As Feld told ReadWriteWeb at the time, the Supreme Court had a change to address some of the serious issues with innovation, patenting, and software but "instead of taking a clear and forward looking position, they effectively punted on the hard stuff, surrounded it with ambiguity, and increased the mess we find ourselves in surrounding software and business method patents."

Early this week, Nature reported on a recent study that points to another way in which the current patent system impacts entrepreneurship - this time from within the university system.

Two-thirds of the approximately 700 software entrepreneurs who participated in the 2008 Berkeley Patent Survey report that they neither have nor are seeking patents for innovations embodied in their products and services. These entrepreneurs rate patents as the least important mechanism among seven options for attaining competitive advantage in the marketplace. Even software startups that hold patents regard them as providing only a slight incentive to invest in innovation.

These are three of the most striking findings from our recently published article, "High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey."

After providing some background about the survey, this column will discuss some key findings about how software startup firms perceive, use and are affected by the patent system.

While the three findings highlighted above might seem to support a software patent abolitionist position, it is significant that a third of the software entrepreneurs reported having or seeking patents, and that they perceive patents to be important to persons or firms from whom they hope to obtain financing.

Nathan Myhrvold and I have exactly the same goal. We'd both like to promote useful innovations that have a positive social impact. But we have very different opinions about how to do it. Nathan believes the patent system is the answer, and I believe the patent system is the problem.

The New York Times reported on Nathan's approach yesterday and referenced an article he has written in the Harvard Business Review outlining his view.

The world needs a capital market for invention like the venture capital market for start-ups" ... and that "creat[ing] a market where patents can be efficiently bought, sold, or licensed through investment funds that manage the high risks by amassing huge portfolios of patents and packaging them to maximize their value" will accomplish this goal.

Nathan supports this argument by comparing the current market for intellectual property to the early days of the computer industry. He argues that in the 1970s people did not believe the software industry could be an independent business and that it would always be linked to hardware. He says that software industry developed for two reasons. First, software vendors persuaded software users to respect intellectual property rights through both education and lawsuits, and second, the vendors overcame system incompatibilities and developed solutions that would work on different computers. Nathan suggests that a market for inventions would emerge if the same two conditions are met, and then offers his company Intellectual Ventures as a model for how to meet them.

I do not agree. Here's why.

Let's start with software analogy. Put aside the fact that in the 70's software vendors used copyright law to prevent the outright copying of their software and not patents as Nathan proposes to do. The real reason the independent software industry emerged is that operating systems and APIs made it possible for independent software vendors to develop applications independently. They no longer had to ask permission of the hardware vendors. This same characteristic of permissionless innovation led to the explosion of independently created services on the internet. The rampant abuse of the patent system has created the opposite condition for the creators of software and web services today.

Not only is it becoming impossible to invent new services on the web without the permission of a patent holder who claims to own the intellectual property embodied in your invention, it is impossible to know who you need to ask permission of. I recently spoke to an entrepreneur who put it this way.

I ignored my lawyer's advice not to do a patent search to avoid subjecting myself the possibility of treble damages for willful infringement. I hired several firms to search for patents that our service might infringe. Each of them came back with completely different patents and each time I sent them back to do it again, they came back with still more different patents. When I searched myself in the patent database, each time I entered the same search query, it would return different results. None of these patents seemed to cover what we did, so I eventually gave up.

Nathan sees the problem differently. He describes the entire internet industry as pirates.

While respecting intellectual property rights is a cornerstone of some high tech industries-branded pharmaceuticals, medical devices, and wireless, for instance-that's sadly not the case in others, most notably software, computing and other internet related sectors. These 'winner takes most" industries impose extreme competitive pressure on young firms to increase their market share by any means necessary, even copying the ideas of others. To this day, some software and internet companies take the very narrow view that saving money on patent licenses (by infringing) is good because it frees capital for expansion.

I have been investing in software and web services since 1993 and have worked in venture backed startups since 1985. I have never met the people Nathan is describing here. I have never been a party to a discussion about ignoring someone's intellectual property rights for the sake of market share or to free up expansion capital. If anyone can point me to the clear cut abuses that Nathan is describing, I'd be grateful. My experience has been the opposite. As I described in this post, the companies I work with invest a huge amount of time and energy creating a service from scratch only to find after they have launched and become successful that a patent holder they have never heard of, operating (if they operate at all) in an entirely different market claims that our company has stolen their property.

The problem is not the internet industry; the problem is software and business method patents. Nathan, despite his mean spirited and uninformed (based on my experience) attack on the software and internet industry, indirectly acknowledges the weakness of software patents in his HBR article.

When he cites an inventor, he points to the inventor of the incandescent light bulb, Thomas Edison, not the creator of Facebook. When he describes inspiring inventions, he cites "bone screws that can be adjusted remotely, using a wireless power source" and "a new kind of nuclear reactor that all but eliminates the need to enrich uranium" not "one click" purchases on the web. And when he talks about the great companies that support stronger patent protection he mentions General Electric, Proctor & Gamble, 3M, DuPont, and Caterpillar, not Google, eBay or Facebook.

There is a reason for this. Even the average reader of the Harvard Business Review has a gut appreciation for the fundamental unfairness of software patents. Software is not the same as a drug compound. It is not a variable speed windshield wiper. It does not cost millions of dollars to develop or require an expensive approval process to get into the market. When it is patented, the "invention" is abstracted in the hope of covering the largest possible swath of the market. When software patents are prosecuted, it is very often against young companies that independently invented their technology with no prior knowledge of the patent.

I don't know a lot about the invention of things like drugs, windshield wipers, and bone screws, so I don't really have an opinion on whether or not the business model that Nathan proposes makes sense in that sphere. I am absolutely certain it makes no sense in software or web services. We have all benefited from the extraordinary innovation delivered first by the independent software industry and more recently by the web services industry. In both cases, this innovation was a direct result of the ability to innovate without permission. Nathan proposes to replace this world of decentralized innovation on open platforms with one dominated by a new gatekeeper, "intellectual property market makers". In this world, young companies, may not need to ask permission of Dell, Microsoft, or Verizon, before they launch a new web service, but they will have to negotiate with Nathan's firm to as he puts it "get all the patents they need to roll out an innovative product faster and at the same time reduce the risk that they'll miss a necessary license and get blindsided by an infringement suit"

This is not a good idea.

(Editor’s note: Cecily O’Regan is a registered patent attorney and member of the Intellectual Property & Technology Group at Greenberg Traurig LLP.  She submitted this story to VentureBeat.)

Building an IP portfolio can be expensive. And pursuing international rights can be a daunting expense for a young organization – – especially if it’s self-funded.

But there are ways to keep overall costs down during a company’s early stages – and this frugality (and a well thought out IP strategy) is something that will impress VCs when you decide to seek funding

Below, you’ll find some of the best methods for stretching your dollars as you put together your IP portfolio.

Work with an Attorney/Agent familiar with your business space - Not all attorneys are created equal. Just like you wouldn’t hire a podiatrist to perform brain surgery, you should try to pick an attorney or agent who is familiar with your technical and business landscape.

He or she will be able to leverage off of their existing knowledge and experience – making them more efficient and probably less costly, regardless of hourly rate. They’ll also have some understanding of the competitive product landscape, making them more creative at claim drafting and better able to identify projects that may not be worth the expense of a patent.

Focus your patent portfolio on aspects that provide a commercial advantage - Not all inventions are created equal – and a patent application is not necessarily warranted for everything you create. For example, a way to charge a capacitor faster may be one of the outcomes of product development. It may even be an elegant and interesting approach worthy of admiration from other engineers – satisfying the “ghee whiz” factor. However, if it doesn’t contribute to a commercially relevant feature, it may not be worth the expense of filing a patent application.

Use provisional patent applications wisely - At the earliest stages of a project, you can secure preliminary coverage for inventive concepts with a provisional patent application filed in the U.S. Filing this can extend the time for preparing and filing a full utility application for one year – at which point both U.S. and foreign coverage will need to be pursued.

Having one or more provisionals on file will also facilitate being able to talk to VCs and angel investors about funding – without the risk of running afoul of the absolute novelty requirement imposed in many foreign countries.

Ideally you should prepare the provisional application fully with a complete set of claims. However, the requirements of a provisional application are much less formal and sometimes it isn’t feasible to do this.

Keep costs down when the one-year provisional conversion deadline hits - If your application needs to be filed internationally (and if the improvement is an incremental one, it may not), you can delay those expenses for up to 18 months by filing a Patent Cooperation Treaty (PCT) application, an international agreement for filing patent applications in up to 117 countries.

This can also buy you some time (and potentially delay $500-$1000 in fees, depending on the number of claims) for a full filing with the U.S. patent office. The U.S. application can be filed from the PCT application anytime (i.e., when money becomes available) up until the thirty-month deadline.

Although many countries are members of the PCT, there are some notable exceptions, such as Taiwan. Know where you plan to pursue coverage.

Using Australia or Korea as the search authority for your PCT can also save you money. Using Korea currently costs $729 and Australia is only $1,278. The U.S. charges $2,080 – and getting it done in Europe runs $2,378. All searches, regardless of origin, scan U.S., European and PCT patents and the results are always provided in English.

(An additional benefit of using Korea or Australia is that it is more likely that the search results will be received by the 18-month deadline, giving an early indication of potential hurdles.)

Develop your international strategy thoughtfully - Any foreign filing should primarily focus on countries where there is a significant market and/or manufacturing capability. It’s also worth your time to identify countries where a potential acquirer pursues patent protection. So, if there are two or three large companies that could be a potential acquirer, find out where they file their patent applications and consider those countries first as you line up foreign coverage.

Some countries, like Brazil and China, offer utility model protection in addition to traditional utility protection. Utility model applications cost 30-50 percent less than a traditional utility application and are primarily used for mechanical inventions. They have a shorter term of protection and go through a less stringent examination process. They’re not only an inexpensive entre into IP coverage in an emerging market, they also can provide access to lower courts in a country for enforcement which can keep litigation costs down.

Consider filing for design patent protection - Design patents provide coverage for visual features, including the shape, configuration and pattern of an article of manufacture. Coverage for the design is less robust than a utility patent, but is an important component to an IP strategy for products.

Keep attorney’s fees and costs under control - Request reporting communications by email: In an increasingly electronic world, email is both expedient and convenient. It also reduces the amount of photocopying charges and eliminates the cost of postage or courier charges. Over time, the reduction adds up. As an added benefit, it’s easier for small companies that lack administrative staff to manage the mountain of papers associated with patent filings – not to mention deadlines. Just be sure to take extra care when addressing the emails, so an attorney-client communication is not inadvertently sent to the wrong email address.

Also, consider paying annuities (taxes) and maintenance fees directly: Instead of having your attorney handle the yearly taxes that are due for foreign patents/applications and maintenance fees (on issued U.S. patents), open an account with one of the commercial annuity services.

It’s a little less convenient, but it eliminate a handling fee that typically ranges from $200-$500 per case). The annuity service will send a quarterly report to you – and you forward instructions along with any payment. If you’ve got just 10 cases, the annuity service could save you up to $5,000 per year. And as your portfolio grows, so does the potential savings.

Finally, communicate, communicate, communicate!: Talk openly and regularly with your counsel about budgeting needs and funding status. Request estimates for projects and insist that you be advised in advance if a project will exceed the estimate. Ask what you can do to reduce the cost. Consider taking on additional tasks, like preparing detailed figures, yourself.