Executive Summary

Dan Briklin, the inventor of the spreadsheet, was once asked what would have been the impact had he patented the spreadsheet. He answered nonchalantly: "Oh, I once calculated and estimated it at about three." After a short pause he added: "Billion dollars that is!"

Dan Briklin could not have patented his invention. At the time, the United States Patent and Trademark Office (USPTO) did not allow patenting software. Recently that position changed and now software companies patent software at an amazing rate. Patenting allows companies to protect and benefit from their ideas, research and development efforts, and to ward off competition. In many respects, patents are the great equalizers: even a small company can take on a huge one and win, as we saw in the $120 Million judgment in the Stac v. Microsoft case. Many other cases show a similar, if less spectacular, picture but patent infringement judgments in the tens of millions of dollars are commonplace. Large corporations continue to invest heavily in software patenting and derive significant portions of their income from it. According to the National Law Journal, IBM alone received 1724 patents in 1997, about a third of which were software based. IBM derived about $1 billion in revenue from its patent portfolio for that year. By 2003, IBM was granted more than 3600 patents, almost half of which are patent based. In 2003 Microsoft received over 750 patents. Many companies, large and small, realize that, besides the protection it provides, a patent is a superb asset that immediately increases a company value and is likely to result in an excellent return on investment.

While, in the past, software companies relied on copyrights, it has become clear that copyrights do not provide adequate protection for the essence of the high-tech product. Patenting the invention, while more expensive than copyrighting, provides far better protection because it protects the underlying principle of a product. (Even when copyrights may still be desirable, in addition to patenting) Patents provide the right to exclude others from making, selling, or using an invention. Ever since software patents became an option, more and more companies choose this venue to protect their inventions, and avoid copycat competition, In many cases, a good patent portfolio allows cross licensing which sometimes may mean the difference between closed doors and continue operations.-This last sentence seems awkward.

Companies that started early in the patenting trend ride the top of the wave right now. Companies like Yahoo, Google, AOL and Priceline owe their continued success to patents that keep competitors at bay. Some software companies even consider themselves primarily as intellectual property laboratories and derive their highest income from licensing and selling their patented inventions. One constantly hears about technology cross licensing deals between large and small corporations, to the benefit of both. At the heart of those agreements are patents that make one company pay attention to the needs of the other, sometimes regardless to their respective size.

On the other hand, some companies avoid patenting their inventions. Some claim that patenting hampers development. It disturbs those free spirits that keep those programmers at their keyboards hour after hour. Some consider it too expensive and often unenforceable, and some simply do not believe they have a patentable invention. As we shall see, patents often increase programmer creativity. In fact, many programmers create patentable inventions without realizing it. We shall also see that an investment in a patent is an investment that, in many cases, will pay for itself in a very short time and many times over throughout the term of the patent.
Unlike other companies that can count on their physical assets for company valuation, a software company value stems from a written invention - an idea coded onto a computer language - that is the software company greatest asset. Software utility patents protect the essence of that asset - the invention. It is clear, therefore, that software patents are a both a boon and a necessity for any company or entrepreneur in the high-tech business.

Perhaps the most important aspect to achieving a good patent is employing a patent agent who truly understands the technology. It is the best contribution to strong patent protection. Therefore, it is crucial to locate a patent agent with strong technical background in the technical area of your invention.

Saltamar Innovations is an association of dedicated, hands-on, experienced professionals, specializing in software and electronics patents. We believe that thorough understanding your technology is a crucial element for deep understanding of your invention and, therefore, an indispensable part of obtaining broad and strong protection for your invention.

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