The wide adoption and impact of FOSS reflects a maturing ability to handle today’s technological demands. FOSS has succeeded at lower margins, with far less capital and more decentralized informal inputs than commercial counterparts. How much then, should American innovation policy accommodate FOSS? My answer is that American innovation policy should not achange just to ccomodate FOSS, as its advocates argue for. Current FOSS attempts to influence IP policy reveal an inability to adapt further into the technological environment, rather than serious effort to craft policy for sustaining innovation in the industry.

Academic support for limiting the policy influence of FOSS can be found in a a 2003 article by Mark Lemley and Dan Burk, where they outline the major theories of innovation that inform law and economic considerations in patent policy. Policy Levers in Patent Law (August 2003). UC Berkeley Public Law Research Paper No. 135. These theories derive from observed “structural differences” in how industries innovate, including: the costs involved, time to market, means of appropriatin, risk of misappropriation, likelihood of economic return and other variables.

The major lesson suggested by Lemley and Burk is that patent policy may not only need to be tailored towards particular industries, but to specific technological segments as well. On the issue of FOSS, Lemley and Burk would probably interpret many FOSS policy positions as confusing apples and oranges. FOSS should only provide policy positions in those industries its economic structure flourishes in.

The significance of innovation theories is that they help explain how general views of patents suffer from incompleteness. Innovation theories only apply to those industries, or technological segments, for which they are meant. As Lemley and Burk point out, “There is no simple or universal correlation between the availability of patents and the incentive to innovate.” The result is a theoretical confusion over patent policy that improperly generalizes economic lessons outside of their context.

The key to understanding the wide range of theories for optimizing patent rules is the different industry contexts in which patents exist. The range of patent theories parallels the range of ways in which the patent system affects companies in different industries.

The economics of FOSS map well to the competitive theory of innovation, which argues that innovation will occur absent or with little patent protection. Lemley and Burk cite the specific instances where this has occurred. To the dismay of FOSS supporters, but wide recognition by the industry, competitive innovation without patent protection has limited application and opposes theories more suited to the realities of the industry.

Competitive Innovation- The theory of competitive innovation focuses on the incentives companies have to innovate even if they do not hold a monopoly position and are unlikely to acquire one through innovation. This approach emphasizes the fact that many inventions do not require substantial and sustained R&D expenditures...

Innovation has flourished in (some) industries in the absence of patent protection. The early history of the software industry is one in which innovators developed impressive new products at very little cost in the absence of patent protection. Some have argued that software should not be patentable even today, though that argument ignores some economic changes in the industry and in any event seems unlikely to prevail.

More recently, the Internet developed without patent protection for its fundamental protocols, in part because it was based on government-funded work and in part because the academic developers simply did not seek patent protection. ..

Competitive innovation theory suggests that ownership is not a necessary prerequisite to innovation, and indeed that it is sometimes inimical to innovation. .. Competitive innovation theory fits business methods, arguably fits the Internet, and--at least in the 1970s--fit software.

Below is the Lemley and Burk summary of cumulative innovation theory. Note that it contrasts the "anti-patent" stance of competitive innovation theory with reality of software innovation.

Cumulative Innovation- The theory of cumulative innovation starts by rejecting the proposition that invention is an activity engaged in by a single inventor or company acting in isolation. Rather, cumulative innovation is an ongoing, iterative process that requires the contributions of many different inventors, each building on the work of others.

Cumulative innovation maps very well onto the modern software industry. The computer industry is characterized by a large number of rapid, iterative improvements on existing products. Computer programs normally build on preexisting ideas and often on prior code itself.

… While the costs of writing software have increased substantially over time as programs have become more complex, the costs of writing and manufacturing computer programs remain low relative to the fixed costs of development in many industries. ..

...Because innovation is relatively low-cost but rapid, the need for patent protection is generally modest. Patent protection for such incremental software inventions should be relatively easy to acquire, but it should be narrow. In particular, software patents should not generally extend across several product generations.

posted by Noel Le @ 12:09 PM | Markets: Business, Investment & Innovation, Patents

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