US FTC 2003 report on innovation

In October 2003, the US Federal Trade Commission published a 315-page Report on innovation. (from [1])

Interesting parts

Pages 153 to 165 of the PDF file focus on "software and internet industries".

Quotes

Here is the whole of the section G "Conclusion" (pdf p.164) of the section "The Software and Internet Industries":

The software and Internet industries generally are characterized by five factors: (1) innovation occurs on a cumulative basis; (2) capital costs are low, particularly relative to the pharmaceutical, biotechnology and hardware industries; (3) the rate of technological change is rapid, and product life cycles are short; (4) alternative means of fostering innovation exist, including copyright protection and open source software; and (5) the industries have experienced a regime change in terms of the availability of patent protection.

Panelists consistently stated that competition drives innovation in these industries. Innovation is also fostered by some industry participants’ use of copyright protection or open source software. Several panelists discounted the value of patent disclosures, because the disclosure of a software product’s underlying source code is not required.

Many panelists and participants expressed the view that software and Internet patents are impeding innovation. They stated that such patents are impairing follow-on incentives, increasing entry barriers, creating uncertainty that harms incentives to invest in innovation, and producing patent thickets. Panelists discussed how defensive patenting increases the complexity of patent thickets and forces companies to divert resources from R&D into obtaining patents. Commentators noted that patent thickets make it more difficult to commercialize new products and raise uncertainty and investment risks. Some panelists also noted that hold-up has become a problem that can result in higher prices being passed along to consumers.

How it has been cited

In its amicus brief for the 2008 in re Bilski case, SAP cited it to support their claims that the software is developed incrementally.

In its amicus brief for the 2009 Bilski v. Kappos case, ESP cited the conclusion of the "The Software and Internet Industries" section (quoted above).

Related pages on ESP Wiki

• Studies on economics and innovation
• More than innovation - software patents harm innovation, but the problems are also much bigger than just innovation

External links

• http://www.ftc.gov/os/2003/10/innovationrpt.pdf - the report
• FFII analyses of the FTC report
• FFII UK's analyses of the report (archive.org copy)