Optimal Scope and Length of Software Patents - A Simulative Approach

Traditionally, only technical inventions such as light bulbs or pharmaceuticals were protected by patents. Nowadays software patents are a widely discussed topic in the U.S. and in Europe because of their proposed impact on national innovation rates. Based on an analysis of the determinants of successfully developing software, we use a bipartite probability model to compare a deregulated market without patents to a market using a patent system. Applying computer-based simulations, we analyze different scenarios to test the impact of different patent duration and width on the innovation behavior of the software market. We can show that strong patent protection is globally efficient only in markets with a relatively low profit potential