In such industries, strong patent protection may be counterproductive, as was commonly recognized in the early years of the semiconductor industry. It was to our interest to spread it around. But the picture changes dramatically when innovation is achieved only at the cost of repeated imitative sequences. Designed to examine the incentives to innovate in an industry in which sequential innovation is the norm, Bessen and Maskin's mathematical model shows that strong patent protection is dysfunctional over the long run. Before long, firms lose the incentive to innovate.
Prices rise, research development drops off and, ultimately, the public pays the price.
There are signs aplenty that some of the most significant innovation in the software industry is coming from outside the United States. To cite one example, US software firms have made only diffident efforts to improve software quality, citing the expense, inherently difficulty and irrelevance of producing Space Shuttle-quality software for desktop computers. But don't tell that to someone who's using this software for mission-critical applications. That's one of the reasons customers are turning to software firms in India, which is fast emerging as a world leader in the art of producing software that is virtually flawless. In the US, someone, sooner or later, will get a patent for the methods and processes of implementing a total quality system for software production.