Of course there is the risk that bigger companies with more manpower and marketing muscle will copy good ideas from startups. But I think most entrepreneurs would rather fight that fight by being quicker, smarter and listening to the customer, than to fight patent trolls in court. In the first case their will be a winner, and a looser, but generally the public wins. In lawsuits you may win some, or loose some, but in the long run only the lawyers win.
Also, software became patentable in 1991 when a lower court overruled US Supreme Court precedent that software for general-purpose computers is not patentable. Some people cite Diamond v. Diehr (1980) as enabling software patents, but that contradicts what the court opinion actually says.
In order to avoid running afoul of copyright law you'd need to do a vacuum reimplementation based just on the description/specification of the algorithm - all that patents achieve is making such vacuum reimplementation also illegal, and it's up in the air whether that's even a good thing or not.
I think the case you're interested in is this one: http://en.wikipedia.org/wiki/Computer_Associates_Internation....
Based on trials that have used the filtration technique, if I know the issue ahead of time, I can workaround it.
Of course, if you do walk this close to the line, you probably don't want to leave a paper trail that you're doing so.
I shouldn't need funding to refactor my code.
In particular, I suspect the author's comment on software thriving in spite of software patents is correct. Unfortunately, it's a difficult thing to prove or disprove.
The industry thrives for very few companies. Boutique brands make their money largely by skimming money from extremely wealthy or showy.
If you hear VCs talk about the fashion industry you'll often hear, "It's a brutal business, I don't want to be in it". It's all about rack space. The other issue with fasion is that there's virtually no R&D cost in fashion. Companies like Nike do R&D, but Sketchers does virtually none.
If we couple two large trends... end of SW patents and app stores, the end result is probably a few large partners that copy any hot application and then get profiled in the app store. Word Lens is great, but iLens by Apple is the one that gets all the money due to the fact that its spotlighted in the AppStore.
The thing that I always find somewhat interesting is that computer technology has moved incredibly fast over the past 30 years. Faster than probably any other technology or industry in the world. Yet it happened with patents. If we didn't have patents today would we have perfect AI today or something? The pace of innovation actually seems mighty brisk with our current system.