· Copyright and patent protection may impose costs on consumers of between $80 and $120 billion a year, compared to a situation in which all software was available at its competitivemarket price. The pure efficiency loss to the economy could be in the neighborhood of $70 to $110 billion a year. These losses dwarf estimates of the losses from other forms of protectionism, such as tariffs or quotas on imported goods;

· A substantial portion of the resources devoted to software development are currently wasted due to IPRs. This is a result of the fact that IPR protection leads to unnecessary duplication, as developers have substantial incentive to produce software that simply replicates the function of existing software. In the absence of IPR protection, developers could better spend their time improving existing software. IPRs also provide incentives for software locks and secrecy, which impede the process of software development. It is likely that a substantial portion of software development (possibly a majority) is misdirected as a result of the market distortions created by IPRs;

· IPRs also lead to large amounts of waste by providing incentives for rent-seeking activity. This waste includes expenditures for advertising and marketing, and payments to lawyers and lobbyists. Those enjoying IPR protection have also been able to impose costs on third parties, for example by requiring Internet Service Providers to monitor activities or universities to take steps to reduce the amount of unauthorized copying of IPR protected material on their premises. IPR holders have also secured laws that restrict the development of software and hardware designed to support better searches and digital reproductions;

· There are feasible alternative mechanisms for supporting software development. One mechanism outlined in the paper would create a “Software Development Corps,” which would be a series of competing government funded software corporations. An annual appropriation of $2.1 billion (approximately 0.08 percent of federal spending) should be enough to support the work of approximately 20,000 software developers. The government should be able to recoup most, if not all, of this money through the lower price it will pay on the computers and software it purchases. The remaining benefit would be the equivalent of a tax cut to consumers in the range of $80 to $120 billion a year. This money would provide a substantial stimulus to the economy and lead to the creation of millions of jobs.