Jeremy J. Gustrowsky

IP Gotchas: Protecting Software IP

February 25, 2021

Software is enormously valuable. Of the top 10 largest companies today, only Saudi Aramco and Berkshire Hathaway are not in the software business, but even they could not survive without it. The others – Apple, Microsoft, Amazon, Google, Tencent, Facebook, Tesla, and Alibaba – not only rely on it, but also specialize in it. As the digital revolution continues into the era of expanding data science, machine learning, and artificial intelligence, the value of software continues to increase exponentially. Whether you are a small startup, or one of the tech giants listed above, your software is worth protecting, and giving some thought to the possible pitfalls involved is important.

Copyright protection is enough: It is true that copyright protection for software is a powerful deterrent. A copyright registration is cheap, easy to obtain, does not require a long examination process, and lasts about a century. Best of all, the damages are baked right into the statute meaning you don’t have to show monetary harm to recover up to $150,000 for each unauthorized copy. This is helpful if your source code, training materials, forms, graphics, videos, or other artistic works might be copied by others without your permission. However, copyright protection does not stop competitors from creating their own system that copies what your system does or copies how it works. In other words, others are still free to reverse engineer your system or create a clone that mimics its behavior using their own graphics and source code.

Patent protection isn’t available for my software: Maybe. Software systems that merely solve business problems or replicate common activities that can be performed by a person with a paper and pencil face a tough battle in the Patent Office – in the US or abroad. Software that solves a technical problem, performs a new process that has no manual analog, or controls an existing machine in a novel way has a much better chance of success. It is true that patent protection is relatively expensive to obtain, and is only limited to a 20 year term, and you will have to tell the world how your system works. More detail is better than less, particularly when it comes to describing not only what the system does, but more importantly, how it achieves those results. The value in having an issued patent is that it gives you the option to push back against competitors who have created a system that works like yours. Just having an application on file can be enough to scare off potential competitors.

I’ll just keep it as a trade secret: This is an excellent choice in those situations where the innovation is occurring in house and is never released into the public in any form. For example, if your business model is provided online using a “Software-as-a-Service” (SAAS) model, trade secret protection is a good option. Google enjoys market dominance in the search engine arena because the “secret sauce” in the Google search engine has never been made public, and never will be. The secret never leaves a Google server farm, so the risk of losing it is low. But for any products shipped out the door, the danger of losing control of the secret is very real, because to maintain trade secret protection, the secret has to be kept, well, secret. If the secret is released to the public, is reverse engineered, or is independently developed by others, then you have no recourse. To be effective, trade secret protection must be a central aspect of the corporate cultural. Access to the documents, source code, formulas, manufacturing processes, client lists, or other aspects of the “secret sauce” must be kept secret from the public, and all employees must understand and agree in writing that they have a duty to keep the proprietary information in-house, and that it cannot be disclosed if they leave. Any breach of these protocols can mean the secret is lost, and with it valuable market share.

IP Gotchas: Open Source Software

November 9, 2020

Many companies use open source software to produce goods and services, and many also actively develop software using open source libraries and modules. Open source software is commonly used for online software services, smart phone apps, downloadable executables, or embedded in the memory chips of physical products. Its use has grown because open source software is easy to obtain, actively maintained by a strong user base, performs well, and best of all, it is free. This makes it an easy choice, especially for young start-up companies trying to preserve precious capital. However, open source software relies on copyright law and built in license agreements to keep it “open”. Confusion about the legal issues involved tends to give rise to a number of misconceptions about open source software.

It’s free – so there are no restrictions to worry about. “Free” in the open source context means free to use within the confines of copyright law and according to the terms of the open source license. Open source license agreements are self-executing which means that a user does not have to click “I accept” when downloading open source code – but the terms of the open source agreement are still binding on the organization. Also, different open source software packages may be subject to different terms. There are currently at least 80 different open source licenses in play, and using multiple open source packages in a large system may mean agreeing to licenses that have conflicting terms. Failure to consider these issues in advance may be crippling. A long development effort could be wasted if the combined product includes open source modules with conflicting license terms that make it impossible to distribute the end product.

Our legal department will handle the licensing issues. Open source licenses are self-executing. That means a software developer who uses the software has already entered into a binding software license regardless of whether the organization has granted that individual the authority to do so. This is true whether the open source modules are used in-house or distributed as part of a product or service. The corporation would likely be required to abide by the license terms, whether or not management was aware of the license. Also, once the open source material is part of the end product or service, the corporation is vulnerable to the threat of termination of the license if the terms of the license are not met. On termination of the license, any later use of the software would infringe the copyright.

It’s a minor software thing, and not that big of a deal. Not true. Discovery that open source software is in use may come at the most inopportune times during a merger or acquisition, when an IPO or venture capital financing deal is in the works, or in litigation. This can leave the organization scrambling to resolve critical issues at the worst times. Finding this out at critical times may cast a negative light on the entire organization and can dramatically change the outcome. For example, when IBM was negotiating to acquire Think Dynamics in 2003, the discovery of open source software that was previously unaccounted for resulted in a reduction in the final offer from $67 million to $46 million.

We didn’t change the open source code, so we have no issues. Maybe. It is true that open source licenses usually require that modifications to the open source software itself must be licensed according to the terms of the original license – meaning they must be freely distributed to anyone who uses the software. Thus, modifying your copy of the open source code to include your proprietary algorithms is generally a bad idea if you want to keep them under wraps. But what if the open source code is unchanged, but it is compiled into a single executable with the proprietary code? What if the open source code and proprietary code are compiled separately and dynamically linked at run time? Does a mere reference to a simple sort routine or hash table algorithm in an open source library put the entire code base under the open source license? The answer is “probably not”, but no one can say for sure, and other specific details about the software could change that outcome. This area is especially gray because the courts have not decided what constitutes a derivative work in the open source context. Some open source licenses clarify things a little, but generally speaking, the full legal ramifications of using open source software alongside proprietary code are still unclear.

IP Gotchas: Patenting Neural Networks

October 12, 2020

The demand for improvements in autonomous technology is accelerating. Memory and processing power has continued to grow exponentially cheaper, but the volume of data to process has exploded making it nearly impossible for traditional data analysis techniques to provide timely and cost effective guidance. Whether the data arrives in real time, or is acquired and stored for later analysis, the need for systems that can generate valuable insights from mountains of raw information will only increase. Consequently, neural network technology is increasingly valuable to organizations large and small making it a prime target for intellectual property protection. However, a number of misconceptions have arisen regarding the patentability of neural network technology.

Software isn’t patentable, so neural nets aren’t either: Software inventions are patentable, but the Patent Office and the Courts have narrowed the scope of what is patentable by requiring that the patent claims must be directed to something more than a well-known or abstract concept implemented on a computer. This is especially interesting where neural networks are involved because in some cases, the network itself is not new. The network topology (i.e. number of nodes, number of layers, the connections between them, etc.) may not be new, and perhaps the activation functions or backpropagation techniques used by the network are also not new. The training data sets or data preprocessing techniques may not be new either, but the outcome of using such a neural network may be truly revolutionary. Thus it is important to plan ahead in the drafting process to include aspects like tangible data sources and physical sensor input/output, control of physical objects or machines, and information about what technical problems are being overcome and how.

I didn’t invent a neural network so this is probably not patentable: Keeping the right focus on the invention is a fundamental issue that sometimes hampers patentability for software inventions, and it can be particularly problematic where neural networks are involved. Is the “magic” in the neural network or is the magic in how that network is used? For example, is the concept a new topology for a neural net that is more efficient, yields better results, or solves a particular problem? Is it a new activation function, or a new type of backpropagation scheme? Is the invention a new gradient descent algorithm that is optimized for a particular problem space? If any of these are the case, then the claims and disclosure should focus more on the network itself and how it is configured. On the other hand, is the invention a system that works better because it uses a neural network? If the invention is an improvement on neural networks, then more details about the network itself will be needed to show the technical problem and solution. If the invention is an improvement in some other field of endeavor that happens to involve a neural network, then more information about the inputs, outputs, and operation of the device will be needed, and perhaps less information about the neural network itself. Determining what the invention is will drive what kind of disclosure is needed in order to obtain a patent.

I’ll file the application but keep the real invention secret: The patent system grants the right to stop others from making, using, or selling patented inventions. In return, inventors are required to teach the world how to make the invention. In the case of neural networks, this can be tricky because many of the details about how a neural net reaches a given result are unknown until it is put to use, or they may be different from one execution to the next, or in some cases they are simply unknowable without extreme effort. In some cases, billions of permutations of inputs, outputs, and the corresponding weights for each node in the network could exist, but only after the network is put to use. That said, trying to patent a concept while keeping it secret is not permitted. The invention must be disclosed in such a way that a person of ordinary skill in the field could make and use the invention. The claims may be allowed to describe inputs and outputs at a high level, but at least some explanation is required as to how the system uses them and how they interact with other components of the system. Usually, more disclosure is better than less because failure to adequately explain the workings of a neural network, or the use of it, may cost both the opportunity to patent the concept, and the opportunity to protect the invention some other way, such as by trying to keep it a trade secret. With a little careful planning, both of these negative outcomes can usually be avoided.

Jeremy J. Gustrowsky and Michael M. Morris included in the Inaugural Edition of Best Lawyers: Ones to Watch

August 20, 2020

Best Lawyers: Ones to Watch inaugural list recognizes attorneys who have been in practice for 5-9 years for outstanding professional excellence in private practice in the United States.

The Firm congratulates Jeremy and Mike for their recognition in the following 2021 Edition of Best Lawyers: Ones to Watch practice areas:

  • Jeremy J. Gustrowsky – Patent Law
  • Michael M. Morris – Intellectual Property Law


IP Gotchas: The Patent System

June 11, 2020

Many times Businesses form and thrive because of a revolutionary product like the smart phone, or because of a new service model like ride sharing. These products and services often include novel processes for solving old problems, or new and useful combinations of existing products. Sometimes no one thought to try it, or perhaps for many years everyone believed it couldn’t be done. Common misconceptions about the patent system can result in missed opportunities to jump-start growth, secure market share, and give a superior business model the chance to dominate the marketplace in the face of strong competition. Following are some “gotchas” related to the patent process that result in missed opportunities.

If I Patent It, I Can Build It: Not necessarily. It is possible to make the product you claim in your patent, and still infringe someone else’s patent. That’s because patents do not grant you the right to make and sell your product or service. Patents only grant you the right to stop others from making or selling your product. For example, Kerri has a patent on a cup, and Joe patents an improvement on the cup by adding a handle. Now Kerri has a patent on cups and Joe has a patent on cups with handles. Before Joe can make and sell cups with handles, he must obtain Kerri’s permission because he cannot make a cup with a handle without first making a cup. Kerri’s patent gives her the right to stop anyone from making cups of any kind, with or without handles.

I’ll Sell It First, Then Patent It Later: The first impulse for many entrepreneurs is to see if the product has market acceptance before proceeding with a patent process that may cost precious startup capital. The U.S. patent system still provides a year to file for patent protection after the first disclosure or offer for sale, but the U.S. system is unique in this regard. Rights can be lost when details are mentioned in public and then left out of the patent application by mistake. Also, any public disclosure means you will not be able to pursue patent protection on the concept anywhere else in the world. While this may be less of a concern to some businesses, it can become a serious obstacle to growth as the business takes off in other countries. With a little careful planning before that first disclosure, entrepreneurs and inventors should establish a road map through the patent system that fits their budget and gives them the best chance of retaining patent rights now that may soon become very valuable.

I’ll Keep My Patent a Secret: The patent system gives inventors the exclusive right to stop others from making, using, or selling their patented invention. In return, inventors are required to teach the world how to make the invention. This way others can study the drawings and description in the issued patent to quickly learn from the inventor and make improvements on the concept sooner, rather than later and thereby advance the overall state of the art more efficiently. Conversely, inventors that try to obtain a patent without disclosing the most important aspects of the invention may cripple their opportunities for obtaining viable patent protection in the U.S. and abroad. Furthermore, this approach may also destroy options for securing IP rights that might otherwise be available such as trade secret protection. Here again, there are several ways to address this issue, all of which are ideally considered early on as part of a cohesive IP strategy – preferably long before valuable IP rights are potentially lost.

IP Gotchas: Failing to Recognize Your Company’s Intellectual Property Assets

March 26, 2020

Companies routinely focus on development and marketing of new ideas, particularly in the early days as a startup. Protecting intellectual property is often set aside for later after the idea takes off and the marketplace has indicated “there is something of value to protect”. However, this mindset can be a costly, or even crippling approach to take. The truth is your business is already generating intellectual property whether you realize it or not. Recognizing and protecting this property in the right way can have a big impact on your future success.

What are my company’s intellectual property assets?

Name recognition and customer loyalty. Whatever words, shapes, colors, sounds, or packaging you use to distinguish your products and services from those offered by others may be protectable as a trademark. Taking the right steps to identify your brand and protect it from competitors in the marketplace adds value to your overall bottom line.

Proprietary information. Any business endeavor is likely to possess proprietary information. Examples include customer data, steps in a manufacturing process, marketing analysis, chemical formulas, internal training manuals, and just about anything else that gives your business an edge in the marketplace. These types of proprietary information are likely trade secrets and failure to recognize their value and protect them can be catastrophic.

New products or services. In many cases, businesses form around new products or services that no one has considered before. These include new methods of making or delivering products, or new combinations of existing devices. If your business involves products, recipes, processes, or other new concepts you have not seen in the marketplace, patent protection is worth considering. An issued patent in hand can be a powerful way to scare off competitors and effectively build market share.

Creative works. Documents, plans, designs, computer code, marketing brochures, web sites, videos, musical compositions, and other such creative endeavors are the types of property you are likely already creating that might benefit from copyright protection. This is particularly true for public or customer facing materials that are important to your success as a business. Identifying these and protecting them is important, particularly in the digital age where copies are easily created and transmitted.

It is important for your success to investigate, recognize and inventory your intellectual property assets. Failure to take this important early step can result in hampered growth, or worse yet, losing control of the business venture altogether.

USPTO Gives New Guidance on Software Inventions

January 25, 2019

Earlier this month, the United State Patent and Trademark Office released new guidance for its Examiners to help them better determine when an invention is too abstract to be patentable. This latest effort by the Patent Office brings more clarity and predictability to the examination process for inventors seeking patent protection for software and business methods.

To be patentable, an invention must be new, useful, and unobvious. The courts have also recognized that abstract ideas and laws of nature are also not eligible for patent protection. Predicting which inventions are too abstract for patent protection has been a challenge in the past, and has become more difficult since the Supreme Court’s ruling in Alice Corp. v. CLS Bank (March, 2014). The Court of Appeals for the Federal Circuit has so far attempted to follow the Supreme Court’s guidelines on a case by case basis giving us clues as to the kinds of inventions that are too abstract to be patented. This effort has created some clarity in specific cases, but it has also created additional confusion where the Federal Circuit has given differing opinions for similar inventions. This raises the possibility that different Examiners in the same technology area may pick and choose how to handle similar inventions thus arriving at different conclusions for similar subject matter.

The Patent Office has responded with this latest guidance for the Examiner corps that attempts to synthesize the case law into a more practical legal framework that may be applied in a more predictable manner. Although they do not have the force of law, the guidelines offer valuable insights into how Examiners will determine whether the subject matter in a given application is unpatentably abstract.

Looking briefly at the substance of the latest guidance, the USPTO is revising its examination procedure by: (1) Providing groupings of subject matter that it considers to be an abstract idea; and (2) clarifying that a claim is not ‘‘directed to’’ a judicial exception if the judicial exception is integrated into a practical application of that exception.

On the first point, the Patent Office sees three separate categories of material that are unpatentably abstract:

  1. Mathematical Concepts: Mathematical relationships, mathematical formulas or equations, mathematical calculations
  2. Methods of Organizing Human Activity: Fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviors; business relations); managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions)
  3. Mental Processes: Mental processes—concepts performed in the human mind (including an observation, evaluation, judgment, opinion).

According to the guidelines, concepts that do not fit one of these categories are probably not abstract ideas. The Patent Office does leave open the possibility that exceptional cases could arise where the concept is too abstract to be patented, but also does not fit into one of these categories.

On the second point, the Patent Office explains that even if the claims do fall within one of the three groupings above, they may still be eligible for patent protection if the abstract concept is integrated into a practical application of that concept. A “practical application” is one that applies, relies on, or uses the concept “in a manner that imposes a meaningful limit on the abstract concept.”

The new guidance represents a noteworthy change in the way applications will be handled by Examiners, and it marks the latest attempt by the Patent Office to bring clarity and predictability to the process. It is also important to note that this is not a change in the statute approved by Congress, nor is it a change to the legal framework that has been endorsed by the Federal Circuit or the Supreme Court. It remains to be seen then, what the long-term effect of this change will be on applications currently under examination, and what affect, if any, it will have on patent litigation going forward.

Woodard, Emhardt, Moriarty, McNett & Henry LLP Promotes Two to Partnership

January 3, 2018

Woodard, Emhardt, Moriarty, McNett & Henry LLP is proud to announce that Jeremy Gustrowsky and Michael Morris have been named to the firm’s partnership, which was effective January 1, 2018.

Jeremy Gustrowsky focuses on all areas of intellectual property. He assists clients with a wide variety of needs to plan and execute strategies for protecting their ideas and branding their products and services. He has significant experience in preparing and prosecuting patent applications in the U.S. and abroad for a broad range of products. He also assists in litigation and dispute resolution matters.
He is a graduate of Indiana University Robert H. McKinney School of Law (J.D., 2010) and University of North Carolina at Asheville (B.S., 1999)

Michael Morris practices in all areas of intellectual property, including providing services for identifying, procuring, and enforcing intellectual property rights. In particular, he has significant experience in preparing and prosecuting medical device and mechanical patent applications in the U.S. and abroad; providing freedom-to-operate, infringement/non-infringement, invalidity/validity opinions and monitoring competitor IP.
He is a graduate of Indiana University Maurer School of Law (J.D., 2011) and Rose-Hulman Institute of Technology (B.S., 2008)

Software Patentability v. A Review of 2016 Federal Circuit Opinions

January 19, 2017

The January patent prosecution practice luncheon included a discussion of highlights from 2016 Federal Circuit opinions that addressed the patentability of software inventions. Although the Federal Circuit continued its trend of invalidating most of the software patents it reviewed, several cases offered software patent holders new cause for optimism. To view the presentation, visit:   Alice Corp Update 2016 Cases from Woodard, Emhardt, Moriarty, McNett and Henry LLP

House Passes Federal Trade Secret Bill

April 28, 2016

The House on Wednesday passed the Defend Trade Secrets Act of 2016 which would allow individuals and companies to fight trade-secret theft in federal court. The Senate already voted to approve the bill earlier this month, and President Obama is expected to sign it into law.

Trade secrets include customer lists, recipes, procedures, blueprints, and other accumulated proprietary knowledge that provides businesses with a competitive advantage in the marketplace. Such proprietary information provides hundreds of billions of dollars in annual revenue and millions of jobs.

Currently, federal trade secret protection is only available by requesting the Justice Department to intervene. Companies or individuals cannot file a federal lawsuit and must therefore address the issue in state courts. This can mean added complexity and expense when dealing with various state courts with differing laws, particularly when a trade secret case involves multiple states.

The Defend Trade Secrets Act would authorize individuals and companies to file a civil lawsuit in federal court for the misappropriation of a trade secret that is related to products or services involved in interstate or foreign commerce. Besides the potential for reduced cost and complexity, the law provides options for enforcement that are beyond what state courts are typically willing to do. For example, a seizure provision allows a company to ask for the government to seize its trade secrets prior to giving any notice of the lawsuit to a potential defendant.

The Obama Administration has thus far supported the Defense of Trade Secrets Act. In a statement released earlier this month, the President said he “strongly supports” the legislation and its effort to make trade secret protection “more uniform, reliable, and predictable.”

Contact us if you have any questions on this or any other aspect of intellectual property protection.

Older Posts »