Our point is not that patents are necessarily and always bad, but that policy should be careful and balanced. Indeed, prior to the 1980s, both economic theory and legal theory took a balanced view, recognizing both benefits and costs to patents and calling for limits on patent protection. Our paper argues for a return to this perspective. We do NOT argue that the explosion in software patents has stifled innovation in software generally. We would hardly argue that the software industry as a whole has become less innovative.
Economists understand very well the costs of monopoly rights.
Patent monopolies mean consumers pay higher prices either to a monopolist or in the form of licensing fees that are passed on. These costs can be thought of as a social subsidy to patentholders. They hope to cash in on these government-sponsored subsidies that are potentially worth many many billions over the next 20 years. Prudent policy makers should examine whether society receives commensurate benefit for these large subsidies. Although some Europeans are opposed to software patents of any kind, much of what we hear is really a much more balanced view.