Arevos

The problem with patents is that they are a double-edged sword. They are intended as a incentive for innovation; if you invent something interesting, you can patent it, and retain a monopoly over the invention for a temporary period of time.

So up until the patent is granted, they encourage innovation. Once the patent is granted, they prevent innovation; rival companies cannot improve on your invention, and you have less financial incentive to make improvements due to the lack of competition.

Broadly speaking, patents are good for the economy (assuming that people are entirely logical entities) iff: Profit(With a Patent) > Cost(R&D) > Profit(Without a Patent)

Time also factors in; if a patent is granted for too long a period, and (Profit(With a Patent) >> Profit(Without a Patent)), then again things start to go downhill. For instance, the patent on the algorithm that encodes GIFs is, I believe, going to expire in the EU in 2007, but the GIF format has been outdated by the superior PNG format. By the time the patent expires, the invention is obsolete!

So two problems occur with software patents:
1. The Patent Office tends to employer examiners who are not always up to the high technical standards needed to evaluate the worth of the software patent.
2. The time granted to software patents may be too long. For instance, the invention the patent covers may become obsolete before the patent expires.

Both of these problems result in a drain on the economy and makes the country implementing software patents less internationally competitive.

I'm generally against software patents, because I don't believe a government entity like the Patent Office has the required technical expertise and high standards for patents to be a boon to the economy. The US Patent Office demonstrates nicely how not to handle software patents.