Do Small Companies Need Software Patents?

In a comment on Wednesday’s post on software patents, Patrick Mullen offers the following argument:

I think patents actually make it harder for companies like Microsoft and Apple. You can be the best programmer in the world and write the best program ever, but if a company with the resources of Microsoft has the ability to copy your program, who do you think will have the market share? Do you think you would stand a chance against their marketing machine?

I would find this argument more persuasive if there weren’t so many counterexamples. Let’s start with Google. They entered what everyone thought was a mature industry in 1998 and created a $150 billion company in under a decade. Yahoo and Microsoft did their best to copy the technology, but they were unable to stop Google’s momentum.

Or take YouTube. Google–by 2005 a large company with deep pockets–actually beat YouTube to market with a flash-based video site. Yet YouTube surged past them, and after 18 months they had beaten the company so soundly that Google was forced to shell out $1.5 billion to buy them.

There are plenty of other examples: MySpace, FaceBook, Flickr, Hotmail, Digg, and probably hundreds of smaller firms I’m not thinking of. Most of these had big companies try to replicate their success. And in most cases, those efforts failed miserably; the competing products weren’t as good, or couldn’t generate the buzz of the original. As far as I know, software patents were not an important component of any of these startups’ business models.

Now, of course some small companies have been crushed by larger rivals. Netscape is the obvious example. Kiko is arguably another. But it’s not clear to me why we should consider that a problem. One of Netscape’s big problems was that Netscape version 4 sucked, and then they took 3 years to release an even more sucky version 6.

As Mike Masnick emphasizes over and over again, it’s a good thing that companies have to keep innovating if they want to succeed. Giving a company a patent that guarantees it a lock on a particular market simply reduces their incentive to keep improving the product. That doesn’t seem like good policy to me.

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