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Alex Osterwalder on building The Invincible Company

iSPIRT Foundation, Confederation of Indian Industry (CII), The CII-Suresh Neotia Center for Innovation, NSRCEL at IIM Bangalore, CIIE at IIM Ahmedabad and Mahindra Leadership University came together to host the first of the Global Leadership Seminar series on 25th September, 2020.

Our inaugural speaker was Dr. Alex Osterwalder, the well known author of the Business Model Canvas, who spoke about his latest book, The Invincible Company. The talk was followed by a fireside chat with two industry veterans, Rajan Anandan, MD of Sequoia, former VP of Google South East Asia, and a prolific angel investor, and Sanjay Behl, CEO India & Co-Founder Nextqore Private Limited, and Chairman of the CII National Committee on HR & Leadership.

Prof. Rishikesha Krishnan, Director of IIM Bangalore, gave the welcome address and said that he was a big fan of the Business Model Canvas and has given many copies of the book away. Alex started his talk by saying that no company is invincible. The only thing they can do is to constantly reinvent themselves. The most successful companies reinvent themselves when the going is good. In a crisis, it is often too late for a company to reinvent itself. Great companies compete on superior business models in which technology, services and innovation and price are embedded. Great companies are also able to transcend industry boundaries easily. An example of an innovative company that transcends industry boundaries is Tesla, which sells cars, batteries and data. Alex said that his favorite example is China’s Ping An, which transformed itself from an insurance company into a conglomerate. Ping An broke out of industry boundaries to build Ping An Good Doctor, which now has 300 million users. Alex said that the pharma companies of the world could have also made such a transition but they defined their industry boundaries too rigidly. 

Note: The full video of the seminar and fireside chat embedded below

Alex said that companies need to be ambidextrous and be able to both exploit existing business models and explore new ones, but both these require very different skill sets. 

Quoting Clayton Christensen, Alex said that there are three types of innovation:

Efficiency innovation: Using robots in warehouses would improve efficiency, but was not enough for survival. 

Sustaining innovation: New car models, digital transformation etc are good examples 

Transformative innovation: Completely new business models. For example Amazon started as a book seller but went on to become an infrastructure provider with Amazon Web Services.

He said that most companies were not doing enough of transformative innovation that created value for customers and organizations. He said that it was possible for a company to disrupt an industry with inferior technology. Sharing the example of Nintendo WII, he said that it was not based on proprietary technology, but off the shelf components including motion sensors, that appealed to an underserved market of casual gamers who did not worry much about graphics and technology. 

He suggested that companies could build an Explore portfolio by investing a small amount of money in a large amount of ideas. You cannot pick the winners upfront but learn from the VC industry where typically 6 out of 10 ideas will fail, 3 out of 10 will make some money, and 4 out of 1000 will be home runs. The German engineering company, Bosch is exploring this model. It gave 200 teams 120,000 Euros each and gave them three months to test their ideas. Seventy percent of these teams were cancelled after six months. 60 teams get a follow-up investment of 300,000 Euros, and finally 15 got further investments and were moved to the Exploit phase. This is what companies like Amazon have been doing for a long time. 

Rajan kicked off the fireside chat by saying that innovation is a leader’s job, and that titles like Chief Innovation Officer are dead-end jobs delegated to those who cannot run businesses. He pointed out the trillion dollar market cap companies that exist today are founder driven companies. Sharing the example of Google, he said that, in Google people get noticed for doing the Big New Thing, and not just for keeping the machine running. Rajan argued for purposeful, targeted innovation, and for making adjacent bets. He said that Google Payments was one of the bets that they made, which has paid off well. Another was the Internet Saathi, which was an idea brought to him by Google employee, Neha Barjatya, which made sense as an initiative that aimed to bring women online. His take was that one has to think like a VC and make selective calls. He felt that the approach of making 200 bets and seeing what would work, was not feasible and gave the example of Sequoia, which manages $5.5 billion dollars but has a portfolio of only 200 companies. He also argued that, when it comes to innovation, and chasing new areas, you have to put your best people on the job. 

Sanjay, who has worked in large companies like Levers, Reliance, Nokia, and raymonds before going on to start his own IOT company, NextQore, said that most of our larger companies are built for efficiency and not innovation and disruption. These companies rewarded predictability, but the world is now unpredictable. They are vertical, matrix organizations in a world that is flat, and has moved to platforms. They were trained to manage scarcity, but we now live in a world of abundance. These organizations were trained to manage linear change, but change has now become exponential. He said that the immune system of large companies was trained to reject innovation, and they need to now look at replacing scalable efficiency with scalable learning. 

Alex said that innovation is becoming a profession. Therefore, these frameworks will become essential since CEOs now want a process for innovation, and less of an ad-hoc process. Rajan seemed to be all for targeted innovation and big bets while Alex’s model was to take a lot of small bets, and scale them up. Which approach should CEOs go with? Can innovation be turned into a predictable process, or is it something that depends on the leadership driving it. Write to us with your comments and let us know what you think.

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Call for Volunteers: FinTech Leapfrog Council [FTLC]

iSPIRT’s FinTech Leapfrog Council (FTLC) is an initiative designed to help incumbent, government-owned banks make the transition to an era of cashless, presenceless and paperless transactions enabled by India Stack and other emerging technologies.

At iSPIRT, our belief is that banking will change more in the next five years than it has in the last 50 years. For a variety of reasons, the changes happening in India will follow a path that is very different from other countries. Indian Banks, therefore, have two choices: Create a new playbook to deal with these changes, or stick to the old rulebook and risk being disrupted.

Over the last two years, FTLC has been helping SBI, Axis, BOB and IDFC Bank create new playbooks in six orbit shifts that will help banks successfully transform themselves. These six orbit shifts are:

  1. Fee-based Payments to UPI and Payments as a Service
  2. Closed Billing Systems to Bharat Bill Payment System (BBPS) and Billing as a business  
  3. Asset-based lending to (Cash) Flow-Based Lending
  4. Closed Pipe Architectures to Open APIs and Platform Banking
  5. Core Banking Systems to Internet Architecture and Transaction Engines
  6. Data Silos to Consent-based Data Sharing

These FTLC banks have major government shareholding and comprise more than 30 percent of the Indian banking system. Therefore, helping them create these new playbooks is a mission of national importance.

FTLC works with the CEOs and leadership teams of these banks through a series of quarterly workshops and customised workshops in the above-mentioned areas. Some of the industry leaders who spoke at FTLC workshops to facilitate these orbit shifts are:

  • Shamir Karkal, Head of Open APIs at BBVA Bank, Spain, and co-founder of Simple Bank
  • S Ramakrishnan, former Chief Data Officer of Citibank
  • Prof. Saras Sarasvathy of the Darden School of Business
  • Nandan Nilekani, Non-Executive Chairman, Infosys
  • Sharad Sharma, Co-founder of iSPIRT & Ex CEO – Yahoo Inc, R &D. 
  • Sanjay Swamy, Managing Partner of Prime Ventures.

We are looking for an anchor volunteer who can work closely with the FTLC banks to ensure that they are making progress on these orbit shifts, and gradually take my place at FTLC.

For me, being the anchor volunteer for FTLC has been rewarding in many ways. The opportunity to work with other volunteers whose work is reshaping the fundamental nature of banking in India has been very exciting. The opportunity to work with some master strategists who can see the big picture without losing focus on the nitty-gritty details of execution has been awe-inspiring. Seeing young volunteers take on crucial roles and excelling in it has given me great hope for the future of our country. And finally, the fact that iSPIRT’s work is helping India create a world-class digital infrastructure is something that fills my heart with great pride. I had initially signed on as anchor volunteer for FTLC for one year, but the work was so interesting that one year became two before I realised it! We are now looking for a volunteer who can replace me, but start off gradually as a volunteer-in-training.

As you probably know by now, it is difficult to become an iSPIRT volunteer, but easy to cease being one. The arduous process of becoming a volunteer allows each side to feel each other out. We want you to get into volunteering with your eyes open. As part of this counter-intuitive mantra, we let you hibernate without any hesitation. This enables you to make soft promises that you can keep.

If you are interested in being a volunteer for FTLC, contact me at [email protected] or [email protected]

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A Leapfrog moment for Indian Banking

At iSPIRT, our belief is that banking will change more in the next five years than it has in the last 50 years. For a variety of reasons, the changes happening in India will follow a path that is very different from other countries. Indian Banks therefore have two choices: Create a new playbook to deal with these changes, or stick to the old rulebook and risk being disrupted.

In mid-2015, Nandan Nilekani gave a talk titled, The Whatsapp Moment in Banking that went viral within banking circles. The analogy was derived from the manner in which the sharp growth of Whatsapp had hit the SMS revenues of the global telecom industry. SMS used to account for 10-15 percent of the global telco industry revenues but Whatsapp, a company that had a mere 40 people in 2009 easily eclipsed them with a traffic of 30 billion messages per day. As against this, all the incumbent telcos of the world put together accounted for just 20 million messages per day! Similarly, a growing confluence of technologies would allow new age banks to handle millions of customers at a very low cost, without costly branches and expensive technologies; and with a minimum staff strength.

Responding to this challenge, Mrs. Arundhati Bhattacharya, the Chairman of the State Bank of India, India’s largest bank, brought a team of more than 30 senior leaders from SBI to Bangalore for a half-day session on how banking is being transformed in July 2015. This session became the forerunner for a forum called the FinTech Leapfrog Council (FTLC) that iSPIRT set up to help incumbent banks navigate the disruptive changes facing them.

001For incumbent banks to transform themselves is a truly difficult challenge, but given that these banks cumulatively account for more than 30 percent of the Indian banking sector, their transformation is of national importance. In the first phase of FTLC, four banks — SBI, Bank of Baroda, Axis Bank and IDFC Bank — were invited to join FTLC, and all four of them accepted. FTLC then helped the banks through quarterly workshops that consisted of deep-dives focused on disruptions in areas like alternative lending, payments and analytics; and emerging technologies like the Unified Payment Interface, and the IndiaStack, which enables cashless, presenceless and paperless transactions with a consent layer on top. Some of the industry leaders who spoke at FTLC workshops, which attracts the CEOs and top management of the four banks are:

  • Shamir Karkal, Head of Open APIs at BBVA Bank, Spain, and co-founder of Simple Bank
  • S Ramakrishnan, former Chief Data Officer of Citibank
  • Prof. Saras Sarasvathy of the Darden School of Business
  • Nandan Nilekani
  • Sharad Sharma, co-founder of iSPIRT
  • Sanjay Swamy, Managing Partner of Prime Ventures.

While everyone agrees that what a bank looks like 5-10 years from now would be radically different, no one can predict exactly what the bank of the future will look like. In this situation, banks face one of the most disconcerting forms of change that we call non-linear change. In the FTLC taxonomy, there are three kinds of change:

  1. Incremental change focussed on process improvement — for example, approving a loan in five days as opposed to seven days
  2. Disruptive change which is very painful, but where the end state is well known. Several MNC IT services companies faced this, when they recognized that they had to embrace the Global Delivery Model perfected by Indian services companies. In the last few years, many of these MNCs turned around their business models and reached a point where most of their employees are in India. The change was painful, but they had a sense of where they were and where they need to be.
  3. Non-Linear Change, where the end state is difficult to predict. In the telecom industry, who would have predicted that Whatsapp would carry 30 billion messages a day? In the transport industry, who would have predicted that Uber, a company founded in March 2009, would be valued at $62.5 billion in June 2015?

To navigate the Non Linear Change, iSPIRT helped the FTLC banks embrace Non Predictive Control (NPC), a method researched by Prof. Saras Sarasvathy of the Darden School of Business. While strategic planning helps organizations in situations where the future is predictable, NPC helps banks in situations where the future is unpredictable. For instance, its is clear that a large expansion will take place in non­-collateralized debt to the under­banked, but it is impossible to know what this alternative lending system will exactly look like. Hence, it’s imperative that banks bet on several competing scenarios, monitor progress on all of them, and then retire or double down on each bet. iSPIRT curated a set of startups in Alternative Lending and Payments, and set up several pilots with the FTLC banks, to help them master the NPC methodology.

For Indian banks, another development, unique to our country, is the emergence of the IndiaStack, a powerful set of Open APIs to enable cashless, presence less and paperless transactions with a consent layer that empowers users with control over their data. iSPIRT has been closely involved in the development of the IndiaStack, which rides on top of the JAM trinity consisting of JanDhan bank accounts, Aadhaar biometric identification and Mobilephones.

The Government promoting financial inclusion through Jhan Dhan Yojana, has led to over 263 million new bank accounts being opened. With RBI giving licences to over 20 new banks, including small banks and payment banks, the competitive intensity of the sector is set to increase. Over 1 billion Indian residents now have Aadhaar, an online biometric identity, and smartphones are expected to reach a penetration of 700 million by 2020. One can visualise a future where every adult Indian has an Aadhaar number, a smartphone and a bank account. Already over 367 million Indian residents have an Aadhaar linked bank account and more than 1 billion DBT (Direct Benefit Transfer) transactions have happened, whose value is in the billions of dollars. Those banks that leverage the JAM trinity and the India Stack will be able to reach out to a vast new set of customers, at a dramatically lower cost. For example, it is estimated that the cost of complying with the mandatory Know Your Customer (KYC) norms can be brought down from Rs 1,000 to Rs 5, by using the IndiaStack. This alone can enable the process of financial inclusion for millions of Indians.

Industry experts, like Bill Gates, and many others who have been following these developments, feel that India is set to leapfrog the rest of the world in financial inclusion. The FTLC program combines global best practices with a home-grown, world-class architecture for financial inclusion, and helps incumbent Indian banks create a “leapfrog roadmap” for their organizations.

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Lipstick on a pig

It’s to the credit of policymakers that they have steadfastly refused to kiss this pig called ‘software patents’, despite it being dressed up in the lipstick of ‘innovation’.

Lipstick on a pig” is a popular Americanism for making superficial or cosmetic changes that disguise the true nature of a product. The pig in question is the regime of software patents being advocated by some multinational corporations (MNCs) and their highly paid lawyers, while the lipstick is the much abused term—“innovation”.

Ever since the Indian Patent Office (IPO) issued the revised Computer Related Inventions Guidelines, a host of MNCs has been busy trying to lobby the Indian government to overturn these guidelines. At stake is India’s future in the digital age.

Patents are a state-granted monopoly on an invention, for a limited period of time. Those who have been granted these monopolies then get the right to prevent others from using the ideas and methods they have patented. Software developers, and researchers who study innovation, contend that the US, which has the most permissive patenting system in the world, made a huge mistake by bringing software under the ambit of patentability.

James Bessen and Michael Meurer, two Boston University professors, found that almost 38% of all patent litigation in the US is around software. In their book,Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, the authors explain how software falls within the realm of abstract ideas, and that it is impossible to draw boundaries around abstract ideas.

For example, if a property developer is planning to build a skyscraper on a piece of land, he can do a title search and find out the boundaries to the east, west, north and south of that piece of land. A clear title enables the developer to invest money with peace of mind. However, software being an abstract field, even law-abiding software developers cannot do a conclusive patent search in the areas they are working on, which increases the risk of software development in countries that allow software patents.

The US patent system has come to such a pass that even a respected inventor like Andy Grove of Intel was compelled to say, “The patent product brings financial derivatives to mind. Derivatives have a complex relationship with an underlying asset. While there’s nothing wrong with them in principle, their unfettered use has damaged the financial services industry and possibly the entire economy.” This was right after the financial crisis in 2008 that was caused by housing derivatives.

How did the US patent system go so wrong that one of its most venerated inventors became its harshest critics? In their book, Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What to Do About It, two Harvard University professors Adam B. Jaffe and Josh Lerner explain how the 1980s were a time of great concern about US “competitiveness”, as well as a general movement to shrink government and make it more efficient. The government responded to these concerns by making the United States Patent and Trademark Office (USPTO) run more like a business, so that its processes would become easier for inventors. The effect was that patent seekers turned into “clients” and not applicants at USPTO. The authors add that USPTO (much like IPO) has been chronically strained for resources, with patent examiners often having just a dozen hours to assess a patent application.

As a result, the number of patents granted in the US has reached 326,000 in 2015, up from 66,170 in 1980. The flood of poor quality patents in the US has led to a surge in lawsuits, and the rise of patent trolls—organizations that make nothing, and whose sole business is to acquire patents and use them to extract royalty payments from unsuspecting users.

Under the Patent Cooperation Treaty, if India allows software patents, it will have to give priority to the existing patents that have been filed in other countries. Bessen and Meurer estimate that there are around 4,000 patents on e-commerce and around 11,000 patents on online shopping in the US. If these patents are granted in India, MNCs will have the right to exclude Indian companies from using their claimed inventions. This will slow down the pace of innovation, and nip India’s growing software product ecosystem in the bud.

It is to the credit of Indian policymakers that they have steadfastly refused to kiss this pig called “software patents”, despite it being dressed up in the lipstick of “innovation”. This gives Indian software developers the freedom to innovate without worrying about patent lawsuits.

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Software Patents FAQs for Indian Startups

A couple of months ago, you might have noticed press reports where iSPIRT took a strong stance against software patents in India. The global experience with software patents has been that it leads to increased patent litigation, and uncertainty for startups. Thanks to some enlightened policy making, India has been relatively free of the kind of software patent lawsuits that we see in the US, and we would like to keep it that way.

At the same time, we cannot wish away the fact that software patents are a reality in countries like the US, and every company needs to have a software patents strategy in place. We therefore set out to understand the most frequently asked questions (FAQs) and answer them. In talking to various stakeholders, we found that even veteran entrepreneurs would often confuse copyrights and software patents. We also found that there is very little awareness of what software patents actually are. Therefore, we curated a set of FAQs and answered them in very simple layman terms. Our goal is that even entrepreneurs who are beginning their startup journey should be able to get an understanding of this topic. Even if you are a veteran in the IT industry, these FAQs might help you avoid some common misconceptions.

We therefore invite all entrepreneurs to put this one their, “Must Read” lists. We also invite you to submit your questions and feedback to these FAQs. We view this document as a first step in understanding this topic, and look forward to your feedback to make this FAQ more useful to you.

Venkatesh Hariharan, Samuel Mani and Mishi Chowdhary
Software Patents Expert Team

Software Patents FAQs for Indian Startups

Executive Summary

As India’s product startup ecosystem grows and becomes global, the issue of software patents becomes increasingly important. Most startups work extremely hard to grow their marketshare, but do not realize the importance of a software patents strategy for protecting their interests. This document answers some of the most common questions that startups have around software patents. It outlines the importance of a software patents strategy, clarifies some of the common misconceptions around software patents, and proposes a software patents strategy for Indian startups to consider.

Note: This set of FAQs includes information about legal issues and legal developments. These are for informational purposes only. These are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You should contact a lawyer for advice on specific legal issues. We don’t accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained in these materials.This document is intended for startup founders and executives. It aims to be a starting point for discussions around software patents, and not the last word on this subject.

1. Why do I need a software patents strategy?

Every IT company, and especially one that aims to go global, has to have a software patents strategy in place. This is one area where the old saying, “A stitch in time saves nine,” holds true. A proactive strategy can help many software startups improve their valuations and prevent a lot of grief. Some Venture Capitalists (VCs) tend to assign a higher valuation to startups that have software patents, though this depends from VC to VC.

Patents can also help startups from a defensive perspective. When a startup is flying under the radar, software patents might not be much of an issue. However, when a startup grows big, starts hitting the headlines, or goes global,[1] that is the time when the risk of patent litigation shoots up. Apart from being an expensive business, patent litigation can create a cloud of uncertainity over your business, and potentially scare away clients.[2] Startups that plan to take their products and services to markets like the US, that allow software patents, should be especially careful about software patents.

2. What is a patent?

A patent is a state granted monopoly to an inventor, in return for disclosure of the details of the invention. This monopoly is granted for a limited period of time. The classical test of whether something is an invention or not is novelty, usefulness, and non-obviousness. The word patent originates from the Latin word, patere, which means “to lay open” (i.e., to make available for public inspection).

3. India does not allow software patents. Therefore, why should I be worried?

Section 3 of the Indian Patent Act deals with things that are not considered to be inventions within the meaning of this Act. Section 3(k) of the act says that, “A mathematical or business method or a computer programme per se or algorithms are not patentable.” However, the definition of “per se “ has proven to be controversial. The recent guidelines from the Indian Patent Office on Computer Related Inventions would have the effect of making software a patentable subject matter, as long as it has technical effects. Many, including, iSPIRT have argued that this is against the will of the Indian Parliament, which had rejected a move to grant patents on technical effects of software.

Despite the controversy over how “software per se” should be defined, the number of patent applications that are being filed at the the Indian Patent Office is multiplying, and there is a sharp surge in the number of patents granted by the Indian Patent Office every year. A large number of these patent applications cover software in some form or the other. The legal validity of such patent grants is in question, but if these patent owners begin suing for infringment, it can cast a cloud of uncertainity over startups.

Startups that aim to go global will have to have a software patent strategy in place, when they enter markets like the US, where software patents are granted. This is because software patent litigation is an expensive business and a defensive mechanism needs to be in place. It would be advisable for such startups to hire a patent lawyer and check if they might be infringing on any software patents. If they are indeed infringing, they might have to either obtain a licence to use those patents or rewite their code, to ensure they are not infringing.

If your startup has an app (or builds apps for others), it has to be kept in mind that the jurisdiction of the app store is the US, since the major app stores are owned by companies based in the US[3].

Therefore, being proactive, and putting a software patent strategy in place, will help your organization in the long run.

4. If I cannot use patents to protect my software, how else can I protect it?

Software is algorithms for computers in human readable terms. Software can be protected through copyrights and trade secrets. Trade secrets offer certain advantages over software patents.

  1. Patent protection does not cover “abstract ideas” whereas trade secret protection can. Trade secret protection can cover almost any information (including code) which is secret and which provides an economic advantage over others.
  2. Patent protection is for a limited period of time (depending upon jurisdiction) but trade secret protection is available indefinitely.
  3. Patent protection is expensive and time consuming to obtain. In India, trade secret protection can be obtained simply by way of confidentiality and non-disclosure agreements. It is quicker and cheaper.

5. What is the harm if we also use patents, in addition to copyrights and trade secrets to protect software?

Protecting software with patents add another layer that complicates the lives of software developers. Under copyright law, if software developers write code that is similar to that of another, they can defend themselves on the grounds of independent invention because copyright protects the expression of an idea. However, the same defense is not possible under a software patent regime because a patent is a monopoly on the idea itself. Thus, even if software developers independently create a program, they may be liable for infringement, in countries that allow for software patenting.

Even end-users who use software for routine, everyday activities may be liable for infringement. For example, in the US, which has the most permissive software patenting regime, McDonalds and 400 other entities were served notices for violating DataCard’s patent on “Method for processing debit purchase transactions using a counter-top terminal system.” In another case, a company called Beneficial Innovations, sued the New York Times, You Tube and many other media organizations for allegedly violating its patent on “Method and system for playing games on a network.” Therefore the problem of software patents is not one that is confined to the software development industry alone and ends up increasing the cost of software for society as a whole.

6. What are the defensive strategies that I can adopt?

You could join a patent non-agression network like the Open Invention Network (OIN), which is the largest patent non-agression community with 1,700 members as on August 2015. Membership to OIN is free, and members have to agree that they will not sue other members of OIN around the Linux System, a list of 2,300 packages of core infrastructure technology in Linux and open source. Members also get a royalty free license to 1000 software patents owned by OIN, worth around $90 million. OIN was formed to protect Linux and Open Source users from patent litigation.

Startups that are not in the business of licensing patents to others should consider filing defensive patents. This can be an expensive business costing around $15,000 per patent (Rs 9.45 lakhs approximately).

Startups that have a unique idea, but do not want to go to the expense of filing a patent can consider submitting their ideas to www.defensivepublications.org that will review ideas and take care of patenting selected ideas. Defensive publications, which are endorsed by the US Patents and Trademarks Office (USPTO) as an Intellectual Property Rights management tool, are documents that provide descriptions and artwork of a product, device or method so that it enters the public domain and becomes prior art. This powerful preemptive disclosure prevents other parties from obtaining a patent on the product, device or method. It enables the original inventor to ensure that they have access to their invention by preventing others from later making patent claims on it. It also means that they do not have to shoulder the cost of patent applications.

7. What are the different forms of IP and can you offer a comparison between them?

Different forms of IP1Different-Forms of IP2Different Forms of IP3Different forms of IP4

 

8. How are patents granted? Do the norms vary from country to country?

The procedure for granting patents, the requirements placed on the patentee, and the extent of the exclusive rights vary widely between countries according to national laws and international agreements. Typically, however, a granted patent application must include one or more claims that define the invention. A patent may include many claims, each of which defines a specific property right. These claims must meet relevantpatentability requirements, such as novelty, usefulness, and non-obviousness. The exclusive right granted to a patentee in most countries is the right to prevent others, or at least to try to prevent others, from commercially making, using, selling, importing, or distributing a patented invention without permission.


9. If patents are granted by a sovereign state, does it mean that I have to file for the same patent in multiple geographies?

The procedure for granting patents, the requirements placed on the patentee, and the extent of the exclusive rights vary widely between countries according to national laws and international agreements. Typically, however, a granted patent application must include one or more claims that define the invention. A patent may include many claims, each of which defines a specific property right. These claims must meet relevantpatentability requirements, such as novelty, usefulness, and non-obviousness. The exclusive right granted to a patentee in most countries is the right to prevent others, or at least to try to prevent others, from commercially making, using, selling, importing, or distributing a patented invention without permission.

Under the World Trade Organization‘s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights, patents should be available in WTO member states for any invention, in all fields of technology,]and the term of protection available should be a minimum of twenty years. Nevertheless, there are variations on what is patentable subject matter from country to country. New Zealand, for instance, has taken a stance that software is not an invention and therefore, does not grant software patents.

10. What are patent trolls or Non Practicing Entities (NPEs)?

Patent trolls or Non Practicing Entities (NPEs) are organizations that exist solely for suing as a rent seeking or economic activity. Patent trolls usually strike when a startup is being acquired, is going public, or it announces the acquisition of large clients.

11. How difficult is it to file for a software patent, in jurisdictions that allow it?

Filing patents is a tedious process. Each step in the process of patent grant including filing, examination and closure is an expensive one. Companies with limited resources should in fact, give very careful consideration to a decision to file for patents. Many companies including huge market players file patents as a defensive measure rather than an offensive one. Therefore, it is important to focus on only high quality patents because only those provide a reliable and secure defensive cover. If a company has decided to invest huge sums of money in patenting activity, it would be prudent to have one good quality patent (for instance) rather than several patents of questionable merit and quality. What constitutes a good quality patent is dependent on the specific facts.

It is important to remember that patents are granted on a country by country basis and its prosecution is also on a country by country basis. Not all countries consider software a patentable subject matter. While patent applicants may file applications in various countries (which are signatories of the Patent Cooperation Treaty) with an advantage of the same priority date (i.e. the date on which the application was first filed in any country), a PCT application is helpful only to the extent of locking in on priority date. It does not however, ensure smooth patent grant procedures in all jurisdictions and the same is subject to local laws relating to patentable subject matter and examination rules. Several patent applications lose out in the examination stage in jurisdictions which have strict examination procedures and a tighter filtering mechanism for quality.

Given the above, there are obvious disadvantages to disclosure of technology a company may have spent a great deal of money and resources creating/developing. First of all, it makes otherwise confidential information public and makes the company more vulnerable to patent infringement suits. Secondly, it exposes the company’s business strategy or core technology asset to be accessed by entities in other jurisdictions who may have easy access to a patent in their country. There is no telling who may actually become privy to the company’s valuable technology assets and the company would not even be in the know if a potential competitor in a different country may use it to its advantage, especially in countries where software is not patentable. A lot of time, resources and money may therefore get wasted on waiting for a patent grant which may be well spent on actual innovation by the company.

Many high-tech companies, especially in the software product space, use trade secrets to protect their truly innovative and valuable assets (including business strategy forming the ‘secret sauce’ of their business, so to speak) because it is considered a much more effective mechanism to protect their IP without giving away or disclosing any part of their confidential information. Trade secret protection is much less complicated, much more economical and also quite effective in protecting a company’s IP assets compared to the complicated, tenuous and confounding patenting system. While there are specific trade secret laws in the US, in India we have to rely on implicit protections under the Contract Act.

[1]               See “How Life360 won its patent war,” at http://arstechnica.com/tech-policy/2015/03/how-life360-won-its-patent-war/

[2]                For an example see http://www.feld.com/archives/2012/08/a-software-entrepreneur-on-the-madness-of-software-patents-and-trolls.html

[3]               “More app developers sued over patent claims,” at http://www.theguardian.com/technology/2011/may/18/app-developers-sued-over-patent-claims

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Open Innovation, entrepreneurship, and our digital future

Open Innovation has lead to the creation of priceless resources like Wikipedia, and Free and Open Source Software (FOSS) that form the foundations of our digital society. The freedoms enjoyed by hundreds of thousands of young people around the world, hacking on laptops, hacking on servers, hacking on general purpose hardware is the primary source of the innovation which drove much of the world’s great economic expansion in the past ten years. This freedom to hack has enabled innovation and entrepreneurship, and made it possible for innovation to occur where it can occur without friction, which is at the bottom of the pyramid of capital.

As India witnesses one of the greatest entrepreneurial spurts in its history, much of it based on technologies built through collaboration and openness, it is important to understand the forces that drive the Open Innovation ecosystem. In this session, some of the brightest minds in the Open Innovation ecosystem, and the world of FOSS, will discuss:

  • 1) Why Open Innovation is important for India’s digital future
  • 2) Why Open Innovation and entrepreneurship are deeply interconnected
  • 3) How India can become one the leaders of this entrepreneurship
  • 4) What India needs to do to protect and nurture Open Innovation

The speakers are:

Prof. Eben Moglen: Prof. Eben Moglen is Professor of Law and Legal History at Columbia University Law School. Professor Moglen is the founder of the Software Freedom Law Center, which has represented many of the world’s leading free software developers. Professor Moglen earned his PhD in History and law degree at Yale University. He has taught at Columbia Law School since 1987 and has held visiting appointments at Harvard University, Tel Aviv University and the University of Virginia. In 2003 he was given the Electronic Frontier Foundation’s Pioneer Award for efforts on behalf of freedom in the electronic society.

Keith Bergelt: Keith Bergelt is the chief executive officer of Open Invention Network (OIN), a collaborative enterprise that enables innovation in open source and an increasingly vibrant ecosystem around Linux. In this capacity he is directly responsible for enabling, influencing and defending the integrity of the Linux ecosystem. Central to the achievement of his goals is the acquisition and transfer of patent rights designed to permit members of the Linux ecosystem to operate free of the threat of assertion and litigation from those whose business models are antithetical to innovation and global economic growth in information technology and computing.

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Software Patents: Evil, Necessary or an Evil Necessity? iSPIRT OEQ Hangout

iSPIRT organized a OEQ(Open Ecosystem Hangout) on 20th April, 2015, to understand the role of software patents within the software ecosystem.Software patents are a much debated subject in the technology world today. In some jurisdictions like India, software is not part of patentable subject matter, while in other jurisdictions like the US, software patents are rampant. Do Indian startups need software patents? In a globalizing world, what strategies can they adapt to navigate through the software patents conundrum?

I moderated the session and asked the software entrepreneurs in the discussion to share their cost-benefit analysis of software patents.

Rushabh Mehta of ERPnext responded by saying that as a young startup, they find the cost of software patenting (estimated at around $ 15,000-$20,000 or between Rs 9.3 lakh to Rs 12.4 lakh) to be too high.

Srivibhavan Balaram of Vocera Communications, an entrepreneur, who has worked with open source and closed source software companies, said that patenting makes sense only if there is something unique that is worth patenting. However, he also added that the market for enterprise software was tilting more to open source now because companies were more inclined to go with time tested open source software, which find much faster acceptance. He added that companies are wary of proprietary software from startups.

Subramaniam Vutha, a veteran IP Lawyer and founder of the Technology Law Forum, said that India should actively encourage open source software, while accumulating as many patents as possible in jurisdictions that allowed it. He called this strategy, “Running with the hares and hunting with the hounds.”

Samuel Mani, Partner at Mani Chengappa & Mathur, said that defensibility is the only reason to file software patents. In a study that his organization did, he found that most areas that could be patented were already staked out. He pointed out that the cost of patenting is between $15,000-$20,000 which is the cost of hiring one employee for two years. He suggested that companies that aim to create a defense against software patents could join a defensive patent pool like the Open Invention Network (OIN).

Mishi Choudhary of the Software Freedom Law Center agreed with Mani on defensive patent pools like OIN. She added that most Free and Open Source Software are copyright licenses, but some also contain patent grants. She suggested that participants review the Debian Patent Policy.

This was the first such Hangout on software patents from iSPIRT, and there are plans to organize more such Hangouts to generate greater understanding of this topic.