Many were taken aback when Yahoo! recently announced that it was purchasing the mobile app company, Summly, for a reported $30 million – from a 17-year-old, no less. Summly was a mobile app designed by its founder, Nick D’Aloisio, to aggregate and summarize Internet content using proprietary algorithms, and present the summarized content to users for easier consumption on their mobile devices. Yahoo! also announced that it would promptly close Summly, and launch the same technology within its own network of sites. This has led many people to wonder: if Yahoo! didn’t purchase Summly for its mobile app, which it immediately pulled from the iTunes store, or its millions of existing customers, what exactly did Yahoo! purchase, other than a vaguely enforceable employment contract with the 17-year-old Mr. D’Aloisio?
The likely answer is that most of the $30 million is compensation for Summly’s intellectual property, embodied in some combination of patent applications and trade secrets. While Summly’s patent position is still not yet publicly available, D’Aloisio previously told TechCrunch that he had shoveled early seed money into filing patent applications, and that MIT researchers were impressed by Summly’s “patent-pending” technology. While we cannot yet assess the strength of Summly’s IP, it’s hard to believe that Yahoo! would have purchased the company, instead of just forging off on its own, if Summly did not have significant patent applications pending.
The story of Summly’s acquisition highlights the importance of properly handling the IP around a company’s mobile applications. Many mobile developers – and software engineers in general – are wary of using the patent system to protect their new mobile applications. Some prefer to promote their inventions as open source platforms. Others are uncertain whether their mobile-related inventions should or even can be patented. The fact is, novel mobile applications can be patented, and even if patented, they can still be distributed for free or under open source licenses (with some caveats). Also, companies seeking to fortify their competitive position and value would be wise to pursue patent protection for their mobile innovations.
Doors to Patent Office Open to Mobile Apps
U.S. patent laws provide for patenting of systems, devices, and methods, including those relating to mobile applications. While software itself cannot be patented in its intangible form, it is patent-eligible when it is disclosed and claimed in the context of methods of interacting with a computer or mobile device. What poses more of a hurdle than mobile software’s “patent eligibility,” is the question of whether a mobile app satisfies the other main requirements that it be both new and nonobvious. The U.S. Patent & Trademark Office scrutinizes patent applications carefully for whether the claimed invention has, in fact, not been previously used, published, or patented, and whether it involves more than an obvious combination of prior uses, publications, or patents. The importance of filing a patent application before others disclose or patent similar technology is more important than ever, since the U.S. recently switched from a “first-to-invent” to a “first-inventor-to-file” system. As a result, companies that believe they have developed an innovative mobile application should consider promptly filing one or more related patent applications. At a minimum, those companies should commission a patent search to gain insights on the likely novelty, and thus, patentability, of their mobile applications.
Open Source Your Patented Mobile App
The desire to promote mobile-related inventions as open source platforms also should not dictate against filing patent applications. Companies that develop novel mobile applications can patent them but still elect to distribute their apps under free, open-source licenses. However, deciding to distribute applications without patenting can severely inhibit the innovator’s ability to later control the use or direction of that application. When Toyota’s subsidiary, Denso Wave, invented the two-dimensional barcode – the now ubiquitous “QR-code” – its patent attorneys patented the technology even though the company promoted it as an open source standard for improved barcodes. Now, millions of people around the world are scanning QR codes using the various QR code-reading apps available in the iTunes and Android app stores. Denso Wave has profited from just its own use of the widely adopted technology. More recently, Twitter made big headlines last year when it announced its “Innovator’s Patent Agreement,” which promised that its patents would be used only for defensive purposes, except that they could be used in offensive litigation with the inventors’ permission. Although Twitter’s policy contains several caveats, it reflects a broad interest in patenting its innovations while respecting its inventors’ desire to elect for open source. By contrast, companies like Lodsys and MacroSource, for better or worse depending on whom you ask, are vigorously enforcing their patents against mobile app distributors, both big and small.
Mobile Isn’t Just Mobile Anymore
In the past few months, media outlets have widely reported on the astonishing ascent of mobile content and its predicted 2014 overtaking of standard web content as the most viewed media. Considering the dynamic and growing importance of mobile applications, even diversified companies no longer can afford to neglect the IP surrounding their mobile apps. In addition, in the fast developing world of mobile applications, being the first mover is not always the key to securing a large market share. Mobile applications can be copied easily, and companies with substantial marketing budgets can muscle their way in to capture the public’s attention as the top app for a particular function. App Promo’s “First Annual Developer Survey” found that the amount of money spent on marketing was one of the most determinative factors for the success of a mobile application. Mobile has become so valuable that if your company doesn’t patent its mobile apps, someone else may try to, and they might even enforce those patents against you. But, if you at least try to patent your mobile apps, then an envious latecomer might be more likely to buy or license your technology, than to brazenly steal your market share.
Key Considerations for Patenting Mobile Apps
If your company decides to pursue patent protection for its mobile app, there are several important considerations to keep in mind. First of all, it is important to disclose and claim your mobile application in the context of both the method performed at the client level and the method performed at the server level. Many mobile applications do their heaviest data processing and analysis steps at the server level. For example, the popular music recognition app, Shazam, records a segment of music and sends the audio clip to a server for processing-intensive analysis and recognition. The server then sends back to the user the name and description of the identified music track, along with links to purchase or share the track. Similarly, many new medical imaging apps allow doctors to view the analysis of medical images, such as CT and MRI scans. However, processing-intensive analysis is usually performed at a server, and images or text of analytics are transmitted to a doctor’s handheld device for viewing.
In many cases, a potential infringer would not be able to avoid infringement liability by moving some particular processing step from the server level to the client level, or vice versa. Nevertheless, it is important to describe and claim the processing as occurring entirely at the device, or at a server, or some combination of the two, to create a more robust and flexibly enforceable patent in the event of changes in the patent laws or technology.
In addition to describing and claiming both client- and server-level methods, it is also important to disclose and claim the actual mobile device storing the mobile application (i.e., “device” or “apparatus” claims), and the physical storage of the mobile application software – so called “computer-readable medium” claims.
Build Your Mobile App Patents to Last
Keep in mind that a patent will be enforceable for up to twenty years from the filing date. Ten years from now, processing power will be orders of magnitude higher than it is now, and hardware components may be orders of magnitude smaller. Processes you consider too burdensome for your customer’s iPhone 5 might be a trivial matter for their iPhone 15. And, the successor standard to 4G LTE will enable even faster data transfer between mobile devices and servers. Also, consider whether consumers will be interacting with your mobile application through a touchscreen, as they likely are now, or possibly through voice recognition or some other input mechanism, and how that might impact the functionality of your application. Think about and describe the various ways to modify your user interface or improve your unique functionalities, without limiting your patent application to the release version you’re ready to upload to the app store.
Lock-up Ownership Before it’s Too Late
Last, but possibly most important, many companies outsource mobile development to contractors. In many cases, an outsourced mobile developer is just programming the inventive concepts that your company instructs it to program. If the developer is indeed just following your company’s instructions, then its employees likely would not be considered inventors under the patent laws. However, inventorship often becomes murky, and a developer might later claim an ownership interest in your intellectual property. Because of that risk, it is critical and most prudent to have in place previously signed agreements by which the developer agrees that any inventions or improvements made under the development contract are the property of your company, and to explicitly assign in writing all IP rights to your company. Your developer agreement should also have assignment and work-for-hire clauses specifying that any code will be treated as a work-for-hire that your company paid for and now owns. It’s especially important to have that written agreement locked up before your app starts climbing the ranking charts.
Mobile software is an exciting and dynamic technology, but it’s important to pause to periodically consider your patent strategy as it relates to your company’s long term goals. With the right strategy, you’ll put your company in a position to continue leveraging your innovative apps well into the release of Google Glass 15. At a minimum, you’ll increase the chances that a later, and possibly larger, entry to the market will stop to review and assess your patent filings, and perhaps bring you along for the ride.
Chris Agrawal advises technology companies on developing comprehensive patent strategies consistent with their business goals. He focuses on developing high-impact patent portfolios, managing freedom-to-operate for new technologies, and positioning clients to maximize their market, investment, and acquisition opportunities over their competitors.
This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the author and is not attributable to Bookoff McAndrews, PLLC, or the firm’s clients.
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