I seem to have software patents on the brain lately. After I wrote about our decision not to move forward with Infovark’s provisional patent, several recent articles and blog posts have caught my attention.

What started the latest round of software industry soul-searching was an article in the Harvard Business Review written by Nathan Myrhvold regarding his company, Intellectual Ventures. It’s called The Big Idea: Funding Eureka. His company aims to make money from enforcing patent rights created by both in-house and independent inventors. You can read a recent profile of Intellectual Ventures and its strategy in the New York Times.

I didn’t know about Intellectual Ventures at the time I wrote our blog post, but it’s exactly the sort of company I was thinking about when I described the collect ‘em, trade ‘em patent game. Intellectual Property lawyers call it a Non-Practicing Entity or NPE, but most folks in software and technology would call it a patent troll.

Big tech companies have a lot of time, money and effort invested in their patent portfolios, and they are very worried about the impact companies like Intellectual Ventures will have on innovation.

The venture capital community is also concerned. Brad Burnham of Union Square Ventures thinks that software patents are the problem, not the answer. Other prominent VC bloggers, like Fred Wilson and Brad Feld, agree.

Changes in the wind?

It looks like the idea of software patent reform is gathering momentum. Business method patents, like Amazon’s famous “one-click” shopping cart patent, have always seemed wrong to me. I also dislike the idea of software patents in general. A computer is fundamentally a machine for doing math. If mathematical formulas are not patentable, why should software be?

But it’ll be a long, hard road to get the law changed. And there’s only so much change that a reinterpretation of existing law, like the In re Bilski case, can bring about.

For one thing, investors must be persuaded to stop putting a premium on businesses and start-ups with patents pending. Companies that have patents must stop using them as competitive weapons — ways to tangle and trip up their competitors in red tape. Accountants must stop treating patents as a corporate asset or as capital.

Ultimately, companies will still pursue patents so long as they have a financial incentive to do so. And the companies that own patents have a vested interest in keeping the status quo. Even some of the VCs that back patent reform admit that they advise their portfolio companies to protect what they can.

There are enormous incentives to play by the rules, even when the rules themselves are broken.

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1. Patent Foolishness