Patents The Good , the Bad , and the Messy Matt

" Some… may think that there should be no patents on software-related inventions. Whatever the merits of this position, the debate in the U.S. has shifted from this issue to that of patent quality. " Samuelson (2004, p. 23) To gain competitive advantage in an increasingly digital economy many firms engage in costly research and development activities to develop innovative software applications. At the same time recent advances in software reengineering techniques have reduced the cost and time to imitate these innovations, making it more difficult for innovators to recoup their costs and, therefore, reducing their incentive to innovate. Increasingly, software innovators have turned to the patent system to attain protection from cheap, quick imitation [Bessen and Hunt (2004), Samuelson (2004)]. The goal of the patent system is to provide innovators with profit-incentive, beyond that provided by a free market, to develop substantial innovations that benefit consumers. To achieve this goal, policymakers must address the following questions: (1) What is the target of feasible patent policies that will provide innovators profit-incentive to seek a patent? (2) Which policies within the target are good (or socially beneficial) and which are bad (or socially detrimental)? (3) Which policy on the target is socially optimal? (4) What process issues may prevent the policymaker from properly identifying the target and hitting the optimal (or even a good) policy on the target?