Quote:
A higher total volume of patents leads to increasing transaction costs, particularly in markets which are patent intensive. The cost/benefit trade-off of the patent system may shift away from the socially optimal position – i.e. where innovation incentive benefits outweigh transaction costs by the largest margin.
And (sequential here refers to innovation that gradually build on past innovation, with computer programs specifically mentioned as a case of that):
This means that while for non-sequential inventions, such as a new drug or medical treatment, having a patent system generally yields higher welfare than not having one; in a fully sequential case, higher welfare and more innovation may be more likely to result from the absence of patenting opportunities. Over time, as digital technology becomes pervasive across the economy, this represents a serious concern.
At least they have a very good understanding of the problem of software patents.