Of all the arguments against intellectual property, the idea that they hamper "innovation" seems the most odd. Since patents and copyright protect original works, and innovation means to create something new, then it would seem that protecting intellectual property results in more new things, not less. After all, if one wants to avoid patent and copyright infringement, then one necessarily needs to create something original.
I hesitate to discuss this, because it might seem like I'm considering something other than a purely individual rights-based argument for protecting intellectual property. I'm not. Property of both a material and intellectual property should be protected because such property represents human effort, physical and intellectual, and every individual has the right to benefit from his efforts according to his own standards.
Other arguments, though, like the one referenced above, are social arguments that place the good of "society" above the individual. Because "society" is a nebulous term disconnected from any real entity, the supposed goods are also nebulous--applying to everyone and no one at the same time. In this case, it's "innovation," which as to be expected is a meaningless phrase that means the opposite of its intended definition.
It's not "innovation" that the argument refers to, in the sense of the on-going creation of new inventions and works, but rather the widespread adoption of them. Microsoft is wrong to assert its patents, the argument would go, not because the patents stop Linux developers from creating something "new." They don't, of course; the patents only stop developers from utilizing already patented technologies in their works--which thus requires new, truly innovate means to accomplish something.
Rather, according to the argument, Microsoft is wrong to assert its patents because doing so hampers the wider adoption of some technology. That's the crux of the argument, which is a variant of the idea that "information wants to be free." By limiting the adoption of a work to dissemination by a single entity, a patent presumably makes the work available to a smaller subset of the population--hence, its adoption is hampered.
However, it's not actually true that a patent makes a technology less available. Instead, it makes a technology only available from the patent holder. Even by the standard of "society," patents are harmless, unless one abandons the very notion of property. From a societal standpoint, certainly, an individual's possession of a piece of property necessarily limits its utility for everyone else. However, only in collectivist command economies is this a negative. In free societies, one doesn't expect to control someone else property--unless, of course, as in the "innovation" argument, one is speaking of intellectual property.
Microsoft has products for sale utilizing technologies that are covered under its patents. One has easy access to those technologies--one merely needs to purchase the relevant products. The only ones to complain at this arrangement are Linux and other developers who desire to use the technologies in their own products and consumers who want the technologies for free. Neither are legitimate concerns in a society that protects the rights of the individual.