Uh, you should really read up on America's early economic development. Its success has very little to do with IP laws.
And to counter your claim: look at China, which has no IP laws. How much software innovation do you see coming from there?
Yup, zero.
Both America and China industrialized by misappropriating trade secrets from the reigning technical powers of the time (Britain and America, respectively) and then bringing that knowledge home where it could be employed by workers who were willing to work for less. The birthplace of the American industrial revolution are the textile mills at Waltham and later Lowell, MA. Francis Cabot Lowell spent 2 years memorizing how British power mills worked, and then came back to America with all that knowledge in his head. He then copied the design of that mill on the banks of the Charles River, and American industry was born.
China's manufacturing similarly depends upon transfer of knowledge from developed to developing nations, though in this case the transfer is largely voluntary, with American firms setting up factories in China. However, people then leave those factories and set up their own firms, using the trade secrets they gained while working at foreign multinationals. Software is the wrong industry to look at - think in terms of textiles or cars.
Back to my original point: if the US software patent system is so broken, how come America is #1 in software innovation?
It may be difficult because the sheer amount of capital in the US, both physical and cultural, is probably enough to offset the effect of bad IP laws in comparison to most countries. You also need to find a way to measure software innovation per capita to control for population.
It may be that the US is simply the best of a bad lot.
Yup, zero.
The IP laws here mean they wouldn't be able to sell me anything that resulted from their lack of IP laws, and the language barrier means I wouldn't likely see anything they weren't trying to sell me. So why would my not seeing anything have any meaning?
http://en.wikipedia.org/wiki/Software_industry_in_China
"China's software industry grew at a compound annual growth rate of more than 39% over the period from 2001 to 2007 to reach RMB 506 billion and is further anticipated to grow at a CAGR of nearly 22% through 2012."
> It is predicted that in China, Linux market (both server and client) will grow with an annual rate of 34 %. The client-side share growth will be comparatively faster.[citation needed]
I recently walked around a large computer bazaar in China looking for a laptop with Linux pre-installed. I finally found one with a sign saying "Computers for sale with Windows or Linux installed". I walked in asking for one with Linux, pointing to the sign. The seller went "Uhh?!? These are all there are, and they all have Windows. You should know better than to read signs."
Where are the Google, Facebook, Twitter, Apple, Foursquare, LinkedIn? Look at all the startups and new ideas described in Techcrunch every day, how many of them came from China?