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Sunday, May 29, 2005

Small Software Firms & Patents

Andre Carter thinks that patents remain key to protecting innovations for small software firms. The reports of death of small software firms appear to be exaggerated. New software firms continue to emerge, break new ground, and trounce their competition. They succeed because they tackle new problems and continue to innovate in the face of competition. The expansive patent portfolios of industry giants can certainly make some competitive development projects difficult for small firms. However, software patents have emerged as the most effective tool for small firms to protect their inventions against the large players.. The competitiveness of the software market demands that trailblazing entrepreneurs protect their innovations in order to profit from them, and copyright and trade secrets are often not enough. While copyright is an important intellectual property protection for software developers, it is not sufficient for protecting unique inventions. Copyright only protects the software code, not the innovative ideas behind it. Patents enable small firms to simultaneously protect their innovations and share them with their partners and potential clients. Small firms with patents are often able to deter predatory action by large companies and negotiate from much stronger positions.
Using their institutional advantages of market penetration, geographic reach, promotional dollars, etc., larger competitors can simply co-opt the copyrighted inventions of smaller firms. Soon,they can reverse engineer their technologies and quickly distribute the new products through their well-established pipelines. Patents help encourage venture capital both by demonstrating value and showing a company's commitment to its engineering. This value and commitment can also encourage acquisition. Small companies, like large, can use their patents to derive licensing revenue or to create cross-licensing deals. Perhaps the most important value, is that patents can prevent larger competitors from simply co-opting the inventions of smaller firms without licensing them. Small software firms continue to compete and innovate despite dire predictions. Instead of buying into the gloom around software patents, small firms should focus on developing a cohesive intellectual property strategy

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
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