Patents and the Software Industry

by on June 10, 2007 · 8 comments

Matt Yglesias makes a fair point about word choice in yesterday’s op-ed:

I guess I’m not thrilled with the word choice around “bad for the software industry.” Patents are bad for the development of new software. If you define “software industry” as “incumbent for profit software firms” it may be good for the “industry.” The thing to keep in mind with any sort of IP protection is that strong IP creates, on the one hand, an incentive for innovation but at the same time it also creates a barrier to innovation. In the case of software patents, the balance tips overwhelmingly in the direction of creating barriers — indeed, the main incentive it creates is merely for the innovative production of patents rather than of actual products.

Right. What I should have said is “bad for competition and innovation in the software industry.” For a variety of reasons I’ve discussed at length here on TLF, the incentive for innovation caused by software patents is pretty small. Therefore, the primary effect of software patents is to give an advantage to companies who primarily have good patent lawyers at the expense of companies who have only good engineers. The larger, less dynamic parts of the software industry are probably helped by software patents.

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About Tim Lee

Timothy B. Lee (Contributor, 2004-2009) is an adjunct scholar at the Cato Institute. He is currently a PhD student and a member of the Center for Information Technology Policy at Princeton University. He contributes regularly to a variety of online publications, including Ars Technica, Techdirt, Cato @ Liberty, and The Angry Blog. He has been a Mac bigot since 1984, a Unix, vi, and Perl bigot since 1998, and a sworn enemy of HTML-formatted email for as long as certain companies have thought that was a good idea. You can reach him by email at leex1008@umn.edu.

Read more articles by Tim Lee.

  • http://eldiabloenlosdetalles.net Carlos

    Tim:

    The link to Matt’s post is pointing to TLF.

    (despite the above correction, your op-ed was excellent).

    Cheers.

  • http://eldiabloenlosdetalles.net Carlos

    Tim:

    The link to Matt’s post is pointing to TLF.

    (despite the above correction, your op-ed was excellent).

    Cheers.

  • http://weblog.ipcentral.info/ Noel

    Tim, it appears you’re extending the patent debate to one between: 1) engineers v patent lawyers, 2) industry entrants v incumbents.

    On engineers v patent lawyers, your argument is meaningless. As far as I know, every successful technology firm has good engineers and patent lawyers (or retains outside counsel). If a firm only has good engineers, its obviously new at the game of innovation, or just not very smart. In any case, this is an organizational- business management issue, and not reflective of the patent system.

    Your point about small firms and industry incumbents is more meaningful, however you got it backwards- patents help small firms more than big firms, I’m not aware of evidence to the contrary. Smaller firms have few mechanisms outside of patents with which to level the playing field with larger firms. Patents are also essential to vertically decentralized business structures where a small firm can focus on a specialized space in innovation, and license its patent for integration into larger inventions.

    You should also not consider the probability of infringement as a per se drawback of the patent system. Even if every invention has some probability of infringing on a patent, that makes licensing and collaboration deals more important in the sector. IP negotiations happen every day in the industry, its a common practice, everybody does it, nobody freaks out just because their invention may infringe on a patent.

  • http://weblog.ipcentral.info/ Noel

    Tim, it appears you’re extending the patent debate to one between: 1) engineers v patent lawyers, 2) industry entrants v incumbents.

    On engineers v patent lawyers, your argument is meaningless. As far as I know, every successful technology firm has good engineers and patent lawyers (or retains outside counsel). If a firm only has good engineers, its obviously new at the game of innovation, or just not very smart. In any case, this is an organizational- business management issue, and not reflective of the patent system.

    Your point about small firms and industry incumbents is more meaningful, however you got it backwards- patents help small firms more than big firms, I’m not aware of evidence to the contrary. Smaller firms have few mechanisms outside of patents with which to level the playing field with larger firms. Patents are also essential to vertically decentralized business structures where a small firm can focus on a specialized space in innovation, and license its patent for integration into larger inventions.

    You should also not consider the probability of infringement as a per se drawback of the patent system. Even if every invention has some probability of infringing on a patent, that makes licensing and collaboration deals more important in the sector. IP negotiations happen every day in the industry, its a common practice, everybody does it, nobody freaks out just because their invention may infringe on a patent.

  • http://enigmafoundry.wordpress.com/ enigma_foundry

    That’s not really a correction, Tim.

    If you say: “The larger, less dynamic parts of the software industry are probably helped by software patents.” then, unless you believe its good for an industry to be less dynamic and innovative, it does follow that software patents are bad for the software industry.

    In the same way, GM is not as good for the automobile industry as Toyota is.

  • http://enigmafoundry.wordpress.com eee_eff

    That’s not really a correction, Tim.

    If you say: “The larger, less dynamic parts of the software industry are probably helped by software patents.” then, unless you believe its good for an industry to be less dynamic and innovative, it does follow that software patents are bad for the software industry.

    In the same way, GM is not as good for the automobile industry as Toyota is.

  • Brian Moore

    But for some people, it’s important to distinguish between things that are good for powerful companies and things that are good for others.

    Whereas people like me, I would like things that are equally good for both — which I believe loosening restrictions to be, even if the large, patently entrenched companies’ lawyers don’t think so right now.

    I think software patents are potentially a good idea — but that the execution has been horrible, exacerbated by the nature of software itself, and so I am forced (rather cheerfully) to agree with Tim’s position. The practicalities of arranging a working software patent system may simply be so hard that it’s better just to not have one.

    I suppose I could conceive a world in which evil megacorporations were stealing new software bit for bit from startups, and we’d need some protection from that, but I think we’re quite a bit at the other end of the spectrum at this point.

    At any rate, nice article!

  • Brian Moore

    But for some people, it’s important to distinguish between things that are good for powerful companies and things that are good for others.

    Whereas people like me, I would like things that are equally good for both — which I believe loosening restrictions to be, even if the large, patently entrenched companies’ lawyers don’t think so right now.

    I think software patents are potentially a good idea — but that the execution has been horrible, exacerbated by the nature of software itself, and so I am forced (rather cheerfully) to agree with Tim’s position. The practicalities of arranging a working software patent system may simply be so hard that it’s better just to not have one.

    I suppose I could conceive a world in which evil megacorporations were stealing new software bit for bit from startups, and we’d need some protection from that, but I think we’re quite a bit at the other end of the spectrum at this point.

    At any rate, nice article!

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