The Cost of Scepticism: Software Patents and Australia’s Productivity Gap
Recent analysis by the e61 Institute finds that Australia’s market sector labour productivity now trails the United States by around 12 percent, with much of the gap concentrated in sectors where US firms have significantly higher levels of intellectual property investment. A significant part of that gap can be traced to lower investment in intellectual property, particularly in software, and to challenges in diffusing that innovation across the economy.
That finding should give the Australian tech community pause. One structural reason for this underinvestment may be a belief that has become almost embedded in the Australian technology ecosystem: the idea that software is not really patentable.
It is not hard to see how that perception has taken hold. For more than a decade, Australian courts have closely scrutinised computer-implemented inventions. A number of patents and patent applications have failed, particularly where the claimed invention looked like a business idea performed using conventional computing. Others struggled because the specification did not describe the technical implementation in enough detail to support the claimed invention.
Legally, those outcomes are understandable. But commercially, they have sent a broader and less nuanced message: software patents are difficult, uncertain and often not worth pursuing.
That conclusion is not right, but it is widely believed.
By contrast, in the United States, the value of software patents is far more deeply embedded in the commercial and cultural landscape. It is part of the tech “zeitgeist”. Silicon Valley companies routinely build large patent portfolios, not just defensively, but as core strategic assets. Employees are actively incentivised to invent, with some companies providing structured time to work on new ideas. Those inventions are captured, protected and leveraged.
The result is not just more patents. It is a stronger connection between innovation, ownership and investment.
Australia has world-class software companies, including Atlassian, Canva and WiseTech, and each has built a meaningful patent portfolio. These companies clearly do not share the prevailing scepticism. They understand that patents, when done properly, can support valuation, facilitate global expansion and create defensible positions in competitive markets.
So why does the broader market remain unconvinced?
There are three practical reasons.
First, software patentability is genuinely complex. The tests applied in Australia, the United States and Europe are not aligned, and they continue to evolve. In Australia, the inquiry is highly dependent on how the invention is characterised and whether the claimed contribution is properly technical in substance. This is not an area where generic patent drafting is sufficient. It requires specialist expertise and a clear understanding of how to frame the technical problem, the technical solution and the practical implementation.
Second, the law has moved. Some earlier filings were prepared in a period when the boundaries of software patentability were still being worked through. The expectations are now clearer, and in many respects more demanding. A successful application needs more than a high-level description of a commercial outcome achieved by software. It needs to explain how the technology works, what technical problem is being solved, and why the implementation is more than routine computer use. The lesson is not that software patents do not work. The lesson is that they need to be drafted with the current legal tests firmly in mind.
Third, there is a broader cultural divide in how intangible assets are valued. US investors and technology businesses are accustomed to viewing IP, including software patents, as a core asset class. In Australia, there is still a stronger bias toward tangible assets and short-term commercial outcomes. This shapes behaviour at every stage, from early-stage funding decisions through to exit strategies.
The consequence is not just fewer patents. It is a weaker translation of innovation into protectable, scalable commercial advantage.
If Australia is serious about closing the productivity gap, that mindset needs to shift.
A patent strategy should be selective. But software should not be dismissed from that strategy simply because it is software. With the right technical detail, the right claim framing and the right jurisdictional awareness, software patents can be a powerful commercial tool.
If Australia wants more globally competitive technology companies, it needs to get better at recognising software innovation as an asset, not just a product feature.
