Use cases driven by digital technology are an increasingly bigger part of companies' business strategies, both to create new customer value and to reduce operational and supply chain costs. Yet, outside the major technology companies of the world like Google, Microsoft and IBM, few IP organizations are equipped to create patent portfolios covering software-focused digital technology.

To help IP organizations – as well as their technology and business stakeholders – understand why, what and how digital solutions can be patented, we typically use three categories of digital inventions; Technical approach, Functional operation, and Use case application. This straightforward logic helps to create an understanding of how the digital use cases of business strategies can be supported by patents, and how the typical “that is software and cannot be patented” norms of traditional technology and IP organizations can be overcome.

1. Digital patent categorization

Digital patents refers to patents covering computer-related inventions, typically claiming methods performed using software. It is however not the software code that is protected, but the structures and processes that deliver the functionality, i.e. how the software operates and impacts the world around it.

Digital patents typically consist of flow charts. They often include an overall architecture of the program or system that shall perform the desired function, a master flow chart describing how the software operates at large (from the perspective of the computer, not of the user), and a series of flow charts that show the logic of the major routines and subroutines that together accomplish the larger function.

Exhibit 1

Definitions of digital patent categories

Source: Konsert Strategy & IP

Digital patents can be divided into three categories based on their technological content: Technical approach patents, Functional operation patents, and Use case application patents. The three categories are defined further in Exhibits 1-3. Digital patents can cover one, two, or all three categories. With patents covering all three categories protecting a system as-a-whole. Most patent applications typically are found in the intersection of the Functional operation and Use case application categories.

Exhibit 2

Examples of digital patents

Source: Konsert Strategy & IP

Exhibit 3

Example distribution of digital patents covering AI technology

Source: WIPO - "Technology Trends 2019 - Artificial technologies"

2. Using the categorization

Understanding the categorization can help a company on many levels in terms of how to develop and use patents on digital inventions to strengthen competitiveness.

On a high level, the categorization is a good tool for educating business and technology owners on how to translate between business and IP for their digital use cases. Understanding what the digital patent portfolio could, and should, look like helps business stakeholders with how to think about digital patents when interacting with customers, partners and competitors. Having a clear vision of the digital patent portfolio also enables planning when it comes to filling IP portfolios gaps, for example how to develop patents to mitigate risks from digital entrants in the industry.

On an operational level in the R&D and technology community, the categorization helps to guide inventors working in projects and agile sprints on what to look for and how to file invention disclosures on digital technologies. The categorization ultimately supports in overcoming “software cannot be patented” norms which are deeply rooted in some organizations. Of course, the patentability of computer-related inventions is still a moving target in most jurisdictions and infringement detection may be a challenge, but few companies can afford to sit idle while others are making strategic IP bets in relation to digital.

The categorization can also be helpful to broaden the mindset of IP professionals. For example to improve how digital patent landscape analyses are run. When taking a too narrow scope, often only focusing on the Technical approach category, patent landscapes can seem very crowded. Adding Functional operation and Use case application lenses to the analysis can often show where there still is white space and how to navigate around the digital giants that often account for the density in the more limited landscape search.

CASE: Redefining digital patents at traditional engineering company

The company was investing heavily in software-based solutions to augment and extend their product and service offerings. They were especially developing industry-specific decisions models using machine learning. The client’s IP organization was very capable in handling mechanical engineering-based inventions, but was inexperienced in patenting of digital solutions.

At the same time, the company’s environment was changing as digital-savvy tech companies and born-digital start-ups had already started to fill the relevant patent landscape. To make things worse, one of the company’s key competitors had gotten a number of patent applications granted covering highly relevant digital solutions that the company had deemed as non-patentable. The competitor was now leveraging the patents in sales material and meetings and was winning over customers.

To up their game in using patents to support their growing digital business, the company used the Digital patent categorization approach to educate relevant business owners, technology owners, development teams and patent team on the logic behind digital patents. This enabled the organization to understand how digital solutions could be patented and how they could be put into use in business situations.

The categorization also made patent landscape analyses on e.g. machine learning much more useful. At first, the landscape seemed heavily crowded with broad patents covering machine learning-based decision models. However, when taking the Use case application category into account, it revealed white space and opportunities to build strong patent portfolios focused on the industry-specific use cases the company was focusing on.

Strengthened by a new digital IP strategy and improved digital patenting understanding, the company is actively using patents covering digital technology to guide and support their digitalization journey. They are winning customer contracts with the help of patent protected digital product features and have an IP portfolio to bring to the negotiation table when dealing with digital entrants in the industry.