Software Patents are Back

Software patents were in rough seas

Software patents have been in rough seas for the past few years. The US Supreme Court has been chipping away at the scope of software patents, and the European Patent Office has been tightening the requirements for software patents. This has made it harder for software companies to protect their software with patents. This trend led to the rise of other forms of intellectual property protection, with the most common one being the hoarding of user data that can be capitalized on. This complex regulatory environment in turn enabled the productization of user data, and to the rise of rent seeking SaaS companies.

Software Patents Trolls spoilt the party

The so called "patent trolls" have been a major problem for the software industry. These trolls are companies (or individuals) that generally do not produce any products or services, and instead acquire patent portfolios called patent thickets. The thickets are then used extract rents from companies by claiming infringement on their often broad and vague patents. Because of the high cost of litigation, most companies would rather settle than fight, with the trolls knowing this and using it to their advantage. Some companies went out of business because of patent trolls, and some took on the fight to stop their practices. This has led to a lot of litigation, stifled innovation in the software industry, and created a negative environment for software patents.

Most governments acted to reduce the practice, and a result, the number of software patents has been decreasing compared to the volume of software that is in the wild.

Software Patents could be back

With the advent of AI generated code, software patents could be back as the main protective moat for software. Copyright laws around AI generated code are still unclear, and patents may be the best way to protect new software innovations.

As the scope of software expands into new frontier technologies like AI, blockchain, and quantum computing, the need for software patents will only increase. These technologies are much more complex than traditional SaaS and require a much greater level of investment to develop, commercialize, and optimize. Software patents will be the most effective way to protect these investments, with the caveat that they must be used to protect true innovation, and not to extract rents from other companies. It is also important that software patents can be not only obtained, but also enforced.

Software Patents are a competitive advantage

As with any commoditized industry, software companies will need to innovate to stay ahead of the competition. Software patents will be a key tool in this innovation, and will help to protect the investments that companies make in developing new software. Companies that are able to leverage software patents effectively will be able to create a competitive advantage that could last longer than the current cycle of innovation (or hype cycle).

The definition of software is expanding

As software expands into new frontiers, its own definition will evolve and expand. Software is no longer a static set of instructions that run on a computer, but a dynamic and evolving system that can adapt to new environments and new challenges. This new frontier of software will require new forms of protection, both to protect the investments that companies make in developing new software, and to protect the software itself from being copied or stolen by competitors, or abused by patent trolls.