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Re: Strawmen and Urban Legends

From: Alexander Terekhov
Subject: Re: Strawmen and Urban Legends
Date: Mon, 18 Dec 2006 10:02:16 +0100

Ciaran O'Riordan wrote:
> An informative read is "The Dangers of Software Patents":

"The advocates of software idea patents ask you to take for granted 
that no matter what harm or trouble or nuisance these patents may 
cause, they must be promoting progress and surely that justifies 
whatever, whatever trouble they may impose on you. But this is not 
so. You can look at the economic modelling to show it's not so. 

In, I warn you, it's rather 
mathematical, but it shows how, in a field with incremental innovation, 
a patent system can retard progress. The assumption that they want us 
to take for granted is false."


We trust that the Commission fully understands that, despite statements
to the contrary in some quarters, there is no consensus among economists
that patents inhibit innovation in the software sector. The study most
often cited by proponents of this argument (“Sequential Innovation,
Patents and Imitation”; J. Bessen/E. Maskin, 1997/1999) is inconclusive 
at best and flawed in many respects. It relies largely on data from the 
1970’s and 1980’s. In this dynamic and rapidly changing industry, public 
policy for the 21st century should not be based on inconclusive results 
drawn from data from an earlier era of information and communications 

The authors claim that “standard arguments would predict that R&D
intensity and productivity should have increased among patenting firms” 
during the period studied and that this increase did not occur, 
consistent with their model, for several samples of software-related 
industries and firms after 1986. They conclude that this is an effect of 
an extension of patent protection to many software ideas by a series of 
court decisions in the early 1980’s, although there is no causal link 
demonstrated in thepaper.

Moreover, “R&D intensity” is defined in the paper as “R&D spending
relative to sales” (page 18, para 3). As one can easily understand, 
the proposition that R&D intensity should increase among patenting firms 
may be valid – for one firm or a sample of firms – only within narrow 
limits. At some stage, a steady state of R&D spending relative to sales 
will necessarily be reached.

A constant increase of R&D spending relative to sales would result in
losses and finally in bankruptcy of one firm or of all firms in a sample
when the “R&D intensity” continues to rise, finally eating up any

Responsible management, therefore, must ensure that the “R&D intensity”
is kept relatively constant after a starting phase. To increase profits 
the management should further tend to increase the R&D efficiency, that 
is the R&D output relative to R&D spending, with the aim to decrease 
“R&D intensity”. This principle applies whether there are patents or not.

Therefore, the effects shown in Figures 5 to 8 of the Bessen/Maskin
study seem to be explainable by the activities of responsible management 
in firms regardless of the existence of patents for software related

Care to comment, GNUtian ciaran?

BTW, are you working/lobbying for free at Brussel? 

Are you an unpaid volunteer?


"Don't Buy Harry Potter Books"


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