Do you actually need a patent as a software startup?

There's a lot of lore in both directions as to the importance of patenting for any startup. Some say don't bother, others say it's essential for investment and medium-term viability.  Let's unpack some of the detail.

And a lot of time, money and focus goes into product development, and working out what the market wants.

How closely will the product even resemble projected development in 12 months? Adding a patenting strategy to your lean and agile software startup is another footprint of time and money and focus that must be accommodated. Is it worth it?

Simply put, patenting may not create a great deal of value. Securing a patent won't do anything to make the product or business a success in their critical early stages, it will just help protect later success. So, no, the short answer is your software startup may not need a patent.

There are exceptions, of course, and we'll talk about those later.

The importance of IP ownership

You absolutely must however OWN the IP you THINK YOU OWN

That's a mission critical, a non-negotiable requirement.

You might be tempted to become blasé if you have decided to go the 'no patent' route. This is a mistake. A contentious claim to IP ownership is serious BAD NEWS.

And often it's not whether the claim is valid but whether it's plausible. Funnily enough, valuable IP and a thriving venture tend to attract IP claims that might not otherwise surface.

Rewind 2013. Blurred Lines (Robin Thicke, Pharrell Williams) is something you probably heard on the radio. It won the record for largest radio audience, ever. And lo and behold the 9th US Circuit Court of Appeals upheld that 50% of royalties should go to the estate of Marvin Gaye (for Got to Give It Up, 1977).

A dissenting judge in the 2-1 appeal decision states that the result amounts to copyrighting an entire musical style, which is probably correct to my ears. All this is to say that the claim would probably not been brought if the single wan't all over the radio, and was in any event far from a cut-and-dried proposition. Music copyright is obviously not tech IP, but similar principles apply: no lawsuit if the song tanked.

So how do IP ownership disputes arise for software startup?

#1 — Poaching from a competitor

You've landed the services of a developer with proven work experience. And as planned, they leverage their prior work into your startup. Just as you're about to secure funding their former company alleges that the IP was developed during earlier tenure. And the company owns it. Who knows, perhaps you're that developer? Perhaps the company even has a strong audit trail to make their case, and that might be difficult to repudiate.

#2 — Joint-development project

You're famous in your technological specialty, and Big Corporate Inc reaches out to co-develop a new application. There is a lot of money on the table and you jump at the chance. Big Corporate Inc decides they own all your hard work. There was a long legal agreement you signed, but it didn't even deal with who owns what is developed. They're relying on you not being able to push back.

#3 — Outsourced development

You use a freelance developer or digital development agency. They've been great. Depending on prevailing laws, and any agreement you may have, they may retain ownership of their contribution. And with the expertise they've now developed, they may get involved with a startup in a very similar space. You could find yourself on a collision course over who has the stronger claim.

#4 — Mutual NDA Trap

You enter into discussions with a maybe collaborator, maybe competitor. And before getting down to business you both sign a mutual NDA to allow for clear and open discussions. Now you're both protected, right? You find out your competitor presents you a roadmap of their new revamped product. Problem is, you've been building the exact same thing in the background. You're really in a bind now.

When it can be essential to patent as a software startup

I mentioned we'd return to why you might considering patenting for your software startup.

There are no hard and fast rules. You must make your best informed judgement of your risk profile, circumstances and the commercial landscape in which you operate.

Here are some examples for when it can be a good idea.

#1 — Safeguarding foundational technical innovation

Your startup is founded on a key and important technical innovation that is a keystone to the value offered. It's synonymous with the startup, and the entire point of difference. That won't change, and whatever features you add later will only ever be incremental compared to this breakthrough. Patenting is thus a now or never proposition. And not patenting goes to ongoing commercial viability, and exit value.

#2 — Investment readiness

Your startup will require some significant funding fairly early on. Patenting is optional from a competitive perspective. You assess the risk of copying is not especially strong. But you expect a solid patent position will help in raising funding. And on better terms than may be available without patent protection. Essentially, you expect that the cost to achieve 'patent pending' will pay for itself.

#3 — Deal-making flexibility

Your startup may not end up operating what it builds. One possible outcome is the venture relies on licensing out the evolving technology to others. A patent provides a robust framework for structuring a commercial deal for the underlying technology. As a bonus, there is a disincentive way from reverse engineering, and towards deal-making.

#4 — Strengthening market authority

Your startup has wide appeal, and in a market that is hotly contested. It's also genuinely a new offering. You can patent now, or patent later as you anticipate strong product development as the offering is refined. You'd feel more comfortable putting some protection in place early for the core initial offering as a disincentive to others. You'd prefer to reduce the risk of competitors following you as it will dilute your uniqueness and split your market.

The takeaway

You may not need a patent as a software startup. There are many specific situations however in which a very clear rationale exists for patenting. You certainly need to own the IP you think you own regardless, less disaster strike in the form of an ownership challenge. Otherwise, if you think it may be worthwhile, seek a patent profession for early advice to review your situation and check your thinking.

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