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Open source a key to software innovation, suggests Nobel Prize research

It turns out that patents inhibit innovation, and open source encourages it.

Stacey at Hyperic has an excellent post parsing research from recent Nobel Prize winners, Leonid Hurwicz, Eric Maskin and Roger Myerson. Digging into their research, she uncovers the following analog to open source:

...when discoveries are "sequential" (so that each successive invention builds in an essential way on its predecessors) patent protection is not as useful for encouraging innovation as in a static setting. Indeed, society and even inventors themselves may be better off without such protection. Furthermore, an inventor's prospective profit may actually be enhanced by competition and imitation.
Now, their premise is on patents and closed source license models. It would be interesting to extend that to Open Source licenses, which grant authors credit and some control, but encourage reuse, extension and innovation. As long as lawyers exist, I am sure Intellectual Property rights will not die. However, as the software market expands and accelerates, we most assuredly have seen the beginnings of the death throes of innovation in a closed source model. People jealously hide their inventions from other developers as well as customers. This process slows their time to market, masks their true value and creates artificial barriers to entry through what essentially amounts to scare tactics. The market stagnates and dies...[while open source] spurs faster economics, which means better products at a better price.

All of which leads back to the researchers' contention that patents do not spur innovation (at least not in some contexts), but rather hold back markets, as Glyn Moody records:

...the software industry in the United States was subjected to a revealing natural experiment in the 1980?s. Through a sequence of court decisions, patent protection for computer programs was significantly strengthened. We will show that, far from unleashing a flurry of new innovative activity, these stronger property rights ushered in a period of stagnant, if not declining, R&D among those industries and firms that patented most.

Why do we continue to fetish the very thing that holds back the industry from expansion? Because the few at the top want to horde what (little) they have. That's OK: industries have a way of opening themselves up. Some of this opening will come through legal mechanisms, but some will come (as Stacey notes) through curmudgeonly old models dying in the face of competition from fleet-footed competition.

I don't need a Department of Justice to quash Microsoft and the proprietary horders of yesterday's market. I just need customers to continue voting with their mouse clicks and wallets.