Patents, Entry and Growth in the Software Industry

Intellectual Property and Patents

Article Snapshot


Robert Merges


Working Paper, 2006


This paper looks at arguments that software patents do more harm than good.

Policy Relevance

The software sector is healthy and software patents have done little harm. Modest reforms to address limited problems like patent trolls should be favored over drastic ones.

Main Points

  • Some warned that software patents would slow entry and lead to stagnation.


  • The evidence shows that the software sector is highly innovative, that new firm entry is robust, and the sector is not concentrated.


  • In comparing Israel, Ireland, and India, the country with the most patents, Israel, has the highest levels of innovation and research & development.


  • Some argue firms stockpile low-quality patents that they can use to threaten other firms. But evidence shows that firms that file high-quality patents have higher revenues. So firms probably do not try to amass low-quality patents.

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