Breaks common software distribution models
Some software development models and business models rely on distributing software without charging directly. When a patent holder can demand royalties, these can completely break those distribution and development models.
A problem specific to software
- (see also Why software is different)
Because of hardware's intrinsic per-unit costs, hardware is always produced and distributed with a directly financial goal.
Standard patent licensing terms, such as the requirement to inform the patent holder of how many units were distributed, and to pay the patent holder certain royalties per-unit, are always possible. (Depending on the circumstances, they might cause financial problems, but that's a matter of negotiating the numbers, not a fundamental problem.)
The same terms applied to software, are completely incompatible with any software development or distribution models that allow and encourage recipients to make subsequent copies. This includes, but is not limited to, free software.