The credible threat of a published patent’s right to exclude acts like a beacon in the dark, drawing to itself all those interested in the patented subject matter. This beacon effect motivates those diverse actors to interact with one another and with the patentee, starting conversations among the relevant parties.
On one level, this analysis is simply out of touch with the realities of the software industry. There’s nothing beacon-like about software patents. Software companies do not use patents as a mechanism for finding technologies or business partners. Patents tend to be written in unintelligible legalese, they’re not well indexed, and they issue years after they’re filed. They’re completely irrelevant to the day-to-day process of product development in the software industry. I’ve never met a software developer who regards the patent database as a useful source of information about software inventions, nor can I think of an example of a software company (Intellectual Ventures doesn’t count) that uses patents as a central part of its product-development strategy.
Companies don’t need patents to “start conversations,” or to “motivate” other companies to work with them. The software industry has developed lots and lots of mechanisms for communications and coordination. There are standards-setting bodies, conferences, computer science journals, blogs, technology demos, aggregators, venture capital pitches and so forth. The only advantage of coordination by patent is that patents allow you to coerce your “business partners” to the negotiating table whether they want to be there or not. And frankly, “conversations” started under duress are unlikely to lead to anything productive.
On a deeper level, I think this analysis reflects a perversely top-down understanding of the innovative process. The unstated assumption here is that progress requires a kind of technological central planning: the legal system picks one firm to have the exclusive right to develop a given technology, and that firm makes all the key decisions and collects the profits (or suffers the losses). I think there’s ample evidence that at least in the software industry, this isn’t how progress tends to happen. Yahoo didn’t get the search engine patent in 1995 and “draw to itself” all the parties interested in search engines. Rather, Yahoo built one search engine, Altavista built another, Excite built a third, and so forth. And then we used the free market to decide which search engines would succeed. Ultimately, a plucky startup called Google came along and clobbered all those established search engine markets. This was possible only because the search engine market wasn’t clogged up with patents.
Now, Epstein is a smart guy who generally has a clear understanding of and appreciation for market competition. So I’m not sure what to make of his apparent fondness for central planning in this instance. I suspect the problem is that he simply doesn’t know very much about how the software industry works. Certainly, his utter bafflement at the success of open source software suggests a relatively shallow understanding of the software industry. Epstein has a general inclination in favor of strong patents (based on what I regard as a misguided analogy between patents and property rights), and I suppose that from a 50,000 foot level, this seems like a plausible application of those priors to the software industry.