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In Japan, the software patent system has been reformed and now software has become a patentable subject matter. In this paper, this pro-patent shift on software is surveyed and its impact on software innovation is analyzed. Before the 1990's, inventions related to software could not be patented by themselves, but they could be applied when combined with hardware related inventions. Therefore, integrated electronics firms used to be the major software patent applicants. However, during the period from the late 1990's to the early 2000's, when software patent reforms were introduced, innovative activities (measuring patent applications) by independent software development firms began.
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