Although the computer software industry is a global industry, significant differences remain among the software industries and the associated intellectual property regimes of the industrial economies. Domestic lobbying for the creation or modification of legal regimes covering this relatively new form of intellectual property has contributed to differences in the level and characteristics of intellectual property rights for computer software among major industrial economies. The recent controversies over business methods patents and the response by both Congress and the U.S. Patent and Trademark Office (USPTO) to these controversies (see below) are only the latest examples of this endogenous character of national intellectual property rights regimes.

This chapter surveys intellectual property rights policies and controversies in the U.S. computer software industry. Immediately below, we discuss the historical development of the U.S. software industry, highlighting the ways in which the role, structure, and importance of formal intellectual property rights have changed over the course of the industry’s development. We then present data on the (limited) portion of the software industry for which reliable indicators of the intensity of patenting activity during the 1980s and 1990s can be computed, focusing on patenting by specialized packaged software firms. These indicators cover the “propensity to patent” (patents per R&D dollar) and provide some evidence on change over time in the “importance” of these firms’ patents. We also discuss patenting by large electronics systems firms in the same patent classes and compare the patenting behavior (and the “importance” of their patents) of the electronics systems firm that for many years was also the leading vendor of software, IBM, and the largest specialized packaged software firm, Microsoft. After a brief discussion of the changing prominence of U.S. universities as patenters in software, we examine the changing importance of copyright and patent protection of software-related intellectual property during the 1980s and 1990s. Our conclusion considers some of the policy implications of this analysis.

The growth of the global computer software industry has been marked by at least four distinct eras spanning the 1945-2001 period. The first era (1945-1965) covers the development and commercialization of the computer. The gradual adoption of “standard” computer architectures in the 1950s supported the emergence of software that could operate on more than one type of computer or in more than one computer installation. In the United States, the introduction of the IBM 650 in the 1950s, followed by the even more dominant IBM 360 in the 1960s, provided a large market for standard operating systems and application programs. The emergence of a large installed base of a single mainframe architecture occurred first and to the greatest extent in the United States. Nonetheless,