Discusses the concerns and limitations of using patents to protect rights in software and provides some alternate legal tools and strategies that can be used.

1. Software Protection Strategies: Alternatives to Patents
Over the past few decades, intellectual property (IP) has become an increasingly larger
portion of the capital investment and assets of U.S. companies. For software companies, in
particular, IP legal protection is crucial to secure their assets from theft or copycats.
Pros and Cons of Software Patents. For many software companies, patents serve as a key
tool in protecting their rights in and to their software products. U.S. patent owners can
prevent others from making, using or selling any products or services that incorporate their
patented inventions or methods throughout the U.S. As such, patents can be powerful
deterrents to copycats, and can provide patent owners with significant market advantages.
However, software patents are expensive and difficult to maintain, and can be even more
expensive and difficult to enforce. The lifetime cost of obtaining and maintaining a patent
in the U.S. can easily top $30,000. Of course, patents expire after a maximum of 20 years, so
at some point the patented inventions become open to the pubic.
Also, U.S. patent protection does not protect the invention from users in other countries.
Of course, since the U.S. patent process involves a publication of the claims that, thanks to
the Internet, are globally available, failure to secure international patents leaves a U.S. patent
owner unable to prevent use of their technology by foreigners. As such, U.S. patent owners
often seek patent protection in foreign countries, as well, at costs of $30,000 or more for
each additional country where patent protection is desired.
In addition, once a patent is obtained, the burden of enforcing patent rights falls upon the
patent owners, themselves. Thus, patent owners must bear the cost of investigating
potential infringement and, if necessary, filing infringement lawsuits. A recent study by the
American Intellectual Property Law Association to find median litigation costs for patent
infringement suits can be significant: For claims of less than a $1 million, median legal costs
are $650,000. When $1 million to $25 million is considered at risk, total litigation costs can
hit $2.5 million. For claims over $25 million, median legal costs are $5 million.
Alternatives to Software Patents. In light of the costs and limitations of software patents,
some of which are outlined above, software owners often employ alternative legal tools to
protect their IP rights. Some of these alternative software IP protection strategies include
the following tools:
 Licensing. Effective use of licenses can grant software owners significant legal
powers to use control the use of the software by partners, affiliates, developers,
distributors, and users of their software. The main benefit of this tool is that the
license language can grant broad powers to the software owner and moves legal
considerations from the more nuanced and complex realm of “IP law” (confusing to
many courts), and renders them more simple “breach of contract” issues that courts
handle on a regular basis. However, a significant limitation to this mechanism is that
the licenses can only be enforced against those who agree to it, and not against
others.

2.  Trade Secrets. Trade secret laws protect a company’s secret items that have
commercial value. Items protected by trade secret laws are typically the same subject
matter as patents. However, trade secrets do not require any filings or public
disclosure, as is required with patents. Moreover, trade secrets do not expire, so a
secret can remain protected indefinitely (e.g., the Coca-Cola formula). The
mechanics of qualifying for trade secret protection are fairly nominal, but software
owners should implement comprehensive protocols to ensure their software is fully
protected.
 Copyright Registration. While not required to create rights in a copyrighted work,
registering software with the U.S. Copyright Office grants software owners
significant legal protections and enforcement tools, such as: the ability to sue in
federal court for infringement, the ability to receive an award of attorneys fees from
infringers, and the ability to receive statutory damages (meaning that the injured
copyright owner doesn’t have to prove lost revenue or profit to receive a money
award). U.S. Copyright Office registrations are relatively inexpensive to acquire, do
not require renewal, and protections can last 100 years or more.
 Trademark Registration. While trademark registration with the U.S. Patent and
Trademark Office (USPTO) won’t protect the underlying code associated with a
software program, a USPTO trademark registration can help ensure that no one in
the U.S. can market similar products under a name or logo that is “confusingly
similar” to the registered mark. The USPTO trademark registration process is much
simpler and less expensive than patents, typically costing less than 10% of the cost of
patent protection. In addition, USPTO registrations can be renewed indefinitely, as
long as the mark remains in use.
Finally, for copyrighted works registered with the U.S. Copyright Office and for
trademarks registered with the USPTO, the registration owners can also record their
registrations with U.S. Custom and Border Protection (CBP). Once these are
recorded, CBP will ensure that no infringing items are imported into the U.S.,
effectively locking out the entire U.S. market from foreign imports of infringing
goods.
The above discussion represents a brief overview of some of the legal tools that software
owners can employ instead of, or in addition to, software patents. The best options and
strategies for protecting software will depend on a number of factors, and software owners
should consult competent IP legal counsel for advice.