Slashdot Mirror

doom writes "You've probably already heard that the Nobel Prize for Economics was given to three gents who were working on advances in mechanism design theory. What you may not have heard is what one of those recipients was using that theory to study: 'One recent subject of Professor Maskin's wide-ranging research has been on the value of software patents. He determined that software was a market where innovations tended to be sequential, in that they were built closely on the work of predecessors, and innovators could take many different paths to the same goal. In such markets, he said, patents might serve as a wall that inhibited innovation rather than stimulating progress.' Here's one of Maskin's papers on the subject: Sequential Innovation, Patents, limitation (pdf).

tarball_tinkerbell sends us to the NY Times for word on a book due out next year that claims that beginning in the late 1990s, on average patents cost companies more than they earned them. A big exception was pharmaceuticals, which accounted for 2/3 of the revenues attributable to patents. The authors of the book Do Patents Work? (synopsis and sample chapters), James Bessen and Michael J. Meurer of the Boston University School of Law, have crunched the numbers and say that, especially in the IT industry, patents no longer make economic sense. Their views are less radical than those of a pair of Washington University at St. Louis economists who argue that the patent system should be abolished outright.

JPMH writes "At last, some quantitative analysis about software patents. This paper by Bessen and Hunt looks at the econometrics of who is being granted sw patents. It finds that far from encouraging innovation, software patenting is associated with firms which have *lower* then expected R&D spending as a proportion of sales (and even lower as a proportion of costs). Also, the companies which are most orientated towards software patenting (ie which have the largest proportion of their new patents in software) are the same companies who for their size are the most aggressive in the area of non-software patenting generally. This suggests that software patents are an unusually cheap and easy option for firms trying to build strategic "patent thickets" around their positions. Software patents have become a substitute, not an incentive, for innovation.
(Note: the key EU parliament committee vote in the debate on new legislation on software patenting in Europe is now expected on 10 June, not May 21. Still time to write those letters)." Read on for some interesting findings from the study.

"The paper itself is quite technical, with a detailed presentation of the mathematical economics involved, so here are some of Bessen and Hunt's more interesting results (see especially the tables at the end of the paper for more details):

• 69% of software patents in 1995-99 were assigned to manufacturing companies, despite these only employing 10% of programmers and analysts.
• Pure software publishers obtain unusually few patents per $10m R&D, only about a quarter of the rate for the whole economy. (But software services firms, and especially IBM, patent significantly more).
• In the 1980s, when software patents were hard to obtain, firms whose patents were mostly in software had unusally low numbers of patents in total (allowing for their size, R&D spending etc).
• Now this has reversed, and the firms with the largest proportion of their patents in software are those which are also granted the largest number of non-software patents (again, allowing for their size, R&D spending etc).
• A higher proportion of software patents is associated with a reduction in R&D as a proportion of sales, and an even larger reduction in R&D as a proportion of costs.
• Without the substitution of patent activity for research, "thumbnail calculations imply that at the end of the 90s R&D would have been about 10-15% higher" for the economy as a whole."