An Empirical Look at Software Patents

FRB of Philadelphia Working Paper No. 03-17

53 Pages Posted: 1 Apr 2004

See all articles by James E. Bessen

James E. Bessen

Technology & Policy Research Initiative, BU School of Law

Robert M. Hunt

Consumer Finance Institute, Federal Reserve Bank of Philadelphia

Multiple version iconThere are 2 versions of this paper

Date Written: March 2004

Abstract

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.

Keywords: Software Patents Innovation Technological Change

JEL Classification: O34 D23 L86

Suggested Citation

Bessen, James E. and Hunt, Robert M., An Empirical Look at Software Patents (March 2004). FRB of Philadelphia Working Paper No. 03-17. Available at SSRN: https://ssrn.com/abstract=461701 or http://dx.doi.org/10.2139/ssrn.461701

James E. Bessen

Technology & Policy Research Initiative, BU School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Robert M. Hunt (Contact Author)

Consumer Finance Institute, Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3806 (Phone)
215-574-7101 (Fax)

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