The Story of The First Software Patent

It’s the opposite of what you expect

July 04, 2023

Around twelve years ago, it seemed like software patents were all over the news. A lot of big tech companies were exploiting patents for things that seemed too obvious to be patentable, like Amazon’s one-click purchasing. And at the same time, patent trolls were buying overly-broad software patents for things they didn’t even invent and using them as weapons against small startups, forcing them to pay licensing fees they couldn’t afford or go out of business.

In the U.S., the constitution grants inventors an exclusive right to their discoveries for a limited time “to promote the Progress of Science and useful Arts.” But this wasn’t promoting progress. It was stifling it. And there were debates over whether or not software should even be patentable to begin with.

It seemed like software patents might just be a tool that big companies could use to squash little ones before they got too big to be a threat.

At this time, I was pretty deep into my Inventor Profiles project speaking with inventors from all walks of life, so I decided to seek out whoever it was that got the very first software patent and find out how all this began.

That’s how I found Marty Goetz, who became the 40th inventor in my project.

Marty started working in the computer industry way back in 1954, when he learned to program on the UNIVAC I. He worked for Sperry Rand and then IBM, and eventually cofounded a company called Applied Data Research, which became the first company to sell software.

But back in the 1960s IBM used to just give away their software. Customers spent a ton of money on the computer hardware, and got the software for free. For a smaller company trying to sell software, that’s hard to compete with.

One of Marty’s innovations was a new method of sorting data on a computer. The problem was that IBM also had software that sorted data. Marty thought his method was better, and without any intellectual protection, there was nothing stopping IBM from just copying Marty’s method and giving it away for free.

So he applied for a patent. And lo and behold, it was granted in 1968, becoming the first software patent ever issued.

Of course, not everything that’s patented becomes a product. And it turned out that their second software patent actually ended up being their first product to compete with IBM:

[We developed] a flowcharting system that would take a program and automatically produce a flowchart of that program on a printer. Prior to that time, you would have to draw the flowchart manually. IBM was giving away a free flowcharting system, not using the method that we used, so we applied for a patent for that method of producing a flowchart automatically. So that was the second patent I received and we were very successful selling our Autoflow program, and we sold actually well over a thousand of those programs. So that was sort of the start of the software industry. It was also the start of people and companies applying for patents for their software inventions.

Around this time, the Justice Department began looking into IBM’s practice of bundling software with their computers. Marty and others took the stance that IBM giving away their software had the same effect as “tying” software to the computer — making it so that you were forced to buy their software when you bought their hardware, stifling competition.

In 1969, IBM decided to unbundle their software and hardware, selling them separately, just as the Justice Department filed antitrust lawsuits against them. Those lawsuits were eventually dropped, but the floodgates were opened and the software industry was born.

Whether or not software should even be patentable is still debated today. Marty obviously believes yes, although he also says it’s the wrong question to ask. But what fascinates me so much is that before talking to Marty, I only ever thought of software patents as a tool the big companies used against the little struggling companies. But it all started as the opposite — a way for a smaller company to compete against the big guys!

When I interviewed Marty, I also spent a little time with his wife, Norma. They were a charming couple, married 38 years when I sat with them 12 years ago. They were two native New Yorkers who met at a singles weekend at the Concord Resort Hotel in the Catskills, back when the Borscht Belt was a happenin’ place.

When I made a video about Marty, I included a little segment with Norma. It’s a bit of a sidetrack and has nothing to do with his invention, and looking back I wonder if it’s too much of a tangent to have included. I’m not sure if I would make the same choice today. But you can watch it and be the judge!

And this brings yet another newsletter to a close! I hope you’re all having a wonderful Fourth of July. See you next time!

David

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