Category Archives: Software

Recent Court Decisions Limit Patentability of Business Methods

The Federal Circuit recently issued two opinions addressing the question of “what is a patentable invention” in the context of software and business methods.  Although the opinions are not likely to cause a major change in current USPTO examination practice, they do affirm certain aspects of that practice.  The cases also will guide corporate IP managers and due diligence professionals who need to examine the likelihood that a software/business method invention is patentable — or whether an issued software/business method patent is likely to withstand a challenge in the future. Continue reading

Considering the New GNU General Public License (GPLv3) in IP Due Diligence

In June 2007 the Free Software Foundation released version 3 of the GNU General Public License relating to open source software code.  Under version 3, distributors of open source software have the option to continue distribution under GPLv2 or changing distribution to GPLv3. 

When IP due diligence reveals that a software product is licensed using the GNU General Public License, the license version (GPLv2 or GPLv3) can be important.  For example, GPLv3 does not permit licensed open source code to be used as a “technological measure” for controlling access to a copyrighted work.  Thus, if the software product at issue includes technical features such as digital rights management (DRM) to prevent copying, GPLv3 prohibits the use of licensed open source code to achiee the DRM or similar features. 

In addition, GPLv3 expressly requires a user of open source code to license any relevant patents to others who also want to use the open source code.  Thus, if a software product is covered by a patent but also contains open source code, the resulting product’s code must not only be made available to others, but any patents covering the product also may be automatically licensed to others.  Of course, this can significantly reduce the value of the patent.

Issues such as these may require that IP due diligence include an inquiry into which version of the GPL covers open source code.  The complete text of GPLv3 is available from the GNU Project.

Does Your Due Diligence Include a Software License Audit?

A common shortcut in due diligence is to give commercially-available, off-the-shelf (COTS) software a cursory review, since such licenses can easily be purchased if needed after the transaction is complete.  However, if a due diligence target is out of compliance with a COTS software license, the cost to correct the noncompliance can be substantial — especially for a small company or a company that does not ensure that its employees understand the risk of noncompliance. 

 The U.S. Court of Appeals for the Sixth Circuit recently issued a reminder of this cost in Thoroughbred Software International v. Dice Corp. (No. 06-2080, June 14, 2007), when it considered a software license that permitted the licensee to make one backup copy of each licensed product.  However, a software audit found the licensee made a 38 extra copies of one licensed product,and 31 extra copies of another product.  Although most of the copies were merely residing on computers that were not being used, the court found the copies to violate the terms of the license and awarded the software company nearly $184,000 in damages.  The Sixth Circuit also vacated the lower court’s denial of attorney’s fees and remanded the case to determine whether the infringing licensee should also pay the software company’s attorneys’ fees.

 A few well-placed inquiries during due diligence can help to avoid headaches down the road, since in most cases software noncompliance can be corrected before a transaction is complete.