Some Economic Considerations in the Intellectual Property Protection of Software

TLDR

Intellectual property law must address how to protect new technologies, and the rise of software presents a major challenge; an economic approach complements existing legal analysis, with copyright and patent law offering efficient protection that balances innovation while avoiding monopoly, provided key distinctions between attachment/replacement and transformative/substitutive uses are maintained. The study adds an economic perspective to software IP protection, complementing existing legal analysis. Software‑related patents are economically sound, but the current system often yields too many invalid patents, and sui generis protection is less desirable than copyright or patent protection.

Abstract

Intellectual property has frequently had to confront the issue of how to protect new technologies. The rise of software as a major industry is one such new challenge. An economic approach to the protection of software adds to the already extensive legal analysis. On the one hand, existing copyright and patent law provides a sound basis for an economically efficient system of protection. Copyright law deals with the appropriability problem without creating significant monopoly or rent-seeking problems. Copyright law also provides a sound basis for preserving a balance between innovation today and innovation tomorrow. These conclusions depend crucially, however, on maintaining the distinctions between attachment and replacement and between transformative and substitutive uses. Software-related patents are economically sound. However, as actually administered, the system may generate too many invalid patents. Sui generis protection is less desirable than copyright and patent protection.