Intellectual Property (IP) is the backbone of many new companies, as well as that of successful and thriving companies. A company’s IP strategy can largely differ due to many different factors, including the company’s size, number of customers, capital, reputation, as well as the type of technology they produce and stage of technological development. As a company, understanding your position on this spectrum is integral when developing a business growth strategy, determining how to allocate assets, and determining how and when to best protect your technology/innovation with IP. Understanding and efficiently addressing these elements allows a company to effectively commercialize their technology and choose the best strategy when pursuing intellectual property.
In the last 20 years, no area has seen more significant growth, investment, and integration than software. The top 10 companies in the United States all utilize software, whether it’s to maintain an online marketspace, search engine, phone operating system, etc. In addition, hundreds of start-ups are started each year that utilize software as the core of their innovation, or simply an element. Those start-ups that continue to grow all likely have one thing in common: they found a way to maintain their competitiveness within their marketspace. In order to do this, they likely employed intellectual property protection, whether through a Patent, Trademark, Copyright, or Trade Secret.
Large and established companies are typically well versed in intellectual property, highly structured, and well-funded. In most marketspaces this typically means that they can address issues quickly, find a solution, and protect the solution, namely through patents (when available). Software is unique. Software inherently is not patentable; rather what can potentially be patented is the sequence of processing steps, which is patented as a process. As a result, alternative methods are employed to protect software; if appropriate, the code can be protected as a trade secret or as a copyright.
For a new or small company, a patent provides an opportunity to draw investors and capital, further it affords the opportunity to spearhead a new market or claw themselves a piece of an established one; for a large company, a patent expands their portfolio and helps maintain their market share/competitiveness. The challenge, patents are costly and timely to obtain and even more costly and timely to enforce. For new and small companies, they need to assess the value of the patent, the broadness with which it can be applied, the value of said patent, and whether they will be able to afford to enforce it, should it be granted. A strong patent can afford a company the opportunity to be invested in, acquired, or ignored. How a company projects themselves and the strength of their position will largely dictate their outcome.
A trade secret can be used by a company of any size, largely to the same affect. Trade secrets afford indefinite protection so long as someone does not reverse engineer or otherwise invent the software themselves. The issue with this protection is that it affords no negative rights, should a competitor produce the same or similar product, they have no right to restrict a competitor’s actions.
Further, copyright protection can be afforded to source code, if it is an original work of authorship when coded/written (fixed in a tangible medium of expression), as it will inherently be protected by copyright. Enforcement of the copyright requires registration of the code with the U.S. Copyright Office. So, before enforcement, cost is negligible, which is beneficial to new and small companies. Unfortunately, copyright protects the source code itself, not the function as with patents; therefore, competitors can often write different code to perform the same function, which avoids infringement.
Trademarks afford no direct protection to the software; rather, they represent the brand/company and are designed to seamlessly represent the quality of the product they produce. To a new company, a trademark holds minimal value (with exception), as there is often little or no brand recognition, as a result, patents and other avenues of protection are much more valuable, because they afford tangible value, and the means to enter and maintain market value. To an established company, a Trademark may be its most valuable IP. As a company grows, the company itself can overtake the recognition of the product or service they offer. People buy Apple, as much because of the product, as the fact that it is “Apple.” Microsoft offers essentially the same software and hardware (often at a cheaper cost), but people still buy Apple because of the name/brand (Trademark) for the quality of the product, or the influence/recognition the product/brand holds is unique to the purchaser.
This is why for smaller companies, patents, while expensive, can be effective for growth and competitiveness. The negative right is of substantial value, particularly if it is broad and of value. Otherwise, if you place a small company (with no name recognition) next to a large company (with strong name recognition), and have both provide a service/software with the same function for the same cost, almost always the Trademark will allow the large/established companies to outcompete the smaller/new company.
For new and small companies, competing in an established market can be challenging; understanding your position, IP, and finding the right partners and support are vital in order to succeed. IP protection for software can be costly and complex, understanding what your companies’ goals are, whether that’s to maintain their position in the market as an established company, grow as a new company, or seek acquisition as a small company. No matter your status or goals, understanding Intellectual Property is vital to a company’s future. For further support and take the next steps to hitting the market, our teams are available to assist you at the Southeast Innovation Institute (SEII): https://SEII.us; and supported by the legal team at https://DobsonLaw.us/.
 Software and the encompassing field, falls within a complex area of patent law; companies seeking IP protection for software should consult an attorney for greater understanding on a strategy unique to their situation.
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Cody M. Andrusko, Esq.
Project Director, Southeast Innovation Institute (SEII)