The software patent system hampers innovation and is unfair to small business, a new report suggests.

Research from analyst and consulting company Ovum suggests the system plays into the hands of big businesses that can afford the resources and legal expertise to create an arsenal of patents.

Ovum also said the patents were harming competition, with companies using them as weapons against competitors.

They also harmed innovation making it harder for companies to create a product without infringing other patents.

"Many see patents as a good thing simply because they make money by licensing them," said research director Gary Barnett, who led the project.

"This is a short-sighted and fallacious point of view.

"Patents ultimately limit the choice of products available to consumers, meaning they will have to pay more for software.