Sociology Index

IP in the software industry

Until the early 1970s the US Patent Office was refusing patents on software and mathematical algorithms per se, i.e. independently from a device using it. The protection of software was initially ensured by copyrights rather than by patents. Personal computers brought explosive growth to the software industry and led to the beginning of software patenting in the US. The development of e-trading led to the introduction of patenting for business methods and multimedia. A way of doing business “as such” cannot be protected; however, some protection for business methods may be obtained by claiming a new, inventive, technical method of implementing a business method. In the e-commerce arena there have been and continue to be technical innovations.

Intellectual property rights are at the foundation of the software industry. Each intellectual property right is itself an asset. The law provides different methods for protecting these rights of ownership based on their type. There are four types of intellectual property rights relevant to software under patent law, copyrights, trade secrets law and trademark law.

Patents, copyrights and trade secrets can be used to protect the technology itself. Trademarks do not protect technology, but the names or symbols used to distinguish a product in the marketplace. Likhovski et al. (2000) analyses the law in the US and Europe and includes a survey of the EPO and United Kingdom patent filings for business methods.

The survey indicates that US companies are now filing significantly and proportionately more applications for business methods than their European counterparts. In the EPO over the sample period: 52% of all patent applications for business methods were filed by US nationals. By contrast, over roughly the same period US nationals filed only 28% of all applications.

In the United Kingdom Patent Office, 31% of all business method applications were filed by US nationals. In 1997 and 1998 US nationals filed only 10% of all patent applications.

Graham and Mowery (2001) and in Merges (1997) and Ordover (1999). The earlier history of the software industry and the use of IPRs to protect software and business methods (both by copyrights and patents) are documented.