The use of software as a service in tech of all sorts has skyrocketed ever since the pandemic. A McKinsey report estimates that the SaaS industry in India will generate a revenue of $50 billion to $70 billion by 2030. It will account for about 4%-6% of the global SaaS market by the next decade. So, to remain competitive, protecting software inventions has become more critical than ever. A look at the facts relating to patent lawsuits in the US will highlight this need further. E.g., during 2020, US courts awarded $4.67 billion for patent damages. To respond, defend or pursue a lawsuit, the average litigation costs in the US ranged from $2.3 million to $4 million. Thus software companies are prone to patent lawsuits. We will look at some reasons why they get sued for patent infringement abroad in this article.
Software patents are not popular in India
One cannot stress enough the need to protect software inventions through IP. An invention is anything new, not known to the public, and is useful in the industry. India was one of the earliest nations to protect software inventions through copyrights. But getting software patents remains a daunting task.
Software is not patentable ‘per se’ in India
You cannot patent software as such (or per se)in India. The Indian patent law excludes some inventions from patentable inventions. So “mathematical or business” methods or a computer program per se or algorithms are not patentable. But protecting software through IP has been a raging topic worldwide and more so in India. So the IPO laid out some guidelines to tackle software patents under Computer Related Inventions. Yet, you can patent software through careful drafting of patent claims. Besides, the software must be a combination of some form of hardware and software to be patentable. You can find more information on software patents in India here.
Because of these reasons and lack of awareness, many SaaS companies fall prey to patent lawsuits. This is more so in countries like the US, where software patents are much more popular.
Software is generally copyrighted
You can find that most owners of software-related inventions copyright them. In the Indian context, copyright can protect against misuse of your software to some extent. But compared to copyright, the patent offers more robust legal protection as its procedure is stricter. An inventor can use patents to protect against copying the logic of a computer program. But, copyright would only protect the literary work and not the logic of the program itself.
The misuse of one’s intellectual property rights may lead to patent litigation. This leads us to the question of what litigation is? It is the legal process you undergo when a patent owner sues you for using their patented invention without permission. This illegal use is what we know as patent infringement. Thus, marketing or selling patented products in the US is an infringement of those patents.
Lack of awareness of IP
A simple comparison of the number of patent applications filed in India vs. the US shows a huge difference. On average, there are about six patent applications for every 10 lakh people in India. One hundred times more people file patent applications in the US. This shows the importance of filing patents in the US. Even though various reasons account for the low percentage of patents in India, it is a must to get patents (or licenses) outside of India.
US has a lot of software patents
According to a leading IP strategist, Raymond Millien, the percentage of software-related patents issued in the US was 61.8% in 2019. The USA encourages innovation since SaaS is essential for progress. Getting software patents in the US is not as tricky as in India. The US patent law excludes abstract ideas, laws of nature, and natural phenomenon from patentable inventions. But software inventions are patentable under certain conditions. For example, activities that occur before and after computer processing are patentable. An algorithm that has some inventive concept in its application is also patentable. A process or apparatus that uses software as a component can get a patent as well.
Many cases show that US courts value practical use of the invention. This is different from the focus on category or drafting of the patent claims in India. Not only are software patents more popular, but many patent lawsuits involve software patents as well. A factor that might influence this is the judicial district of Texas. Texas is often referred to as a haven for SaaS patent-holding trolls or companies. Thus new entrants into the SaaS market in the US are much more prone to infringement lawsuits in the US than in India.
Patent trolls
A lot of SaaS companies, especially MSMEs, face patent lawsuits by patent trolls. Patent trolls are also called Patent Assertion Entities (PAE) or Non-Practicing Entities (NPE). They are not involved in manufacturing or services. Their entire business model is buying patents and suing others for damages. Sometimes these NPEs force companies to sign patent license agreements for royalties. NPEs have a vested interest in suing companies. Versata, Uniloc, MARA, and Xperi Holding Corp are some examples of patent trolls.
Patent trolls take advantage of the judicial systems and use loopholes to sue companies for patent infringement. Sometimes the lawsuits may even be frivolous to scare an enterprise and extort money. This may be the reason that most patent infringement lawsuits settle outside the courts in the US. Some Indian companies may not be aware of such strategies and the existence of such entities. Thus, they fall prey to lawsuits on software patents by trolls. You can find some vital strategies to tackle patent trolls in our article here.
Lawsuits by competitors
While most lawsuits will involve a patent troll, businesses holding SaaS patents can also sue you for infringement. They’re only trying to run their business and knock out the competition. To do this, they will include damage to the business and attorney fees as compensation. Suing for a lawsuit is also a tactic to stop you from entering the market as a newcomer. So it would be best to be very careful when entering or launching a service in a new market.
Indian SaaS companies using open source software may still be sued
Have you ever wondered how software works? That part of the software that we, as users, can’t see is the source code. It is the code that programmers use to change how a piece of software or application works. They can use the source code to improve or fix problems in the software. Open-source software has such a source code that anyone can inspect and make changes to. For example, only authors/coders of the software Skype can alter or inspect it. But, the Linux operating system is an open-source software, and you too can enhance and alter it.
The spirit of open source software is to encourage innovation and share knowledge for free. You cannot directly use it to make profit out of it. Open source software is distributable under licenses. Thus the situation becomes tricky when there are more than two parties involved in license agreements. You should be careful while getting a license from a second party that is not the original holder of the product. Otherwise, another party can sue you for breaching their terms of license agreement.
Conclusion
There can be many reasons from those listed above for why Indian SaaS companies face software patent infringement lawsuits abroad. Handling these patent lawsuits is a costly affair. Therefore, awareness of the IP of concerned products helps mitigate such risks. There are various strategies you can adopt to prevent patent lawsuits. We will shed light on some lawsuits Indian SaaS companies faced in the US in another article.