagree with them, although I admit I am not impartial.

Let’s consider the business dynamics of innovation. Innovation is not a hobby. Inventors have a reasonable expectation of a return on their investment of time and money. That return is realized as a licensing fee from others or some advantage in the marketplace over competitors. What happens if that return is never realized? The inventor loses money. An innovator is left to compete with others in the marketplace by only manufacturing and marketing the product, without any advantage for creating an innovation.

Without protecting their intellectual property rights, inventors are at a disadvantage to their competitors. They have already incurred costs related to creating the intellectual property. That cost can be opportunity cost (money you do not make from other activities because you are inventing) or out-of-pocket costs such as equipment, salaries, and consulting fees necessary to innovate.

Consider the mathematical relationship between cost, sales, profit margin, and gross profit. If your profit margin is 10 percent, and you spend US $10,000 to innovate, you must realize income of $100,000 from sales to break even on the innovation. If a competitor merely absorbs your idea into its product without that innovation cost, then it will be profitable sooner than yours. Your business is not at the same starting gate as your competitors. They are running a 100-meter race, and you are running a 120-meter one.

I experienced the financial loss of someone taking my design and merely duplicating it. I spent months designing a software product, TimeClock Lyte. It was my second time-and-attendance product. I had relatively good success selling it for the first few years because I had spent a great deal of time and effort talking with customers to understand what they needed. A potential competitor saw my success and bought a copy of my product. I suspected his intention by the curious questions he asked when he bought it. Then he went on to easily duplicate every key feature and took away a good portion of my market—all without investing the time I spent talking with potential customers and fine-tuning my design. He was profitable moving fewer units than I had, because of my need to cover my innovation costs.

A patent provides some protection by giving you exclusive use for 20 years. You can license that technology to others for a fee or use your exclusive rights to produce a commercial product. The only compensation society asks from you is that you explain to others how your invention works in your patent application. Everyone can freely use your invention after your exclusive-use time expires. Society gets new technology, you get paid, and everyone wins. For example, my three patents are protected right now but, after they expire, anyone can freely use the technology I have created and explained in the patent application.

OTHER REVENUE SOURCES

Trade secrets are another way inventors are paid, and they do have some advantages. There are no patent or legal fees to pay. Potentially, the creator can use the invention exclusively forever. However, there are extreme disadvantages. What if there is a security breach, and your invention’s intellectual property becomes common knowledge? You have lost all your hard-earned advantages.

There is also the real danger of someone independently developing the same technique. Trade secrets are worthless when that happens. You are not protected against an independent researcher discovering your trade “secret.” Many times I have had an idea and, during my research, I found another inventor had recently published an article about the same idea. This frequently happens if you are one of those working in the “sweet spot,” which is the leading edge of technological evolution. A technology is moving in a certain direction, and it’s just a matter of time before a particular innovation occurs. A famous example of independent creators inventing the same thing is calculus. Both Gottfried Liebniz and Isaac Newton independently developed calculus.

Trade secrets are often a loss for society. The potential for lost art is legendary. The techniques for creating Stradivari violins, Roman concrete, Greek fire, and Damascus steel have all been lost because those were trade secrets without an apprentice to carry on the craft. I saw that happen in my own software company. In the 1990s I had developed a database replication engine, DbDelta, which took any delimited file and efficiently replicated changes from the host data store to remote sites. My company, Quality Software Solutions, could not afford to apply for a patent, so I kept it as an unpublished trade secret. The method I created vanished when the company went out of business. If I had patented the technology, a document would have existed that explained the method.

OTHER BENEFITS

The patenting process often gives incidental gifts to the general public. Many innovation firms publish defensive technical bulletins. These are written ideas that are not financially feasible for a patent, but the company needs to protect its ability to create a product in that domain without fear of someone creating a “submarine” patent. This kind of patent is intentionally obscured, waiting for an unsuspecting company to bring a product to market so the patent holder can extract fees. The bulletin prevents someone from patenting your method and suing you for using your own invention in your own product. Publishing a technical bulletin gives you freedom to create a product using your invention.

Anyone is free to incorporate patented ideas, however. For example, Eric Kline, Sarbajit Rakshit, and I created a data modeling system that maximized food production in a multicrop agricultural field. My former employer published a defensive technical bulletin on that method. An undergrad engineering student could develop a software system as a senior project from that technical bulletin. The technical bulletin is available, the idea is ready to be developed, and society would benefit.

IEEE Senior Member Donald Bryson has been an inventor most of his life. He started inventing in a ninth-grade physical science class and has not stopped, with various degrees of success, for the past 47 years. He currently is a contract software engineer with Johnson Service Group.

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