The Scope of Software Patent Protection in the Digital Age: Evidence from Alice

Previous studies on software patents using data from the 1990s and early 2000s found a positive association between strong patent rights and sales within the software industry. Our research expands on this work in three ways. First, we consider more recent data from 2010 to 2018, which better represent the advancements in digitalization. Second, we shift our focus to the breadth of software patent protection rather than the quantity of patents held by a firm. Third, we provide evidence showing increased open-source involvement and sales for software firms when software patent protection is more limited. Put simply, a more restricted scope of software patent protection could foster a beneficial situation for both software firms and society. Despite less reliance on formal patent protection, companies can still generate and profit from their innovations without excluding societal members from utilizing these advancements. This “less-is-more” approach may extend to a wider array of software-related innovations, including but not limited to artificial intelligence, blockchain, and other emerging digital technologies.