Digital Commons Network^™

Opinion: How Software Stifles Competition And Innovation, James Bessen

Faculty Scholarship

Innovation is not what it used to be, and software is part of the reason. In many industries—industries well beyond Big Tech—dominant firms have built large software-based platforms delivering important consumer benefits, but these platforms also slow the rise of innovative rivals, including productive startups.5 Because access to these platforms is limited, competition has been constrained, creating a troubling market dynamic that slows economic growth.

The Remainder Effect: How Automation Complements Labor Quality, James Bessen, Erich Denk, Chen Meng

Faculty Scholarship

This paper argues that automation both complements and replaces workers. Extending the Acemoglu-Restrepo model of automation to consider labor quality, we obtain a Remainder Effect: while automation displaces labor on some tasks, it raises the returns to skill on remaining tasks across skill groups. This effect increases between-firm pay inequality while labor displacement affects within-firm inequality. Using job ad data, we find firm adoption of information technologies leads to both greater demand for diverse skills and higher pay across skill groups. This accounts for most of the sorting of skills to high paying firms that is central to rising inequality.

A Generation Of Software Patents, James Bessen

Faculty Scholarship

This report examines changes in the patenting behavior of the software industry since the 1990s. It finds that most software firms still do not patent, most software patents are obtained by a few large firms in the software industry or in other industries, and the risk of litigation from software patents continues to increase dramatically. Given these findings, it is hard to conclude that software patents have provided a net social benefit in the software industry.

The Ali's Principles Of Software Contracting: Some Comments & Clarifications, Maureen A. O'Rourke

Faculty Scholarship

When I joined Boston University School of Law's faculty in 1993, there seemed to be general agreement among practitioners and academics alike that the time was ripe for some sort of uniform law to address transactions involving software. The debate was over the form that law should take rather than whether it should exist at all. More specifically, interested parties were discussing an important structural question-whether software contracts might best be dealt with in the Uniform Commercial Code (UCC) under a "hub and spoke" approach or as a standalone Article. Eventually, drafters focused on a standalone Article, and the National …

Defending Disclosure In Software Licensing, Maureen A. O'Rourke

Faculty Scholarship

For lack of our imagination, this article does not have the most scintillating title. However, the subject matter is critically important. We survey prominent kinds of disclosures in law and show why the disclosure tool, though subject to substantial criticism, is central to the legitimacy of any legal regime. Our working example is the American Law Institute’s “Principles of the Law of Software Contracts” (hereinafter “ALI Principles”).

The ALI Principles include three kinds of disclosure: disclosure of facts (concerning the quality of software),disclosure of terms (of standard forms), and disclosure of post-contract intentions (to pursue remote disablement of software). We …

Principles Of The Law Of Software Contracts: Some Highlights, Robert A. Hillman, Maureen A. O'Rourke

Faculty Scholarship

The final draft of the Principles of the Law of Software Contracts ("Principles") was unanimously approved bythe American Law Institute membership in May of 2009. The goal of the project is to “clarify and unify thelaw of software transactions.” However, the Principles will not become law in any jurisdiction unless and until a court adopts them, so only time will tell whether the project will accomplish this goal. Nevertheless, one thing is certain. The current law of software transactions, a mish-mash of common law, Article 2 of theUniform Commercial Code, and federal intellectual property law, among other things, is in …

Principles Of The Law Of Software Contracts, Robert A. Hillman, Maureen A. O'Rourke

Faculty Scholarship

An overview of a new set of legal principles for software contracts developed by the American Law Institute.

Sequential Innovation, Patents, And Imitation, James Bessen, Eric Maskin

Faculty Scholarship

How could such industries as software, semiconductors, and computers have been so innovative despite historically weak patent protection? We argue that if innovation is both sequential and complementary--as it certainly has been in those industries--competition can increase firms' future profits thus offsetting short-term dissipation of rents. A simple model also shows that in such a dynamic industry, patent protection may reduce overall innovation and social welfare. The natural experiment that occurred when patent protection was extended to software in the 1980?s provides a test of this model. Standard arguments would predict that R&D intensity and productivity should have increased among …

What's Wrong With The Patent System? Fuzzy Boundaries And The Patent Tax, James Bessen, Michael J. Meurer

Faculty Scholarship

The annual number of patent lawsuits filed in the U.S. has roughly tripled from 1970 to 2004. The number of suits was more or less steady in the 1970s, climbed slowly in the 1980s, and exploded in the 1990s. Why? The usual answers point to (1) the growth of the “new economy” and the concomitant explosion of patenting, (2) the failure of the Patent Office to reject patents on old or obvious inventions, or (3) the rise of the patent troll. There is an element of truth in all these answers, but even collectively they do a poor job explaining …

An Empirical Look At Software Patents, James Bessen, Robert M. Hunt

Faculty Scholarship

U.S. legal changes have made it easier to obtain patents on inventions that use software. Software patents have grown rapidly and now comprise 15 percent of all patents. They are acquired primarily by large manufacturing firms in industries known for strategic patenting; only 5 percent belong to software publishers. The very large increase in software patent propensity over time is not adequately explained by changes in R&D investments, employment of computer programmers, or productivity growth. The residual increase in patent propensity is consistent with a sizeable rise in the cost effectiveness of software patents during the 1990s. We find evidence …

A Comment On 'Do Patents Facilitate Financing In The Software Industry?', James Bessen

Faculty Scholarship

'Do Patents Facilitate Financing in the Software Industry?' by Ronald J. Mann contributes empirical evidence to our understanding of how software startups use patents. However, a close examination of the actual empirical findings in this paper points to rather different conclusions than those that Mann draws, namely: few software startups benefit from software patents and patents are not widely used by software firms to obtain venture financing. Indeed, among other things, the paper reports that 80% of venture-financed software startups had no acquired any patents within four years of receiving financing.

Chapter 3: Open Source Software: Free Provision Of Complex Public Goods, James Bessen

Faculty Scholarship

Open source software, developed by volunteers, appears counter to the conventional wisdom that private provision of public goods is socially more efficient. But complexity makes a difference. Under standard models, development contracts for specialized software may be difficult to write and ownership rights do not necessarily elicit socially optimal effort. I consider three mechanisms that improve the likelihood that firms can obtain the software they need: pre-packaged software, Application Program Interfaces (APIs) and Free/Open Source software (FOSS). I show that with complex software, some firms will choose to participate in FOSS over both "make or buy" and this increases social …

An Essay On The Challenges Of Drafting A Uniform Law Of Software Contracting, Maureen A. O'Rourke

Faculty Scholarship

This Essay, originally presented at Lewis & Clark Law School’s 2006 Distinguished Intellectual Property Visitor lecture, discusses the challenges involved in developing a uniform law of software contracting. Technology and the law have developed since 1995, when the first efforts to codify such a law began. These earlier efforts were largely unsuccessful, and substantial uncertainty still exists in transactions involving software. In this Essay, Dean O’Rourke discusses the American Law Institute’s Principles project that seeks to identify approaches courts could use in adjudicating disputes involving software agreements. The challenges of developing the Principles include the same theoretical, practical and political …