[reissbaker]

Pharmaceutical and other physical patents make sense and appear to work. But arguing that software companies won't innovate without patents ignores the fact that software companies did innovate without patents, for years. And software patents obviously haven't been working: see Microsoft's patent on "if not", among other things.

[petegrif]

You are absolutely correct. There are differences between the two industries. The two key ones would seem to be that (a) the investment required in time and money to create the software and its likely lifetime value are low compared with a drug, and (b) the ease of difficulty with which the software may be copied can vary a great deal. Compiled source code is harder to reengineer than a drug. Server side code that is held as a trade secret, such as google's search algorithms, is hard to recreate. So in these cases it is quite true that there has been innotation (ignoring the fact google did have some IP protection). But there are cases I can think of where it would be downright foolish for a software company, particularly a small one, to invest substantially without protection. The key characteristic is that the code cannot be held secret and can be readily read and thereby copied. The key point is that it really isn't very helpful to generalize to broadly about the software industry.