[Tfug] Microsoft reportedly wants open source software users to pa y rolyalties

[Wafa Hakim Orman]

Claude Rubinson wrote:

> Can anyone point to a decent justification for software (or business)
> patents?  Because, to me, the whole idea sounds absurd.  As I
> understand it, patents are to protect implementations so as to
> encourage research and innovation which, ultimately, benefits society
> as a whole.  (This, of course, assumes a neoclassical economic model
> which is a questionable assumption, but that's a discussion for
> another time and venue.  Yes, I'm looking at you, Jude...)
> 
> What I'm thinking, though, is that I've only heard the FLOSS side of
> the story.  Could it be that I'm misunderstanding the
> [theoretical/social] benefit of software/business patents?  Can anyone
> point to a discussion that argues that software patents do, in fact,
> serve the greater good?
>.

Gasp -- calumny hurled at traditional neoclassical economics! How could 
I sit this one out quietly?

Seriously, though, here is a paper from two traditional neoclassical 
economists, James Besson & Eric Maskin:

http://www.dklevine.com/naj/cache/321307000000000021.pdf

The abstract:
How could such industries as software, semiconductors, and computers
have been so innovative despite historically weak protection? We argue 
that if innovation is both sequential and complementary—as it certainly 
has been in those industries—competition can increase firms’ future 
profits thus offsetting short-term dissipation of rents. A simple model 
also shows that in such a dynamic industry, patent protection may reduce 
overall innovation and social welfare. The natural experiment that 
occurred when patent protection was extended to software in the 1980's 
provides a test of this model. Standard arguments would predict that
R&D intensity and productivity should have increased among patenting 
firms. Consistent with our model, however, these increases did not 
occur. Other evidence supporting our model includes a distinctive 
pattern of cross-licensing in these industries and a positive 
relationship between rates of innovation and firm entry.


In English, they say that when innovation builds on previous innovation 
and is complementary to it rather than substituting previous innovation 
-- which is quite obviously the case with software -- then even 
neoclassical economics says software patents are bad, and lots of 
competition is good.


Miffed & nursing bruised economist ego,

Wafa.

-- 
"So it goes."
	--Kurt Vonnegut