> The software / hardware equivalence makes simple definitions impossible.

The software / hardware equivalence is overstated. You can implement everything in hardware that you can implement in software, but you can't implement everything in software that you can implement in hardware. There is no software alone that you can run on a general purpose computer to cause it to generate thrust, or convert raw steel into an automobile chassis, or help the immune system to fight cancer.

So your argument seems to be that we can't define "software patent" as "patent that software executing on a general purpose computer infringes" because that would include patents over software hard-coded into hardware. But why is that a problem? Firmware is code. Microcode is code. They're supposed to fall into the same category as "software" -- the fact that you can't disambiguate them is a result of them being the same thing. And they are all things that, like other software, can be protected by copyright.

On the other hand, the watch isn't the same thing. The formula that describes the timing of a watch mechanism is not a watch mechanism. A watch simulator is not a watch. Executing a software simulator of a watch mechanism on a general purpose computer without a clock doesn't imbue it with the ability to keep time. You can patent a physical watch without patenting its "algorithm" in much the same way as you can patent a specific nuclear reactor design without patenting E=MC^2, or patent a drug without causing a research paper describing the drug to infringe.

>- The majority of software startups are not doing anything particularly technically innovative.

>- The (vast) majority of the software industry as a whole is not doing anything particularly technically innovative.

The second is a refutation of the first. If you take Microsoft, IBM et al as not doing anything particularly technically innovative, even though they are applying for a large number of patents, "innovation" (in the sense of interesting rather than merely something you can lawyer through the patent office) is clearly not a requirement for obtaining a patent. Which means that a lack of innovation can't adequately explain why startups should be less inclined to file for patents than larger firms which are innovating even less.

>- Patents are expensive to apply for and get, something a startup can't often afford.

>- Patents don't provide enough protection for software products anyway.

It doesn't surprise me that the study found both of these. This is evidence that software patents are ineffective to promote innovation. But again, uselessness without harm is irritating but mostly benign. The real trouble is that software patents are harmful, because they entrench incumbents by creating patent thickets and facilitate the trolling of successful innovators by lawyers and failures.

> But if there's no funding, there's no startup, let alone innovation, so for many founders it's a necessary evil.

That's the point. If we get rid of software patents then VCs would need to find some other signaling mechanism to distinguish between startups, but founders would no longer need to spend scarce resources and time on patent prosecution that could better be spent somewhere more productive.