Re: License Dilemma

[Alexander Terekhov]

David Kastrup wrote:
[...]
> As it stands, the current patent system is out of control, something
> which even its proponents will tend to acknowledge.

http://ec.europa.eu/internal_market/indprop/docs/comp/replies/eicta_en.pdf

I especially like this:

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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 technologies.

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 the
paper.

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
profits.

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 
inventions.
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Care to comment, GNUtian dak?
 
regards,
alexander.