1. Furthering Monopoly
Software patents let companies such as Oracle buy up patents on technology created by others and then launch lawsuit after lawsuit as a way to generate revenue. This is what it means to be a "patent troll," and it's of course motivated by the huge sums that have been awarded by the courts in the past. It also puts the advantage squarely in the hands of the industry's monoliths, which are the ones with deep enough pockets to acquire and assert all that intellectual property.
2. Hindering Innovation
By their very definition, patents reduce the sharing of new ideas. In the software industry--which relies on just that kind of diffusion to spur further innovation--that's particularly destructive. Software patents frequently have very broad or vague boundaries, making it highly unclear where the patented piece of a program begins and ends. Frequently, software patents cover what can be considered the equivalent of a sequence of notes in a piece of music; imagine if that were to happen in the music world!
It has also been historically very difficult for patent offices to judge patent quality, or to realize when a patent application is too broad or covers something trivial.
3. Cost and Time
Patents are extremely expensive, and the examination process takes a very long time. Not only are the costs extremely high to determine if a particular piece of software infringes any issued patents--thereby reducing the funds companies have available to spend on R&D--but the results are highly uncertain, and take a ridiculously long time. Patent applications are often not disclosed until the invention becomes widely used, so developers frequently have no way of knowing if a useful new idea may become patented in the future--potentially after they've begun to use it.
4. Harming the Little Guy
For all of the above reasons, software patents have the most deleterious effects on small and medium-sized companies, whose funds for clearance searches and licensing fees are more limited and which probably have smaller patent portfolios of their own. Yet the smaller companies are also often the ones with the most innovative new ideas. Because of the patent system, promising new ideas can be nipped in the bud or bled to death through patent litigation.
5. Harming Consumers
Consumers, however, ultimately pay the heaviest price--both in terms of the costs of the software that does make it to market (think pharmaceuticals here, and the way R&D costs are recouped through high prices), and also in terms of the potentially life-changing software that *doesn't* make it through. The software that does make it through is also likely of a poorer quality than it would be otherwise, since no one besides the patent holder is allowed to improve it. It's no wonder the Electronic Frontier Foundation maintains a list of software patents it wants to see "busted." [http://w2.eff.org/patent/]
Copyright is far preferable to patents when it comes to software. Because it applies to a written expression of an idea, it has clear boundaries; and what good, after all, is a new idea without a clever implementation of that idea? Expression is at least half the game. Copyright is also relatively inexpensive, and much more conducive to the sharing of ideas.
Copyright is, in fact, put to work in the GNU General Public License (GPL) that's espoused by the Free Software Foundation and frequently used to protect open source software. Essentially, the GNU GPL ensures that licensees share their code by stipulating that not doing so breaches the GPL and results in a loss of protection against copyright infringement claims.
If there was any doubt left that the patent system for software is profoundly broken, Oracle and Allen have surely put those concerns to rest. Allen's move, in particular, seems almost a challenge to the U.S. Patent and Trademark Office -- if this isn't the time for reform, I don't known when would be.
