How Useful Are Software Patents?

In this article, we will discuss how useful software patents can be, as well as issues surrounding their scope and costs. We will also examine their impact on innovation. While there is no one definitive answer, software patents should encourage innovation, not impede it. After all, innovation is the key to a flourishing economy. However, we must ask ourselves: Are software patents really as useful as we might think they are?


The debate over software patents is a contentious one, with many philosophical arguments mingled with the contention that all software should be free. The debate can be both arcane and quasi-religious. Here are a few issues with software patents: The first issue is whether a software patent is truly patentable. The US Supreme Court ruled in 1972 in Gottschalk v. Benson that patents for mathematical formulas were unenforceable. The court said that the patentable idea is “unusable if it is abstract and not embodied in a practical machine,” and that a software patent could not cover such a mathematical formula. While the Diehr case involved a legalese discussion, it had an enormous impact on software patent law. Furthermore, software patents are fundamentally flawed. While they protect the concept behind software, they lock out competitors from delivering similar products. Software patents are often unenforceable because they are easy to copy, independently developed, and reverse-engineered. Further, software patents are often unenforceable, limiting competition and damaging innovation. However, it’s not too late to fix this. Consider all of the following solutions: To make the patent system more stable, we need to end the MAD situation. While software is still patentable, many of these patents were invalidated due to the Alice ruling. The courts’ reasoning was based on the principle that there is no need to “steal” anything. Thus, patents should have a “fair use” provision. This provision is an essential part of any patent law. And it will prevent unfair competition in a world that relies on free speech. In addition to the patent trolls, there are companies that solely rely on patents as a means of monetizing ideas. They may steal ideas and be unable to defend themselves unless companies have legal muscle. In other words, the patent trolls are simply taking away our ideas, but that doesn’t make it right. There are issues with software patents that should be addressed. And the Congress needs to take note of them.


The IPI study raises a number of economic questions, but the data are limited and lacking in empirical research. The European Commission has not conducted a further study of software patent costs or benefits for small companies. In fact, the report’s modest survey project questions whether software patents are worth the costs to SMEs. The European Commission’s memo on the patent directive acknowledges the study, but does not address the issue of the cost burden on SMEs. However, the report does mention the burden of complexity and lack of economic data. Software is not a novel technology, and the issue of a software patent’s costs has received much attention. In 1994, when Microsoft sought to buy Stac’s compression technology, Stac sued the company for US$120 million. Microsoft won the case, but the case still serves as a cautionary tale for software patents. In the same internal memo, Gates argued that software patents would have “halted” the industry. If software patents remain as they are now, they will be nearly impossible to enforce and comply with. Real companies will be forced to spend ever-higher sums to defend themselves from lawsuits and unnecessary cross-license agreements. This will consume huge amounts of time, money, and energy – all of which contribute nothing to the productivity of America. And this is not the way to encourage innovation. There are other, more constructive, ways to address the problem of software patents. The costs and benefits of the patent system are difficult to assess. The cost of software patents is higher than the benefits. As a result, economists are unsure of how to balance the costs and benefits of a software patent system. While adjusting the patent system may result in improvements, such changes would conflict with the TRIPS once-size-fits-all principle. Further, adjusting the patent system would require substantial changes to the ICT sector. The study also points out that there is a lack of empirical evidence to justify the Commission’s justification of software patents. This is why the IVIR study recommends regular in-depth monitoring of the impact of patents on European businesses through the European Patent Observatory. In addition, it asserts the need for an increase in the inventive step standard as a response to patent inflation and trivial patents. These concerns are justified by the EU’s recent attempt to restructure its patent policy.


As a result, the scope of software patents has been a source of debate. While many patents are relevant to a software invention, not all software patents are. In fact, only a handful of software patents are actually relevant to software innovation, making the patenting process more expensive than the existing software copyright. According to Mark A. Lemley, an expert on patenting software, the scope of software patents is less clear than in hardware patents. The doctrine of equivalents, which applies to claims written for one product generation, was rejected in a number of cases, and in particular, in the case of software patents. In the last few years, the Supreme Court has interpreted the Patent Act to exclude natural phenomena and abstract ideas. Among the Supreme Court decisions that shaped software patent law, Gottschalk v. Benson rejected a patent application for binary coded decimal signals and their binary form. The Court held that to be patentable, a process had to be performed before the signal could be transformed. Further, a computer program alone is not patentable unless it transforms. Using these criteria for software patents will result in sub-optimal results for software innovation. Ultimately, this will harm the industry and harm innovation. If the CAFC continues to apply this criteria, software patents may become worthless. However, the new rules could result in more sane patent policies. The future of software patents depends on this case. The patenting process is increasingly complex and the law is still evolving. While the patentability of software is still unclear, it has become increasingly clear that the industry is eager to protect its innovation. Since the Supreme Court affirmed that software is patentable, the rest of the statutory criteria are now subject to case-specific scrutiny. These criteria include novelty, non-obviousness, and statutory disclosure requirements. Software patents are rapidly becoming an international norm. So, there’s no better time to get started on software patent litigation. The Federal Circuit has made the process of defending software patents much more complex. The Federal Circuit in State Street Bank, which allowed software patents on software business models, paved the way for numerous bad patents and silly lawsuits. Despite the recent judicial decisions regarding software patents, the scope of software patents remains unclear. But if the Federal Circuit does decide to address the issue, the case will be of strategic importance to the U.S. information technology policy.

Impact on innovation

The increasing number of software patents has been widely publicised and discussed. Universities, too, have embraced the practice. Yet, while the process of patenting software is an excellent way to secure intellectual property rights, the impact of this practice on innovation and commercialisation is controversial. This article explores the multiple roles of software patents in the development of software and technology markets. In particular, it stresses the need for new data to guide the design of policy that will encourage innovation and commercialisation. One of the primary arguments against software patents is that they are expensive and difficult to enforce. Patent enforcement can only be reasonably expensive for large companies and startups. However, most of these companies cannot afford to hire expensive lawyers to defend their patents, so they simply pay royalties to the patent holders. Meanwhile, startups are unlikely to afford to hire expensive attorneys to fight software patent lawsuits, which can halt business transactions. Furthermore, software patents aren’t just an issue for startups. One recent study from Japan has analyzed the impact of software patent reforms. The study shows that software has been considered patentable subject matter, but until recently, software was only eligible for patents when paired with hardware. While integrating electronics firms were the main applicants for software patents, independent software development firms also began measuring the impact of these patent reforms on the industry. The authors find that this trend will likely continue until the patenting system is fixed and software innovation is free to flourish. Exclusion of software from patent protection has many other unintended consequences, including hindering technical development, reducing competition and stifling innovation. It also has disproportionate negative consequences for small businesses, as their IP assets may not be enough to protect them from copycats. Furthermore, the current differences between national IP laws make it impossible to determine whether software patents are beneficial for innovation and competition. This has important implications for the future of our industry and for the development of software.