This is the final part in a five-part series on The Leahy-Smith America Invents Act.
When clients walk into Patrick D. Richards' office to patent a piece of software they just created, he said the process seems "somewhat backwards."
Patents work best as an incentive to innovate — a necessary part of determining whether to create a costly invention, Richards said.
But software designers often step into his office with a finished product and no patent. Rather than a true incentive, the patent acts as a costly "asset" that may end up helping but could also hurt his clients' companies, he said.
"I think (patents) work really well on the pharmaceutical and medical devices side ... where clients are looking for and are getting higher-quality information about what products to pursue," said Richards, owner of Richards Patent Law P.C.
"And I don't think they're creating the right incentives, and I don't think they are creating any certainty on the software side."
Due to the massive amount of software patents and the breadth of inventions they cover, Richards said he can give just about every client in the industry the same advice: "I don't know what you infringe but you almost certainly infringe something."
This type of uncertainty in the software industry — where clients don't know if a patent will help them, and even if it may, whether or not an infringement lawsuit awaits down the road — leads to a chorus of professors, judges and economists saying software patents currently create more harm than good.
A September study called "The Case Against Patents" by two St. Louis Federal Reserve economists, argues to abolish patents entirely.
Richard A. Posner, a 7th U.S. Circuit Court of Appeals judge, says in a July article in The Atlantic that software patents should receive different treatment — such as a shorter lifespan — than those in the pharmaceutical industry.
Posner did not raise an altogether new argument, but it went unaddressed by what the White House calls the most significant patent reform since 1952, the Leahy-Smith America Invents Act, said Mark P. McKenna, a professor at the University of Notre Dame Law School.
"If you were just writing rules for one or the other of those industries (software or pharmaceuticals), you might write them very differently," McKenna said.
"But because it's one-size-fits-all, everybody's got a stake in the rules. And so it's very hard to get people to agree on what should be done. And I think that became the thing that made it impossible to address the most serious problems."
Operating with the system in place today, Richards said it often makes sense to advise small software companies to file patents.
Big companies may take a small patent holder more seriously, he said, and the patent may become worth millions of dollars at a possible cost of "tens of thousands."
But some said it may also feel like a bit of a trap for those patent applicants. They don't know if their software can receive a patent until after an expensive search for similar ones, Richards said. And even if a patent gets issued, an infringement lawsuit could slam the door on them.
Pete Hallenberg, Richards' client and CEO of Chewy Software LLC, a 10-year-old, 23-employee company that develops children's video games, said he saw firsthand the confusion around the benefits of software patents.
As Chewy grew into a successful developer of games for big-name toy companies like LeapFrog and Hasbro, he said his company began to hit a ceiling.
Hallenberg said Chewy needed to innovate. And the company did after spotting a possible new market that seemed perfect: The toy makers Chewy works with wanted to make new toys that interact with touch-screen video games, he said.
Hallenberg's idea, which he recently filed a patent on, allows a touch screen to recognize something other than a finger, he said. It could turn an iPad into a chess board that recognizes a pawn or a king placed on it, for instance.
Chewy received approval last week "on a project that involves using our licensed technology for one of the big toy makers," he said.
Despite the possible benefits of the patent Hallenberg applied for, he said he remains "somewhat ambivalent about them."
"We have a great example of how they can be an equalizer and that seems to be the light side," he said. "The dark side is if (a big competitor) … decided to come after us with their portfolio of patents, we couldn't hope to — I'm sure we couldn't stand up against them."
While companies big and small get hit with patent infringement lawsuits, the difference comes in how those lawsuits impact those companies' innovative products.
David Schellhase, Chicago-based, California-licensed general counsel for Groupon Inc., said the 12,000-employee daily deals company currently faces "15 to 20" patent infringement lawsuits from "non-operating entities."
"We actively defend ourselves," he said. "We fight because we don't want to just roll over when we feel we're right."
Groupon's final product remains unaffected from those lawsuits. Instead, he said they affect the $1.2 billion the company maintained at the end of the second quarter of this year.
Chewy's plans for a new type of video game, however, may never get off the ground if a big company comes knocking with an infringement suit, Hallenberg said.
"And in that regard, I'm somewhat afraid of the patent system," he said.