Whether the patent system fuels or stifles innovation is highly debatable, and I think it depends too on the industry.  For example, in the pharmaceutical industry, where it can cost more than $100 million to develop a drug, I think IP protection is vital to encourage investment in new products.  But, does Friendster really deserve patent protection for social networking?

The US Patent Office is developing a wiki to solicit public feedback on the merit of pending applications, which has promising implications for greater efficiency in the system.