Law and Economics of Software Patent Disclosure

64 Pages Posted: 8 Jun 2009 Last revised: 11 Jan 2011

See all articles by Samuel C. Adams

Samuel C. Adams

Müller-Boré & Partner Patentanwälte PartG mbB

Date Written: November 10, 2008


Historically, a number of advocates have defended patent systems using natural rights or just-reward arguments. The natural rights thesis is based upon the premise that every man has a right to his own person, which by extension applies to the fruits of his labours. Originally applied only to tangible objects, the right was expanded to include ideas, i.e. inventions. In contrast, a proponent of the just reward thesis might hold that an inventor should receive a reward proportional to the usefulness of his invention and that an exclusive patent right is an appropriate way to provide the reward.

Modern economists and politicians tend to see a patent system as a policy instrument, justified because of its positive social effects. Chief among these is providing an incentive to innovate. The basis for the theory that patents provide an incentive to innovate is that at least some inventions will not be distributed unless the inventor is assured a sufficient profit. In some situations, the rigors of competition may deter an inventor from exerting himself to put his ideas into practice and market them. Thus, a patent provides a useful incentive, and the cost of paying more for patented goods is outweighed by the benefits received from goods that would not have been available without patent protection.

This line of reasoning is not completely persuasive. For example, a case could be made that many companies obtain patents simply to have the freedom to operate or to extract licensing fees from others, but they would continue to innovate without patent protection. However, the 'incentive to innovate' argument appears to be the most intellectually satisfying one available. An additional, sometimes neglected benefit of patents is the distribution of useful knowledge. The US and European patent systems require an enabling disclosure, which serves the purpose of enabling a person of ordinary skill in the art to make and use the patented invention. However in many cases, additional information beyond what is disclosed in a patent document is needed to put an invention into practice. While some scholars appear to believe that providing an inventive to innovate is enough to justify a patent system by itself, it is clear that lawmakers intended for patents to distribute useful knowledge as well. Moreover, increasing the value of patents as a knowledge repository could increase public support for patent systems.

With regard to software technology, the beneficial effects of patents are questionable. Software technology progressed rapidly for many years with minimal patent protection and it is easy to find examples of software companies that became big and successful without patent protection. Furthermore, it is debatable whether a patent can be a useful technical teaching for a computer programmer without including source code. However, it appears that at least some innovators would have benefited if software patent protection had been easier to obtain in 1970s and 1980s. In addition, the quality of software patents appears to be just as high as that of other patents and more recent history of the software industry suggests that a number of companies, large and small, have benefited from patent protection. Innovation in software often proceeds on an incremental basis, with many small improvements relying heavily on prior achievements. Moreover, software seems to be vulnerable to patent based afflictions affecting other incremental industries, such as patent thickets (the situation that arises when a large number of patent rights are required to bring a product to market, increasing costs and possibly creating a situation where nothing is produced), and hold-up (when a patentee is able to negotiate license fees disproportionate to its contribution to a complex invention based on the threat of an injunction). An effect that appears unique to software is the large open source community. Open source software produces many obvious benefits, including lower cost, additional competition for proprietary vendors and an alternative platform for exploiting information technology. Developers of open source software have been some of the leading critics of software patents.

One response to software patent critics is to reject all patent claims defining software subject matter. While still attracting a few adherents, this position is unpersuasive. One problem is the difficulties involved in treating a particular type of patentable subject matter differently from others. Furthermore, it is possible to see the negative effects of patents in other industries, e.g. the high price of pharmaceuticals; however, even sceptics seem to agree that it would be unwise to abolish patents in all fields of technology. Another possibility is to mandate disclosure of source code. While this would undoubtedly discourage some patent applications, it would also dramatically improve the value of software patent disclosures. In addition, improved disclosure might help convince a sceptical public of the benefits of software patents. However, such a move would certainly meet opposition from the software industry, whose members are reluctant to disclose even the minimal source code necessary for copyright registration. Additionally, this approach would probably hinder innovation since requiring additional disclosure in cases where it is not necessary increases the cost of an application and may discourage inventors from filing patents.

This paper advocates a different approach, taking lessons from the procedure that is in place for biological deposits. In the US, biological deposits can be requested at the discretion of the patent examiner and are maintained by an organization outside the patent office. One reason that examiners may not require source code from software patent applicants is that the patent office does not know what to do with it. Establishing a process to certify source code depositories outside the patent office would facilitate the deposit and organization of source code in conjunction with software patent applications. Properly certified depositories would provide security for applicants while enabling software patent applications to more effectively fulfil their disclosure function. Adapting the approach from biological deposits to source code would give industry the security of being able to request judicial review in cases where an examiner requires disclosure not appropriate to a particular invention. Certifying organizations outside a patent office to maintain source code would have the benefit of allowing the patent office to focus on its core specialty of examining and granting patents.

Keywords: software, computer implemented inventions, patent, biological deposit, source code, european, office, EPO, United States, USPTO, technical board of appeal

JEL Classification: O34,K39

Suggested Citation

Adams, Samuel C., Law and Economics of Software Patent Disclosure (November 10, 2008). Available at SSRN: or

Samuel C. Adams (Contact Author)

Müller-Boré & Partner Patentanwälte PartG mbB ( email )

Friedenheimer Brücke 21
München, Bayern 80639

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