An Empirical Look at Software Patents
James E. Bessen
Boston University - School of Law; Research on Innovation
Robert M. Hunt
Federal Reserve Bank of Philadelphia
FRB of Philadelphia Working Paper No. 03-17
U.S. legal changes have made it easier to obtain patents on inventions that use software. Software patents have grown rapidly and now comprise 15 percent of all patents. They are acquired primarily by large manufacturing firms in industries known for strategic patenting; only 5 percent belong to software publishers. The very large increase in software patent propensity over time is not adequately explained by changes in R&D investments, employment of computer programmers, or productivity growth. The residual increase in patent propensity is consistent with a sizeable rise in the cost effectiveness of software patents during the 1990s. We find evidence that software patents substitute for R&D at the firm level; they are associated with lower R&D intensity. This result occurs primarily in industries known for strategic patenting and is difficult to reconcile with the traditional incentive theory of patents.
Number of Pages in PDF File: 53
Keywords: Software Patents Innovation Technological Change
JEL Classification: O34 D23 L86
Date posted: April 1, 2004
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