COLLOQUIUM
Department of Computer Science and Engineering
University of South Carolina

A Model of Optimal Software Patent Policy

Matt E. Thatcher

Department of Computer Information Systems
University of Louisville

Date: February 3, 2012
Time: 1430-1530 (2:30pm-3:30pm)
Place: Swearingen 1A03 (Faculty Lounge)

Abstract

Increasingly, software application innovators have turned to the
patent system to attain protection from cheap, quick imitation by
competitors.  Over the past two decades a combination of new
legislation and court decisions have lowered the height (protection
from improvements), increased the width (protection from imitation),
and increased the length (duration of protection) of software patents.
We use a duopoly model of quality-price competition between a software
innovator and an imitator to assess the social welfare implications of
these recent policy trends and to determine the socially optimal
software patent policy.  We find that an increase in patent length
expands the set of policies that provide the innovator with profit
incentive to seek a patent.  Interestingly, for a given combination of
patent height and width, such an increase in length reduces social
welfare.  However, if all three patent policy instruments can be
adjusted simultaneously we find that the optimal patent policy is to
maximize patent length (or grant patent protection for the entire life
of the innovative product) and to set patent height and width to
intermediate levels.  This policy not only maximizes social welfare,
but also makes all stakeholders (the innovator, imitator, and
consumers) better off than in the absence of a patent.  I will
conclude the presentation with an examination of the impact of the
private and public costs associated with the patent system on the
viability of software patent policy.

Dr. Matt E. Thatcher is a Professor of Computer Information Systems
(CIS) and the Director of the CIS Scholastic Excellence Scholarship
program at the University of Louisville where he has been a member of
the faculty since 2008.  He previously held positions as Associate
Professor of Management Information Systems (MIS) at University of
Nevada, Las Vegas (2006-2008) and Assistant Professor of MIS at
University of Arizona (1998-2006).  He holds a B.S. in economics and
an M.A. and Ph.D. in information systems from the Wharton School of
the University of Pennsylvania.  Dr. Thatcher's research interests
are at the intersection of information systems, strategy, and
economics with a focus on four themes: software patent policy design,
information technology (IT) value, IT outsourcing, and social costs of
information privacy.  Dr. Thatcher also serves as the Director of the
CIS Scholastic Excellence Scholarship program which is funded through
a $600,000 National Science Foundation grant for which Dr. Thatcher is
the Principal Investigator.  Outside of the University Dr. Thatcher
serves as an Associate Editor for the Decision Sciences Journal and
has served as an Associate Editor for the special issue on Information
Technology Funding and System Justification in the Organization for
the European Journal of Information Systems.  In addition, he has
served as a Track Chair, Associate Editor, Program Committee Member,
and invited panelist for many of the field's top international
conferences.  Most recently, he was Chair of the Economics and Value
of Information Technology Track for the 2011 Americas Conference on
Information Systems in Detroit, Michigan.