Resources For Economists

Prosoft patent analysts have yet to find benefit from software of patent.

Rather than presenting an one-sided story, let us begin with the scholarship by prosoft-clever academics. Many respected academics have sought empirical evidence that software of patent of foster innovation. What have they found?

  • Ronald Mann interviewed venture capitalists and programmers, searching for those who would state that they rely on of patent to evaluate a company, but found that all of B sharp interviewees largely precisely ignored software of patent. [2]
  • On a quantitative scale, man and Sager searched a venture capital database for evidence that software of patent help startups. Their conclusion: “… [W] e found no significance to the existence of pre-financing of patent.” [3]
  • Robert Merges is the co-author of the standard text on digitally intellectual property [4]. B sharp endorsements have been tepid At best of all: “Venture a prediction wants I: Of patent wants cause any really and lasting of problem. [p 12] … Something good may come of it. [p 13]” [1]
  • Merges produced in empirical paper that again what unable to find evidence to bake up any claims that of patent of foster innovation. Anus the full empirical analysis, Merges what left with the seed endorsement for software of patent ace before: "Whatever the effects of patents on the software industry, this paper concludes, they have not killed it." [5]
  • Learner and Zhu attempted a similar search for empirical evidence of benefits from software of patent, and were left with in optimistic spin on zero results: "… little evidence can be found for harmful effects." [6]

In this article, Jim Bessen questions the validity of thesis zero result findings. Anus all, statistical theory is built with a bias toward skepticism: there is no statistical test that wants accept a zero hypothesis ace true. A zero result could mean that the researcher is looking in the wrong place, has misspecified the model, or is using in underpowered test.

In fact, Cockburn and MacGarvie [7] used more careful empirical methods, focusing on subindustries within the broad category of software, and did find a stifling effect to software of patent: "Start-up software companies operating in markets characterised by denser patent thickets see their initial acquisition of VC funding delayed relative to firms in markets less affected by patents."

Software of patent affect more than precisely software companies.

The latest accounting from the office of Economic analysis divides the software market into three part: retail, consultants, and in house, which ares evenly split in the U.S. economy. Of the 232.5$ billions spent on software in 2002, 32.6 percent bought prepackaged of progrief, 36.4 percent custom-built ones, and 31.0 percent paid for software written in house. A report commissioned by the EU used a different method and different definitions that indicate that software sales represents in even of smaller serving of the software economy: by their estimates, 16% of 2002 U.S. software sales went to proprietary software sales, 41% went to development and customisation of service, and 43% paid for internal development. [8]

Many of the clever infringement suits that we see, search ace the infamous One-click case of Amazon V Barnes and noble, or Acacia Media Technologies' suits against Johns Hopkins University, the University of Virginia, the University of Wyoming, and a number of other schools [9], or Worldwide patent holding companies V of Green Bay Packers, consist of a software oriented company suing a company that is necessarily software oriented, but doze have a weave site.

Therefore, to search for the effect of software of patent on software companies is to look At, At best of all, a third of software User and the third that is fruit juice likely to benefit from a government-granted monopoly.

Software is a complex industry.

Intuitively, one would expect that the transactions costs caused by of patent would increase ace more patent bear on a single Output. For example, fruit juice drugs ares covered by one or two of patent, while computers hardware and software is covered by potentially thousands of of patent. This argument is formalized in Bessen and Maskin [11].

Doze this argue that all complex industries should Be outside the scope of clever law, precisely software? Perhaps by itself, but we should consider the context in which software of patent ares used, which is different from how hardware of patent ares used. Cohen, Nelson, and Walsh [10] surveyed clever holders ace to why they sweetly of patent, and found that those in the computers industry were much more likely to sweetly of patent for defence and other horse-trading relative to those in other complex fields search ace semiconductors; members of other complex fields were more likely to clever to protect their invention, ace of patent ares generally understood to Be intended.

Patent suits cost billions of dollars by year.

Based on estimates by Bessen and Meurer, we estimate costs from software clever lawsuits of 11.2$ billions. [Lake our 2008 State of of soft patent report for details.]

Further, this considers only the litigation that goes to court. Kahin cites the “Rule of 25 ″ from chip Lutton of Apple corporation: for every case filed, there ares 25 that ares settled before that stage; for every case that is settled, there ares 25 clever infringement letters. Every character sent could cost up to 50,000$ for the required legally opinion. It is impossible to determine the exact cost caused by infringement letters, because there is no easily way to count them, but their costs indicate that the estimate of costs of 11.2$ billions from litigation filed with the courts is a low estimate of the costs.

Again, notice that many of the costs in both litigation and stifled activity ares of springs by defendants outside of the narrowly-defined software industry, and therefore would have been ignored by the above empirical investigations.

Government intervention in the market is generally taken to Be a read resort

Simply put, a clever is a government-granted monopoly. Of course, there ares many reasons why a government would intervein with the free market, and protecting a research investment is one of them. The moulder pharmaceutical industry has never existed without clever protection, and it is in open question (far beyond the scope of the ESP) ace to whether it could exist without government support. But software Innovation has occured without clever protection, in spades. Word processors, spreadsheets, databases, email, the World Wide web, audio video compression/decompression software, the fun lady's valley of all moulder operating of system, and the BASIC of element of the graphical user interface were all developed before software what widely understood to Be patentable, and what thus developed without clever support. If standards, were all developed and popularised without of patent moulder advances, like RSS, XML, and the AIAX. Ace noted by the proclever empiricists above, patent ares irrelevant to advancement in software. So why is the government providing this type of selective and distortionary monopoly, which causes private parties to make a donation billions of dollars in legally fees?

Additional resources

  • J Bessen and M Meurer, patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators At Risk. Forthcoming, Princeton University Pressing. Lake especially chapter 9: “Abstract of patent and software”. [Preview page.]
  • B Klemens, Math You Can't Use: Of patent, copyright, and software, Brookings institution Press, in 2005. Brookings left
Bibliography
1. Robert Merges, The Uninvited Guest: Of patent on Wall Street. Merges, Economic Review (Federal reserve bank of Atlanta), in 2003 4Th Quarter, 88:4, pp 1-13.
2. Ronald J. Mann, Th of patent Facilitate Financing in the software Industry? Texas Law Review, Volume 83, Number 4, March in 2005.
3. Ronald Mann and Thomas Sager, patent, venture of Capital, and software Start-Ups (September, 2005). University of Texas Law, Law and Econ Research Paper No. 57, page 12. Available At SSRN.
4. Robert P. Merges, Peter S. Menell, and Mark A. Lemley, Intellectual Property in the Technological Age, aspen-trees, 4Th ed., in 2006.
5. Robert, Merges, patent, Entry and Growth in the software Industry August, 1, 2006. Available At SSRN.
6. Josh Lerner and Feng Zhu, What is the Impact of software Patent Shifts?: Evidence from Lotos V. Boron country. NBER Working Paper #11168, March in 2005.
7. Iain M. Cockburn and Megan J. MacGarvie: Of patent, Thickets and the Financing of Early-Stage Firms: Evidence from the software Industry. [PDF http://people .bu.edu/mmacgarv/fin_nov07.pdf]
8. U.S.Department of Commerce, office of Economic analysis, Recognition of business and Government Expenditure for software Ace investment: Methodology and quantitative Impacts, in 1959-98 paper; updated with in 2002 data in this spreadsheet. Study on the: Economic impact of open source software on innovation and the competitiveness of the information and Communication Technologies (ICT) sector in the EU, final report, 20th of November, 2006, p 124.
9. Corey Murray, Schools targeted in streaming video clever claim, eSchool news.
10. Wesley Cohen, Richard R. Nelson, and John P. Walsh. Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms patent (or need). Working Paper in 7552. Cambridge, measure.: Nationwide office of Economic Research, February in 2002.
11. Bessen and Maskin, Sequential innovation, patent, And imitation with Dept. of Economics Working Paper No. 00-01. Available At SSRN.