ACM OC: An Intellectual Property Primer For Software Developers

Past Tides
October 10, 2016 By Hai Truong

The Orange County Chapter of the Association for Computer & Machinery (ACM) held their seventh program meeting on Wednesday evening. ACM has over 100,000 members worldwide, representing various disciplines of science. The Orange County chapter has been in existence since 2014. The evening focused on a detailed overview of intellectual property relevant to software developers. By providing real-life examples, the intention was to help developers avoid problems related to IP while building their company. ┬áThe presentation was lead by John King, an authority on intellectual property and partner from Knobbe Marten’s Orange County office. With experience counseling numerous startups during early stages of development and helping larger clients build patent portfolios, OC Metro Magazine has named John King one of Orange County’s top patent attorneys multiple years in a row.

The event kicked off with Dan Whelan, Ph.D., Chair of the Orange County ACM chapter, sharing opening remarks on the organization and giving thanks to the Cove and Applied Innovation for providing a meeting space. Whelan then introduced King who shared an outline with topics ranging from how to outsource work to contractors to how to use open source code effectively. Next, King explained that ownership of technology is crucial. A common misunderstanding for companies that are starting out is that if someone is paid for the code he or she creates, the person paying ultimately holds ownership. He explained this is not true unless an agreement transferring the rights of code back to the purchasing buyer is signed. Agreements for independent consultants and employees should also follow this same approach with an obligation of confidentiality included. King provided a real-world example of a company who commissioned a contractor to develop custom software. The contractor eventually created a third-party version of the software to compete with the original client who hired them. Since no agreement was signed initially by each party, the contractor was within their right to proceed. King emphasized that ensuring ownership of the technology is a crucial part of due diligence for investors.

Next, King explained the effect of legislation passed in recent years such as the America Invents Act and the importance of deadlines. To reduce the cost of patent legislation and to simplify the process, the America Invents Act states that whoever successfully passes through the patent office first will win the rights. Additionally, deadlines still exist, and once the technology is put into either media, for sale, or for public use, there is a one-year window to file. King provided a real-life example of Michael Jackson’s famous anti-gravity lean, as seen in the Smooth Criminal music video, which was enabled by special shoes developed for the effect. Jackson filed for the patent in 1992 and used the shoes on his tour in 1990. Though he was the first to file, he did not do so within the one-year filing period, and the patent was deemed invalid.

King proceeded with his presentation and explained different options to expedite patent filings such as the Patent Prosecution Highway, First Action Interview Program, and Prioritized Examination. Under the guidelines of the Patent Prosecution Highway, if a patent office in another country finds the IP patentable, it can be fast-tracked in the US with allowance rates as high as 90% within one year. The First Action Interview Program is a free request and has approval rates as high as 45% in six months. King provided a real-life example of a past client for Prioritized Examination with his firm filing January of 2014 and receiving an issued patent in October of the same year.

In addition to protecting crucial technology and ensuring ownership of it, King also highlighted the increased funding potential with a patent. He provided an example of an internet advertising company who acquired 5 million dollars in funding with a patent after trying for years to move their business forward. An additional real-life example included TiVo’s exponential valuation increase on their first day of going public due to pending and valid lawsuits against competitors who were trying to build a similar technology; the result involving competitors having to purchase the technology directly from TiVo. Though examples such as TiVo’s are exceptions and not the norm, they show how having patents can bolster a company’s position in their space and provide additional peace of mind for potential investors.

The evening concluded with King’s overview of the pros and cons of open source and a Q&A from the audience. King shared that the pros of using open source include: that it is good for rapid prototyping, great for internal software tools, a valuable resource for powerful SaaS tools, and a good way to distribute the product with the intention to rewrite software over time, so it becomes proprietary. Alternatively, a con of using open source code includes an obligation to dedicate intellectual property to the public depending on the license. With the remaining time, an audience member asked King about the top three mistakes startups make with intellectual property. King responded that he has seen startups commonly miss due dates and not look for the problems with other people’s related patents that may hurt them later. Lastly, he shared startups should not file a patent off of a prototype, but instead use a provisional patent until the long-term features of an IP have been determined.