ACIS TESTIMONY AT PTO HEARING ON PATENT PROTECTION FOR SOFTWARE RELATED INVENTIONS I am Chris Byrne, Senior Intellectual Property Counsel for Storage Technology Corporation (StorageTek). I am testifying today on behalf of the American Committee for Interoperable Systems, or ACIS, to which StorageTek belongs. ACIS sincerely appreciates this opportunity to provide testimony. I will address Topic A, Questions 4(a) and 5: Does the present framework of patent, copyright, and trade secret law effectively promote innovation in the field of software? Do you believe a new form of protection for computer programs is needed? Because these questions are two sides of the same coin, I will respond to them together. ACIS members include numerous innovative high technology companies such as Sun Microsystems, NCR and Broderbund Software. My own company, StorageTek, is headquartered in Louisville, Colorado. We employ thousands of people worldwide and we had 1993 revenues of approximately $1.4 billion. StorageTek designs and manufactures high performance data storage and retrieval systems for mainframe, mid-range and networked desk-top computer systems. Our customers include many fortune 200 communication, transportation and financial companies. In fact, if you recently made a phone call, bought an airline ticket or bought or sold securities, chances are that records of your activity has been stored on one of our products, awaiting ready access and retrieval when necessary. Our competitors include IBM, Hitachi and Fujitsu. Like other ACIS members, we rely heavily upon our nation's intellectual property system to protect our most valuable assets: the innovations of our engineers, particularly our software engineers. Without adequate intellectual property protection, we could not protect and recover our substantial investment in research and development. For instance, at StorageTek alone last year we invested approximately 10% of our revenues in R&D; that's over $100 million dollars. Without that R&D investment, we simply cannot stay competitive and in business. Indeed, last November Vice President Gore himself toured our substantial R&D facilities and personally previewed key technology which we believe will facilitate his grand vision of the information superhighway. While all ACIS companies believe in strong intellectual property rights as the best way to protect our substantial R&D investments, we also believe in balance. We believe that overprotection is as threatening to innovation as underprotection. The need for this sophisticated balance is particularly important with respect to software, which is so pervasive in our economy and critical to its growth and our national leadership in high technology. ACIS believes that it would be a dangerous act of underprotection to deny patent protection to software subject matter per se. But it is an equally dangerous example of over protection to fail to expeditiously implement needed corrections in the way we currently do software patents, if not all our patents. Those needed corrections are well known and ACIS has gone on record in support of them. They include: _ Improving the software prior art database so that it is accurate, timely and includes both patent and non-patent prior art. The quality of the software patent database will be directly related to the quality of the software patentability examination by the PTO. _ Working to raising the skill level of the PTO examiners who are charged with the vital and difficult task of examining software patent applications. One way to accomplish this is with site visits by examiners. For instance, last year two groups of Examiners, one group from Art Unit 2308 led by Michael Fleming and another group from Art Unit 2507 led by Bruce Arnold, visited StrorageTek. They spent valuable time with our engineers and our patent committee learning how we do R&D and how we make our decisions about which inventions to seek to patent. We were very favorably impressed with the legal and technical expertise of the examiners, who too often are merely names at the end of an office action. To our mutual benefit, the examiners learned about the challenges we face in innovative R&D and we received a much better understanding of the difficult nature of the examiners' work. Such educational visits by examiners is one way to help raise skill levels. Implementing key procedural reforms to prevent applicants from secretly and indefinitely submerging their applications in the PTO until they are ready to ambush the public. Otherwise we need to speed the examination process and include accompanying public notice of possible patents. Many such procedural reforms are considered as a function of possible global harmonization of patent law, but such reform in this country should proceed with or without harmonization. But all the good work we undertake to improve software patents will be simply undermined if we do not address another balancing issue, and that is the proper balance between patent versus copyright protection of software. This is because copyright, if misapplied, can achieve patent-like protection for software functionality. This misapplication is particularly dangerous when we consider that there is no examination for copyright, as there is with patents; a copyright registration does not specify the boundary line of protected expression in a work whereas a patent is explicitly bounded by the terms of its claims; and copyright protection outlasts patent protection by at least a factor of four. This de facto patent protection under copyright is particularly pernicious with respect to interface specifications. Unlike novels and plays, which stand alone and do not need to interact with other works, computer programs never stand by themselves; they function only by interacting with a computer environment. If the developer of the environment can use copyright to prevent other developers from conforming to the system of rules governing interaction within the environment - to its interface specifications - the first developer can gain a patent-like monopoly without ever subjecting his system of rules to a patent examination. In the absence of competition, the first developer would have little incentive to develop more innovative and less costly products. Moreover, this result is particularly dangerous to a company such as mine. StorageTek designs and manufactures data storage peripherals which interface with the computers made by the dominant American, European and Japanese computer vendors. With de facto patent-like copyright control of their operating systems, these vendors have the potential to therefore control functional access to that interface and therefore exert market control over subject matter, i.e. the peripheral device, which is completely beyond the scope of the copyright itself. That is dangerous overprotection of software via copyright. StorageTek joined ACIS because of our concern that the courts and the U.S. government were losing sight of the importance of maintaining a balance between incentives and competition in the area of intellectual property protection of software, particularly copyright protection. From the outset, it was our belief that the proper application of traditional copyright principles such as the idea/expression dichotomy, merger, scenes a faire, and the fair use doctrine would yield the appropriate scope of protection for software. Recent court decisions have validated this. The Second, Ninth, and Federal Circuits have all found that copyright does not protect functional interface specifications. Further the Ninth and Federal Circuits have found the reverse engineering technique known as disassembly to be a fair use and proper means to achieve functional interoperability. In our view, the Altai, Sega, and Atari decisions are not radical departures from traditional principles; rather, they return copyright to its proper course. We expect that the First Circuit will soon be consistent and overturn Judge Keeton's decision in Lotus v. Borland. Despite this positive trend in the case law, however, we fear that the U.S. government has allowed its laudable goal to improve the balance of trade to inadvertently divert its attention from the ultimate goal of our patent and copyright system: promote the progress of science and the useful arts, as explicitly provided for in Article I, Section 8, Clause 8, of the United States Constitution. We applaud the manner and spirit of these hearings, therefore, as solid indication that the U.S. government clearly appreciates that more protection is not necessarily better. We are also encouraged that Assistant Attorney General Bingaman has established a task force to review and reformulate the Antitrust Division's policies on intellectual property and antitrust. We applaud her observation that the scope of copyright protection for computer software has important competitive implications. In summary, we see no need for a sui generis software protection law. Until recently, courts applied copyright in a manner that overprotected software, but the Altai, Atari, and Sega decisions corrected that aberration. Bad software patents also dangerously risk overprotecting software, but let's not throw out the baby with the bath water; let's move quickly to implement needed improvements in the way we do our software patents. Thank you for this opportunity to present this testimony and for your kind attention. I would be happy to answer any questions you may have. ******** Prepared Remarks of Douglas K. Brotz Adobe Systems Incorporated Presented at Public Hearings on Patent Protection for Software-Related Inventions Patent and Trademark Office, Department of Commerce January 26, 1994 Good morning Mr. Secretary and members of the panel. My name is Douglas Brotz. I am a Principal Scientist at Adobe Systems Incorporated, and I am representing the views of Adobe Systems as well as my own. Adobe Systems is a software company based in Mountain View, California. We are most well known for our PostScript¨ Language and Interpreter, which provide the foundation for desktop and electronic publishing. Although I am a computer scientist, I became involved in patents when Adobe was contacted by another company regarding AdobeÕs possible infringement of a patent. I am currently AdobeÕs technical advisor to our patent attorneys. Let me make my position on the patentability of software clear. I believe that software per se should not be allowed patent protection. I take this position as the creator of software and as the beneficiary of the rewards that innovative software can bring in the marketplace. I do not take this position because I or my company are eager to steal the ideas of others in our industry; Adobe has built its business by creating new markets with new software. We take this position because it is the best policy for maintaining a healthy software industry, where innovative companies can prosper. The problems inherent in certain aspects of the patent process for software-related inventions are well known. The difficulties of finding and citing prior art, the problems of obviousness, the difficulties of adequate specification for software are a few of these problems. However, I argue that software should not be patented not because it is difficult to do so, but because it is wrong to do so. The software marketplace requires constant innovation, regardless of whether computer programs can be patented. Indeed, the fundamental computer programs and concepts on which the entire industry is based were conceived in an era when software was considered to be unpatentable. For example, when we at Adobe founded a company on the concept of software to revolutionize the world of printing, we believed there was no possibility of patenting our work. That belief did not stop us from creating that software, nor did it deter the savvy venture capitalists who helped us with early investment. We have done very well despite our having no patents on our original work. On the other hand, the emergence in recent years of patents on software has hurt Adobe and the industry. A Òpatent litigation taxÓ is one impediment to our financial health that our industry can ill afford. Resources that could have been used to further innovation have been diverted to the patent problem. Engineers and scientists such as myself, who could have been creating new software, instead are working on analyzing patents, applying for patents and preparing defenses. Revenues are being sunk into legal costs instead of into research and development. It is clear to me that the constitutional mandate ÒTo promote progress in the useful artsÓ is not served by the issuance of patents on software. Let me illustrate this burden with figures. The case Information International, Inc. v. Adobe, et al. was filed five years ago. Last year, the trial court ruled for Adobe, finding no infringement. In December, the Appeals Court for the Federal Circuit unanimously affirmed that judgment. Yet, in that time, it has cost Adobe over $4.5 million in legal fees and expenses. I have spent over 3500 hours of my time (equivalent to almost two years of working time), and at least another thousand hours was spent by others at Adobe. Our Chairman of the Board spent a month at the trial. This type of company behavior would not be high on anyoneÕs list of ways to promote progress. This state of affairs might be acceptable if there were a corresponding benefit from patents in the software industry. However, I see none. Companies that have trumpeted their Òfundamental software patentsÓ are not leaders in software innovation. Conferring monopoly positions in an industry that was already the most innovative of any will promote stagnation rather than increased innovation. When companies turn from competing by offering the best products to earning money by the threat of patent litigation, we will see our best hope for job creation in this country disappear. An industry that still generates tremendous job growth through the startups of Òtwo guys in a garageÓ will not continue to grow when room for a third person, a patent attorney, needs to be made in that garage. There exists a perfectly adequate vehicle to protect creatorsÕ rights in this industryÑthe Copyright law. The nature of software is that it is a writing, an expression, of mathematical ideas. The Copyright law protects the expression, and it does so without requiring costly and time consuming proceedings. For people working in the fast paced software industry, the way a copyright is created is ideal. While feverishly working to meet deadlines, there is no need to explain what youÕve done to a government agency; the very act of writing the software confers the copyright on it. Furthermore, Copyright law confers the correct level of protection on computer software. Regardless of what current regulations may say, the fact is that all computer programs express mathematical algorithms. Every part of every computer program manipulates numbers with logic. Any software that performs any task does so through mathematics. It is inconsistent to hold that mathematical algorithms are unpatentable while granting patents on systems composed of software. If the Patent Office were truly following the law, it would recognize the inherent mathematical nature of software, and it would not grant patents to software-based inventions. In the last decade, the Patent Office has been granting patents on software and algorithms, regardless of the superficial attempts to cast claims as ÒsystemsÓ, ÒmethodsÓ, or ÒprocessesÓ. The Supreme Court did not say in Diamond v. Diehr that pure software inventions are patentable. By adopting this position in its recent practice, the Patent Office has made a dangerous step that could decimate the very industry it wishes to protect. Whenever the Patent Office grants a software patent, it grants a right to the patent holder to devastate innocent businesses. Due to the arcane nature of this technology, our courts find it very difficult to distinguish frivolous software patent lawsuits from legitimate ones. As a result, a frivolous plaintiff is in a very strong blackmailing position, where the defendant can look forward either to an extortionate settlement or enormous legal costs. An excellent remedy would be to change our law to allow a successful defendant to recoup legal costs in patent cases. Until that day arrives, at least our Patent Office can refrain from granting these dubious patents. We may hear today from proponents of software patents who will claim that these patents can protect the independent inventor. This belief is a delusion. The expensive patent process protects the large, methodical corporation that can afford to apply for scores of patents much more than it protects the poorly capitalized lone inventor. And, when that inventor tries to produce his invention, he may well find that those large corporations can ruin his own business with their large software patent portfolios. In summary, these are my main points. 1. The software industry thrived without patents, creating its fundamental base in an era of no software patents. 2. Software patents harm the industry, with no corresponding benefit. 3. Software embodies mathematical algorithms. 4. The law (starting with the constitution) argues against patents for software-related inventions. 5. The proper form of protection for software is Copyright. As a postscript to the figures on the patent lawsuit I discussed before, the final figures are not in. Although Adobe has been successful twice already, the plaintiffs are asking for reconsideration of the unanimous appeal judgment against them. These kinds of festering sores are what our country can ill afford when we are trying to lead the world in creative industry. ALPHA Testimony on patent hearings January 26, 1994 or Will the Software Inventor be a Road Kill on the Information Superhighway Commissioner Lehman, I commend your holding hearings on software patents. Much has been said about software patents and it is useful to get the facts on the record and give people an opportunity to state their views. My name is Paul Heckel. I am the founder and president of two software companies and a founder and acting president of ALPHA a non profit organization of software patentholders. I have probably been the software developer who has been the most active proponent of software patents. Patent policy is too important to be left to the lawyers. Inventors must play an active role. ALPHA1 is an ad hoc organization of software patentholders and others interested in software patents. While we have only about 20 members, those members include a dozen software patentholders, two of whom were on the board of the Software Publishers Association and three of whose patents were maligned by the League for Programming Freedom in various publications. We also count among our members a former Commissioner of Patents and Trademarks. ALPHA suggests a beginning, as is an appropriate name for an organization of inventors. It is an acronym for Abraham Lincoln Patent Holders Association. ALPHA is named after Lincoln for three reasons. First, Lincoln was the only president to hold a patent; indeed, LincolnÕs last litigation in private practice was a patent case. Second, Lincoln was intrigued by technology and a champion of the small inventor. As president, he brought machine guns and breechloaders into use in the Civil War on his own initiative and he promoted the use of ironclad warships, breechloading cannon, incendiary weapons and aerial reconnaissanceÑmost of these coming from small inventors. Third, in trying to abolish slavery, Lincoln found himself countering arguments that outlawing slavery abridged oneÕs freedom to own slaves. The League for Programming Freedom by its very name similarly tries to justify appropriating the work of others by claiming a freedom. ALPHA strongly supports the broadest form of software patentability. Inventiveness should be judged by the content of the invention, not by the color of the technology. It supports improving the quality of the patent office examination of patents. It particularly supports increasing the professionalism of the corps of patent examiners by various means including increasing their pay. Being a patent examiner should be a high prestige job, not just a stepping stone to a legal practice. We generally support the positions of the American Bar Association, the Software Entrepreneurs Forum and the Intellectual Property Section of the California State Bar. I also speak on behalf of HyperRacks, a software company I founded. The United Inventors Association of the United States of America, an umbrella organization of inventors organizations supports our position. Since we expect many people to speak on behalf of software patents, we feel testimony based on the personal experience of our members would be more useful here. Three of the alpha members listed below had planned to try to testify here but just could not make the time. I mention this because many of the entrepreneurs who can most speak to the importance of patents find their businesses keep them much to busy to get involved in public policy issues which can have a major effect on them. The Morgans Mike and Susan Morgan founded SoftView and developed MacInTax and a forms generation product. They eventually sold the company to ChipSoft. The fact that they had applied for software patents made it easier to raise money. As Susan told me, ÒWhen the venture capitalists asked how we would protect ourselves against, say, Microsoft coming out with a competitive product and stealing our market, the fact that I said we had applied for patents put that problem to bed. It makes the VCs feel much more comfortable and thatÕs a big difference.Ó Mike and Susan have started their second software company and are applying for several patents. At this early stage they have already hired two programmers. Their business plan is to license technology to other companies and they expect it will be lot easier with patents. Tom Cannon Tom Cannon founded SuperVend to develop his invention: kiosks which let a user select greeting cards from a laser disk, add a personal message and print them out. This invention replaces the long racks of greeting cards, with kiosks having a much smaller footprint. As a result, this invention will likely be used in supermarkets and department stores and so threatens to disrupt the current marketing channels. This is an example of why established companies donÕt like innovation. Hallmark tried to take his invention by filing an interference based on a patent Hallmark had filed earlier, and what Tom feels is a much different, invention. Because Tom had received a patent and was advised he had a good interference case he was able to sell his company on an attractive basis. He is developing the technology further. Reed Hastings Reed Hasting founded Pure Software, a company to develop his invention which helps software developers detect errors so improve the quality of their programs. The result is highly reliable code. He started the business, became profitable and then raise $2,000,000 in investment from venture capitalists. He said patents were important in encouraging him to start his venture, and they helped convince venture capitalist to invest in his company. Recently he found out that one of the established companies in his market had incorporated ReedÕs invention into their product and he is having to face how to deal with those that would use technology he pioneered. Dr. Robert Markison Dr. Robert Markison is associated with the University of California at San Francisco as an associate clinical professor of surgery. His specialties are trauma and hand surgery. He is a leading expert on computer keyboard-caused repetitive strain injuryÑan affliction which may afflict 15 to 30% of keyboard users. He is also a member of the American Collage of Physician Inventors and holds several patents. Dr. Markison also uses copyright protection and when Oracle recently demonstrated its capabilities for the information superhighway they came to him and licensed his HyperCard-based application Salvaging a patient with a stab wound to the heart to demonstrate OracleÕs capabilities. Commissioner Lehman, Oracle has a product called Oracle Card which is generally considered to be similar to, if not a clone of, HyperCard the product my company sued Apple computer for patent infringement on, and on which Apple settled and took out a license. Oracle has not provided an effective response to my notifying them about my patent. Given that Oracle seems to respect copyrights. I am looking forward to their testimony on software patents. Commissioner Lehman, Dr. Markison has asked me to tell you that he Òhas seen first hand the emotional and financial damage done to independent inventors whose inventions are ripped off by big companies.Ó and that he fears Òmany small inventors will be road kills on the information superhighway.Ò Elon Gasper Elon Gasper invented the idea of talking tutorsÑ lip synched animationÑto help his daughter learn to read. He decided to develop his invention he sold his house, and with that money and much of the life savings of his relatives he founded a company, Bright Star. Over time he raised $3,500,000 in 3 rounds of venture financing. Recently, he sold out on a 5 year performance based payout. ElonÕs investors held up one round of financing until they got a notice of allowance on a pending patent. This suggests the importance of timely patent prosecution. Elon told me that without patents, or at least patents pending, he would never have started the company, nor would his investors have invested. Elon has licensed his patents for recurring revenue . Bright Star, a company that would not exist without its software patents, currently employs 33 people. His product have helped tens of thousands of children learn to read faster and better. Hal Nissley Hal Nissley invests in Silicon Valley startupsÑ often playing an active role such as being on the board. With his contacts he often brings other investors into his deals. Currently he is invested in four companies which have software patents or are in the process of getting them. He says patents are a major factor in any decision to invest, especially in software companies where an established company has major marketing and financial advantages over a startup. Paul Heckel In 1982 I founded a company, based on a new computer metaphor. The fact my idea was patentable gave me more confidence in starting the company and it helped me raise money from investors. I raised about $400,000 in two rounds, mostly from friends and former clients. We had four people on the payroll for a while and we brought two products to the market. While we were able to prove our concept and build a base of happy users, we never attained a positive cash flow largely because our initial marketing efforts were on a dieing computerÑthe Atari ST. Having been granted a patent by the U.S. government, I relied on these rights in shaping my business plan and making business decisions. But when I asserted my patents, I found out that big companies rarely respect patents unless you sue them. Patents, I found, were judged, not by the content of their inventiveness, but by the color of the patentholderÕs bank account. Apple Computer, to whom we had shown our product, came out with HyperCard. It incorporated many of our ideas and infringed our patent. We got a contingency fee lawyer to sue Apple for infringement. Ultimately, Apple settled with us, recognized our patents and took out a license. Later when IBM bundled a product that the world considers to be a HyperCard clone we tried to deal with IBM to little effect. The stories of my struggles getting Apple and IBM to recognize my patents is told in the second edition of my book.2 IBM claimed to have prior art on my patent and which the refused to show me. Why is there a double standard in that suspected infringers have no obligation to show prior art of which they are aware, but patent applicants are? IBM pressured my publisher not to publish my description of their treatment of an inventor, foreshadowing what I would find to be a recurring attempt to keep the pro-software patent side of the argument out of the general and trade press. I sent one patent back to the patent office for reexam and another for reissue after settling with Apple figuring when I got the patents back I would have a much clearer idea my coverage and would be able to restart my company. While the reexam came out three months ago, the reissue is still in process. It has been there almost four years. It took the United States less time to win World War II than it is taking the patent office to reissue my patent. I know of several other people who have had similar experiences. The problem seems to me to be systemic and requires changes to patent office procedures to ensure that the most critical patents get a higher priority for examination. This, I believe, requires changing the incentive structure for examiners. It appears to me that examiners want to do a good job, especially on critical patents, but the system penalizes them for putting in what they feel is the necessary time on such cases. It is difficult for me to make business decisions or raise money until I know the coverage of my patents, and I canÕt know that until the patent office issues a notice of allowance. The effect is that I have not been able to upgrade our product. This delay has been devastating to my company in that we have missed a window of opportunity to bring out an improved version of our product. Now rather than being a product development company as we would like to be, it looks like we will be a licensing company. I have twice been suffered what appears to me to be clear malpractice on the part of my attorneys. The first time was in my litigation against Apple which I describe in my book. 3 The second occurred when a patent lawyer I had just fired put attorney client confidential information on record at the patent office. I have twice been to court to observe patent lawsuits.4 In both cases the alleged infringer charged inequitable conduct and argued that the patent should be invalidated even though the fault was entirely the fault of the attorney. In the first case (as I point out later), the attorney seems to have lied on the stand to avoid a malpractice suit, and in the second case much of the testimony had to do with a malpractice case the patentholder filed against his former attorney and which was settled for $8 million. I expect most of the sloppy lawyering and malpractice goes undetected, or is not acted upon because clients are naive. I believe that this greatly damages the patent system as it means there are fewer successful innovators to act as role models to those who would innovate. After Apple issued a press release saying my patents were valid and Apple was taking out a license, I found myself and my patents maligned in the business and trade press. What I found most frustrating was that those in the press who attacked software patents refused to let a software developer present the pro-patent side. Many refused even to discuss the issue. The National Academies of Science and of Engineering published an article entitled Why Patents are bad for Software in their house organ, Issues in Science and Technology. It was coauthored by Mr.Stallman and was filled with misleading information, attacking several patent, including mine. The article drew a stinging letter from Patent Commissioner Manbeck, but Issues would not print a response from me or any software developer. The League for Programming Freedom has repeatedly framed the issues as patent lawyers like software patents and software developers do not. The only people I saw publicly defending software patents were patent lawyers, lending credence to Mr StallmanÕs view. I felt patents were particularly valuable for software developers and U.S. competitiveness and felt that it was important for software developers to make the case for software patents. One of my concerns was that small innovative software developersÑthe most creative part of the communityÑwould not use patents and the result would hurt the software industry and U.S. competitiveness. And so I founded ALPHA to counteract the misinformation on software patents. The description surrounding my patent in the Issues and other articles authored by Mr. Stallman or The League for Programming Freedom were at best grossly misleading. Suspecting that the other patents might have been mischaracterized, I contacted the named inventors. Shortly thereafter, the Association for Computing Machinery published another of Mr. StallmanÕs attacks on software patents. But the ACM, unlike organizations like the Licensing Executives Society5 and the National Academies of Science and Technology, agreed to let a software developer defend software patents. I wrote a twenty-page article, Debunking the Software Patent Myths.6 The ACM also ran several followup letters on both sides of the question in following issues. I want to commend the ACM for presenting both sides of the software patent issue. In a similar vein, I would like to commend Commisioner Lehman for holding these hearings and letting everyone present their views, the facts, and the analyses on which they are based. Over time I have begun to understand how the system works. Most big companies are in favor of software patents in the same way people are in favor of trash incinerators. Not in my back yard. As a result, people who villify software patentsÑ or any patentsÑserve the interests of companies that use patents. In a sense it discourages competitors from building the equivalent of a trash incinerator in their back yard. As a result the established companies might take a formal position in favor of software patents, but it is not in their interest to fight for them in public. Why educate your competitors? When I investigated the patents The League for Programming Freedom attacked, I found the very patents he chose to argue against software patents, provide devastating evidence against his case. I refer to my Computer Lawyer7 article which is mainly an abridgement of my ACM article. The League for Programming Freedom referred to 9 patents. While 9 is a small number, it is enough for a rough analysis. This is what I found: 1. All 9 patents protected commercial products. 2. Software patent are stimulating new business formation. Four of the nine patents were held by companies that were started to exploit the patented technology. A fifth patent was filed by a company that had been in business for only a few years. This is a startling figure. Commissioner Lehman, doesnÕt this strongly suggest software patents stimulate new entrepreneurial businesses? 3. Software patents stimulate the commercial introduction of fundamental advances by small entities. Three of the patents held by small companies introduced technologies that have since been widely adopted. 4. Where similar-size companies had a dispute, they settled differences quickly without litigation. 5. Patent piracy by large entities appears to be common and small entities have a tough time getting their rights respected. Four of the five small companies had had to sue to enforce their patent rights. The one case were infringement was resolved without a lawsuit was where both companies were small. I suggest this is a major problem. Patents are not respected in practiceÑat least big companies donÕt respect the patents of small companies. Since I wrote this article I have talked to several inventors in many different technologies who have had to enforce their patents against larger entities and their experience only serves to reinforce this finding. 6. Small entities using patents are exceptionally cost-effective in encouraging innovationÑ especially compared to federal funding. This last point is illustrated by the following table. Innovation Commercial Efficacy Cost Cost-effectiveness Source Products (Patents Asserted) (000,000/yr) Large entity 4 2 $30,000 33,333 Small entity 5 5 $10,000 250,000 Federally funded 0 1 (assumed) $487,000,000 1.03 If someone invents something, gets a patent on it, starts a company to exploit the invention, and asserts his patent against someone he believes is infringing, such a person is doing what U.S policy is trying to encourage. I suggest the number of such instances is a measure of efficacy of innovation. Consider the cost of innovation from the taxpayers perspective. 2 million dollars were allocated from the public treasury to fund the patent office in 1989 and this was used to calculate the costs of small and large entity patenting. We also used the amount of money funded for Computer Science R & D in 1989 as the cost of federally funded innovation. We can calculate measures of effectiveness and find that from the taxpayers point of view large entities are 33,000 times as cost effective as federally funded research, and small entities are 250,000 times as cost-effective as federally funded research. Might I suggest we evaluate federal funding of the PTO and research on the same basis of cost effectiveness to the taxpayers. In considering funding of the information superhighway, I suggest you consider the great contribution the patent system can make because of the great cost effectiveness of entrepreneurial inventors. StallmanÕs data is sparse; the underlying model, crude; and the calculations, rough. I think we would all welcome a more sophisticated analysis based on a larger data base of patents. However, this data present strong prima facie evidence that patenting is an extremely cost effective way for encouraging innovation in software. Remember, I did not select the sample to analyze. The League for Programming Freedom did. These results are based on their sample. Commissioner Lehman, based on StallmanÕs data, I suggest it would be good public policy to completely fund the small entity patent office from the general fund, say by allocating a 1/2% override on all federally funded R & D. As the Commissioner may remember I testified at the harmonization hearings. The thrust of my testimony their was the importance of the entrepreneurial inventor and thus patents to what I called the ecology of innovation. Having talked with about 20 non-software inventors who had tried to enforce their patents, I have an experience base to say that innovation works similarly in software as in other areas. The Spreadsheet Patent The story of one of our members, Remy Landau, again demonstrates the problems of how the patent system works in practice. Remy Landau and his partner Rene Pardo invented what the League for Programming Freedom called the automatic recalculation patent for spreadsheets. This invention has been held up by the League and the press as Òwell knownÓ, ÒobviousÓ and is frequently cited as an example of a bad patent. In my opinion Pardo and Landau made the major invention behind the computer spreadsheet. It is an invention which is behind the success of Lotus and other software companies. It is the source of Mitch KaporÕs net worth of over 100 million dollars. It is responsible for much of AppleÕs early success which provided the profits they used to fund the Macintosh development. Pardo and Landau made their invention and filed for patents on it in 1970Ñ24 years agoÑ and have yet to receive dime one for their invention. VisiCalc was introduced in 1978. Pardo and Landau made their invention in 1970. The Pardo/Landau patent does not refer to display devices, nor does it use the term Òspreadsheet.Ó Their invention is an improvement on BASIC a terminal based computer language. Anyone who reads the patent can see that their invention was to take the BASIC statement numbers, split them in two parts, and use the two parts as indices into an array of formulas. They taught how such an array of formulas could be used to solve business problems by letting the user place the formulas in the position where they made visual sense. They taught that the computer should determine the order of recalculation rather than demanding the user do it as is done in BASIC. They started a business, hired people, raised investment funds, developed a software product to run on timesharing computers, brought their product to market, and developed a user base. It seems clear to me that they are to the modern spreadsheet what the Wright Brothers were to the airplane. The patent system has treated them poorly. They got a notice of allowance of their U.S. patent, but shortly thereafter the Benson decision came down and the Patent Office withdrew their patent prior to issue. It did nothing on the application for years while resisted issuing patents on software inventions. Pardo and Landau appealed pro se to the CCPA. That means they were not represented by lawyers; the appeals court ruled in their favor in the decision In re Pardo is a landmark case on software patentability. You should know the current patent mass is largely due to IBM whose internal policy was that software should not be patentable, who headed a government commission to make it not patentable, and who filed an Amicus brief in the Benson decision against patentability. I mention it here because that action on IBMÕs part case a ten year delay in the issuing of the Pardo/Landau patent8. The Pardo and Landau patent issued in 1983, 10 years after the Canadian patent. Commissioner Lehman, should it take 13 years to issue a patent? Pardo and Landau unsuccessfully tried to get Lotus and other companies to respect their patent. So in 1989 they did a deal with a third party to fund the litigation. When I talked to Remy Landau shortly after the newspapers had announced the lawsuit and the columnists had attacked the patent, I was surprised to have him tell me no one from the American press had contacted him. Finance is the area that has been most effected by computer spreadsheets. The invention may have been obvious to The League for Programming Freedom in the late 1980Õs with the advantage of hindsight, but it was not obvious to my former Professor of Finance who taught Finance at the time of the invention. William F. Sharpe, told me that when he first used VisiCale he was impressed with the concept behind it. He said he did not find it obvious. He has used spreadsheets extensively since he discovered them. Indeed, Professor Sharpe is quite knowledgeable about computers having used timesharing systems since the early 1960Õs when he was at RAND. He wrote several publications including a book on BASIC and he ran the Stanford GSB Computer Center in the early Ô70s. He is, I might add, a Nobel Laureate in Economics. Pardo and Landau are in litigation against Lotus. In July of last year I went to hear the first phase of the trial. I was shocked at what I was to see in the courtroom. I heard a patent attorney in my opinion commit perjury and testify against his client to save himself from a malpractice suit. Pardo and Landau find that the are being accused of fraud. This is a standard tactic big company infringers use when the donÕt have a case on the merits. The issue was this: Did the inventors intend to mislead the patent office when they had affidavits filed saying the invention was enabled? Lotus says that the affidavits should have stated the affiant had a post financial association with the inventors. The only association the affiants had with the inventors was prior to filing the affidavits. Only one fellow worked for PardoÕs fledgling company for 6-8 weeks a year or two earlier. Lotus says the inventors intended to deceive the patent office by not mentioning the prior association in the affidavits. If the inventors had intended to mislead the patent office on a material matter then they committed fraud. I donÕt believe the issue was very material, Examiners tell me they donÕt place a great deal of reliance of affidavits anyway, and there seems little doubt but that the invention was enabled. In short, Lotus was nitpicking the patent prosecution. The inventors testified that they though the affiant were disinterested because they had no current interest in their invention. The inventorsÕ patent lawyer testified in open court under oath that he helped the affiants prepare the affidavits, did not verify their lack of association with the inventors, but relied on his having told the inventors to get affiants who had no such association. I didnÕt find his testimony credible. In their closing arguments, the inventorsÕ attorney called the patent attorney a ÒliarÓ and even the Lotus lawyer acknowledged discrepancies between deposition and court testimony. In my opinion the patent lawyer perjured himself on the stand in open court and testified against his clients so as to protect himself from a malpractice suit. I have talked to enough inventors to know that patent attorney malpractice is not unusual in either patent prosecution or litigation. I only marvel at what I was to see in open court. Although the trial was in July, the decision has yet to come down. I fully realize the difficulty patent attorneys face in patent prosecution and the multiple opportunities for errors. However, I believe clear and willful actions should be be treated severely. Commissioner Lehman, having talked to may people, lawyers and inventors alike, I have concluded that not only is poor quality work by patent lawyers common, but the lawyers often act to cover up their errors and so do more damage to the interest of their clients. I suggest such actions by patent lawyers damages U.S. patent system and should be punished so as to send a clear signal to the patent community. It is particularly damaging to small inventors who, unlike big companies, do not have the sophistication to judge the quality of their lawyers work until it is too late. When Judge Sotomeyer hands down her decision, I respectfully request you review that decision to see if it is appropriate to suspend Mr. Rhodes from practice under 35 USC 32. Twenty-four years ago Pardo and Landau made one of the major computer software inventions. Their invention has been one of the driving forces of the personal computer industry. They were responsible for a landmark computer software decisions, In re Pardo which the pursued pro se. And while many people have become multimillionaires on the Pardo/Landau invention, Pardo and Landau have yet to receive dime one for their contribution. My discussions with many inventors whose inventions have been ripped off shows that this case may be extreme but that it is not unusual. Commisioner Lehman, is this image we want to project of what happens to inventors who try to benefit society by inventing something? Few things are as strongly based in our history as the patent system. James Madison proposed the patent clause in the Constitution. George Washington walked the first patent law through Congress, Thomas Jefferson acted as the first patent commissioner. Franklin and Jefferson were amateur inventors. Lincoln was an inventor and an active proponent of patents and invention. Did these founders of our country intend that the inventor have the rights to his invention as the Constitution says? Or did they intend that the benefit go to the inventorsÕ widow and children? Or to Lawyers? Did our founding fathers intend to put up such a thicket of laws and regulations that patent attorneys would be forced to perjure themselves and testify or act against their clientsÕ interests to avoid a malpractice suit? Recommendations: If I might make some specific recommendations: 1. Either get rid of patents entirely or make them meaningful legal instruments in the hands of small inventors. We should not continue to perpetuate a system that encourages naive inventors to spend their time and money, to get money from friends and relatives, and to bring their inventions to market motivated by being given patents rights, if those rights are not meaningful. We need legislation and court decisions that will cause companies analyzing infringement to reach the same conclusion when they do an economic analysis as the they do when they do a moral and legal analysis. 2. We need to drastically reduce the amount of time it takes to get a patent issued and to do reissues and reexaminations. No one benefits from the uncertainty of what is protected by a patent. 3. Currently if an attorney commits malpractice, the inventor must file a malpractice lawsuit to collect damagesÑusually years after the patent was filed. Change the law to prevent the invalidation of patents because of the the actions of the attorneys in prosecuting the patent. If infringers are to benefit in not having to recognize a patent because of errors of the prosecuting attorney, then their remedy should be to recover damages from the attorney who erred in prosecuting the patent. 4. I urge you to find some way to change the general climate so inventors are seen as heros and not as villains. The culture which has led to these hearings seems to be one which denies real inventors both credit and financial reward for their inventions. 5. Require that suspected infringers bring prior art of which they are aware to the attention of the patent office. Eliminate the double standard for producing prior art. 6. We should codify the rules of engagement in potential patent disputes so as to make level the playing field between large and small, and rich and poor. As I see it, the current rules encourage game playing and often end up by exploding into wasteful litigation due to a slight miscalculation on one side. The rules should be designed to encourage the disclosure of all relevant facts by all parties and encourage settlement early on. They should also be designed to encourage the principles to deal directly with each with the assistance of, rather than through their attorneys. 6. Improve the quality of the patent examiners corps by upgrading status and pay. 7. I suggest affirmative action in favor of software company patentholders to rectify the wrongs afflicted by past prejudice. I suggest that the patent office review the Amicus briefs filed by IBM, CBEMA and others in the Benson and similar cases to identify those companies who spoke against the patentability of software. Just as we we have affirmative action to rectify the wrongs of past racial prejudice, we should have affirmative action to rectify the wrongs of prejudice against software inventors. I suggest that the identified companies (a) be given lower priority by the patent office in examining their patents; (b) not be allowed to assert their patents against small software companies; and(c) not be allowed to use non-patent prior art to invalidate issued patents asserted against them. Should not those who caused the current software patent mess be the ones to suffer from the problems caused by that mess? In Conclusion Commisioner Lehman, I think I have been able to show ample evidence that the patent system does encourage people to start companies and introduce innovative products. Unfortunately, I think it shows that many of those so encouraged have been naive to the realities of patent enforcement. I suggest we will have even more innovation if the system would operate so as to better enforce patents even when held by those who can ill afford to litigate. Commissioner Lehman, some people have felt that you are would not be a good commissioner because you are a copyright lawyer rather than a patent lawyer. I admit to having been one of them. But I am of a different view now. You have an advantage over patent lawyers. You can look at the patent process from the perspective of a copyright lawyer and how much more successful the copyright is in ensuring rights holders can enforce their rights independent of their financial worth. While inadequate patent protection has caused us to lose many of our innovations to foreigners, our stronger copyright protection has been a huge moneymaker for the United States especially in the film industry. Why are there criminal laws against copyright infringement but not against patent infringement? Why is it that when a possible infringer considers whether to respect a patent he asks not about the content of the patent, but the color of the inventorÕs financial worth? My recommendation to you is that you seek to get for patentholders the respect that copyright holders have, and seek to get for patent infringers the disrespect that copyright infringers have. If you in your term of office you can bring the patent system to the level of the copyright system as it works in practice, you tenure as Commissioner, your place in history will be assured. TESTIMONY ON PATENT PROTECTION FOR SOFTWARE RELATED INVENTIONS I am Jonathan Band, a partner in the Intellectual Property Group of the Washington, D.C. office of Morrison & Foerster. The views I express here today are my own. I attended the PTO hearings two weeks ago in San Jose, and I would like to share with you three observations based not on the testimony -- which you heard -- but on my conversations with many of the Silicon Valley spectators. This is, if you will, a report from the peanut gallery. First, using Ron Laurie's perceptive classification, a small but not insignificant minority of the audience fell into the "software patents are bad" category, while a majority fell into the "bad software patents are bad" category. My further discussions with the "software patents are bad" adherents revealed that they were confused and frustrated by the case law on the patentability of software related inventions, and that they had no confidence in the ability of the PTO to search the prior art. This suggests that if the PTO successfully addresses the concerns of the "bad software patents are bad" people, many of "software patents are bad" people will be satisfied as well. Second, and following from the first point, I detected a strong mandate for serious procedural reforms that would improve the quality of software patents and eliminate submarine patents. The PTO has already announced that it will introduce legislation establishing a 20 year term from filing and reforming the reexamination process. These proposals met with near universal support in San Jose. There was also strong support for pre- grant publication of applications and reform of the continuation and division practice. The PTO should give these and the many other amendments suggested close consideration. As the PTO reviews these proposals, it should place the interests of the inventing community ahead of those of the patent bar, the primary beneficiaries of the current obfuscation and litigation. Reform of the patent system to make it simpler and more predictable while eliminating the game-playing and the lawsuits would be a lasting legacy of the Clinton Administration in the technological history of our nation. Speaking of game-playing and the patent bar, the current hopelessly confusing state of the case law on the patentability of software related inventions means that the success of a software patent application turns more on the cleverness of the patent lawyer than on the quality of the invention. This, of course, is backwards. The PTO should establish a commission consisting of programmers, law professors, practitioners, and jurists to establish some order in this area. My third observation on the San Jose hearings is that there is an underlying concern in the inventing community that in the past decade the pendulum may have swung from too little intellectual property protection to too much I.P. protection. As Judge Kozinski of the Ninth Circuit has observed, "overprotecting intellectual property is as harmful as underprotecting it." Judge Kozinski further notes that "creativity is impossible without a rich public domain." For this reason, the intellectual property laws are full of what Judge Kozinski calls "careful balances between what's set aside for the owner and what's left in the public domain for the rest of us." Because patents and copyrights are monopolies created by the intellectual property laws, regulation of those monopolies is the responsibility primarily of the intellectual property laws, and only secondarily of the antitrust laws. Given the PTO Commissioner's emerging role as the Administration's intellectual property policy advisor, the PTO must be vigilant about maintaining the balance between protection and competition. Thank you for your attention. TESTIMONY OF JEFFREY A. BERKOWITZ, FINNEGAN, HENDERSON ET AL. Good afternoon Mr. Commissioner and other distinguished members of today's panel. I am Jeffrey Berkowitz, an associate with the intellectual property firm of Finnegan, Henderson, Farabow, Garrett and Dunner in its Washington, D.C. offices. This afternoon I would like to address the tenth question listed in Topic B of the Notice for today's hearing. My comments are my own and not necessarily those of my law firm. In question number ten the PTO asks for comments on how the PTO should handle the submission of computer program code listings. Specifically, the PTO seeks comments on the following four items: (1) Should the PTO require submission of program code listings? (2) Should the PTO require submission of code listings in machine readable format only? (3) Should program code listings be included in patent documents or should they be made available only through a publicly accessible database? (4) What hardships would patent applicants face if these requirements were imposed? In my opinion, the PTO should not require submission of program code listings. The following discussion concerning my opinions on the first item of question ten necessarily provides my opinion on the remaining items. Currently, applicants may file program code listings with the PTO, and I emphasis the word "may". Because these listings, particularly when in machine readable format, can take hundreds of pages, it is clear that the PTO must deal with substantial financial, printing, and logistical problems when an applicant chooses to submit a program listing. In an effort to deal with these problems, the PTO promulgated 37 C.F.R. ¤ 1.96, under which program listings must be included in the application itself, either in the specification or as part of the drawings, if the listing is under 11 pages in length. If the listing is 11 or more pages in length, then the listing may be submitted in the form of a "microfiche appendix," which will not be part of the printed patent but will become available to the public once the patent is issued. Some applicants choose to submit program code listings (regardless of the number of pages) to ensure that their applications comply with the statutory requirements of ¤ 112, first paragraph. However, if a programmer of ordinary skill in the art could write a program (without undue experimentation) from the disclosure of a program-less application (that is, an application for a software-related invention absent a program listing), and if such a listing is not required to satisfy other statutory requirements (for example, the best mode requirement of ¤ 112, second paragraph), then the applicant would not need to file a program code listing for the invention. Based on this reasoning, many applicants typically choose not to file program code listings. A requirement for program listings would prevent applicants from filing applications until product development is complete, which would further delay the process of filing applications, examining applications, and issuing patents for software-related inventions. In many of the software-related patent applications that I have written and prosecuted, inventors have not yet completed development of their software-related inventions to be patented prior to filing the application. Thus, there is no final program listing to be submitted with the application. This should not prevent the applicant from filing an application on his or her invention. In this regard it is important to note that, in other technologies applicants can and do file patent applications without having completed product development. Applicants also choose not to file program code listings because filing the listings would make the entire program available to the public which, in some cases, may divulge important trade secrets or other information the applicant may not need to specifically divulge in order to secure patent protection. Even if applicants choose to submit machine readable listings, such listings may be reverse engineered. As long as a programmer of ordinary skill in the art could write a program (without undue experimentation) from the disclosure of a program-less application, and if such a listing is not required to satisfy other statutory requirements, then the applicant should not have to file a program code listing for the invention and divulge important trade secrets. Furthermore, a requirement for the submission of program code listings, regardless of the form of the listings, will only further increase the PTO's burden in connection with both the examination of software-related inventions as well as the practical aspects related to storing program code listings and making the listings available to the public. Examiners do not have time to study program listings regardless of the form in which they are submitted to the PTO. Nor does the PTO have resources to waste in storing program code listings and making them available to the public. Some of the hardships associated with a mandatory requirement for submission of program listings are apparent from the above discussion. There are also a number of problems associated with the current microfiche appendix requirements that are worth mentioning. First is the availability and cost associated with the microfiche appendix requirements outlined above. When an applicant chooses to submit a program listing of 11 or more pages he or she must locate a company that provides the microfiche services, a task that is not so easy, and spend additional money to have the listing put on microfiche, a cost that may be high depending upon the length of the program listing. Instead, if the PTO believes that it is necessary to require appendices for program listings, I suggest that the PTO consider more practical approaches such as submission of program listings on a CD-ROM or other mass storage device and in a format that may be used by Examiners to inspect efficiently and effectively the program listings. I believe these other approaches are less expensive and more accessible to inventors of software-related inventions than the archaic microfiche appendices instituted in the current rules. Finally, I am also concerned that requiring submission of program code listings would surely lead to litigants unnecessarily raising issues concerning a program listing should the PTO adopt a submission requirement. This, however, is beyond the scope of these hearings. Thank you for your time today to present my views. TESTIMONY OF ROBERT H. KOHN BORLAND INTERNATIONAL, INC. U.S. Patent & Trademark Office Hearings on Patenting of Software-Related Inventions January 26-27, 1994 San Jose, California Thank you, Commissioner Lehman, for the opportunity to testify. A. Background of the Witness I am Robert H. Kohn, Vice President of Corporate Affairs of Borland International, Inc., a leading developer and marketer of desktop and client/server computer software, including dBASE, Quattro Pro, Paradox, Interbase, and Borland C++. I have worked in the entertainment and computer software industries my entire career. My experience in the software industry includes many types of application and utility software for both mainframe and desktop computers. After a brief period in private practice and as Associate Editor of the Entertainment Law Reporter, I joined the legal department of Ashton-Tate Corporation in 1983. Until its acquisition by Borland in 1991, Ashton-Tate was one of the largest software companies in the world. In 1985, I left Ashton- Tate to become associate general counsel to Candle Corporation, a leading supplier of IBM mainframe software. And in 1987, I joined Borland as General Counsel. I want to emphasize that I am sensitive to the need for intellectual property protection on both a professional and personal level. My professional career has focused on protecting the valuable intellectual property assets of software companies. I am also an author myself, having recently written a reference book on music licensing that was published by Prentice Hall. So I can certainly appreciate the need to protect intellectual property. I am testifying today in my capacity as Vice President and General Counsel of Borland, a publicly traded, Silicon Valley company. B. Enforcement vs. Scope of Protection: The Important Role of Competition in Promoting Innovation On behalf of Borland, I want to comment specifically on Question 4 in the Hearing Notice and, if time permits, more generally on questions regarding the scope of protection for visual aspects of software programs. Question 4 asks whether the present framework of patent, copyright and trade secret law: (a) Effectively promotes innovation in the field of software? and (b) Provides the appropriate level of protection for software-related inventions? Like all other software companies, Borland invests heavily in both the creation and acquisition of new software products. And, like other companies, Borland needs strong governmental enforcement of existing intellectual property rights, especially in foreign markets, in order to protect its investment. But it is particularly unproductive, at these hearings and at other forums for public debate of these issues, to hear two extreme views espoused: one group, generally small inventors, argues for no protection or, perhaps, at best, very weak protection. A second group, generally large companies, addresses the issue of scope rather than enforcement, arguing that broader protection for software is necessary and, indeed, the broader the protection the better. We believe that much of the polarization you have heard, and will hear, is the result of a confusion over what is being debated. Protectionist interests, in particular, confuse enforcement of what is an undisputed intellectual property right with the underlying scope of intellectual property protection. We in the industry all understand that software, as a product, is particularly susceptible to unauthorized duplication. We therefore need strong enforcement of existing intellectual property rights to make sure that we are protected against the piratical copying of our software. But issues concerning the enforcement of intellectual property rights must not be confused with issues concerning the scope of intellectual property protection. It is too easy to wrap oneself in the proverbial American Flag of anti- piracy and anti-counterfeiting enforcement. There is no dispute that strong anti-piracy enforcement is required to promote the resources necessary for research and innovation. But it does not follow that, because strong enforcement of intellectual property promotes innovation, a broader scope of intellectual property protection will also. We should understand that many of those who very responsibly argue for limitations on the scope of intellectual property protection are not trying to defend pirates. They are, rather, trying to strike a medium under which the proper scope of intellectual property protection, as established by Congress and the courts, is respected and strongly enforced by the administrative branch of government. This distinction between the enforcement of existing rights and a broadening of the underlying scope of protection was recently addressed at the 1993 Berkeley Roundtable on the International Economy, in which the Vice President, the Commerce Secretary and the Commissioner all participated. The report of the roundtable on "Maintaining Leadership in Software" states the distinction between enforcement and scope very clearly: "Industry representatives argued that the importance of protecting intellectual property from theft by commercial counterfeiters and unscrupulous users must be distinguished from issues concerning the proper scope of intellectual property protection. The government's role in deterring theft by commercial counterfeiters and unscrupulous users, through the improvement of intellectual property laws and simplifying enforcement of those laws, particularly overseas, should continue. But the government should carefully weigh the important balance between providing incentives through protection of intellectual property and promoting innovation through industrial competition when considering issues such as reverse engineering, free use of command structures and other elements required to promote interoperability among computer software." (emphasis in original) Unfortunately, Question 4 in the Hearing Notice, in our view, heightens rather than diminishes the confusion and polarization. Question 4 seems to be based on a premise that strong protection for existing intellectual property rights necessarily implies a greater scope of intellectual property protection, and, further, that a greater scope of protection implies a greater amount of innovation. Implicitly, Question 4 neglects the important role that competition plays in encouraging innovation. We believe that the implication inherent in Question 4 should be the subject of much greater scrutiny and analysis. Within the industry we all, or at least most of us, agree that greater enforcement of existing intellectual property rights is necessary. What has fractionalized the industry is the attempt by some to use the need for greater enforcement to attempt to expand the scope of underlying intellectual property rights, particularly within the copyright area. As the Commissioner is aware, just two weeks ago the Head of the Antitrust Division, Assistant Attorney General Anne Bingaman, gave a major speech on the occasion of the 60th Anniversary of the founding of the Antitrust Division. The Assistant Attorney General recognized the polarization within the industry that has been caused by attempts to increase the scope of intellectual property protection: "The substantive reach of the exclusive rights granted under the intellectual property laws also has been a matter of particular concern and ferment in the software industry. The courts and the agencies have been faced with difficult decisions about the scope of both patents and copyrights in this field, as is clear to anyone who has paid attention to the long series of important court decisions on computer software copyrights, including Whelan, Altai, and the recent decisions in Lotus v. Borland, now under review in the First Circuit. The scope of copyright protection for computer software has, we believe, important competitive implications, as well as important implications for incentives to innovate." We were particularly heartened to hear the Assistant Attorney General most eloquently state her concern about attempts to increase the underlying scope of intellectual property protection. Again please permit me to quote what she had to say: "Given my strong belief in competition, I think courts should be hesitant to read the statutory grant provisions expansively, but should recognize the anticompetititve potential of restrictive practices at or beyond the borders of the clearly conveyed statutory rights." While the Assistant Attorney General was directly addressing only the courts, we believe the same cautions should apply to the administrative branch of government as well. C. Protection of "Control Mechanisms" and "Visuals" Many of the questions to be addressed at these Hearings deal with the visual aspects of a computer's screen display. In evaluating the proper scope of protection for the visual aspects of computer programs, we believe that the Patent and Trademark Office would do well to consider the analytical framework employed by the engineers and computer scientists (as opposed to the lawyers and judges) in the software industry. As the Commissioner is aware, much of the original and seminal work in graphical user interface analysis and design was done at Xerox Corporation in the 1970's. The research at Xerox spawned a wealth of user interfaces, far beyond just those in Xerox's products -- Apple's Macintosh and LISA, Hewlett-Packard's New Wave, Microsoft's Windows, X Windows, and IBM's Office Vision and OS/2, to name but a few. Much of the research at Xerox was published in scholarly papers for distribution both inside and outside of Xerox. The most famous of those papers entitled "A Methodology for User Interface Design," was published by Xerox Palo Alto Research Center in January of 1977. Because of the enormous importance of that paper, I am going to attach it to Borland's written comments and I ask that you consider is as part of these proceedings. The Xerox research produced a methodology of interface design that is based upon what the Xerox researchers called a "taxonomy" or classification for user interface analysis. This taxonomy is designed to permit analysis and evaluation of what each aspect or component of a user interface does. The taxonomy was created for software analysis and not for any legal purpose. But remarkably, it dovetails seamlessly with the overall intellectual property scheme of patents, copyrights and trade secrets established by Congress. As the Xerox research concluded, every user interface has three separable components: (1) the user's conceptual model, (2) the "control mechanism" or "command invocation" of the product, and (3) the "visuals" (or "information display"). The user's conceptual model is the abstraction selected by the software developer which users can relate to the task they are trying to perform. For example, the "spreadsheet metaphor" is the conceptual model that underlies Borland Quattro Pro line of products. Under our intellectual property scheme, the "conceptual model" of a particular piece of software would not be protectable at all (except, of course, insofar as it may be protected as a trade secret or under the terms of a contract or confidential relationship). The "command invocation" or "control mechanism" of a user interface is the mechanism that extracts the functionality built into the software. It is a set of actions and results defined in particular relationships to one another. Menu items and keystrokes are part of the control mechanism and were clearly identified as such by the Xerox research published in the mid-1970's. Indeed, the control mechanism component was originally called the "Command Language." Under the intellectual property scheme established by Congress, the "control mechanism" of a software product falls within the ambit of the patent law, specifically, utility patents. In order to secure utility patent protection over a "control mechanism" an inventor should be required to satisfy the statutory requirements of novelty, advancement over the prior art, and so forth. This would be true even if the control mechanism was a sequence of steps in a visual display. For example, if the user entered a database by first clicking on the picture of a door to simulate knocking, and then clicking on the picture of the doorknob to simulate turning it, the sequence of steps would be part of the control mechanism - and must satisfy the rigors of patent examination if it is to be protected. If the command mechanism does not meet the rigors of patent protection, it should not be protected by any other form of intellectual property protection, such as copyright. Finally, in Xerox's terminology, there are the program's "visuals." For example, the screen displays of many sophisticated user interfaces have a truly separable visual or expressive component -- images that can be manipulated through animation techniques. The Congressional scheme provides for protection of these "visuals." Under both the statute and the case law, the visual display of a computer program may be protected under the copyright law if, and only to the extent that, its artistic features can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the software program. Note that the definition of computer program under the copyright law is "a set of statements or instructions to be used directly in a computer in order to bring about a certain result." The screen display is a "certain result" of the "set of statements or instructions" that comprise the underlying computer program and must independently qualify as a work of authorship. We understand that there has traditionally been a role for design patents which overlaps with the role of copyrights, and that role, insofar as it relates to computer programs, has not been well articulated. The Patent & Trademark Office has requested comments on the applicability of design patents to computer software and we are in the process of formulating our views for a possible submission on the subject at a future hearing. Thank you for the opportunity to appear today and I would be happy to answer any questions from the panel. STATEMENT OF THE BUSINESS SOFTWARE ALLIANCE Before the Commissioner of Patents and Trademarks February 10, 1994 I. Introduction Mr. Secretary: My name is Dianne Callan. I am the Deputy General Counsel of Lotus Development Corporation of Cambridge, Massachusetts. I am appearing here today on behalf of the Business Software Alliance ("BSA"). On behalf of the BSA, I would like to thank you for convening this hearing to consider the many issues associated with the patenting of software-related inventions. We appreciate having the opportunity to participate in this hearing. The BSA was organized in 1988 to promote the continued growth of the software industry through its public policy, education and enforcement programs in the United States and more than 50 other countries throughout North America, Europe, Asia and Latin America. BSA members are actively involved in nearly all aspects of microcomputer software development, including, for example, the production of operating systems, application programs, and networking software. Current BSA members participating in this statement include: Aldus Corporation, Apple Computer, Inc., Autodesk, Inc., Intergraph Corporation, Lotus Development Corporation, Microsoft Corporation, Novell, Inc., and WordPerfect Corporation. II. The Software Industry's Contribution to the U.S. Economy In the last five years, every governmental, academic and industry study of technologies that are key to America's future has identified the vital role to be played by the software industry. Software is characterized by both rapid technological innovation and widespread use in downstream markets. Software innovation improves the competitiveness of other industries which utilize software products to make themselves more innovate and competitive. The benefits of continuous software innovation permeate much of the american economy. In march of last year, the BSA released a study prepared by Economists, Inc. entitled The U.S. Software Industry: Economic Contribution in the U.S. and World Markets.9 Based on government and industry information the study reviewed the economic contribution made to the American economy by the U.S. "core" software industry: prepackaged software; custom computer programming services; and computer integrated design. The Economists, Inc. study found that the "core" software industry: (1) Is the fastest growing industry in the United States; (2) Is now larger than all but five manufacturing industries; (3) Is contributing to the economy of virtually every state in the nation; and (4) Is achieving tremendous success in the international marketplace. Notwithstanding this impressive record, the software industry's role in the growth of the nation's economy will be even more critical in the future as new and more advanced technologies continued to evolve. III. Views of the BSA The BSA has several views on the subject of the hearings: ¡ Strong intellectual property protection is essential to the continued health and growth of the software industry. Software is difficult and expensive to create yet easy and inexpensive to duplicate or steal. Moreover, the real value of software, and the principal assets of software companies, are not tangible factories or raw material inventories. Apart from employees, buildings and computer equipment, the assets of software companies are intellectual property, the technology embodied in the computer programs that are their products. ¡ The BSA does not believe that a new form of protection for software-related inventions is necessary or desirable. ¡ There is, however, an urgent need to improve the operation of the United States patent system as it pertains to software-related inventions. Patents continued to be issued which do not appear to meet the statutory mandates of novelty and non- obviousness, and these patents impose a substantial cost on the software industry and on society as a whole. Those aspects of the patent system that permit long gestation periods for patents also cause economic costs to society without providing commensurate benefits. Members of the BSA have widely divergent views as to the value of patents being granted on software- related inventions. However, all members recognize that the current patent system does not adequately deal with such patents. Therefore, these comments, which are the minimum common points agreed upon by the participating BSA members, primarily suggest procedural changes to the operation of the patent system, to improve its effectiveness regarding the protection of software-related inventions. IV. Discussion The BSA respectfully suggests that the following changes would improve the effectiveness of the patent system: ¡ The patent term should run for a fixed time from the filing date. ¡ The examination process should be improved: á as to the content of the prior art database, á as to the accessibility of that prior art database to the examiners, and á as to the training and treatment of the examiners. ¡ Applicants should be encouraged to conduct a patentability search before filing and to present the prior art located in the search to the PTO before the application is examined. ¡ An opposition procedure should be established, with provisions that ensure expedited results. ¡ Reexamination proceedings should be strengthened procedurally and expanded substantively to include non-prior art validity issues. I would like briefly to explain why the BSA believes each of these changes would improve the system. A. Term Change An important problem with the patent system is the issuance of patents after inordinately long application periods, brought about by continuation and continuation-in-part applications and, occasionally, interference proceedings. Whatever the cause, the result is the sudden appearance of a patent years after the technology to which it relates has been developed and commercialized. At that point, design-around possibilities may no longer be feasible and the patent consequently can assume an enormously enhanced power to disrupt long-established expectations, for a full 17 year term from the issue date. The BSA supports the Commissioner's intention to establish a fixed term from the original filing date, as that would give the patent owner a strong incentive to have her patent issue promptly, and would in any case reduce the likelihood of the "stealth" patent that suddenly appears after having lain hidden in the PTO for 15 or more years. Furthermore, the spur to an applicant to timely present all claims and applications stemming from a single disclosure would promote additional efficiencies in the examination process. The BSA is gratified to learn that the PTO will support legislation embodying this concept. B. Strengthened Examination Most of the prior art regularly available to PTO examiners comprises collections of patents and publications. However, especially in the field of software-related patents, much of the relevant prior art exists not as patents or publications, but rather as companies' internal technical manuals, reference works, bulletins and other similar documents. Thus, often the most relevant prior art is not readily available to examiners of software-related applications. Groups such as the Software Patent Institute have undertaken to compile databases with these types of software- related prior art. It is important, especially in this area, that the PTO expand the universe of prior art on which it typically relies, and improve its access to the universe. The BSA hereby offers to provide ongoing assistance in establishing and providing content for suitable databases as well as examiner training and software tools for searches in those databases. C. Pre-Examination Search Because of the quantity of prior art relating to software-related inventions, as well as the diversity of the nature and location of such prior art, the BSA urges that an applicant should be encouraged to conduct a reasonable prior art search, and to present the results of the search to the PTO within a short time after filing the application. D. Publication of Applications for Opposition A third party may often be aware of prior art not readily accessible to the PTO and may also be the entity with the greatest interest in preventing the issuance of a patent covering what is in the prior art. The BSA believes that providing an opportunity for submissions during prosecution (as is done in the EPO after publication of the application and EPO search report) would facilitate a more complete view by the examiner of the relevant prior art. In addition, once claims are allowed, an opposition period of sufficient duration to permit reasoned investigations pertaining to those claims would provide the public with a timely and efficient opportunity to submit relevant information pertaining to claims as they are expected to be issued. (Our position is premised on the assumptions that: 1)Êthe fact that the period for filing an opposition to a patent expires, without any opposition actually being filed, would not in any way affect the presumption of validity of an issued patent; 2)Êany opposition activity or proceeding would take place in an expedited manner, so that the opposition process cannot be used, as it is in some countries, including Japan, to unduly delay the issuance of the patent, to the disadvantage of the patent owner; and 3) any opposition activity or proceedings would include appropriate procedural safeguards to limit potential abuses of the process.) E. Expanded Reexamination The current reexamination process is generally not viewed as a viable option by opponents to a patent due to the largely ex parte nature of the process. The BSA urges that reexamination be modified to provide more of an inter partes proceeding, allowing opponents to a patent to feel more comfortable in relying on this procedure to efficiently resolve their concerns in what may be the most efficient forum. Further, the scope of reexamination proceedings should be expanded to additionally cover all prior art categories, as well as non-prior art validity and enforceability issues, for example, inequitable conduct regarding an applicant's non- disclosure of material prior art during prosecution of an application.10 BSA acknowledges and supports the Patent Office's intent to forward legislation to Congress making reexamination a more attractive vehicle for challenging a patent's validity. We appreciate having the opportunity to present these remarks. [Intellectual Property Section, California State Bar] PRESENTATION AT PUBLIC HEARINGS ON THE PATENT OFFICE 27 January 1994 San Jose, California The Honorable Commissioner Lehman and Mr. Kushan, my name is Mary O'Hare. I am the chair of the Executive Committee of the Intellectual Property Section of the State Bar of California. The Section is voluntary, comprised of more than 3700 attorneys practicing in the intellectual property fields of copyrights, trademarks, trade secrets, and patents. Our members are from large and small firms, corporations and nonprofit organizations, representing, for the context of this hearing, individuals, those nonprofit organizations, small businesses, and large corporations. We are proud that our organization was one of the first to have Commissioner Lehman as its keynote speaker this past fall and we thank the Commissioner and the Patent Office for holding these hearings in California. All too often in the past, California and the needs of California attorneys and their clients-- more than twenty-six hundred miles and three time zones away from the Patent Office--have been felt to be out of sight and out of mind. Nonetheless, California has been the center of the United States' cultural and technical renaissance of the late twentieth century--a renaissance that, perhaps now more than ever, is a key to CaliforniaÕs vitality. California's two largest Industries-entertainment and technology--are also the United States' two largest export engines. We of the Intellectual Property Section hope that these hearings signal the Patent Office's willingness to have easy and open access to the Patent Office for California practitioners--a privilege until recently primarily enjoyed by the Washington, D. C. patent bar. While I am chair of the Intellectual Property Section, my intellectual property expertise has been gained in the context of a motion picture entertainment practice. Honorable Mr. Commissioner, the tragic earthquake in Southern California may have rattled our homes, our offices, and our psyche, but let me assure you that Californians are not so rattled as to ignore the importance of your presence here -- or to presume to have a motion picture attorney address you on matters concerning the Patent Office. It therefore pleases me to introduce Michael Glenn, an officer of the Executive Committee of the Section and a patent attorney in the Silicon Valley who has represented both individual inventors and large corporations before the Patent Office, especially with regard to complex electronic inventions, including semiconductor, computer and software inventions for the past 14 years. Mr. Glenn recently published an analysis of the current state of the patent law regarding software inventions, "Software, Patents, Allapat and All That", in the SectionÕs publication, NEW MATTER. Mr. Glenn will present the statement of the Section. * * * * * * TodayÕs Hearings have been convened to receive comments from the public on patent protection for software inventions. Rather than respond to the specific questions raised in the Notice of these Hearings, we will address the important, broader issues that form the context in which the issue of patent protection for software inventions arises. These issues include: 1) the expertise and ability of the Examining Corps, especially with regard to the difficult task of applying complex legal principles to emerging and sophisticated technologies; 2) the availability of task appropriate tools and resources to the Examining Corps; 3) the need to make Patent Office services and resources readily available to the public; and 4) the understanding that the U.S. Constitution, in providing the Congress with Òthe power to promote the progress of science and useful arts by securing for limited time to authors and inventors the exclusive right to their respective writings and discoveries,Ó did not limit the types of discoveries for which a grant of exclusive rights would be secured. Preliminarily it must be observed that patent myths abound, and the Patent Office should use its best efforts to dispel these myths. These Hearings are one excellent way to raise the general level of public understanding of the U.S. patent system. However, the primary job of the Patent Office is to examine patent applications. A quality examination and precise application of the patent laws by the Patent Office are necessary to assure that the interests of both the public and the inventor are properly served. First, while recent efforts to improve the quality of Patent Office services, especially the quality of the Examining Corps and, as a result, the quality of patent examination and of patents issued by the Patent Office have not gone unnoticed, more needs to be done. Because the process of examining a patent application necessarily demands both a high level of technical expertise and a thorough understanding of the legal standards that are applied during the examination, the Patent Office must continue to attract and retain Examiners who not only have the technical knowledge necessary to understand the invention, but who also understand the legal framework within which the Patent Office functions. To this end, ability and merit should be the most important standards by which Examiners are hired, promoted, and retained. Secondly,we encourage the Patent Office to do more with regard to improving the quality of the patent examination process. For example, in many technical areas, a search of issued United States patents alone cannot reveal the most relevant prior art. In rapidly developing technologies, such as computer software and biotechnology, where the enforceability and availability of intellectual property rights in the past have been uncertain, the most relevant art may be found in industry journals, and in proceedings of professional societies and institutes. The Examining Corps should be encouraged to search all relevant information sources. Intensive training in using these information sources should be provided to the Examining Corps, such that the most relevant prior art is applied by the Examiners to every patent application filed with the Patent Office. Thirdly, since the Patent Office is also a tremendous depository of knowledge, we encourage the Patent Office to explore the possibility of giving the public throughout the United States free or inexpensive access to the Patent Office database through an on-line source, such as the Internet. At present, the few public patent depositories scattered across the U.S. are underfunded, understaffed, and resource constrained. For example, on-line searching is not available at the Sunnyvale patent depository here in Silicon Valley; and those wishing to perform a computerized search of the now available CD-ROM database there are limited to only twenty minutes of use. The Patent Office search room in Washington, D.C. is not accessible for the public at large, attorneys, and inventors who live, work, and invent in California. Ready public access to such publicly owned information would allow inventors to make informed decisions about whether or not they should pursue patent protection, would allow those seeking to enter a new market to review the patent literature before entering upon a course of action that could lead to a wasteful, potentially disastrous patent infringement law suit, and would allow those seeking to license technology to have access to the marketplace of ideas contained in the Patent Office database and be better able to establish a fair value for such technology. As important, the public would become more familiar with, and better educated concerning the patent system. Fourth, from time to time an issue may arise when a recently issued patent is publicized as part of a marketing campaign by a successful patent applicant, or as part of an ideological debate concerning the applicability of the patent laws to the technology protected or the breadth of coverage afforded the invention by the patentÕs claims. As a result, a discussion ensues concerning the wisdom of extending patent protection to new and emerging technologies. We caution the Patent Office not to allow the mere existence of public debate alone to provide a rationale for establishing separate rules for such technologies. This discussion is not new. In the days of the Wright brothers there was the fear that the future development of aviation would be seriously impeded if Wilbur and Orville should be allowed a basic patent on their invention. As we all know, this was not the case. As Wilbur Wright put it, Ò[w]hen a couple of flying machine inventors fish, metaphorically speaking, in waters where hundreds had previously fished...and spending years of time and thousands of dollars, finally succeed in making a catch, there are people who think it a pity that the courts should give orders that the rights of the inventors shall be respected and that those who wish to enjoy the feast shall contribute something to pay the fishers.Ó With regard to enforceability of patent rights for new and emerging technologies, the Patent Office must show leadership. The statutory mandate of the Patent Office is clear - novel and unobvious inventions that comprise patentable subject matter must be granted a patent. As a general principle, patentable subject matter cannot be limited to known technologies, but, as stated by the Supreme Court in the Chakrabarty case, must also encompass Òanything under the sun that is made by man.Ó Otherwise, only old technologies will be found to comprise patentable subject matter, at which point the patent system will lose all meaning. It is the ownership of inventions that spurs innovation, not just in the promise of exclusivity afforded by a patent grant, but more significantly in the incentive to avoid a patent by inventing around the patented invention. Finally, while the patentability of software inventions has long been an interesting topic of discussion, first in the courts and the Patent Office, and now in the press, much of the discussion may be caused by misunderstanding and confusion. We suggest that some of the misunderstanding stems from the confidential nature of the examination process. In many areas it is not possible to perform an infringement search to clear a new product because the most relevant patents are still pending in the Patent Office, and not available to the public. The Patent Office could explore opportunities for involving the public in the examination process to avoid any surprise attendant with the grant ofbroad reaching patents. For example, the Patent Office may want to consider the pre-grant publication of patent applications and/or pre- grant public opposition proceedings. We applaud the Patent Office decision to reexamine a recently issued patent on its own initiative in light of new art discovered after issuance of the patent. As an organization we have no opinion regarding the outcome of the reexamination. We only applaud this bold and welcome policy on the part of the Patent Office to pursue excellence. The ultimate outcome of such actions will be to improve the stature and regard with which a United States patent is held. This, in turn, will provide more certainty concerning the validity of an issued patent. Reducing the likelihood of a successful attack on the validity of a patent should encourage early settlements of patent disputes and strengthen American industry by strengthening the incentive to innovate, rather than to litigate. In closing, the Patent Office must continue to serve the needs of a broad range of applicants, from independent inventors to multinational corporations, while taking into account the effects of a fast changing global economy. Patents not only protect inventions, but they also protect employment and national wealth. The United States is a technology leader because of the incentives it provides to those persons who take the effort and risk involved in bringing new inventions to the marketplace. Of all the nations of the world, the United States has the only significant software industry, the only significant biotech industry, and the only significant microprocessor industry, to name a few. These industries form a mighty technology river that has human creative energy as its source. The American experience shows us that industry requires this creative energy to thrive and that such creative energy requires incentive. The role of the Patent Office is paramount because the Patent Office is charged by law with providing incentives for this creative energy by protecting patentable inventions. We pledge that if you involve CaliforniaÕs inventors and pracitioners in the on-going discussion of Patent Offfice procedure and policy your job will be easier and, we can together insure that the patent system and the Patent Office fulfills the Constitutional proviso of promoting the progress of science and the useful arts, all to the economic benefit of the citizens of California and the rest of the United States. Thank you. Statement of Dr. Richard LeFaivre on Behalf of the Computer and Business Equipment Manufacturing Association and Apple Computer, Inc. Hearing on Patent Protection for Software Related Inventions January 26, 1994 San Jose, California Good morning. My name is Dr. Richard LeFaivre from Apple Computer. I am here today wearing four hats: First, as a computer scientist with 25 years of experience in software technology as a researcher, professor, and R&D Director. Second, as Vice President of Advanced Technology at Apple Computer. My organization is responsible for a large percentage of the patents granted to Apple, and the protection of the innovation we do is very important to me. In particular, we have seen a marked shift in our innovation focus from hardware to software over the years, so I am very interested in the topic of these hearings. Third, I am a founding member of the Executive Committee of the Software Patent Institute. As you may be aware, the SPI was founded to provide training in software technology and access to prior art, to help ensure that those software patents that are issued are of high quality. I should point out that the Software Patent Institute has chosen to take a neutral stance on the broad issue of the patentability of software, and that the views I am about to express do not necessarily reflect the views of the SPI. Finally, and most importantly, I will be testifying today on behalf of the Computer and Business Equipment Manufacturers Association (CBEMA). Interest of CBEMA CBEMA is a trade association whose members represent the leading edge of high technology companies in the computer, business equipment and telecommunications industries in the U.S. In 1992, CBEMA's 26 members had combined estimated sales of more than $270 billion dollars, representing about 4 1/2% of the U.S. gross national product. CBEMA member companies employed approximately one million workers in the U.S. last year. The computer industry performs approximately 20% of the total private sector R&D investment in the U.S. That figure is five times the investment of the aerospace industry, three times the investment of the health care industry, and four times that of the chemical industry. This investment allows our members to rapidly advance the capabilities of their products, and to gain access to, and compete successfully in, a tough international marketplace. It also results in significant numbers of jobs just within the R&D function. I am here today because patent protection for new computer functions is crucial to all of our members. Software-related inventions fit within our present patent system, and patents issued under a sound application examination process support the Constitutional mandate of promoting the useful arts and sciences. CBEMA members file for, and obtain patents for, software-related inventions; they also enter into agreements to utilize such patents held by others. Because our companies typically have broad product lines, they address patent issues in many areas of technology. They see no reason to treat software- related patents differently from patents related to other technologies. Question 1: Format and Claim Drafting Should not Determine Patentability of Software-Related Inventions In the first question set forth in the hearing notice there are a number of subparts relating to claim subject matter and claim formats. CBEMA'S response to this question is simply that if the claim is drawn to the solution of a real- world commercial problem, and the claimed functional steps or elements, as a whole, meet the strict legal requirement to be new, non-obvious and useful, then a patent should issue. The function claimed, not the format, is important. It should not matter whether new, non-obvious and useful process steps are claimed in the context of a program or a disk, or claimed in a hardware or method format, or in the context of a semiconductor chip. Software-related inventions are valuable to the purchaser, not for what they communicate, but for the functions they perform. The functions are what are important and what should be assessed for novelty and non- obviousness. Question 2: Software-related Patents Have Had an Overall Positive Impact Relative to question two, our members have integrated their software-related patents into their overall patent portfolios and practices, so that separating out their impact is difficult. However, this integration itself demonstrates that these patents are just like all others. They are sought when the inventor or his or her employer believe that the investment in obtaining the patent will be returned. Conversely, CBEMA members often must respect the software-related patents of others, which they do in the same manner as for other technologies. Question 3: The Standards for Software-Related Inventions Should be The Same as Those for Other Technologies Regarding question three, the standard for patent eligibility for software-related inventions should be maintained at the same level as for all other technologies. An alteration in that standard would negatively impact investment in our industry. If the standard were to be restricted severely, it would disarm CBEMA member companies in their dealings with foreign competitors because licenses under U.S. patents are used to negotiate access to foreign markets and foreign technology. Obtaining patents for software-related inventions in our principle competitor countries is generally equivalent to that in the United States. Software-related technology will be one of the leading technologies of the 21st century. Discrimination against this technology would set a terrible example sure to be rapidly adopted by the developing world. To now have the leading country in software creation and patents declare that such inventions are excluded from the statute, despite falling within the terms of statutory subject matter, or are to be treated differently from patents involving other technologies, would reverse much of the hard fought progress that has been made over the last decade in improving intellectual property protection throughout the world. Question 4: The Combination of Patent, Copyright, and Trade Secret Laws Are Needed To Provide the Appropriate Level of Protection for Software Technology Relative to question four, patents provide the relatively broad protection necessary to bring in risk capital for new and useful inventive functions that are generally defined in terms of processes or methods of operation. This protection should be afforded only after a detailed examination to ensure that the claimed functions are truly novel and non-obvious. In contrast, copyright protects only the expression contained in the computer program, as it does for other literary works. High level functional processes are expressly excluded from protection by statute. Trade secret laws provide the necessary protection to facilitate the disclosure of confidential software-related designs to employees, joint venture partners and others within a structure supporting that confidentiality. Thus, each protects different aspects of the intellectual property. The inventor, who may not wish or be able to author a complete software product, deserves protection. The author of a program deserves protection from piracy and plagiarism. Those with valuable confidential information, willing and able to keep it confidential should be able to protect that value against those with which it has a fiduciary relationship. Question 5: Creation of a Sui Generis Regime of Protection to Replace the Current Patent and Copyright Regimes Would be a Legal and Economic Disaster Finally, with regard to question 5, CBEMA supports continued reliance on the tested, well-developed protection of patents, copyrights and trade secrets. We strongly support continued improvement in the patenting process for software- related inventions. Nothing suggests the need to treat software differently. A new and untested regime would fail to provide inventors and authors with any certainty of protection for an extended period of time while judicial precedent was developed to determine the scope of the law. Additionally, international protection for our software research and development is critical. There is no certainty that a new protection system could be implemented worldwide, whether through multilateral or bilateral negotiations. The hard- fought protections in the GATT/TRIPs and NAFTA Treaties regarding literary work protection for programs and the issuance of patents without discrimination based on technology were just obtained last year. It is inconceivable that such protections would now be abrogated with the ink hardly dry on those provisions by the adoption of sui generis protection. Treat Software-Related Inventions Like other Inventions In closing, our message to you is this: Don't cut back on patent protection for software-related inventions because some invalid patents may have been issued. The current re-examination process and the Federal court system provide mechanisms for the removal of these mistakes. We believe that further training for Examiners, and access to a larger library of prior art can and will reduce the possibility of future mistakes. Overall, the system is working -- and should be improved, not abandoned. If the standard for patentability is changed for software-related inventions, or if patent protection is dropped in favor of some new form of protection, it will severely and negatively impact CBEMA members, our industry, and the country. Thank you for permitting us to submit these remarks and for your consideration of them. We look forward to working with you to improve the United States Patent system in the future. Computer and Business Equipment Manufacturing Association Member Companies 3M AMP Incorporated Apple Computer, Inc. AT&T Bell & Howell Bull HN Information Systems, Inc. Compaq Computer Corporation Dictaphone Corporation Digital Equipment Corporation Eastman Kodak Company Fujitsu America, Inc. Hewlett-Packard Company Hitachi Computer Products (America), Inc. Honeywell Keyboard Division IBM Corporation Information Handling Services Lexmark International, Inc. Mitsubishi Electric America, Inc. Multigraphics, A Division of AM International, Inc. NCR Corporation Panasonic Communications and Systems Company Smith Corona Corporation Sony Corporation of America Tandem Computers Incorporated Tektronix, Inc. Xerox Corporation Biography Dr. Richard LeFaivre Vice President, Advanced Technology Group, Apple Computer, Inc. Rick LeFaivre is Vice President of the Advanced Technology Group of Apple Computer, Inc. He is responsible for AppleÕs future technology directions in such areas as advanced systems (system software, hardware architectures, information architectures, media architectures), communication technologies (wireless, broadband, ubiquitous computing, interactive TV), user interaction technologies (speech, pen, graphics, imaging, video), and user solutions (intelligent systems, authoring tools, learning environments). He also oversees AppleÕs Corporate Library, External Research portfolio, and the Apple research centers in Paris and Singapore. He joined Apple in March of 1991. Previously, Dr. LeFaivre was Director of Windows and Graphics Systems at Sun Microsystems, responsible for both technology and product development of SunÕs windowing and graphics subsystems. Prior to joining Sun in 1989, he spent eleven years at Tektronix, Inc. as Director of computing and visual systems research in TekÕs central research labs, and from 1974 to 1978 he was a professor in the Computer Science Department at Rutgers, the State University of New Jersey. Dr. LeFaivre received his B.A. in mathematics from the University of Missouri-Columbia, and his M.S. and Ph.D. in computer science from the University of Wisconsin-Madison. TESTIMONY OF JAMES A CHIDDIX BEFORE THE PATENT & TRADEMARK OFFICE HEARINGS ON PATENT PROTECTION FOR SOFTWARE RELATED INVENTIONS January 26, 1994 Let's start at the beginning. The Constitution says that patents are to be granted in order "To promote the Progress of Science and useful Arts". Time Warner Cable, for which I am Senior Vice President, Engineering and Technology, is the second-largest cable operator in the United States, serving more than 7Êmillion subscribers in 36 states. Two years ago, we built the first 150- channel cable system in Queens, New York, which remains the most advanced cable system in the world today. Currently we are building the country's first electronic superhighway, what we call the "Full Service Network", in Orlando, Florida, which will offer a host of two-way interactive services, including video on demand, interactive shopping and distance learning. Time Warner Cable plans to spend more than $5 billion over the next five years to deploy Full Service Networks in the majority of our service areas across the country. The Administration and members of Congress have indicated that building such networks is a national priority. In our experience, however, the current patent system is, to some extent, working against the development of an advanced communications infrastructure. Ever since we announced our Full Service Network plans, we and our suppliers have received a number of inquiries from individuals and companies who purport to have patent rights that cover basic, but to us, obvious, elements of the information superhighway as well as of traditional cable systems. I would like to describe for you two of these patents. The point is not whether these patents are valid or invalid, or whether any particular use is infringing or non-infringing--although we firmly believe that nothing we are doing infringes any valid patent. The point is that, either way, while none of these patents stand as a significant impediment to our deployment of Full Service Networks, they do serve to illustrate that the current patent system is out of balance and that, rather than promoting the progress of science and useful arts, that system is, in many ways, stifling such progress. The Cutler Patent (U.S. PatentÊ4,135,202) The Cutler patent purports to cover many uses of optical fiber to transmit television signals to receivers in the home. This patent was granted in 1979 and will expire in 1996. The use of fiber, of course, is basic to the electronic superhighway and has also been used for many years in traditional cable systems. Indeed, Time Warner Cable has been a pioneer in the deployment of optical fiber in cable systems. The "inventor" of the Cutler patent did not invent optical fiber. Rather, he merely filed a patent for using fiber to transport video signals to the home. The patent statute says that patents are not to be granted if "the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which such subject matter pertains" (35ÊU.S.C.ʤ 103). I am not a lawyer, but it seems to me that the idea of using optical fiber to transport video signals to television sets is not only obvious, but also inherent in the fiber optic medium itself. If such a patent were valid, I would think it would also have been possible to obtain patents after the invention of television for using that medium to transmit drama, sports or news programming. These, however, are merely self-evident uses that are inherent in the medium of television--just like video transport is inherent in the medium of optical fiber. The StarSight Patents and Patent Application (U.S.ÊPatent 4,706,121, PCT Patent Application No.Ê92/04801) The StarSight patents purport to cover a wide variety of features used in connection with Electronic Program Guides ("EPGs"). EPGs are on- screen guides that provide program listings for channels that are broadcast or provided by a cable system. They do not directly involve Full Service Networks, but, rather, are used to provide schedules for traditional, analog channels. StarSight has a number of patents, but the features I discuss here are purportedly covered by a patent granted in 1987 and another that is currently pending before the patent office. Pursuant to this patent and application, StarSight apparently claims or seeks protection for the following EPG features; -- The ability to move a cursor of automatically- varying size about on an on-screen program guide to highlight a particular program on the schedule and then to press a button on a remote control device to tune to the channel on which that program is being transmitted. -- The ability to combine two or more criteria such as "sports" and "football" to obtain a listing of the times and channels on which programs fitting those criteria will be telecast. Again, to me, these features seem obvious and inherent in the technology that provides them. Daily newspapers have long provided channel listings, often using a grid format that shows what programs are on what channel at what time. In addition, individual broadcast channels and cable systems have long telecast on-screen programming schedules. When a television viewer uses such a schedule, she or he finds a program of interest, identifies the channel, and punches the number into the remote. The StarSight system merely does this tuning process automatically through a straightforward transfer of the process to a computer. Similarly, when I want to watch football games on television, I simply scan the program schedule for such programs. It would be a simple, but somewhat time-consuming task, to write out a list of such programs. But again, preparing lists from data based on multiple criteria is a simple, straightforward and obvious computer application. Under existing law, patents for what I have just described may be valid or invalid. As I said at the beginning of my remarks, however, in either case such patents present impediments to progress. If such patents are found to be valid, surely the patent system has gone too far in providing protection for what would seem obvious to a lay person, let alone to "a person having ordinary skill in the art". The result of awarding such patents at best results in added costs for no added value--if a license is obtained--and at worst, prevents consumers from fully realizing the benefits of the technology--if a license cannot be obtained at an affordable price. If such patents would ultimately be found to be invalid, however, the patent system would still not be working properly. Some of the StarSight patents are currently being challenged in court. Business, however, cannot come to a halt in the meantime. Also, litigation is costly, slow and never free from risk. Rather than expend time and money on litigation, many prudent business people will choose to avoid the problem. Indeed, one of our suppliers of set-top boxes has informed us that, rather than challenge the StarSight patents, they will instead "de-feature" the boxes they are making for one of our cable systems, removing the ability of those boxes to provide some of the features that StarSight claims are covered by its patents. This is not an uncommon or irrational decision. This supplier will be spending many millions of dollars to manufacture these new boxes. Even though they believe the StarSight patents are not valid, it is simply not worth the risk and the cost of fighting them in court. Of course, our supplier could always attempt to obtain a license for these features. But again, this would result in added cost for what in our view provides no real value. So, in our view, the present system of patent protection is not optimally promoting innovation in the field of software-related inventions. Rather, the current system is in some important instances stifling innovation, increasing costs and leading to "de-featuring" rather than fostering the development of new and better products and services. However, it is not the framework of the system that is the problem. The statutory test of obviousness--and the person-of-ordinary-skill standard--in themselves strike the proper balance. What is needed then is not a new framework for patent protection for software-related inventions but a more rigorous application of the present standards. For one thing, obviousness should include routine applications of a given technology, regardless of whether there is prior art showing that particular application. For another, any "invention" that merely transfers a series of routine tasks to a computer should also be viewed as obvious. As your notice for these hearings states, "the computer software industry has evolved into a critical component of the U.S. economy." Indeed, the importance of this component is growing greatly every day as the computer, cable and telephone industries continue to converge. If the United States is going to continue to be at the forefront of these crucial industries, it is imperative that the patent system be restored to its proper balance, so that it can properly foster, rather than frustrate, innovation. TESTIMONY OF D. JOSEPH CLARK, PH.D. CHAIRMAN & CEO VIDEODISCOVERY, INC. PATENT & TRADEMARK OFFICE PUBLIC HEARING SAN JOSE, CALIFORNIA JANUARY 26, 1994 INTRODUCTION Good morning. My name is Joe Clark and I am the Founder, the Chairman and CEO of Videodiscovery in Seattle, Washington. Videodiscovery is a small but well-known publisher of multimedia products for science education K-college. I started Videodiscovery in my basement in 1983 with very little money and business experience. The company has grown to over 60 people in the course of 10 years in spite of original obstacles. Thank you for offering me the opportunity to share with you some of my thoughts regarding the patent process and ways in which it could be improved. First, I would like to provide a little background information. My doctorate is in microbiology and my research experience of nearly 20 years is in the field of molecular genetics. I was a faculty member at the University of Washington in Seattle for 12 years prior to starting Videodiscovery. In 1981 I received a grant from the Department of Education to produce a videodisc for biology education. I became interested in videodisc technology in 1978 and feel that I helped pioneer the multimedia industry. My focus has always been on education. PATENT CASE HISTORY I started to learn about the US Patent system on January 23, 1993 when I received a letter from Optical Data Corporation calling attention to the award of two patents. This letter not only directed our attention to the awarding of two patents, but also stated that as a publisher with videodisc products in our curriculum programs, Videodiscovery probably may be infringing on these patents. Seven other publishers of multimedia products in education received similar letters, including Scholastic, Inc., Encyclopaedia Britannica, Scott Foresman, Prentice Hall, Decision Development Corporation, South-Western Publishing, and Holt, Rinehart, Winston. I can assure you that among this group there was uniform disbelief and anger that the U.S. Patent & Trademark Office (PTO) would have the audacity to provide anyone with a patent on what I would call the "Socratic Method." 1. The first patent, Number 5,120,230, was issued on June 9, 1992. Entitled "Interactive Method for the Effective Conveyance of Information in the Form of Visual Images," this patent covers an instructional methodology that involves an interactive trilogue between the teacher, class, and video display device. 2. The second patent, Number 5,173,051, was issued on December 22, 1992. Entitled "Curriculum Planning and Publishing Method," this patent covers a lesson creation methodology to use software to develop customized curricula. In defense of the PTO, the first patent, (Number 5,120,230) was rejected twice because of the obviousness of the invention, but persistence on the part of the applicant paid off and the patent was finally awarded in June of 1992. At that time in early 1993, I was in contact with all of the parties who had received the letter from the patent holder. I found a consensus that the patents were invalid on the basis of prior art and the obviousness of the claims, and that the patents would have a negative impact on the development of the electronic publishing industry. Through this process, I started to find out more about the patent process and the options available to Videodiscovery to get the two patents invalidated. As a small company, Videodiscovery initially felt it was unable to challenge the validity of the patents. I was advised by my attorney that litigation would cost a minimum of $200,000 and possibly up to $300,000. Since the patent holder was a direct competitor, and we had been put on notice, I felt we had no choice but to address the problem. On August 12, 1993, Videodiscovery filed a complaint against the patent holder in Federal Court requesting a declaratory judgment finding the two patents invalid based on the obviousness of the patents and the existence of numerous examples of prior art. On October 28, 1993, the last day their answer to our complaint was due in court, they elected to dedicate one of the patents, No. 5,120,230, on a "Method of Instruction," to the public domain. In a surprise move, they also asked that the PTO re- examine the second patent. Currently, the case is pending. VIDEODISCOVERY'S EXPERIENCE ILLUSTRATES PROBLEMS WITH PROCESS Let me read the abstract to you and describe in a few words Patent No. 55,120,230: "Interactive Method for the Effective Conveyance of Information in the Form of Visual Images" An interactive method of effectively and efficiently conveying information which makes use of videodisc technology, along with associated printed material. Video images are stored on a videodisc, which images can be randomly accessed for display. The choice of which video images are displayed, or repeated, can be in response to the requests, or needs, of the recipient of the information. EXPANSION OF PATENTS IN MULTIMEDIA INDUSTRY When the first rumblings started with the announcement of Patent Numbers 5,120,230 and 5,173,051 in January of 1993, I cautioned my colleagues that this was just a warning of what was forthcoming from the PTO and that we should work very hard to get the patent process altered. The announcement by Compton's of their patent eight months later confirmed my worst fears. A wrong has been perpetrated by the issuance of the following patents in the last two years which affect the multimedia industry: 1. Patent No. 5,120,230: "Interactive method for the effective conveyance of information in the form of visual images," awarded to Optical Data Corporation; 2. Patent No. 5,173,051: "Curriculum Planning and Publishing Method," awarded to Optical Data Corporation; 3. Patent No. 5,241,671: "Multimedia search system using a plurality of entry path means which indicate interrelatedness of information," awarded to Compton's NewMedia; and, 4. Patent No. 5,012,334: "Video image bank for storing and retrieving video image sequences," awarded to Dubner Computer Systems, Inc. The process of awarding patents is very similar to the phenomenon of earthquakes. When the Dubner patent was issued, there was little notice; it was akin to about a 1.5 on the Richter Scale. Patents '230 and '051 on the "Socratic Method," using a computer to implement that which has been routine in publishing for years and correlating films and text to instructional objectives, came in at about 4.3 on the Richter Scale. Compton's patent on multimedia, on the other hand, raised the rumblings and destruction to approximately 7.4. This is clearly serious business. PTO IS NOT AT FAULT Because the patent process is cloaked in secrecy, those of us in the industry are expectant and anxious about the other patents which are in the pipe line. It is quite similar to living in an earthquake zone. We know that there will be other earthquakes and after-shocks. One cannot predict when. The extent to which this anxiety is based on physical laws is one thing. The extent to which it is based on inadequate and archaic formulations of man and his culture is another. Clearly, a system which produces patents, many of which are found invalid in courts, or cannot be reasonably challenged, should be changed. With actions at the PTO, including these hearings called by Commissioner Lehman, many of us are optimistic about significant and appropriate changes to the system in the future. If any of the recently issued patents in multimedia had been publicly viewed prior to award, I cannot believe that they would ever have left the patent office. Industry members recognize that they are not unique, that the "inventors" were not the first to invent, that they are too broad to warrant patent protection, and that they do not promote the multimedia industry. It seems that the PTO is a victim and not the perpetrator of these wrongful acts. What makes the system of awarding patents dysfunctional is the combination of rapid technological advances, the emergence of new industries, of new industries based on those advances, and the secret process of issuing patents. By definition, emerging industries are built on a series of new ideas. WE NEED IMMEDIATE FEDERAL RELIEF Because patent examiners have little or no experience in a new, emerging industry, and there is no prior art, they have no basis to evaluate the uniqueness of the "invention." It is difficult for patent examiners to separate legitimate from illegitimate inventions. Publish Prior to Award: An obvious solution is to remove the veil of secrecy before the patent is ultimately awarded. The collective members of the industry would readily know if the patent is obvious, if it is superseded by prior art, and whether it deserves to be protected by a patent. The examiner, who is not privy to the history, the prior art, nor the perspective of what is obvious from what is unique, has no chance to make an informed judgment. In most cases, I can believe that the examiner has no choice but to issue the patent. My understanding is that the GATT Accord will force the United States to change the method of issuing patents to a more open process. We will be obliged to adopt the system which is common to all of the other nations in the world but a handful. The first-to-file process mandates that a patent is good for 20 years from the date of filing and will reduce the risk of "landmine" patents. It is essential that with this change, the law also mandates a reasonable period of public disclosure of the patent prior to actual award. This is generally the case in other countries. This simple change will obviate the problems we are facing in the multimedia industry where patents are being awarded for processes and methods which are entirely unwarranted. These patents are obvious ideas, they are preceded with prior art, and they are damaging to the industry as opposed to supporting the industry. Constitute a Commission: I am suggesting that the Commissioner be empowered to establish a commission of a dozen representatives of the emerging industry. This commission would be instructed to: (1) assist the PTO in establishing reasonable guidelines for patentable ideas; (2) assist in building a library of prior art at the PTO; and, (3) review each patent in a new industry prior to award. This suggestion is made only as an alternative to the "public disclosure prior to award" process. It is made in anticipation that changing the patent process will take considerable time, and it is made to counter applicants' concerns that should they apply unsuccessfully under the current system, they will still maintain trade secrets. However, this is not enough. Change Re-examination Process: The re-examination process at the PTO requires serious attention and modification. As you know, the current process allows the challenger to a patent to pay a fee of $2,200 and present reasons why the patent in question should be invalidated. This material is reviewed by the examiner and the inventor and they inform the challenger of their conclusions. The challenger is provided the opportunity to a rebuttal and the PTO closes its door. The inventor and the patent examiner then work in secret to evaluate and re-shape the patent to maintain its validity. I would like to emphasize that the re-examination process needs to be changed to be fairer to both parties. Currently, the process greatly favors the inventor. A challenge can be made, but the challenger has no additional input beyond the initial and rebuttal stage while the PTO and the inventor work to re-shape the patent. The outcome is often a changed patent which is harder to defeat. CONCLUSION I would like the committee to understand that these suggestions come out of frustration with the system and should be interpreted to mean that we are anxious to obtain some relief immediately. The patents which have been granted would never have been granted with any type of open forum. As long as secrecy prevails, we are not unlike earthquake victims who are paralyzed and extra- ordinarily anxious about moving back into their homes and business, worrying that after-shocks or another major quake are right around the corner. The multimedia industry needs the confidence to proceed in a totally focused and creative manner, to the benefit of education, business, and national productivity. Testimony at PTO Hearings on Patenting of Software-Related Invention George S. Cole, Esq. 793 Nash Avenue, Menlo Park, CA 94025 (415) 322- 7760 -6117 (fax) Good afternoon. The first problem area that I would like to address is the paucity of adequately educated Patent Examiners. I will presume we are familiar enough with the problem that I donÕt have to detail it - even ÒFuture ShockÓ is now twenty years old. But 160 examiners are simply not enough to examine annually thousands of patent submissions in detail, keep up with the literature in an expanding number of technical fields, and remain abreast of the continually challenged and adapting common law. Not that and sleep or eat lunch, too. This problem is particularly acute in the area of Software-Related Invention, which is why weÕre here today. It is so bad that there is a serious possibility that the current approach will be abandoned, perhaps in favor of alternatives such as privatizing the process. We could try giving the people in Ann Arbor a secure Ôtrade secretsÕ database of computer ÔinventionsÕ, which would then serve as the basis for seeing if a right to sue infringers existed. Frankly, IÕm in favor of improving the review process, not weakening or abandoning it. It costs society far less to have the determinations made during an impartial review process than it does through adversarial patent litigation. What the PTO needs - what we need the PTO to have - is access to more people with the knowledge needed in the patent review process. We need the process to continue to keep the current legal and technical standards - to improve upon them, particularly the technical standard, particularly in fast-advancing fields such as computer software. Yet we face an inherent problem in the current system that will keep us from solving it by just adding more examiners. ThatÕs because to become a Patent Examiner, you need a scientific degree - a BachelorÕs degree - and a legal education. Virtually all who have such dual qualifications pick them up in that order; science first, then the law. Very few do it the opposite order, which is what I did - law first, then a science - in my case, a MasterÕs in Computer Science at Stanford in Ô87, six years after my law degree at Michigan in Ô81. The order most prospective examiners gain their dual backgrounds matters - and IÕll explain why in a moment. The old approach would be to simply try adding more examiners. That is necessary - and I would suggest that with some creativity on the part of government and business, that the money to do so could be found. Suppose every patent issued gave the government 4% of the royalties received? But this is not going to be the most effective solution, overall. It simply does not use the advances in communications we are so busily pursuing, nor react correctly to societal trends. For one thing, there are often far more rewarding opportunities available to people who have the dual training in law and a technical field than practising in Washington, D.C. If you doubt that, compare todayÕs weather here in San Jose with the East CoastÕs winter. Another approach would be to stop issuing patents in troublesome areas such as computer software. If the U.S. were the only country where software patents could be issued, that might make sense. But since it is not, and since only larger companies can realistically and consistently press for patents abroad - and then, by international treaty, enforce them within the United States - this would only put us at a severe competitive disadvantage. Our most valuable resource, individual creativity, would possibly end up completely stifled by this abandonment. Another approach would be to cease to require that the Patent Examination process involve both legal and technical evaluation, that is, to decrease the standards by which potential 17 year monopolies are judged. Since we are here precisely because people are furious with a perceived inadequacy of standards, I do not suggest this. A core problem with the present system, where most patent examiners - and most patent attorneys, for that matter - have only a bachelorÕs degree in one field, which they picked up before they got their law degree. So the science the Patent Examiner possesses is dated, and potentially outdated. Undergraduate science used to be good enough - just like a basic college degree used to be all individuals needed to be on the leading edge of our society. ThatÕs not true any longer. By the time science makes its way through the labs to the educators and into the curriculum, itÕs going to be dated. Maybe, five years behind the times? And undergraduates generally donÕt read up on the leading edge literature in the field, if only because they are busy struggling to establish the underlying foundation of knowledge that would allow them to comprehend the leading edge literature. Then the prospective Patent examiner takes three years to get his law degree. And heÕs busy studying in that field, so heÕs probably not working too hard at keeping his science current, let alone advancing it. Though he might start to do so when heÕs bored in the third year of law. So by the time our prospective examiner approaches the Patent Office, his technical background is probably eight years old. In a fast moving field such as computer science, heÕs already in trouble. And does he really have enough technical smarts to truly comprehend just where the Ôbleeding edgeÕ of advances lies? But if the PTO starts to require its examiners to have a graduate degree in science, the pool of potential examiners shrinks drastically, worsening an acute problem. So how do we provide the benefits of a process that involves both scientific and legal evaluation with an inherent limitation on the number of people, under our current educational system, who simultaneously obtained both qualifications? What I would like to suggest is that the Patent Office consider ÔleveragingÕ its personnel. Just as the Federal Judiciary can call upon Special Masters, or Judges Pro Tem, to extend the effectiveness of the cadre of full-time Judges, the Patent Office should look for ways to use the tens of thousands of individuals with advanced education in our society. Not as full-time Patent Examiners working solely for the Government, but as additional personnel called in (and paid for) as needed. Perhaps the specialistsÕ fees could be paid by the petitioners or opposers. The Patent ExaminerÕs job would change from doing all of the work on every application him or herself, to managing the process - submitting patent applications for review to technically qualified individuals, or consulting with legal scholars or practitioners on complex legal considerations, and then coordinating and consolidating the results. Is there a concern over maintaining the traditional secrecey of the application process? Researchers have lab assistants or graduate students; law partners have associates. I suggest that, since they have already faced and solved the same type of issues dealing with confidentiality and tracing of information that the Patent Office would face this is a solvable concern. There are many, many individuals throughout the country who could be called upon to assist. Fees could be paid (or, perhaps more attractively to some, an arrangement could be made for income tax credits or income tax waivers). Professors at universities, legal scholars at law schools. Researchers in governmental labs. Graduate students, in science or law, working on an internship basis. With the modern technology available, a secure facsimile transmission could allow the PTO to coordinate such efforts throughout the country. We could see a virtual Washington PTO office in every community in the country. Though those of us in California would still have the weather advantage. The Patent Examiner then becomes a specialist in reviewing and delegating, when necessary, to outside expertise for impartial review, thorny problems or those requiring familiarity with the most recent advances in a specialized and fast- paced field. He or she under this approach has more of a chance to master information and rapid changes, and not be overwhelmed by them. Proposed Amended Regulation Concerning The Scientific Competence of Patent Attorneys I would like to address some particular problems in the current regulations which attempt to provide protection against inadequately trained individuals serving as patent attorneys. Section 10.7(a)(2)(ii) requires an individual, who seeks to be registered to practice before the Patent and Trademark Office, to establish to the DirectorÕs satisfaction that he or she possesses the legal, scientific, and technical qualifications necessary to enable him or her to render applicants for patents valuable service. There is no requirement that this competency be maintained. The examination of a would-be patent attorney is only an initial hurdle; once passed, it acts as a lifetime assurance that the attorney possessed the necessary qualifications, both legal and scientific. This may have been enough when science did not advance rapidly. It is no longer adequate. Furthermore, the PTO presumes that a patent attorney is competent in the field of science underlying a patent the attorney prosecutes before the Patent and Trademark Office. It is left for the client to discover that his patent attorney lacked the scientific competency to adequately evaluate, or prosecute, his patent. The PTO, though required the attorney to provide proof of competency in a given field, does not thereafter track the patent attorneyÕs particular scientific field of competency. That initial information - insisted upon for the protection of the public - is simply discarded. So for two reasons, the current PTO regulations do not provide adequate protection to the public against attorneys whose technical expertise is either outdated or simply in a different field. Necessarily, the Patent Bar is a national practice with uniform standards; but attorneys in different states now face different continuing legal education standards. In many states, attorneys must continue to study a minimum amount to remain active in their practice - but the coursework required, and available, almost always focuses on a stateÕs particular rules are are dictated by its legal education guidelines. Thus state-oriented continuing legal education is almost never relevant nor applicable to the Patent Office concerns. Moreover, this places an additional burden on attorneys who strive to keep up with developments in their scientific domain(s) in which they are consonant. This does not meet with todayÕs reality. Both legal and scientific fields experience constant change during an attorneyÕs practising lifetime. Engineers and scientists generally expect to have to engage in on-going work, attend ongoing education classes, or return to studies in their field, several times during their decades of work. Lawyers, too, are expected to be able to increase the scope of their competency as well as to maintain it. The solution to the first problem is to establish, at the time the attorney takes the Patent Bar, the scientific field or fields in which a patent attorney is qualified. This is in fact already done by the Patent Office - but no record of the determination is kept. Federal guidelines currently determine how an attorney may initially establish his or her qualifications; see Code of Federal Regulations ¤37 CFR ¤10.7. The second and third problems could be solved by additional guidelines stating how an attorney may maintain or upgrade his or her qualifications, and how these efforts will also meet any continued legal education needs under the laws, both before the Patent Bar and before the many State Bars. To meet these needs, and to correct some current imperfections, the following amendment to the Code of Federal Regulations governing registration as a patent attorney or agent is proposed: Section 10.7 is amended adding new sub-sections (c) and (d) as follows: Ò(c) For the protection and benefit of applicants for patents, (i) individuals will be registered to practice only in the scientific or technical fields in which they have and maintain a necessary background of scientific or technical knowledge; (ii) individuals will be able to establish and maintain multiple fields of practice by continuing, renewing, and expanding upon their scientific or technical training; and, (iii) patent attorneys will be permitted to satisfy as much as one-half of their continuing legal education requirements by substituting courses in a scientific or technical field which would allow them to maintain or expand the field or fields in which they are registered to practice in before the Patent and Trademark Office; (d) to meet the requirements of subsection (c), (i) the Director is required (a) to establish and maintain a listing of the field or fields of scientific or technical expertise in which any patent attorney or agent may qualify, (b) to update the listing of the field or fields of scientific or technical expertise at least once every decade; (ii) the current list, in which a bachelorÕs degree from an accredited college or university is considered to preliminarily satisfy the standard of scientific or technical competence, is: (a) Biology, Biochemistry, Botany, Computer Science (including Artificial Intelligence, Database Design, Expert Systems, Operations Research, Operating Systems, Robotics, and Software Design, but excluding Computer Management, Database or Data Management, and Information Systems), Electronics Technology, Engineering (Aeronautical, Agricultural, Biomedical, Ceramic, Chemical, Civil, Computer, Electrical, Electrochemical, Geological, Industrial, Mechanical, Metallurgical, Mining, Nuclear, Physics, or Petroleum), Food Technology, General Chemistry, Marine Technology, Microbiology, Molecular Biology, Organic Chemistry, Pharmacology, Physics, and Textile Technology; (b) any person competent in any of the above fields is also deemed competent to file patents for designs or commonplace items; (iii) the Director is required to establish and maintain a listing of the field or fields of scientific or technical expertise in which each patent attorney or agent is qualified, and to issue the initial and renewal certificates to each patent attorney or agent upon proof of satisfaction of the educational requirements; (iv) each patent attorney or agent shall keep and maintain the certificate(s) specifying the field(s) in which he or she is qualified to practice; (v) an individual may maintain his or her qualification in a field by successfully completing, once during every five year period, an undergraduate level course (including a correspondence course) comprising either four quarter hours or three semester hours from an accredited college or university in that field, which course would be acceptable as meeting the requirements for breadth or depth for an undergraduate major in that science; (vi) an individual may establish the necessary background for an additional scientific or technical field by successfully completing, within any five-year period, no less than one half yearÕs study (four quarter courses of at least fifteen units, or three semester courses of at least eleven units) in courses from an accredited college or university in that field which would be acceptable as meeting the requirements for breadth or depth for an undergraduate major in that science; (vii) the addition of an additional scientific or technical field shall be deemed as maintaining the requirement for one other scientific or technical field in which the attorney is already qualified; (viii) the completion of the course of study for either a bachelorÕs or advanced degree in a scientific or technical field shall be deemed as meeting the requirements of either subsections (iii) or (iv) above; and, (ix) the certificate for any given field shall be good for nine years from year in which it was issued or renewed. (x) Upon enactment of this regulation, the Director shall within four years modify the register of patent attorneys and agents to include the field(s) of competency for each patent agent or attorney who was registered before this regulation came into force, and issue a certificate of competency for such field(s) to all currently registered patent attorneys or agents. Each such patent agent or attorney shall be deemed to be competent in any field for which he or she: (a) provides the PTO with a degree from an accredited university; or (b) prosecuted a patent before the PTO within five years prior to adoption of this regulation.Ó Notes Concerning The Proposed Amended Regulation (1) The list of fields started from that currently provided by the Patent and Trademark Office in their handout ÒGeneral Requirements For Admission To The Examination For Registration To Practice In Patent Cases Before the U.S. Patent And Trademark OfficeÓ, and is amended to include the range of fields dealing with Computer Science where students will most likely have gained an understanding of the science underlying the design, implementation, or methodologies applicable to software, while excluding the sub- fields where students will more likely have only practical understanding in applications or business management of software. The list also restates the Engineering sub-fields in alphabetic order for easier comprehension. Two general classes of patents may be filed by any patent attorney or agent: design patents, and patents for items which are intended for commonplace use, that is, items which the average layperson would adopt and incorporate into the regular pattern of daily life (e.g. the safety pin, or a new recreational toy or game). The reason for this general class is that the evaluation of their patentability depends more on common cultural acumen than field-specific scientific exactitude. The additions to the list of fields are in italics. (ii) the current list, in which a bachelorÕs degree from an accredited college or university is considered to preliminarily satisfy the standard of scientific or technical competence, is: Biology, Biochemistry, Botany, Computer Science (including Artificial Intelligence, Database Design, Expert Systems, Operations Research, Operating Systems, Robotics, and Software Design, but excluding Computer Management, Database or Data Management, and Information Systems), Electronics Technology, Engineering (Aeronautical, Agricultural, Biomedical, Ceramic, Chemical, Civil, Computer, Electrical, Electrochemical, Genetic, Geological, Industrial, Mechanical, Metallurgical, Mining, Nuclear, Physics, or Petroleum), Food Technology, General Chemistry, Marine Technology, Microbiology, Molecular Biology, Organic Chemistry, Pharmacology, Physics, and Textile Technology; (b) any person competent in any of the above fields is also deemed competent to file patents for designs or commonplace items; (2) The amount of study needed to maintain a certificate of good standing in the Patent Bar is similar to that deemed necessary for continuing legal education. A four-unit quarter course will typically require eight hours of work a week for approximately ten weeks, for a total of eighty hours (excluding class time). In California, which has some of the stricter continuing legal education requirements in the country, an attorney must take twelve hours a year of continuing legal education. Thus in five years, an attorney in California will have had sixty hours of legal courses. Half of these hours may be taken by self- study means. By allowing the patent attorney to count half of his hours of study dedicated to maintaining or expanding his scientific competency, a California patent attorney could maintain both scientific and legal competency with a grand total of about one hundred hours every five years (eighty hours in a science course, half of which count towards his continuing legal education, plus an additional twenty hours of continuing legal education). (v) an individual may maintain his or her qualification in a field by successfully completing, once during every five year period, an undergraduate level course (including a correspondence course) comprising either four quarter hours or three semester hours from an accredited college or university in that field, which course would be acceptable as meeting the requirements for breadth or depth for an undergraduate major in that science; (3) The amount of time needed to add an additional field of patent practice is based on the amount of time needed for in-field specialization at the undergraduate level. Most undergraduate majors require about two years of focused coursework. Scientific and engineering majors typically require more than that - some exclude all but the minimum of other courses deemed necessary to establish an unbalanced education. But about half of this coursework will be mathematical prerequisites, laboratory work, or scientific ÔbreadthÕ courses. A registered patent practitioner who already has a bachelorÕs degree will either have had the math (or find a way to pick it up as needed), have had a ÔpracticalÕ experience in the difference between theory and practice of science, and, by virtue of his current qualification, established breadth outside the field he or she is seeking to add. Remember, also, that the attorney seeking to take the core courses will somehow have to establish to the instructorsÕ satisfaction that he or she possesses the necessary prerequisite scientific knowledge to complete the course - or will perforce obtain such knowledge in order to pass the course. That may require further ÔbackgroundÕ work by the attorney which he or she may wish to take on a less formal, and less expensive, audited, correspondence , or self-study basis. Thus the amount of focused work necessary to establish the core knowledge in a new domain will be much less than that required to gain an undergraduate major in that domain. (vi) an individual may establish the necessary background for an additional scientific or technical field by successfully completing, within any five-year period, no less than one yearÕs study (four quarter courses of at least fifteen units, or three semester courses of at least eleven units) in courses from an accredited college or university in that field which would be acceptable as meeting the requirements for breadth or depth for an undergraduate major in that science; (3) Some degree of continuing scientific knowledge in a currently mastered field will come from studying another field, if only because the attorney will be constantly seeking analogies from the current field, using shared or consonant methodologies, or depending on mathematical knowledge common to both. This is in part why many degree programs insist that their students have breadth in their background, to allow them to more readily keep abreast of related fields. Moreover, different scientific fields change and move at different speeds. Rather than require the same study in every field, a certain leeway for adding and maintaining knowledge is granted by allowing addition of a new field to be counted as maintaining not all other fields, but one other field. (vii) the addition of an additional scientific or technical field shall be deemed as maintaining the requirement for one other scientific or technical field in which the attorney is already qualified; (4) The Patent and Trademark Office currently works from a presumption of the first part of this century, that a single undergraduate degree was all that most people, including most scientists and science teachers, would ever have. Yet there are an increasing number of individuals who seek out advanced degrees, or multiple advanced degrees. The next part of the regulation explicitly acknowledges that adding an advanced degree in a scientific or technical field subsumes the underlying undergraduate degree in that field. (viii) the completion of the course of study for either a bachelorÕs or advanced degree in a scientific or technical field shall be deemed as meeting the requirements of either subsections (iii) or (iv) above; and, (5) The choice of how long a certificate remains valid, no matter what number is chosen, will always appear arbitrary. A fixed period is to be preferred for two reasons: (1) it lets the possessor schedule and plan for its continued maintenance, or for a career change (for example, into management); and (2) it is easier for the PTO to maintain. A simple computer program could be written that would keep track of registered agents and attorneys, their field(s) of competency, and the date of their continuing education and of their certificatesÕ renewals. If coupled to generated notice letters, it would require minimal effort to operate. The period chosen was one year less than twice the period in which coursework is required, to allow some time for ÔcorrectiveÕ study, when an attorney has failed to keep current, while ensuring that only a limited period of decreased familiarity with the field exists, for the protection of the public. (ix) the certificate for any given field shall be good for nine years from year in which it was issued or renewed.Ó (6) Finally, there should be a provision for ÔgrandfatheringÕ in all currently qualified patent attorneys or agents, to allow both the PTO and these individuals time to adapt to the new requirements: (x) Upon enactment of this regulation, the Director shall within four years modify the register of patent attorneys and agents to include the field(s) of competency for each patent agent or attorney who was registered before this regulation came into force, and issue a certificate of competency for such field(s) to all currently registered patent attorneys or agents. Each such patent agent or attorney shall be deemed to be competent in any field for which he or she: (a) provides the PTO with a degree from an accredited university; or (b) prosecuted a patent before the PTO within five years prior to adoption of this regulation.Ó Currently-registered patent attorneys or agents have two grounds for establishing field(s) of competency. The first is that used by any attorney or agent seeking initial registration. The second is to give credit for existing practical experience. The four-year implementation period is to allow the PTO to plan and arrange for an efficient method for registering and issuing certificates of competency. The five-year preceding practice period, when coupled with the four-year implementation period, is equal to the nine-year competency period. Once implemented, patent attorneys will be required to maintain their qualification by the study required in subsection (v) for each field; so within nine years after the adoption of the regulation (the period a certificate of competency remains valid) currently practising patent attorneys or patent agents would have studied to remain up-to-date in their field(s). Presentation of Digital Equipment Corporation by Ron Reiling at Public Hearings and Request for Comments on Patent Protection for Software-Related Inventions Marriott Crystal Forum Arlington, Virginia February 10, 1994 Mr. Commissioner and members of the panel, thank you for the opportunity to appear today to discuss patent protection for software-related inventions, and the standards and practices of the Patent and Trademark Office ("PTO"). My name is Ron Reiling and I represent Digital Equipment Corporation. Digital Equipment Corporation is one of the world's largest suppliers of networked computer systems, software, and services. It invests heavily in research and development and relies upon the patent system to protect this investment. We are vitally interested in software-related inventions because Digital spends hundreds of millions of dollars each year on software development. It is generally accepted that creativity and innovation drive technology and industrial progress. Thus, the importance of adequately rewarding the world's best minds by safeguarding their inventions through patents will increase dramatically in the years ahead as technological advances accelerate. In today's global, highly competitive environment, some believe that we are witnessing a fundamental shift in business history. We are, they say, progressing from "managerial capitalism" to "intellectual capitalism." And they believe that the importance of intellectual capital will ultimately lead to a dramatic shift in the wealth of the world; from material resource owners to those who control ideas and knowledge, i.e., intellectual property. A fundamental feature of the patent system is that it establishes the basis for intellectual effort to be regarded as an asset which can be traded in the marketplace. The patent system is essentially a legal mechanism which facilitates and encourages investment and effective marketplace competition in much the same way that real property and contract laws establish the basis for trade in land and goods. Accordingly, an effective patent system which promotes creativity by providing a beneficial and stimulating environment for inventors is essential. This environment will produce a constant ferment of new products and competitive processes, forging the growth of a vigorous American economy. Turning now to the specific issues, Digital believes: (1) that software-related inventions should be treated the same as any other inventions; (2) that no legislative changes are necessary in order to properly protect software-related inventions; (3) that increased examiner training, as well as expanded content and better classification of the prior art available to examiners would improve the examination process; (4) that mechanisms are already in place for public involvement in patenting, including citation of prior art and reexamination, though the PTO should provide an "early" reexamination incentive. A. General Comments on Software-Related Patenting It is important that patents can be obtained for all types of software-related inventions, including, for example, software-related inventions at the operating-system level; at the user-application level; and those pertaining to the storage or transmission of information, such as memory data structures, packet-switched networks, and magnetic and optical media. B. Standards of Review for Software-Related Patents The standards for patentability applied by the PTO for software-related inventions should be the same as those applied to any other technology. These include the well-developed concepts of novelty, non-obviousness, and adequacy of disclosure. It would be a mistake to single out any technology and treat it in a discriminatory manner. The issues attendant to software-related patenting have been evolving for twenty or more years. We are finally approaching a point in this evolutionary process where predictability may be possible. That is very significant for creating an incentive for continued research and development investment. It would be misguided, in our view, to redirect software-related patenting at this time by altering the established standards of review. The standards of review generally prevailing require a two prong test: First, as a threshold determination, the invention must pertain to statutory subject matter under 35 USC 101. Second, the invention must be new and non-obvious. For both of these tests, the PTO must consider the claimed invention in its entirety -- including all limitations concerning structure and function of software. It remains a truism: The claims define the invention! Recently, the PTO appears to have changed its standard of review of certain software-related inventions -- by ignoring novel software-related steps (and means) in claims, therefore finding them anticipated by prior art that does not disclose the ignored claim features. Consequently, the PTO has abridged its long- standing "claim-as-a-whole" analysis for novelty determinations. In other words, the PTO has imported 35 USC ¤101 considerations into 35 USC ¤102 and ¤103 determinations. If left unchecked, this approach will eviscerate the patenting of software-related inventions. The PTO has asked whether implementing a known process, technique or method on a computer should be patentable if, but for the use of software, the overall process, technique or method is known. The answer is emphatically yes, it should be patentable, provided the software recitations in the claims present a new and non-obvious invention. It should not be PTO policy or procedure to exclude software limitations from novelty determinations. On another point, the PTO should not impose any special duty on patent applicants for software- related inventions under Rule 56. Applicants should not be required to conduct patentability searches; meeting such a requirment could be a hardship for individuals and small entities. PTO Rule 56(a)(2) already encourages applicants to examine carefully the closest information over which the inventor (or others associated with the application) believe any pending claim patentably defines. We propose that the PTO remind applicants of that portion of the Rule in Office Actions, and even suggest that applicants cite and distinguish such information. Of course, this approach need not and should not be limited just to software-related inventions, but, rather, be employed with respect to applications in any technology field. With respect to the ways that a software-related invention is described in an application, to a great extent that depends on the type of description to which the invention is amenable. No special requirements should be proscribed or required for software-related inventions. Typically, block diagrams are a useful way to communicate the software steps and functional relationship of components included in software- containing systems. Blocks within the diagrams should be deemed adequate illustrations to support elements of both method and apparatus claims. Program code listings should not be encouraged; they should be accepted, provided the specification without regard to the code listings provides a clear and understandable description of the structure and function of the invention so that effective examination can be undertaken by the PTO. Where code listings are included as appendix, the PTO should not distribute the code listings unless it receives a specific request for the appendix. It is advisable that copies of all patents, including any appendix, be made available electronically to the public, e.g., over public networks. C. Administrative Practices Regarding the Examination of Software-Related Patents i) Quality. With respect to PTO administration, it is vital that it invest in quality! The PTO has recently shown improvements in timeliness and quality of examinations, but further improvements are essential. Congress should approve the hiring and training of more examiners, including computer engineers. Examiners should be required to meet standards of excellence, and a suitable, on-going qualification assurance program including continuing education requirements should be imposed. These measures should be adopted to improve consistency in determinations of patentability. ii) Office Actions. Examiners should be encouraged to continue to improve the quality of Office Actions by including better explanations of rejections. We have observed a recent approach in Office Actions of providing only conclusory statements in prior art rejections, which do not assist applicants in understanding the nature of rejections. Office Actions should provide more specific citation of references and their nexus to the claimed subject matter. iii) Searches. Essential to patent examination is a comprehensive patentability search. Resources within the PTO have improved greatly in recent years, and computer searches provide a valuable addition to patent document searches. We believe that PTO examiners could utilize these resources more advantageously, and perform better prior art searches. Too often other patent offices around the world locate references, including United States patents, which should have been located, but were not, during patentability searches by the PTO. The PTO should study ways of improving its computerized prior art searches. New and improved prior art databases could be developed and accessed by examiners during searching. For example, a closer integration of the resources of the Library of Congress with those of the PTO may provide useful search resources. iv) Electronic Database. It would be helpful if an electronic database were developed that would include, e.g., computer program user guides and developer kits, as well as the vast range of other technical reports and work product relating to computer programs. The public should be able to add to the database over the Internet. v) Public Involvement. Digital believes that the patenting process should afford public involvement. Digital suggests that mechanisms for accomplishing this are already in place, but are not adequately utilized. For example, (a) The PTO should consider inviting the public to cite prior art references pertaining to issued patents, as contemplated by 35 USC ¤301. The cited references collected in the file wrapper of patents could assist in ensuring the issuance of valid patents. The public would have the sense that the PTO wants public contributions, and the PTO could achieve this with minimal costs. Significantly, any prior art references submitted to the PTO under this procedure should also be placed in the PTO search rooms to improve search quality in related cases. (b) The reexamination process could be refined to provide an incentive for early challenges of issued patents. For example, reexaminations requested within three months of patent issuance could carry significantly reduced fees. That would place early reexaminations more within the reach of individuals and small entities. Early decisions in reexaminations are in the public interest. Moreover, early reexaminations should be preferred from an administrative standpoint in that the original examiner is more likely to be available and familiar with the patent's subject matter. Unfortunately, present reexamination practice provides little incentive to removing invalid patents promptly after issuance, thereby avoiding wrongful enforcement of those patents against those who do not have "killer" references. Many have suggested pre-grant opposition, e.g., following publication of applications 18 months after filing. We have misgivings about such an approach, which stem primarily from the potential for delays in examination that could result. Post-grant oppositions, on the other hand, provide less flexibility than the present system of reexaminations. (c) It is incumbent on the PTO to better disseminate information about the courses of action available to the public if a patent is wrongfully issued, including citation of art and reexaminations. In conclusion, software-related patents are of great significance to businesses today. Businesses have a vested interest in assuring the efficient operation of the PTO in issuing valid software-related patents. Software-related patents protect and stimulate innovation today, and will be of even greater significance as the "information super-highway" comes into fruition during the coming decade. Digital is pleased to have had this opportunity to share its views on software-related patenting. We would be happy to discuss any points raised in greater depth, and we invite the Commissioner to contact us if we can be of further assistance. Testimony on Software Patents [Prepared remarks of Les Earnest] Based on my 40 years of experience in computer system development, much of it before software patents were introduced, I believe that the alleged connection between such patents and the stimulation of innovation is tenuous at best and probably negative. Let me confess that even though I oppose the continuation of software patents, as a defensive measure I have filed for some that have been granted. When I entered the field as a programmer in 1954, there were only about a hundred of us in the whole world and each of us was turning out thousands of inventions each year. Software was given the same kinds of protection as other documentation, namely copyright and trade secret. It was certainly a good thing that there were no software patents because my colleagues and I could have papered over the field and retired for 17 years or so to collect royalties. Since such patents didnÕt exist, we kept working and had quite a good time doing it, sharing ideas and standing on each others shoulders to see how high we could reach. In 1956 I went to MIT to help design the SAGE air defense system. It was a technological marvel, chock full of inventions, both hardware and software. It was the first real-time computer system and depended on the large software system that was cooperatively written by many people. This project helped transfer a lot of technology from MIT to IBM, but almost nothing was patented. Dozens of SAGE systems were deployed around the country, each with a vacuum tube computer that covered a floor area about the size of a football field. It is fortunate that the Soviet Union never attacked the U.S. in that era, because the marvelous technology in SAGE had several ÒAchilles heelsÓ that would have caused it to fail catastrophically under attack. However, those shortcomings were kept well hidden from Congress and the public and, as a result, so-called Òcommand-control-communicationsÓ technology became a major growth industry for the military- industrial complex. The most recent example of that line of development was the grossly defective ÒStar WarsÓ system. But that is another story. Beginning in 1959 I developed the first pen-based computer system that reliably recognized cursive writing. I believe that it was more reliable than the 1993 version of Newton, but the idea of getting a patent on such a thing never occurred to me or my colleagues. It wouldnÕt have done much good anyway, because the computer on which it ran filled a rather large room and the 17 year life of a patent would have expired before small, portable computers became available. In order to cope with a personal shortcoming, I developed the first spelling checker in 1966. I didnÕt think that was much of an invention and was rather surprised when many other organizations later took copies. Of course, nobody patented things like that. John McCarthy and I organized the Stanford Artificial Intelligence Laboratory and I served as its Executive Officer for 15 years. There was a great deal of innovation that came out of there, including the first interactive computer aided design system for computers and other electronic devices, early robotics and speech recognition systems, a software invention that became the heart of the Yamaha music synthesizers, document compilation and printing technologies that later came to be called Òdesktop publishing,Ó the Sun workstation and public key cryptography. Few of these inventions were patented in the early period, but we later began to file for such coverage. The pace of innovation has necessarily slowed over time. Concurrently the amount of patent protection has increased. I suspect that these changes are connected. Yesterday in this forum, my friend Paul Heckel said that ÒSoftware patents stimulate new businesses.Ó IÕm afraid that Paul has that backwards Ð in fact, new businesses stimulate software patents. Venture capitalists want the comfort of patents on the products that are being brought into the market, even though Òknow howÓ is far more important in most cases. In 1980 I co-founded IMAGEN Corporation, which developed and manufactured the first commercial desktop publishing systems based on laser printers. We filed for software patents to try to appease the venture capitalists, even though it was not actually important to our business. Of course, they didnÕt understand that and the lawyers were happy to take our money. Based on my experiences, I also joined the League for Programming Freedom to help resist the patent conspiracy and I later served for a time on its board of directors. In summary, for many years there was a great deal of innovation in the computer software field with no patents. Under the ÒstimulationÓ of software patents, the pace now seems to have slowed. I believe that there may be a connection, not only because of the time that must be spent in deciding what to cover and preparing the filing, but also because patents owned by other organizations, many of them actually representing prior art, constitute a mine field that must be carefully navigated. I recommend a return to the good old days, when success depended on moving faster than the other guys rather than trying to catch them in a trap. STATEMENT BY DENNIS FERNANDEZ Fenwick & West Palo Alto, CA INTRODUCTION Good afternoon, ladies and gentlemen, my name is Dennis Fernandez. I am a registered patent attorney at the Silicon Valley-based, technology law firm of Fenwick & West. Before I practiced law, I was an electrical engineer and technical manager for several years at various companies in the computer and electronics industry, including NCR/AT&T, Digital Equipment Corporation, Raytheon, and Racal Limited, where I did semiconductor chip design and processing, as well as managed chip marketing and distribution. Today, I specialize in patent prosecution and litigation in the semiconductor chip industry. And as you well know, in this highly competitive electronics industry, intellectual property protection has become a very important part of doing business. This afternoon, I wish respectfully to share with you a few brief comments based on my practical industry experience, as an electronics engineer and also as legal counsel to such engineers, as to how software patents have already, or might in the future, impact their business interests. DISCUSSION Because of the limited time alloted for speaking, I direct my comments only to a few points which are relevant to chip design software. I believe these comments may reflect the interests of companies who do business in an area known as electronic design automation, or "E.D.A.", wherein fairly sophisticated software is written to automate the highly complex process of designing and testing semiconductor chips and related system boards. In this context, my comments pertain generally to: (1) special technical need for software patent protection, (2) practical timing problems in U.S. patents, and (3) apparent effect of software patents on innovation. ¥ Special Technical Need for Software Patent Protection Because of the highly functional nature of technical innovations developed in EDA software products, patenting seems to be an appropriate way for legal protection. For example, EDA software typically includes software programs for synthesizing logic circuits, generating test program vectors, or simulating digital and analog system components. These software functions involve fairly abstract ideas which would not be protectible ordinarily under copyright law, but would be protectible under patent method or apparatus claims, if sufficiently inventive. Thus, due to the largely functional nature of innovations in EDA software, I believe that patent protection would be appropriate. ¥ Practical Timing Problems in U.S. Patents There appear to be two practical problems which may apply to EDA companies with respect to timing related to U.S. patent applications. First, the 17-year patent duration may be too long. In the context of the EDA industry, where software products typically have product lives that less than half this duration, it might be more appropriate to provide a shorter period of patent enforceability. Second, the current 2 to 3-year backlog in the United States Patent & Trademark Office, particularly in the electronics and software arts, may pose some problems to companies in the EDA industry, both for those companies who wish to enfore their patents during the market window of their software products, and also for those companies who wish to learn the existence of relevant, and thereby avoid possibly, competitor patents. ¥ Apparent Effect of Software Patents on Innovation In the highly competitive EDA business, particularly in the Silicon Valley, it has been my experience in a number of recent cases that the presence of relevant software patents do not necessarily serve to impede or deter competitive product development. Typically, clients in this business tend to be fairly sophisticated in their understanding of patent enforcement matters. These individuals are aggressive entrepreneurs, typically backed by venture capital institutions, who are doing pioneering technical work and product development, and these individuals often find ways to design around even what initially appear to be fairly broad claims. Also, it has been my experience that such EDA clients are often able to raise reasonable arguments of non-infringement based on relevant prior art, thereby providing themselves with opportunities to make, sell or use their EDA products, possibly without legal liability. Thank you very much for your kind attention. Statement by Jerry Fiddler for PTO Hearings I sit before you not as an expert in intellectual property law. IÕm not a lawyer, and most people in this room know far more about intellectual property law than I ever will. Rather, I wish to speak to you as an expert software engineer, and the founder and CEO of a successful software company. Wind River Systems is a $30M public company, with 40% of our revenue from overseas. We create software for embedded systems, the microprocessors found inside our cars, fax machines, telephones, robots, factories, and consumer electronics. According to Software magazine, last year we were the ninety-second largest software company in the US. My perspective on software patents is simple. Stop issuing software patents. Software patents should not exist. I say this for a number of reasons. First and foremost, I look at the reason patents exist, which is for the benefit of society. Certainly there are fields where patents are essential because of the large investment involved for creation of technology and the ease of copying that technology. In such situations, patents incent the major investments necessary for those inventions which benefit society. This doesnÕt apply to software. Availability of patent protection is not necessary to incent creation of software. Copyright and trade secret protection are entirely adequate and more appropriate for protection of software. Yes, major investments are necessary to create software, but that investment is primarily involved in quality implementation and support of the software, not development of the algorithms and concepts that might be patentable. Therefore, unlike a drug, for instance, it is not substantially cheaper or quicker to copy a programÕs functionality than it is to develop the original. The deal society makes with the inventor - ÒTell us about your invention, and you can have a monopoly for seventeen yearsÓ - is not a fair deal today with software. In a field changing as fast as software is today, seventeen years might as well be a millennium. The deal might as well be phrased ÒTell us about your invention and you can monopolize it forever, so the fact that we, society, know about it is meaningless.Ó In fact, patenting of software is actively harmful to society. People donÕt need software monopolies. They need software that is open, compatible and that adheres to their expectations and standards. They need the software equivalent of expectations like Òaccelerator on the right, brake on the left.Ó Patenting of software can only impede these goals. Furthermore, patenting of software will not accelerate its creation or advancement. Rather, it will impede that advancement, which is far better driven by the free market than by monopoly. Imagine where we would be today if patents had been granted on technology or concepts critical to word processors or spreadsheets. Rather than the sophisticated and elegant tools we now have available thanks to competition, we would still be using something very much like the primitive first versions of those tools. Worse still, we must remember that word processors and spreadsheets have been largely responsible for spawning an industry, and making the personal computer a part of most of our lives. The quality and advancements in those tools have created opportunities for computer manufacturers, and for other software vendors who can sell to users who have computers primarily to run those primary tools. It is not too strong to say that if there had been strong patent protection for the first word processors and spreadsheets, the personal computer industry might today be five to ten years behind where it actually is. As another example, if aspects of the TCP/IP network protocol had received patent protection, today the Internet might very well not exist. Creation of software will also be impeded by the difficulty of writing software that doesnÕt inadvertently trip across a patent somewhere. This is true in other fields where patenting is less controversial, but it is far worse in software. It is not unusual for a program to be a million lines long, and consist of many thousands of subroutines and functions. Algorithms and ideas are embodied in each of these components, and in combinations of them. Some of these algorithms may be studied in school or found in books, but many are developed Òon the flyÓ as the program is created. Many of these subroutines and functions might be far afield from the purpose of the program as a whole. An operating system, for instance, might contain routines for sorting and searching, handling queues, parsing text, controlling hardware, testing memory, etc. It will be impossible to know which of these routines, algorithms and ideas violate a patent, because every programmer would need to understand every software patent ever issued. Software is simply too complex, and composed of too many pieces, components, and ideas to lend itself to being broken down into patent-sized chunks. I envision a world in which progress in software is totally blocked by a web of patents, owned by a very few very large companies. Not the best or the most creative companies, but rather those with the most lawyers. In a world like that, it would be completely impossible to start and build a company like mine. This nightmare could come to pass very quickly. To date, there has been little litigation regarding software related patents. God help us all when that litigation does begin. Judges and juries will be asked to rule on whether a large, complicated program, potentially millions of lines long and written in an obscure computer language, violates an arcane patent. The claimed violation will be built into the very fiber of the program, hidden within the programÕs structure and data in complex and subtle ways. One expert will say one thing, another expert will say the opposite. Neither judge nor jury will be competent to understand the nature or veracity of the patent, much less which expert is closer to the truth. The patent will have been issued by an examiner who is not expert in the specific software field, and might not understand the concepts essential to operating systems, fuzzy logic, or whatever, much less the prior art. The chances of a fair and informed decision will be vanishingly small. Software is perhaps more analogous to literature and music than it is to mechanical invention. It would be silly to think about patenting the first person novel, or the sonata form. Yet there are software patents that, to a software engineer, are just as absurd. As a software company CEO, I am perfectly content to compete based on the quality of the software we create and the support we provide for it. I am fully satisfied with copyright, contract, and trade secret protection for the software we write. We have begun to work on some patent applications because I think we may need them for defensive reasons, but I would far rather we didnÕt need to do so. If software patents become prevalent, it will seriously interfere with our ability to continue improving our products and developing new ones. It will also interfere with our ability to provide open-ness and compatibility to our customers - a key part of the value we provide them. The best possible result of these hearings for us, for our customers and for society would be for software patents to simply go away. TESTIMONY OF R. LEWIS GABLE My name is Lewis Gable. I am an attorney with the law firm of Welsh & Katz, Ltd. We are an intellectual property firm with offices in Chicago and Arlington, Virginia. I have practiced patent law for over 30 years specializing in the preparation and prosecution of complex electronic and now computer-related and software-related inventions. While obtaining my law degree, I was an Examiner in what was then known as the Patent Office. I examined the basic patent of Kirby for the integrated circuit. I practiced through the seventies when there was great doubt as to whether software-related inventions were patentable subject matter as defined by 35 U.S.C. ¤ 101. I witnessed the impact of Diamond v. Diehr, 450 U.S. 175 (1981), and the establishment of the Federal Circuit. I have talked and written about software-related inventions in the context of ¤ 101, often with Mike Fleming of the Patent and Trademark Office. I chaired the Electronic and Computer Law Committee of the American Intellectual Property Law Association. The views that I express this morning should be attributed only to myself. I will focus on Questions 2 and 6 of Topic B. Fundamentally, both ask how can the PTO improve the quality of its examination process. Question 2 asks how can an Examiner measure the "ordinary skill of art" and Question 6, how "can the PTO change examination procedures to assess novelty and obviousness of software-related inventions?" These Questions go to the heart of the obviousness determinations required by Graham v. John Deere Co., 383 U.S. 1, 17 (1966). My point is that the experience level of the average Patent Examiner is low and that the lack of experience effects the quality of patent examinations. This is true of all arts, but is of particular concern to software-related inventions. Low experience levels are the result of constant Examiner turnover. The positive aspect of this problem is that, perhaps, it can be effectively addressed. I am not saying that the Office employs poorly qualified candidates, but rather that examiners with only a few years of experience fail many times to provide an adequate patent examination. The average years of experience have dropped over a number of years since I was an Examiner. When I joined the Patent Office, my division (no groups or art units in those days) was comprised mostly of experienced Primary Examiners with 10 to 15 to 20 years of experience. As a novice, non-primary Examiner, all of my work was supervised by my Primary Examiner, John Burns. He retired while I was still in the Office. Mr. Burns had two new examiners to train. He could spend time with us and criticize our Office Actions before they were mailed out. If I missed some feature of the invention, he could identify a patent with that feature by the inventor's name and the shoe where I could find it. He had examined himself or had supervised the Examiners who had issued all of the patents in the inductor art for perhaps 10 to 15 years. Then, the ratio of inexperienced, non- primary Examiners to Primary Examiners was low. Today that ratio has been turned upside down. Anytime that I receive an Office Action, I look to see whether the responsible Examiner is a Primary. I rarely have a Primary Examiner examining my applications. When I attend an interview in the Office, I make it a practice to see how many Primary and non-primary Examiners are in an Art Unit. Often the ratio is 9 or 10 to 1. That ratio also tells me a lot about how much supervision the non-primary Examiners will recieve from their Supervisory Patent Examiner. One patent I obtained illustrates the critical difference between experienced and inexperienced Examiners. This application involved the use of artificial intelligence for setting up a printing press. The application included 100 plus pages of specification and 25 plus pages of flow diagrams. It was examined in the printing group. The initial Office Action was received and it had only a single rejection, i.e., the specification was rejected as being inadequate under 35 U.S.C. ¤ 112, first paragraph. I interviewed the Examiner. She had less than 6 months experience in the Office. She explained that all of the more experienced examiners did not want this long, complex application and had passed it down to her. I went to the Group Director with my problem. He was responsive. He assigned a senior Primary Examiner to help the new Examiner. The next Office Action dropped the 112 rejection and cited a number of pertinent references. The references were clearly evaluated and the rejections well stated. I could then amend the application to distinguish the prior art and bring this application to issuance. Both the Office and I had done our jobs well and a sound patent was issued. The differences between a good and a poor Office Action are not always apparent on their face. An Office Action can list all of the issues. There can be a ¤ 101 rejection. The statutory basis for each rejection may be set out. The purported teaching of a reference may be identified. The basis for combining references may be stated. Even so, such an Office Action may be poor. The references may not be relevant, much less have a clear teaching of the recited invention. All of the pertinent references may not be cited. Significant claim limitations may be overlooked. It is difficult to respond to such Office Actions. The responsive Amendment is often quite long and, when that set of rejections is overcome, the next Office Action may set out a new round of rejections. The expense of such examinations is unnecessarily high for my clients and the resultant patents are clouded with a meaningless if not confusing file history. It is not surprising that new Examiners may issue poor Office Actions. Patent examination involves complex issues of law and technology. Examiners examine applications within a limited technology defined by a group of subclasses. Though limited, it takes years of examining to learn thoroughly the technology. The ability to pick a pertinent reference out of a shoe comes when the Examiner has examined and issued the last 5 shoes of patents. The legal issues are equally challenging, particularly in the Groups 2300 and 2600 which examine many of the software-related applications. Section 101 rejections are particularly difficult. There are no bright lines and such determinations involve an evaluation not only of the claims but the underlying specification. When the ratio of non-primary to Primary Examiners is high, it is difficult to adequately supervise all of the novice Examiners. Inadequate Office Actions may be issued without thorough review. SPEs with 10 or more non-primary examiners simply cannot thoroughly evaluate each applied reference, much less read the claims and specification of each application. My personal observations are confirmed by the personnel figures provided by the PTO. For Computer Group 2300, there are approximately 160 Examiners. Of that total, 130 Examiners or over 80% are non-primaries. 89 Examiners or over 55% have less than 2 years experience. Non-primary examiners cannot issue Office Actions on their own authority. Their Actions must be reviewed before issuance by a Supervisory Patent Examiner. There is one SPE for each of the 13 Art Units in Group 2300. The arithmetic is simple; there are on the average 10 non-primary Examiners for each SPE in Group 2300. In some Art Units, there are as many as 14 non-primary examiners for one SPE. The significance of these numbers is disturbing. I don't believe that it is possible for one SPE to review thoroughly the work product of 10 and perhaps as many as 14 non-primary Examiners. My personal observations are that Office Actions prepared by non-primary Examiners are poorer in quality than those prepared by the experienced Primary Examiners. I use the word quality here in the sense of Questions 2 and 6 of how well or how poorly "the level of skill in the art" and "the novelty and obviousness" of the claimed inventions are determined. I believe that non-primary Examiners and particularly those with less than 2 years experience may not fully understand the invention sought to be patented or the prior art references that they would apply. I further believe that the PTO does not have sufficient management resources at the SPE level to supervise the work product of its non-primary Examiners. These numbers also indicate that there is a massive Examiner drain at the 2-3 year level. These Examiners are going to law firms and corporate patent departments. The attraction in great part is salary. After 2 or 3 years Examiners are making only $32,000 to 35,000, and firms and corporations can pay more. Levels of pay for Primary Examiners are more competitive with those paid outside the Office. The problem is that most Examiners won't wait the 7 or more years required to become a Primary. Thus the cycle continues. An Examiner comes to the PTO, is trained for 2 to 3 years and then leaves. Mr. Commissioner, I have heard you talk at the fall meetings of the American Intellectual Property Law Association and the Intellectual Property Owners and I applaud your efforts to improve the environment and the job support given to Examiners. Your present efforts and, I would suggest, a revision of the Examiner pay schedules, particularly at the critical 2 and 3 year levels, will do much to solve the Examiner turnover problem. I appreciate very much this opportunity to express my views. DRAFT TESTIMONY AT PTO PUBLIC HEARINGS JAN 26-27 1994 Scheduled slot: Thursday, Jan. 27, 10:59 am Honorable Commissioner, Distinguished members of the Panel, MY NAME: Gideon Gimlan (ADDRESS: c/o Fliesler, Dubb, Meyer & Lovejoy 1281 Oakmead Parkway (Suite 202) Sunnyvale, California 94086 Tel: (408) 773-9100 Fax: (408) 773-9830) CURRENT Patent attorney with law firm of Fliesler, Dubb, AFFILIATION: Meyer & Lovejoy of San Francisco and Sunnyvale, California. The firm represents numerous high technology companies located in Silicon Valley and elsewhere. Its work (and my own) includes the preparation and prosecution of software-related patent applications in a variety of areas including: networked computer systems, graphic imaging systems, and mainframe computers. PAST 7+ years as a Hardware/Software engineer. COMPUTER Work assignments included choosing to implement EXPERIENCE: functionalities in software or hardware. VIEWS OF: These comments are my own personal views based on general experience and not those of my law firm or of any clients represented by the firm. I WANT TO FOCUS MY COMMENTS ON QUESTION NUMBER: A3: What are the implications of maintaining or altering the current standards for patent eligibility for software-related inventions? What is current PTO practice ? And where is it leading us in the software arts ? My personal experience is that, in so far as anticipation and obviousness are concerned, the Examining corps treats software-related inventions no differently than other kinds of inventions. The legal tests for 102/103 determinations are fairly well established and most Examiners treat software-based cases with the same uniform fairness as hardware-based cases. The issue of finding good prior art is no different that in any other art. As an aside, I find that the EPO (European Patent Office) tends to find closer prior art than does the US Patent Office --but that applies to general subject matter rather than to software-related cases. In so far as inquiries under 35 U.S.C. ¤101, I fail to see across-the Office uniform consensus on what is or is not statutory subject matter, the OG guidelines notwithstanding. Treatment of the statutory subject matter question appears to vary greatly from Examiner to Examiner. Some Examiners are lenient in what they consider to be statutory while others seem to be on a witch-hunt for a ¤101 basis of rejection. This injects a considerable degree of uncertainty into the application process. You can't predict the outcome of a ¤101 issue with any degree of confidence. It very much depends on which Examiner you draw for your case. Perhaps, "software-related" isn't the proper term for what I am trying to address here. The problem more properly fits under the broader rubric of: "algorithm-related" inventions and should the PTO be expending so much time and energy trying to weed out claims that arguably extend or encroach into nonstatutory areas? I suggest that the answer is no. The patent bar and Examining corps are wasting client money and taxpayer money arguing over metaphysical abstractions, that to technologists in the field, sounds like we are debating over, How many angels dance on the head of a pin. The case of In re Iwahashi 12 USPQ.2d 1908 (Fed. Cir. 1989) serves as a good example. It was not strictly-speaking, a software-related case because the claim preamble started off with "An auto- correlation unit ... comprising:". But, if one wished to take some license and re-write the preamble as reciting "A computer comprising:" (as was done in Example-B of the PTO request for comments), this should not in my mind materially alter the gist of the invention. Any digital signal processor (DSP), including the one in Iwahashi can be viewed as a computing machine or "computer" in short. One can then go out on a limb to call each invention that uses a digital signal processor (DSP), "software-related" because its operations can be described in algorithmic terms. Notice that I didn't say, controlled by a "computer program" or controlled by "software". There are those skilled in the art who will argue even today that a computer program can be used as a "description" of the operations to be carried out by a machine and the description does not necessarily have to form part of the machine that actually performs the operations. The machine's control lines could be instead driven by combinatorial logic. In the end, it should make little difference that an invention is implemented in hardware, software, or in-between-ware. In the eyes of the electronic circuits that carry out a given invention there really isn't any functional difference. (The term "functional" is to be distinguished here from other practical considerations such as price/performance.) A set of electrical signals are first supplied to the DSP machine. Perhaps the input signals originate from a memory device like a ROM or a floppy disk, perhaps they come from an X-ray machine. Irrespective of origin, the signals are somehow transformed by the machine. Then they are output, perhaps for return to a memory device, perhaps for routing to some other immediate use; such as creating a real-time high-definition video image. One inventor recently looked at me with bewildered eyes when I tried to explain some of the related ¤101 concerns and said, "I don't understand, data is data, what does it matter whether it comes from an X-ray machine or from memory? What is the government up to?" [Some literary license taken in this quote.] I think the problem and answer lies in how we, as human beings, come to appreciate the subtle implications of a given invention. We need to step back and ask, Has the inventor come up with a faster or cheaper way of doing things (even if the improvement is found in software)? Has the inventor compressed the physical size of an apparatus, so that something smaller can now do the job of something that previously had to be much larger? Has the inventor obtained a higher level of resolution than was previously feasible? We see in hindsight that these kinds of improvements --faster, smaller, cheaper, better resolution-- have brought us the miracle of affordable palm-top computers, ones that have pen- based, graphical user interfaces (GUI's) and ones that, arguably, give even the technical neophyte access to the powers of the digital revolution because of their intuitive nature. In hindsight, I think we can all agree that these are the kinds of innovations that our patent system is supposed to protect and foster. But when we turn away from past glories and look to the next invention, we are somehow daunted by the enigma of this thing we call software. We are all, in a sense, blind men beating at a pachydermial beast; each finding something different based on the angle from which we approached it. Some say this software stuff is more like the punched paper in a player piano, or like the music recorded on a vinyl record. Others say its more like the mathematical proofs of their college calculus classes. Yet others say its something that is still in its infancy, that will grow and evolve into something we still do not fully understand. In the mean time, the software applications keep pouring in. So what should we do? Should we tell those who craft new software to go away? You are not welcome at the US PTO? Should we direct every algorithm-smith over to the line at the Board of Appeals? Every Examiner has his or her own personal angle on how to deal with the problem. This haphazard system gives inventors --particularly those that have the misfortune of being assigned to an "anti-algorithm" or "anti- software" Examiner-- the impression that they are not receiving uniform, fair treatment. It's absurd to the mind of many technology gurus that an invention is OK if implemented in hardware but suddenly becomes unacceptable if implemented in software. The pat answer is, of course, that inventors can always go to the PTO Board of Appeals, and if not satisfied with results there, they should go higher --to the Court of Appeals for the Federal Circuit in Washington D.C. But that doesn't happen with regularity. Many patent-worthy cases fall by the wayside not because the Applicants agree with the Examiner's ¤101 position (and I sometimes wonder if even the Examiners agree with their official position), but because of monetary considerations. One could argue that well to-do corporations should lead the charge into the courthouse and create better law. That doesn't always work. Some corporations are afraid to get on the bad side of a key Examiner. Even those that are more brazen think twice about pouring more time and money into an application that is already twice rejected by an Examiner. Most inventors, and corporate executives for that matter, do not have the experience or patience to grapple with the kind of mystical questions that are posed when a ¤101 rejection is raised ... for example, whether the claim is TRULY directed to statutory subject matter or whether it is nonstatutory matter "disguised" in the sheep's-cloth of otherwise statutory, but nonetheless "insignificant" pre- or post-computational activities. After a while, they would rather forget the whole thing. If this state of affairs continues, I think that many in the digital/software arts will simply bypass the US Patent Office. They did so in the past, prior to Diamond v. Diehr 209 USPQ 1 (S.Ct. 1981), and they will do so again, particularly if word gets out that software-related applications are not welcome at the US PTO. In the short-run this is wonderful news for the over-burdened Examiner's that deal with these ¤101 questions. In the long run, our patent system will fail to do what is supposed to, namely encouraging inventors to come forward with their inventions. Eventually, another country will pick up the torch. How should we deal with algorithm-related inventions ? I don't think we should simply stand back and wait for the right case to make its way to a sympathetic judicial panel. We need to put out the welcome mat for software inventions sooner than that. The on-going witch hunt at the PTO for nonstatutory subject matter is driving our technology gurus away. These are the people we need most to carry us into the future. We need to encourage them to file more often at the PTO, not less. We need to encourage them to disclose rather than to conceal. Here is my proposal: Unless the claims in an Application are clearly limited to the practice of a mathematical algorithm, the PTO should allow the Applicant to disclaim within the body of the claim that portion of the claimed system/process that falls outside the scope of 35 U.S.C. ¤101 and then allow the case to issue as is, assuming there is no other basis for rejection. After the patent issues, we should let experience and the advice of technical gurus help us decide whether an accused apparatus or method falls within the scope of ¤101 such that it can be covered by the claim or whether the accused activity is protected by ¤101. OTHER SUGGESTIONS We need to amass a database that will help us better understand the impact on society of algorithm-related inventions and other emerging technologies. Congress and the Judiciary will forever have a difficult time keeping up with technical subtleties in new inventions. They will increasingly have to look to the Patent Office or some other government agency for help, maybe not as to what the law should be, but perhaps more so as to what the expected impact will be on the public welfare if patents are allowed or not allowed for different kinds of inventions. To answer that question on a more rational basis, we need to accumulate a historic record of both issued and non-issued (open-to-the public) cases that are in some way related to the technology; software or other. Then we have to assess the long and short run impacts on the public based on a variety of what-if questions. What if a patent for drop-down menus had not been issued. Would competitors have tried to come up with alternatives? What if a patent had been issued in the case of Gottschalk v. Benson 175 USPQ 673 (S.Ct. 1972)? Would engineers have nonetheless come up with other practical ways of performing BCD to binary conversion? Was the court in Benson ill-advised about the technical feasibility of doing BCD to binary conversion in other ways? This is something people in academia can do once the database begins to build. Then we can react on the basis of reason rather than hysteria. A5: Proposal for new, supplemental form of protection for software inventions. Rather than replacing patents and copyrights, add a supplemental form of protection that software practitioners can use. The filing requirement would be the entire source code and sufficeint information to enable one skilled in the art to compile, load, execute, and use the software. The test of novelty and infringement would be algorithmic similarity as judged by one of ordinary skill in the art. The length of time would be seven years and there would be no injunctive relief. A tribunal will decide a mandatory royalty rate. A1: Protectability of Examples C (code on disk) A floppy disk can be as much an article of manufacture that cooperatively engages with a digital signal processor (DSP) as a carburetor is an article of manufacture that cooperatively engages with the remainder of an automobile engine. Until the rest of the car supplies vacuum power and a flow of gas, the parts of a carburetor do not perform their associated functions. But that doesn't seem to bother the art units that handle this kind of technology. Ditto for any electronic circuit sans a power supply. A1: Protectability of Example G (database for doing business). If the technical "effect" is one that leads to a faster, more compact, more accurate machine, then the fact that the machine is used for conducting business bears no weight. Thank you for letting me express my personal opinons on these issue. IBM TESTIMONY My name is Victor Siber. I am Senior Corporate Counsel for the International Business Machines Corporation. My comments represent the views of the IBM Corporation. The IBM Corporation spent $6.5 billion dollars on research and development in 1992. In the same year we employed over 22,000 software programmers and we sold $ 18.5 billion dollars of software products and services ($11.1 billion software). So we are intensely interested in the subject matter of these hearings. We protect the detailed expression in every one of our software products by copyright. And approximately 3-5% of these programs contain new and unobvious functions that are protected by patents. Patent coverage on these inventive functions protects our investment, gives us important business leverage, as well as access into foreign markets. I understand that this hearing was scheduled, in part, to address questions raised by some broad software patents that have recently issued. These patents are alleged to cover old processes. The response by some is to call for changes in the law to prevent the issuance of patents in this technology. In the short term, that would hurt the U.S. computer industry. And in the long term, all industries that use computers to gain a competitive advantage will suffer. The argument over these controversial patents is not that they cover unpatentable abstractions. These patents cover quite useful functions, which others in the industry want to use. The issue, and the key to the controversy, is something quite different: whether these patents cover truly new and non-obvious functions and thereby add something to the useful arts. In the final analysis, that is the job expected from the U.S. Patent & Trademark Office. And it is a job that is doable. The United States was the first, and continues to be the global leader in computer hardware and software technology. This technology is important, not only in itself, but as a driver of innovation in other fields. And today it is facing stronger and broader global competition. As the industry matures and competition from overseas increases, patents will be the key to protecting the most valuable U.S.-originated innovations. You have posed a number of questions for the hearing today. Beginning with question 3 relating to altering the standards for patent eligibility for software related inventions, we completely oppose such a proposal! Going into the next century, the key inventions will be in information processing. Altering the standards for patent eligibility for software- related inventions will shift investment away from this area. The purpose of R&D in any technology is to gain an advantage over your competitor. But if your competitor can legitimately copy the fruits from your R&D and can create a product to compete head- on with your product while you are still trying to build a market for the product, then you have lost. The long term value of R&D in the marketplace is in the new functions implemented by software. If such new functions are protected, investment flows to the industry. If not, investment will dry up! There are several other points I want to make on this issue. We can't divorce computer program-related inventions from computer hardware and other microprocessor inventions. The overlap between the two is so great that cutting back on one automatically cuts back on the other. An alteration in the standards for patent eligibility will also put the courts and your office in a quandary. That's because computer program-related inventions can be implemented either in hardware or in software form. Applicants will simply cast their patent claims in terms of electrical circuitry. And if you limit claim coverage over computer program implementations of circuit inventions, you will turn electrical patents into nullities, because the circuit function can be implemented by a programmed computer. Furthermore, if process patents cannot reach computer implementations of the process steps, there will be a negative impact on every industry that uses computer-controlled industrial processing or uses microprocessors in their products. From an international standpoint, a cut-back on patent eligibility for computer program-related inventions sets a truly unfortunate precedent for the developing world. It would violate GATT and NAFTA provisions that prohibit discrimination of patent eligibility based on technology. The biotechnology area provides a graphic example of what happens when countries limit protection for a technology. Leading European companies working in this area of technology simply moved their biotech R&D operations to the United States. Concerning the issue of sui generis protection, replacing patent protection for new and nonobvious program and process functions, and replacing copyright protection for the original expression contained in computer programs with some form of sui generis right would be devastating to the industry. In a single act, U.S. industry would be unilaterally disarmed relative to our competitors in Japan and Europe. We would lose patent priority rights in the 114 countries of the Paris Convention and we would lose the copyright protection automatically afforded to American program works in 102 countries, as required by the Berne Copyright Convention. As you know from the TRILATERAL Work Studies conducted jointly by the U.S. Patent and Trademark Office with the Japanese Patent Office and the European Patent Office, the standards for patentability in the area of software-related inventions are generally the same, except at the far margins. The Japanese Patent Office has published for opposition in the last six years approximately 4500 patent applications on software-related inventions, while the EPO has issued approximately 2700 patents since 1980, which have resulted in multiple European member country patents. The majority of these software-related patents in the EPO and the great majority in Japan are issuing to non-U.S. companies. Without U.S. patents of a reasonable scope to bargain with, U.S. companies will potentially lose access to those markets. With the introduction of a sui generis system, there would be an extended period of uncertainty, the bane of businessmen and investors, as a body of case law was developed interpreting the new sui generis law and determining its scope. Additionally, there would be a complete absence of effective international protection for the new right. The internationalization of a sui generis law would require a sui generis treaty. Such a treaty would be negotiated without any international consensus on what sort of protection regime would be appropriate. As you know, the primary multilateral treaty to date for a sui generis right, The Treaty on Intellectual Property in Respect of Integrated Circuits, known as the Washington Treaty, was strongly influenced by developing countries (the GROUP OF 77) hostile to IP protection generally. The result was a treaty so flawed that not one single major chip-producing nation would support it. The only remaining way to internationalize that sui generis chip-protection right was through reciprocity. But reciprocity has its rewards and its vices. The European Community now points to the reciprocity provisions in the U.S.'s Semiconductor Chip Protection Act to justify its discrimination against America's authors through the reciprocity provisions in its E.C. Directive on Copyright term extension, and for denying U.S. author's the benefit of the unfair extraction right in the draft E.C. Directive on database protection, and in refusing to grant movie and music producers and authors their fair share of the blank tape and movie levies. Finally, regarding the series of claim format examples in question 1, we believe that the format of the claim should be viewed from the perspective of patentable subject matter. If the claim, as a whole, is directed to a machine, article of manufacture, or machine-operated process, then subject matter eligibility should not be an issue. The focus of the examiner should be on the normal statutory tests of novelty, non-obviousness, and utility of the claim as a whole. And to insure compliance with the formality requirements under 35 USC 112, i.e., that the invention is particularly pointed out and distinctly claimed. Specifically, a claim directed to an article of manufacture comprising a computer-useable medium and a plurality of computer-readable program code means for causing a computer to effect a plurality of specific and interrelated functions should be eligible for patenting under the statute. Such an article of manufacture constitutes a machine part that is commercialized separately. It should be protectable separately, like other machine parts, if it meets the statutory tests of novelty and non-obviousness. In summary, the patent system is designed to instigate the invention of new non-obvious, and useful functions that add to the arts. The key to seeing whether the system is working is to see if there is strong competition in the marketplace; to see if new products are introduced to the market on a regular basis; to see if employers and investors vote for the system with their pocketbooks by funding new development work. As for my company, we rely heavily on the patent system to protect our investment in new products. And we are negatively impacted probably more than others, by poorly examined patent applications. Thus, we want the issuance of poorly examined patents curtailed. And that is clearly doable if the PTO would invest in hiring and training the best possible examiners as well as in the creation of an adequate database of software prior art. Testimony for Intellectual Property Owners Association Regarding Public Hearings On Standards and Practices Used in Examination of Patent Applications For Software Related Inventions Marriott Crystal Forum Arlington, Virginia February 10, 1994 By Stephen L. Noe Intellectual Property Counsel Caterpillar Inc. Peoria, Illinois Statement of Interest Intellectual Property Owners (IPO) is a non-profit association with offices at 1255 Twenty-third Street, N.W., Washington, DC. The association's members include companies, universities, and individuals who own and are interested in intellectual properties of all types, including patents. My testimony has been approved by the Board of Directors of IPO for presentation as an IPO position. Caterpillar is a member organization of the IPO, as well as an interested party in its own right. Caterpillar, the world's foremost manufacturer of earthmoving and related equipment, is both a producer and major user of computer software and software related technology. Introductory Comments Today's hearing presupposes the continued availability of patent protection for computer software implemented inventions, a position strongly endorsed by the IPO, and focuses on the examination of such patent applications. However, implicit in this series of hearings is the suggestion that software is somehow "different" from other technologies, and must be treated in some special way. I disagree. Considering some of the remarks made at the recent hearings in San Jose, just agreeing on what is and what is not "software related technology" may be an Alice in Wonderland exercise in which a word means "just what I choose it to mean--nothing more nor less."11 For purposes of my testimony today I will use "software" or "software related technology" in a broad sense to include discrete software products like word processors, spreadsheets, and databases; highly complex custom software that controls manufacturing systems, CT scanners, and space shuttles; and embedded software that controls engines, anti-lock braking systems, and microwave ovens. One can readily come up with other examples, some of which may look and feel more or less like software than others, but all of which lie along a continuum of software related technology. Used in this broad sense, software related technology encompasses far more than the products of traditional software publishers, and includes most consumer and industrial products susceptible of electronic control. Software properly takes its place along side other evolutionary tools, such as hydraulic, electrical, and electronic control systems. Whether an automobile engine is controlled by a camshaft or a microprocessor is of little import to the driver so long as the engine runs well and reliably. Patent policy should not be the factor that forces a manufacturer to choose which tool to use to control the engine. In short, the IPO supports treating software related technology like any other technology within the scope of the patent system. Continued patent protection of software related technology is important to United States industrial competitiveness, benefitting companies and inventors working on program controlled apparatus large and small, as well as developers of discrete software applications. The PTO should process applications for patents on software related technology no differently than applications in any other technology, either in the examination procedures those applications are put through or in the way the statutory tests for patentability are applied. In particular, the IPO rejects the proposal that software related patent applications should be subject to special tests or standards governing novelty, non-obviousness, or disclosure. With that preface I will address the specific questions posed in the Notice for these hearings. Questions B.1 and B.2 - Are patents and printed publications sufficient to assess novelty, obviousness, and ordinary level of skill? How can prior art collections be improved?12 There is a quantitative and qualitative difference between the PTO's collection of prior art relating to software and its collections for other technologies. Many witnesses have testified to this, and to the resulting difficulty examiners face in locating the best prior art references to cite against software related claims. Respondents to the Advisory Commission on Patent Law Reform "suggested that a large amount of non-patent prior art exists in forms that are not accessible to the patent examiners."13 Patents, and more significantly printed publications, do provide a sufficient and representative collection of prior art to assess novelty and obviousness of software related inventions. Examiners' access to the printed publications is the issue, not the existence of those publications. To locate the prior art references most relevant to a particular invention, examiners and practitioners alike must search far afield from the PTO's collections--in textbooks, technical journals, and software manuals, in narrowly published conference proceedings, and in the online databases that catalog such references. Several avenues are available to and should be used by the PTO to improve its access to and ability to apply software related prior art. These include: _ Supplementing its own collections with non- patent references; _ Reclassifying and computerizing those collections as necessary; _ Encouraging the development of readily accessible prior art collections outside the Office;14 _ Training its existing examiners in the technical programming skills necessary to understand and properly apply the prior art references that they find; and _ Hiring as fully qualified examiners, computer scientists or others who are qualified and trained in software technology. All of these recommendations were contained in the Advisory Commission Report of August, 1992.15 A number of these activities are currently being implemented in the PTO, and the IPO applauds and encourages those efforts. The remainder of the Advisory Commission's recommendations in this area should be implemented as well. Finally, the level of ordinary skill in the art in the field of "computer programming," as phrased in question B.2, is perhaps too narrow an inquiry. Regardless of the field, printed publications and patents do accurately reflect the level of ordinary skill in the software related technologies. Question B.3 - Should a "special duty" of disclosure apply to applicants for software related inventions?16 No. Such a burden would be neither fair nor workable. Even knowing when the duty applies would be difficult and subject to interpretation. There is no bright line separating software related inventions from other inventions; instead, there is a continuum of software relatedness which encompasses products of all descriptions. Developers who implement their inventions using software should not be penalizedŠ for doing so by the patent system simply for administrative convenience. Instead, the PTO must improve the examiners' skills and resources in locating and applying the relevant art. There is another problem with the idea of placing a special duty on applicants in software related applications. If applicants will encounter some special burden if they characterize their inventions as software, then it is in their interest to search for another characterization. The resulting misdirection will only complicate the Office's efforts to classify its software related art collections and to assign applications to the art unit with the most expertise in the relevant technology. Question B.4 - Do present novelty and obviousness standards accurately reflect inventiveness in the field of software?17 Yes, as long as they are applied with reference to the full scope of the relevant prior art and with an understanding of the level of ordinary skill in the art at the time the invention was made. The problem is not with the statutory tests, but rather with the application of the tests. Question B.5 - Should implementing a known process using a computer be patentable?18 Whether a software implementation of a known process, technique, system, or method is patentable should be determined by applying the statutory tests of novelty and obviousness to the claims presented. There should be no hard and fast rule, one way or the other. Accurate understanding of the level of ordinary skill in the relevant art (be it the art of programming, or the art in which that programming is applied) combined with application of the most relevant prior art references, will produce the correct result. There is no need to apply special tests or standards to software related applications. Question B.6 - How can the PTO change examination procedures to assess novelty and obviousness of software related technologies? Should applicants be required to search, explain, and distinguish the prior art? Should applicants be required to distinguish their invention apart from the computer implementation? Should the PTO apply a lower standard of proof to software related technology?19 Once again, there should be no special standards or tests applied to, or duties imposed upon, applicants in software related patent applications. Difficulties in examining software related applications result from examiners unfamiliar with the technology attempting to examine applications using incomplete prior art collections. These difficulties can and should be corrected by supplementing the art collections and improving the examining corps' software expertise. The novelty and obviousness of software related inventions should be assessed using the same statutory tests as interpreted by the courts for all other technologies. There should be no special rules or formulae for application of those tests to software related inventions--merely an accurate assessment in light of the best prior art references and the level of ordinary skill in the relevant art at the time the invention was made. Applicants for software related patents should not be required to follow the special accelerated examination practice. A mandatory duty to search for, disclose, and discuss prior art in software related applications would be a powerful incentive to characterize inventions as other than software related in an attempt to avoid the burdens and disadvantages of that duty. Because of the breadth of the software relatedness spectrum, that burden could be applied to applications in almost all significant technologies. The advantages to the examiner of requiring the applicantŠ to prove prima facie patentability instead of requiring the examiner to prove prima facie unpatentability are great, and examiners will naturally seek every opportunity to characterize inventions as software related. Combined with applicants' strong incentive to avoid such characterization, the resulting game playing will merely exacerbate the PTO's administrative problems. The same analysis applies to the idea of requiring applicants to prove novelty and obviousness "aside from implementation. . .on a computer." Examiners will try to impose the requirement; applicants will try to avoid it; and the quality of examination and classification will suffer. Nor should the examiners' difficulties in assessing software implementations in the various technologies be cured by eliminating from consideration the implementationŠ on the computer and analyzing the remainder of the claim for novelty and obviousness. The examiners must do the job required by the patent statutes, and measure novelty and obviousness of the claimed invention from the starting point of the level of ordinary skill at the time the invention was made. Anything less will distort the patent system's incentive promoting innovation and disclosure. The patent statute says that an applicant shall be entitled to a patent unless the invention fails certain tests including those of sections 102 and 103. This places the initial burden on the PTO, and requires that the examiner demonstrate prima facie anticipation or obviousness before the burden switches to the applicant to distinguish the invention over the cited prior art references. Permitting the examiner to use a standard of proof lower than in other technologies effectively and incorrectly places the initial burden on the applicant. The PTO must not implement rules or procedures that change the statutory practice, but instead must take the steps necessary to obtain the ability to do the job that Congress has set before it. Other Access Issues - The Information Highway One item of software related technology that the PTO should follow closely and make early use of is the National Information Infrastructure or High Speed Data Highway. A major problem underlying the difficulty in examining software related patent applications is information related--the PTO does not have sufficient access to the best prior art information and the public has no convenient access to the PTO search files. The proposed Data Highway could close this information gap, providing a common resource to searchers both within and outside of the PTO. This technology could even offer a cost effective way to implement early publication of pending applications, allowing interested parties to review applications and provide relevant art. This approach would take advantage of the knowledge of those most informed in the field of software technology and most concerned about the issuance of software related patents. Question B.7 - What is the most effective way to describe software in patent applications?20 There is no "best" way to describe or depict embodiments of software related inventions, because of the breadth of software relatedness. What may work well to describe an invention in packet-switched digital telecommunications may not be at all suited to describe the microcode and processor controlling an innovative earth moving machine. Furthermore, what may be helpful to an examiner preparing to search the prior art relevant to a software related application may well confuse the judge or jury trying the issue of enablement of the resulting patent. Current practice allows the applicant to choose the combination of words and drawings that best describes the embodiments of the claimed invention. That should be true regardless of the technology involved. The applicant knows the invention, and should determine how to claim and describe it within the general confines of the statute. Questions B.8-B.12 - What difficulties do applicants face in complying with existing disclosure requirements? Should applicants be required to conform to a standardized disclosure format for software related applications? How should the submission of computer program code listings be handled?21 The best mode requirement of US law used to be a non-issue. Best mode issues seldom arose in patent contests. However, recent judicial opinions have caused quite a stir in this area, and patent practitioners have responded as they believe necessary to protect their clients' property rights. Some, in an abundance of caution, feel the need to submit program source or object code listings to satisfy the best mode requirement. Others believe that such listings add nothing useful to the content of the disclosure, and do not submit them. Those who do submit code listings today must choose between submitting each page of listing as a sheet of drawings (creating the "jumbo" and "super-jumbo" specifications clogging the Office today), and having the listings microfiched and submitted as an appendix to the specification. Each of these alternatives is costly and time consuming. The PTO cannot unilaterally resolve this matter; resolution must await legislative or judicial clarification. However, the Office could begin accepting code listings on standard machine- readable recording media containing printable files. Such machine-readable listings could be retained in the official file wrapper available for public inspection in some manner, but should not be routinely distributed with copies of the issued patent--much as microfiche appendices are handled today. However, the Office should not mandate the use of such machine-readable listings, and should continue to accept microfiche and drawings containing such listings. Otherwise those applicants awaiting definitive application of the best mode requirement to software related inventions will have no assurance that their efforts to comply with requirements will satisfy a future judge or jury. Given the opportunity to submit machine-readable listings, I expect few applicants will spend the time and money to prepare and submit drawings or microfiche. Aside from the acceptance of machine-readable program listings, the rules governing drawings in patent applications need no change. Flowcharts, block diagrams, timing diagrams, pseudocode and the like are all acceptable today, and applicants can choose the formats they believe best disclose and describe the preferred embodiments of their inventions. The PTO should not require patent applicants to conform to a standardized disclosure format for such applications. No one format can be the "best" for all of the wide range of software related technology. What would simplify examination in the Office might well complicate others' understanding of the resulting patent. Concluding Remarks The issues commented on here today are important ones for all of American industry, because software permeates every facet of technology. Industry needs the assurance of patent protection for innovative developments--software related or otherwise--to maintain and improve technological leadership into the twenty-first century. Software related technology is not inherently different from any other new technology that the patent system has faced and adapted to in the past and will be called uponŠ to deal with in the future. The problem that exists today lies not with the technology, but with the initial PTO refusal to meet it head on--the PTO resisted until the courts insisted. Had the patent system and the technology grown side-by-side, as is the usual case, there would be no hearing today. Now the PTO is a bit behind the curve, but progress is being made. This is the time to accelerate, support, and encourage adaptation to the technology, not to make a special case of it. Who can say what the next generation of innovation will bring, i.e., what will be the "software" issue of the future. With appropriate training, tools, and hiring practices, the PTO can examine software related applications just as capably as anything else, and the patent law can remain technology neutral, as it must. The Intellectual Property Owners oppose discrimination against patenting software related technology, and support the treatment of such patent applications in accordance with the well developed body of law relating to other technologies. Testimony before the Commissioner of Patents and Trademarks 10 February 1994, Crystal City, Virginia Presented by Robert Lippincott, Vice President, Content, Ziff-Davis Interactive and Executive Vice President, Interactive Multimedia Association Good morning, Mr. Commissioner, distinguished members of the panel, ladies and gentlemen, my name is Rob Lippincott. I am Vice President for Content at Ziff-Davis Interactive, an online information services and multimedia publisher. I also serve as Executive Vice President of the Interactive Multimedia Association. The Association's general counsel, Brian Kahin, who also directs our Intellectual Property Project, is with me to help answer any questions you may have. As a traditional magazine and newsletter publisher, Ziff-Davis has built a business on the value added by the work of editors and writers doing research, selecting, highlighting, and linking information, by aggregating rights, by creating original material, and by expressing the opinions they believe will influence the market, change the flow of business, or touch human souls. As multimedia information publishers, we have come to view interactivity as perhaps the fundamental principle of the new media. It is how editors and developers use computers to speak to people; it is how people use computers to get the information they need; it is how people speak to other people through computers. Most importantly, it is how communities grow and how markets are formed. Interactivity per se cannot be considered to be a patented process, it is simply how we communicate. It is this perspective which I believe is shared by the majority of my fellow IMA members and it is from that perspective that I offer the following testimony. The Interactive Multimedia Association is a U.S.- based trade association with more than 280 member companies and organizations representing all areas of the multimedia industry. Its mission is to promote the development of interactive multimedia applications and reduce the barriers to the widespread use of multimedia technology. Multimedia draws on traditional content industries (movies, television, music, publishing), which have been powerful export industries for the United States. These are creative industries which have functioned very effectively and comfortably to date. As my colleague, Tom Lopez, testified in San Jose, a number of the creative people in our emerging industry feel threatened by abstract process patents that they believe give patentees leverage over content developers and publishers. Our concern is not software patents in general but patents that constrain and control human expression and the flow of information. Under the European Patent Convention, patents are not granted for "schemes, rules and methods for performing mental acts, playing games or doing business; programs for computers; [or] presentations of information." While we have similar judicially created exceptions in our law, in certain instances they have been eroded if not eliminated. The result is that we have a patent system that has in certain instances been stretched (beyond its resources and capabilities some argue) to regulate abstract functions. From the perspective of a number of our members, multimedia developers and producers, the patent system is a one-size-fits-all system for creating property rights that is indifferent to its impact on the industries it regulates, directly and indirectly. Software is treated the same as chemical compounds, but has persistent problems in the examination process. Broad patents, especially patents that preempt functions that cannot be designed around, should not be granted without an extraordinary level of quality control, preferably in the form of peer review, as has been suggested by others in earlier testimony. Whatever the practical limitations on the knowledge and experience of examiners, they ought to be able to identify such broad claims and route the applications accordingly. Broad patents are inherently regulatory in nature. It is imperative that the claims be precise and that the examination be thorough. Such patents must be widely acknowledged and respected within the fields and industries they affect. Pre-grant publication, for both broad and narrow patents, is an absolute necessity in the software area because the patent database is so limited. In Europe, Japan, and virtually everywhere else in the world, patent applications are published before the patent is granted. Many of the patents that trouble the multimedia industry because of their breadth would never stand up to pre-grant publication. In 1966, the President's Commission on the Patent System recommended against granting patents for computer programs for practical reasons: "The Patent Office now cannot examine applications for programs because of the lack of a classification scheme and the requisite search files. Even if these were available, reliable searches would not be feasible or economic because of the tremendous volume of prior art being generated." 28 years later, and an important 28 years in the growth of our industry, the situation remains the same, because the search files have never been completely developed and the volume of prior art has, naturally, grown exponentially. However, the USPTO began to grant patents on software processes liberally without addressing the practical problems. Pre-grant publication is an alternative which could, in due course, elicit sufficient prior art to make such a database feasible. Furthermore, we have the beginnings of an information infrastructure that can make pre-grant publication inexpensive and effective. The patent system should be an integral part of this infrastructure. The problems of subject matter and problems of the examination process tend to go hand in hand. While we applaud the fact that last month the PTO finally began hiring examiners with degrees in computer science, this did not happen until 12 years after the PTO liberalized its policy on software. With the PTO granting patents on multimedia designs, business methods, and educational methods, by rights it should admit MBAs and Masters in instructional design as patent examiners. Given the past experience, we would not expect this to happen anytime soon. But the notion [suggested in question 2.] that an examiner trained in electrical engineering can deduce the level of ordinary skill in these "arts" from reading a few journal articles and patents is clearly unsupportable. The relevant "art" or "arts" should be identified by applicant, the examiners should be identified with the cited arts, and their final signature should affirm that they are skilled in those arts . There are number of other considerations we do not have time to note here but will in writing. We will do so with the understanding that other industries may feel differently about the operations of the patent system. Other industries may feel that the opportunity to maintain trade secret protection outweighs the need for a better examination process. We respect their views, because we feel that system should be tailored to promote innovation, not simply to validate preconceived rights through the threat of exhorbitantly expensive lawsuits. As you, Mr. Commissioner, suggested in San Jose, there is a dearth of economic analysis of the patent system. But there are costs that are real and, for multimedia developers, frightening. Stanford professor John Barton estimates the average cost of patent litigation at $500,000 per claim per side. The cost of insuring against inadvertent patent infringement (a minimum of $50,000 per multimedia product, with a $50,000 deductible) is a marketplace measure of the tax that the patent system places on our industry. This figure is likely to be five to ten times the cost of conventional errors and omissions insurance, which covers most other liabilities. This figure is one benchmark that multimedia developers will look to to gauge what the PTO and the Administration do to protect expression in the multimedia age. Thank you, Mr. Commissioner, for this opportunity to express the concerns of multimedia developers and publishers. TESTIMONY OF DANIEL J. KLUTH AT THE PUBLIC HEARINGS BY THE U.S. DEPARTMENT OF COMMERCE PATENT & TRADEMARK OFFICE ON PATENT PROTECTION FOR SOFTWARE-RELATED INVENTIONS February 11, 1994 Marriot Crystal Forum, Arlington, VA. Good morning ladies and gentlemen. My name is Daniel J. Kluth and I am a patent attorney with Schwegman, Lundberg & Woessner, P.A. of Minneapolis, Minnesota. I am the chair of the Software Protection Committee of the Minnesota Intellectual Property Law Association and I am the Chair of the Government Relations Committee of the Minnesota Software Association. Although I am the chair of these two Committees, I must point out that my remarks today do not have the complete endorsement of these organizations. I have polled many of the members of these two organizations and, specifically, the Software Protection Committee, and I will try to convey the impressions I received. The USPTO has been kind enough to allow me some extra time today to address both Topic B (Standards and Practices used in Examination of Patent Applications for Software Related Inventions) and Topic C (Significance of and Protection for Visual Aspects of Software Related Inventions). Thus, I will speak on both topics. First, Topic B. In reviewing the testimony given in the San Jose hearing last month, many concerns were voiced about the quality of the examination process and the issuance of seemingly overbroad and invalid software patents. I won't belabor that point. I would like to point out, however, that I believe establishing new rules in the CFR or new or special procedures in the MPEP for software inventions would be wrong. Software patent applicants should stand on the same footing as any other technology groups or classes. I do not believe there is any basis in the current statutes which would allow special burdens to be placed on software applicants. The first insurmountable barrier would be how to decide if a patent application is a "software" patent. Because there already has been so much comment in this area, I thought I would focus on questions 7- 12 of Topic B. This set of questions deals with the problem of effectively and meaningfully disclosing software-related inventions. A patent application must teach one skilled in the art how to make and use the invention (enablement) and the best mode in which an invention may be practiced. Failure to disclose the invention and teach the best mode robs the public of its part of the bargain in the patent system. In many instances, the application is filed with a source code appendix in accordance with 37 CFR Section 1.96, either in paper form or on microfiche. This is one of the few rules promulgated by the USPTO which provides special consideration to a technology class: namely software. As an aside, I would like to point out that a lot of the testimony presented in January and yesterday was directed to areas outside of the control of the USPTO. Many comments, if acted upon, would require changes to statutes and in one or two extreme cases, an amendment to the Constitution. But improving the quality of examination of software patents is very much in the sphere of authority of the Patent Office and in some cases, can be done without rule changes. Simple refinements in procedure and using existing statutes and rules will suffice. This is particularly true in the area of disclosures. The source code appendix has proven in many instances to be a burden on the USPTO and does not appear to provide the applicant with a better patent application. I suggest that we eliminate Rule 96 and place the burden on the applicant to do a better job in explaining the software operation in the body of the specification. Many patent applicants provide the source code in a patent application as a "backstop" to their application to satisfy both the best mode and the enablement requirements. I will first discuss enablement. Applicants hope that they can overcome an enablement rejection from the USPTO on their software patent application by relying on the source code to overcome the rejection. This reliance actually works against the public interest in permitting lax disclosures or poorly written disclosures in the body of the specification. By eliminating Rule 96, the applicants would be forced to do a better job of describing their invention. In many cases, Rule 96 encourages this poor practice. In many cases, the source code appendix does not teach the public anything unless an expert is hired to decode, decompile or flow chart the appendix. Unfortunately, Rule 96 has become a de facto standard. By itself, eliminating Rule 96 would return the earlier practice of submitting source code listings in the body of the specification. This practice was a terrible burden on the public and the USPTO in creating many jumbo patent applications. But this practice should never have been allowed to flourish since it violates the requirements under 35 USC Section 112 which requires that the applicant describe the invention in clear and concise terms. Patent applications filed with the source code embodiment in the specification should be rejected as not being concise and the rules allowing substitute specifications be invoked to clean up the application. This procedure would be still useful in the case of rush-filed applications, especially if the U.S. adopts a first-to-file system. Applicants who file source code listings [only if necessary] in the body of the specification would be required to follow up with a concise substitute specification. Source code listings are also submitted to satisfy the best mode requirement. But best mode is an objective standard which can rarely be tested in the USPTO examination process. This determination is made during litigation and is assisted by the discovery practice to determine the inventor's state of mind and to determine if the best mode was suppressed or concealed. In all other technology areas for patents, the best mode for practicing the invention is a comparison of the specification to information obtained during discovery. Software patents should be treated the same as other technology areas and the specification should stand alone without reliance on a source code appendix. Allowing for and even encouraging the submission of source code listings also hurts the public by discouraging some applicants from filing software patent applications for fear of losing trade secret protection for the non-patentable aspects of the software disclosed in the source code appendix. In short, source code listings are similar to the submission of a model of the invention which is no longer required or even allowed. Eliminating Rule 96 is consistent with my position that no special burdens or rules be carved out for software-related technology or patent applications. Once the source code is gone, how best to describe software? Question 9 asks the question in effect "Should the PTO require a standardized disclosure format for software patent applications?" Patent applicants already are granted a broad range of disclosure options in all other technology classes. Requiring a standard submission format would place a heavy burden on the application since different software is best described in different ways. In many cases, high level pseudo- code is more descriptive than flow charts. State diagrams are often better for sequential operation descriptions. All these forms should still be allowed. It is true that many players in the software industry have complained about the readability of the patent applications. But the existing drawing requirements in the CFR require that the claimed invention be shown in a drawing (with some limited exceptions). This rule should be used by examiners to improve the disclosures and allow the submission of drawings taken from the description in the specification.. Another existing rule which is used very little in my experience is the discretionary authority of Examiners to require that the Abstract and the Summary of the Invention sections of the patent application be amended to reflect the allowed claims. The use of this tool by the Patent Office may work to improve the readability of many software patents thereby diffusing much unfounded criticism of overbroad software patents in the software industry. And now I would like to address my remarks to Topic C: The Significance of and Protection for Visual Aspects of Software- Related Inventions. I will not go into a lengthy history of the development of this issue, but I have followed the topic with great interest ever since the first icon design patents issued to Xerox Corporation in June of 1988. In August of 1988, Steven Lundberg and I published an article in the Computer Lawyer entitled "Design Patents: A New Form of Intellectual Property Protection for Computer Software", which was later republished in the JPOS. This article and the ensuing interest in the matter resulted in a single letter being written to the Commissioner of Patents and Trademarks opposing this form of protection. I learned through an FOIA request that other letters were also received, but they were all supportive. This led to a chain of events in which the pending Xerox design patent applications were rejected under 35 USC Section 171 and that those rejections led to the Patent Office Board of Patent Appeals and Interferences decision In re Strijland and other decisions. The strict holding in the Strijland decision was that the Xerox design patent applications as originally filed did not show an article of manufacture and, hence, were deficient. The later amendments to the application to describe the icons for use on a computer screen were rejected as new matter by the Board. The Strijland decision went beyond the holding to suggest that if Xerox had shown a three-dimensional article of manufacture on which the icon was displayed, this would be proper subject matter under 35 USC Section 171 and the article of manufacture was then a programmed computer screen display. To date, the Patent Office has not issued any comments on the Strijland decision or the other related cases. The Patent Office is instead suspending all prosecution of these cases even if they comply with the Strijland requirements. My position is that the Strijland decision was correct in stating that the application as originally filed did not disclose an article of manufacture if you adopt their position that the word ICON is not limited to the computer field. If an application for an icon or a screen display properly describes the article of manufacture in the title or description as being software for a programmed computer screen display, I believe this is enough to pass muster under 35 USC Section 171. This leads me to my second point which is that the Board misconstrued what is the article of manufacture. I contend that the article of manufacture is the software, not the programmed screen display. This is consistent with the test for infringement for a design patent which as stated in the Supreme Court case of Gorham v. White reads: "If in the eye of the ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other". So, like in the trademark infringement test, inducement of an ordinary purchaser is key. The point is that an ordinary purchaser of software would not be induced to purchase one computer thinking it to be another. The purchaser would confuse the software. This clarity of definition of the article of manufacture harmonizes the infringement test with the other issue in the Strijland decision: namely - the dicta which required future cases to show a three- dimensional computer screen adorned by the icon. This is not necessary since the article of manufacture, the software, defies a three- dimensional drawing. The drawing requirements of 37 CFR are not rigid in their requirement of a three-dimensional object and the statute, 35 USC Section 171, does not require it. The Patent Office has not required it in type font design patents, game board design patents and watch faces, to name a few. To require three- dimensional drawings for icon or screen display design patent application is setting an extra burden for these cases which is unjustified. In summary, I believe that the holding in the Strijland decision can be satisfied by describing the icon designs as for display on a screen display of a programmed computer. I do not believe the dicta of the Strijland decision need be followed since three- dimensional drawings are not required, and I believe that the article of manufacture is the software. Finally, I have detected very little concern in the software industry for the issuance of design patents for screen displays. 35 USC Section 171 should not be used as a gatekeeper in this regard since the requirements of novelty and non- obviousness under 35 USC Sections 102 and 103 will ferret out designs that are not worthy of protection. Thank you, Daniel J. Kluth RONALD S. LAURIE Direct Line: (415) 926-6210/Internet: rsl@applelink.apple.com WEIL, GOTSHAL & MANGES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS SILICON VALLEY OFFICE 2882 SAND HILL ROAD, SUITE 280 MENLO PARK, CA 94015-7022 TEL: (415) 926-6200 FAX: (415) 854-3713 DALLAS/HOUSTON/MIAMI/NEW YORK/WASHINGTON D.C./BRUSSELS/BUDAPEST/LONDON/PRAGUE/WARSAW January 21, 1994 Via Facsimile & Express Mail Commissioner of Patents and Trademarks U.S. Patent and Trademark Office, Box 4 Washington, DC 20231 Attention: Jeff Kushan re: PTO Inquiry on Patent Protection for Software- Related Inventions Docket No. 931222-3322 Dear Mr. Kushan: Responsive to the Notice of Public Hearings and Request for Comments concerning the above subject which appeared in the December 20, 1993 issue of the Federal Register, I respectfully request the opportunity to present some brief oral remarks at the hearing to be held in San Jose, California on January 26-27, 1994. I would like to address the issue of patent protection for software-related inventions generally rather than the specific questions raised in the Notice. The views expressed herein are my own and do not necessarily represent the position of my law firm or any particular client thereof. By way of introduction, I have worked in Silicon Valley for thirty three years, initially as a programmer and software designer and later as a patent lawyer focusing on computer technology. I currently teach a course at Stanford Law School titled, Intellectual Property Protection for Information Technologies. I have previously served on advisory panels to the National Research Council and the National Academy of Science in connection with software protection. I was the only patent lawyer on the advisory panel to the Office of Technology Assessment in its recent study of the subject. When one listens carefully to the impassioned arguments against Òpatenting software,Ó it becomes apparent that the arguments, and the basic intellectual property policy positions which underlie them, can be classified into three categories: (a) Òpatents are badÓ; (b) Òsoftware patents are badÓ; and (c) Òbad software patents are bad.Ó The first position is most often heard in the halls of academia and raises fundamental social and economic issues which go far beyond the scope of the present inquiry. The second position is often advanced by some, though not by any measure all, of the software companies that emerged and flourished during the early and mid eighties as a direct result of the commercial introduction of the microprocessor, at a time when the industry generally (and incorrectly) believed that software-based inventions were unpatentable as a class. The third position is the one most widely held today, and for obvious reasons, the easiest to defend. In the heat of the debate over software patents the boundary between the second and third positions tends to blur, but it is important to address them separately. I respectfully submit that the second position is legally unsound and that the third, while correct, does not represent an insoluble problem. In support of my thesis, I offer the following five premises: Premise One. U.S. patent law does not protect software. Rather, it protects processes and machines that are Òwithin the technological arts.Ó In one of the first cases to consider the question of whether inventions involving computer programs constituted patentable subject matter, Judge Giles Rich (one of the principal architects of the current patent statute) introduced the phrase Òtechnological arts,Ó as the modern equivalent of the Constitutional term Òuseful arts,Ó and as therefore defining the outer boundaries of patentable subject matter both under the Constitution and under Section 101 of the Patent Act, All that is necessary, in our view, to make a sequence of operational steps a statutory ÒprocessÓ within 35 USC 101 is that it be in the technological arts, so as to be in consonance with the Constitutional purpose to promote the progress of Òuseful arts.Ó (In re Musgrave, 167 USPQ 280, CCPA 1970; emphasis added.) Over the more than two decades since Musgrave, Judge RichÕs formulation has remained unchallenged by any subsequent decision -- although, unfortunately, it has been ignored by many. Thus, any process that is not sufficiently applied to the physical environment in which it operates to qualify as being Òwithin the technological artsÓ represents unpatentable subject matter. The critical distinction is between applied technology and abstract ideas. Examples of the latter include laws of nature, scientific principles, methods of doing business, printed matter and unapplied mathematical relationships. Premise Two. Computer-implemented solutions to technological problems - in the form of processes and/or machines - typically exist along a design spectrum ranging from pure hardware (i.e., random logic) to pure software (i.e., an externally loaded computer program running on a general purpose digital computer). Intermediate points along the spectrum involve designs which may described as special purpose computers and which combine elements of hardware and software in varying proportions using random logic, array logic (such as PLAs and PALs), microcode and ÒfirmwareÓ (fixed programs stored in internal read-only memory). The particular point along the design spectrum that represents the optimum solution to a given problem is determined by a variety of factors such as cost, speed, size, flexibility and so on. Moreover, the optimum design point moves over time as competing implementation technologies evolve at different rates. For example, in the mid seventies, complex video game functionality was implemented entirely in random logic; after the arrival of the microprocessor, the very same functionality was realized using firmware. Finally, technologies such as logic synthesis are becoming available by which a software solution can be ÒtranslatedÓ into an equivalent hardware solution, and vice versa. It should be self evident that, as a matter of legal policy, the law should not promote artificial distinctions that the technology does not recognize. Premise Three. The fact that a particular solution can be expressed mathematically, or as a series of logical operations, should be irrelevant to the patentability of the solution. In 1972, based on what many commentators believe to be an erroneous interpretation of its prior decisions involving laws of nature and scientific principles, the U.S. Supreme Court announced in Benson v. Gottschalk that a patent claim describing a process which Òwholly preempts a mathematical algorithmÓ is non- statutory, i.e., does not define patentable subject matter under Section 101 of the Patent Act. The result of this formulation has been over two decades of confusion and inconsistency in the case law involving the patentability of software- implemented or assisted processes. The fact is that mathematics is a language, albeit a very precise one, and like other languages can be used to describe concepts and relationships that are technologically applied as well as those of a more abstract nature that are not so applied. (As noted by Professor Chisum, the real issue is not one of subject matter under Section 101, but rather one of indefinite claiming of the invention under section 112.) Under the Constitutional standard (Òwithin the technological artsÓ), it is the subject matter of the invention and not the language chosen to describe it, that should determine the presence or absence of patentable subject matter. Premise Four. Even if a particular software-implemented solution represents patentable subject matter (see Premises One through Three), in order to justify the exclusionary benefits conferred by a patent, it must also pass the tests of novelty and nonobviousness over the prior art. This is the key factor that interrelates the second and third Positions discussed above, i.e., software patents are bad versus bad software patents are bad. That is, even if a software-implemented solution is sufficiently technologically applied to pass muster under the statutory subject matter test, in order to qualify for patent protection the solution must also be novel and not Òobvious to a person of ordinary skill in the art to which the invention pertains.Ó (It is submitted that, given the objective to be accomplished and accepted principles of software design, most of the software written today would not pass the nonobvious test.) Thus, the effectiveness of the patent system in a particular area of technology is directly related to the degree to which the examining authority, in this case the U.S. Patent & Trademark Office, has access to the most relevant prior art. To the extent that there are, or can be created, mechanisms through which the PTO can access the widest body of software-related prior art, the system will work. A number of such mechanisms either exist or are being discussed. These include: PTO access to the growing number of commercial and public databases of software technology, private sector assistance in supplementing the PTO internal database, early publication of patent applications coupled with submission of prior art by individuals, companies or industry groups, and institution of reexamination proceedings by third parties or by the PTO. The important point here is that the problem of bad software patents is mechanical and not inherent. That is, over time it can be engineered away, or at least reduced to a commercially tolerable error rate. Premise Five. A very heavy burden of persuasion should be placed on anyone who advocates that a particular kind of technology should be exempted from the normal operation of the patent system. In 1980, the U.S. Supreme Court, in Diamond v. Chakrabarty, interpreted the patent-copyright clause of the U.S. Constitution to require that the scope of patentable subject matter should be as broad as possible (Òanything under the sun that is made by manÓ). Those who maintain that software-based inventions should be excluded, as a class, from patent protection argue that, ÒSoftware is different.Ó ItÕs different, they argue, in terms of its essential character (itÕs ÒlogicalÓ); itÕs different in terms of the creative process by which it comes into being (itÕs ÒauthoredÓ rather than engineered); or, itÕs different in terms of the underlying economic model governing its production, distribution and life cycle. These differences have been discussed and debated at gatherings of distinguished software developers, computer scientists, economists and legal scholars and practitioners under the sponsorship of a number of government agencies including the National Research Council, the National Academy of Science, the Office of Technology Assessment of the U.S. Congress, and the U.S. Patent & Trademark Office. Despite the fact that the positions on both sides have been eloquently expressed, the results are inconclusive. The primary reason is that there is no hard data available to support the anti-software patent position and the evidence is anecdotal at best. Clearly, software is different; but is it different enough from all other technologies to justify a special exemption from the operation of the patent laws? Given the unavailability of reliable data on the societal costs and benefits of patenting software- implemented technology, we are presented with a situation where important policy decisions must be based on fundamental legal principles. In such a setting, we must conclude that those who would withhold patent protection from technologically- applied processes and machines that happen to be implemented partially or wholly in software, have failed to satisfy the burden that the Constitution, the Supreme Court, and sound legal policy principles have placed upon them. Thank you for providing the opportunity to present these remarks. Very truly yours, Ronald S. Laurie PTO HEARINGS ON PATENTABILITY OF SOFTWARE- RELATED INVENTIONS Testimony of Allen M. Lo Good morning. My name is Allen Lo. I worked as an examiner in Group 2300 for two and a half years, examining patent applications involving computer control systems, computer aided product manufacturing, and error correction and detection systems. Last March, I left the PTO to work for the law firm of Finnegan, Henderson, Farabow, Garrett and Dunner, where I currently prosecute and write patent applications, many of which involve software-related inventions. I also currently attend the Georgetown University Law Center as a third-year evening student. Today, I am speaking on my own behalf. The views that I will express are my own and do not reflect the views of the firm or its clients. Mr. Commissioner, I would like to address two different matters this morning. First, I would like to speak on Group 2300's policy regarding the patentability of claims drawn to software stored on a disk. Second, I would like to make a few comments about what the PTO can do to improve the quality of examination. Beginning with the first issue, it has been the policy of Group 2300 that claims drawn to software stored on a disk are per se unpatentable. During the examination of an application involving a software-related invention, examiners in Group 2300 place the claims into one of two groups: implemented and non-implemented computer software. Implemented computer software generally refers to computer software which is claimed as being executed on a computer, and is treated by Group 2300 as being patentable, subject to the novelty and nonobvious requirements. For example, a claim reciting a general-purpose computer running a novel and nonobvious computer program is treated as being a new machine and, thus, would be allowed. In contrast, non-implemented computer software refers to computer software that is not being executed on a computer, in other words, a static program. Claims reciting non-implemented computer software may be directed either to the computer program itself, such as "a computer program comprising" followed by source code or means-plus-function, or to software stored on a disk, such as "computer-readable medium storing a computer program, comprising," followed by source code or mean-plus-function. Group 2300 views claims directed to non-implemented computer software as being per se unpatentable. I would like to focus my comments on one type of non-implemented software claim, that is, a claim reciting a disk storing a computer program claimed in terms of means for performing FUNCTION A, means for performing FUNCTION B, etc. Examiners in Group 2300 are trained to reject this type of claim under 35 U.S.C. ¤¤ 101, 102, 103, and 112 first and second paragraphs. These rejections can be simplified and generally classified into 3 categories. First, the claim is rejected under 35 U.S.C. ¤ 101 as being directed to printed matter. Second, the claim is rejected under 35 U.S.C. ¤¤ 102 and 103 over a prior art disk by effectively reading out any specific recitations in the claims directed to a computer program and concluding either that the claims are anticipated by a prior art disk or that storing any type of data on a prior art disk would have been obvious. And third, the claim is rejected under 35 U.S.C. ¤ 112, first and second paragraphs, because the disk itself is unable to perform the claimed functions, but requires a computer to be claimed to perform the recited functions. I believe that these rejections are either unsupportable under the case law or can be avoided by careful claim drafting. With respect to the printed matter rejection, the claim does not attempt to claim the mere arrangement of words, such as the program code, but rather the claim is specifically directed to the functionality that is provided by the computer program and, thus, the claim does not contain printed matter. Even if the computer program can be analogized to printed matter, the case law provides an exception to the printed matter rule where there is a functional relationship between the printed matter and the medium which the printed matter is on. In the case of a computer program stored on a disk, the computer program transforms the disk into a new disk the same way that a computer program running on a computer transforms the computer into a new machine. With respect to the rejections over a prior art disk, it is simply improper for the PTO to ignore any recitations in the claim, particularly, in this case, where the computer program is claimed in means-plus-function language. Finally, with respect to the rejections based on the disk being unable to provide the claimed functions, the claim can be drafted to more specifically and particularly claim the actual function that is performed by the disk.22 For example, the claim can be drafted to read "a disk storing a computer program, comprising: means for instructing a processor to perform FUNCTION A . . ." It should be noted that claiming software on a disk is not merely a trivial exercise in claim drafting. Patentees have an interest in obtaining claims drawn to software stored on a disk. By disallowing these types of claims, patentees must obtain patents with claims drawn to software running on a computer. When a patentee seek to enforce his patent, manufacturers and sellers of infringing software would not be liable for direct infringement to the patentee as long as they are not running the software on a computer. Instead, the users of the infringing software, usually the customers, would actually be the ones to directly infringe the claims. Manufacturers and sellers of infringing software would only be liable to the patentee under cumbersome theories of contributory infringement and inducement of infringement, requiring the patentee to prove additional elements, including knowledge and intent. Whether or not the PTO changes its policy toward non-implemented computer software, it is important that the PTO at least publish in the Official Gazette clear guidelines and rules defining the types of software claims which the PTO considers to be acceptable. Now, turning to the matter of improving the quality of examination, I would like to make the following observations and suggestions. First, as others have suggested, examiners in Group 2300 need to receive more legal and technical training. Many of the examiners who attend law school eventually end up leaving the PTO to accept more lucrative positions in private practice, resulting in fewer and fewer examiners with legal training. I would recommend that more in-house legal courses teaching basis legal skills, such as legal research and writing, be offered to those examiners who don't attend law school. Further, examiners should be invited and encouraged to attend meetings and lectures related to software patenting, such as today's hearings, so that they can better understand the "big picture" and appreciate the issues that they face during examination. Further, more technical courses need to be offered to increase the level of technical understanding within the group. It is difficult for an examiner to appreciate the advantages and benefits of an invention if the examiner is unable to understand what the invention is. And, as Dave Clark pointed out earlier, the training of examiners is undermined if the PTO is unable to retain its examiners. My experience has been that examiners leave the PTO for various reasons. Certainly, many examiners are lured from the PTO by the higher salaries offered by patent law firms. This problem can be somewhat alleviated by raising salaries in groups with high turnover rates, such as Group 2300. However, I believe that some examiners, myself included, leave the PTO because they feel that the examining function is no longer stimulating or challenging. Finding solutions for retaining these people may be difficult, but I believe that the Examiner Enrichment Program which the Commissioner mentioned in his opening remarks yesterday is a definite step in the right direction. Finally, there is a natural tension between the count system and the quality of examination. While the count system is a necessary evil, I submit that the quality of examination can never really be appreciably increased without a reassessment of the number of hours that examiners are allotted to work on each case. Thank you for allowing me this opportunity to testify. APPENDIX-- PROPOSED ACCEPTABLE FORMATS FOR CLAIMS DRAWN TO NON-IMPLEMENTED COMPUTER SOFTWARE 1. A computer-readable medium storing a computer program, comprising: means for instructing a processor to FUNCTION A means for instructing a processor to FUNCTION B; and means for instructing a processor to FUNCTION C. 2. A computer-readable medium storing a computer program, the computer program comprising the following modules: a module for FUNCTION A; a module for FUNCTION B; and a module for FUNCTION C. 3. A computer-readable medium configured in a manner as to be capable of instructing a computer to perform the following steps: STEP A; STEP B; and STEP C. MULTIMEDIA DEVELOPMENT GROUP (MDG) 2601 Mariposa Street, San Francisco, CA 94110 Ñ Tel: 415/553-2300 Fax: 415/553-2403 January 27, 1994 Good morning, my name is Tim Boyle. I am speaking for the Multimedia Development Group (MDG). I am the Acting Executive Director of the Group. The Multimedia Development Group is a market development oriented trade association based in San Francisco. Our members are primarily interested in the "software" side of the multimedia industry. We represent over 400 companies in this industry: about 200 multimedia developers and publishers; 50 technology companies; 150 service providers: including accounting, public relations, marketing firms, 25 law firms; we also represent 20 to 25 educational, non-profit and governmental organizations. Our mission is to help emerging multimedia software companies become commercially viable by facilitating communication between the parties who develop, fund, service, sell or regulate multimedia titles. Thank you for providing this forum. We appreciate the fact that you are soliciting our opinions. We would like to address three points today: The first is the need to stimulate the creative process, and the commercial structures that support them, through an equitable code of intellectual property Second, the need for this code to meet the digital challenge by distinguishing between patent-able inventions and copyright-able creations And finally, some suggestions for your consideration, such as the possibly of incorporating some of the precepts of academic science in the work of the Patent & Trademark Office (PTO), in particular Peer Review The furor over Compton's New Media patent claim comes from our community. We note with pride that Compton's New Media is a member of our organization and wish to see their creations appropriately protected. The majority of our members believe that the ideas at issue in that claim are better protected by copyright rather than a patent. Compton's Multimedia Encyclopedia is a very clever, and extremely innovative, use of the new vocabulary of digital communication. As such it represents a unique and creative arrangement of fundamental elements which constitute the new vocabulary of the artist and author in the digital age. Graphical screen elements (windows, buttons and such), search and navigation methodologies and multiple views of databases are part and parcel of this new vocabulary. It is their use in the expression and representation of ideas that creates value and this is the value our membership believe must be protected. We look to the PTO to identify, understand and protect the fundamental concepts of this new media. These concepts properly belong in the "public domain" because they are the alphabet, the building blocks, of our new media. The multimedia developer community has a vested interest in protecting their intellectual work from unfair copying or infringement and to ensure that the "concepts" on which they are based can be freely exchanged. We believe that one can only properly assess the "patent-ability" of a work after reviewing it in the context of all the work which has gone before it. This was a much more simple task in the Industrial Age than it is, at this point, in the Information Age. How would theater have developed if the concept of "plot" was owned by someone? William Shakespeare could never have afforded the licensing agreement. It is the innovator, and society, who will suffer if we fail to protect the "novel" or recognize the "obvious" in this new media. We suggest... Opening up the patent application process. The current process has been characterized as "secretive", we would like to see that characterization change. Peer Review. In academic science a discovery is accorded recognition only when it has passed the test of Peer Review (remember cold fusion). We recognize that there are problems that open review presence's for inventions with great commercial potential. The members of our industry have put forward a number of proposals in this regard. Our organization endorses the general concept of Peer Review as an important element in the evaluation of software patent applications. Building a definitive library of Prior Art. The MDG has published a call for "Prior Art" to be housed at the law firm of Morrison & Foerster, to the attention of Jim Shay. We would like to offer your office access to any and all materials we receive. We would like to establish an ongoing relationship to ensure that your office has access to any Prior Art it requires. The Multimedia Development Group's purpose is to represent the interests of the multimedia development community and to grow this industry. We would like to extend our hand to assist you in gaining access to, and understanding the needs of, this community. We want as strong a relationship with our Patent Office as the one enjoyed by the metal fabricating inventors of the Industrial Age. That Patent Office created the basis for the most explosive economic growth the world had ever seen. This Patent Office has the opportunity to dwarf that achievement by creating the basis for a global information economy. The Evolving Telecommunications Infrastructure Information Services and Entertainment Good Afternoon President Fessler and members of the commission. My name is Tim Boyle, I am the Director of the San Francisco - Multimedia Development Group (SF-MDG). Thank you for this opportunity to talk to you about potential information services and entertainment possibilities in our evolving telecommunications infrastructure. I represent an industry which has hardly been born. One where employees are still learning, still inventing, the terminology they will use to communicate with each other. An industry that did not exist more than ten years ago and where most of the companies have been building products for less than two years. I represent a technology that is considered the next logical step in computing, it is seen as the future of Hollywood, and it is intregal to the strategic plans of every telephone and cable television company in America. I represent the multimedia industry, more specifically companies involved in the content creation side of this industry. Multimedia is a difficult term to define, or, it is a term with many definitions. Among these are ... Multimedia is the convergence of Television, Computers, and Telecommunications. it is the combination of text, graphics, audio and video delivered through a computer. a process to communicate, inform, educate or entertain under user control. For instance, co-workers in different cities -- Los Angeles, Fresno and Eureka -- need to agree on their departmental budget. They need to share their work, their spreadsheets and databases; they need to discuss alternatives; and they need to ÒseeÓ what the other people are talking about. Our present telecommunications system will let them ÒcommunicateÓ to some degree by telephone, fax machines and perhaps modems. But , it will happen over a relatively long period of time -- days or weeks -- and if they really want to be effective they will probably have to meet in one location to share information. One variant of multimedia, video-conferencing with data transfer, would allow these people to look at each otherÕs computer programs, share background information, try out different budgets, talk to experts if they need to, run a point by the boss - in real time or by electronic mail, in a word communicate. But this more comprehensive conversation would take an hour. The difference between POTS and multimedia is in the richness of the communication and the time required to accomplish the task. Multimedia informs... Three hotels in San Francisco are offering access to the city from their rooms. By simply pressing buttons on the TV set remote control, hotel guests can obtain information about local museums, art galleries, restaurants, shopping areas, daily events, transportation -- plus electronic tours of local neighborhoods. You learn with multimedia... A department store chain went to one of their fabric suppliers and wanted to know why their quality had gone UP so radically in the last 90 days. The supplier tracked the change to an interactive videodisc training program newly required of their sewing machine operators. The operators were generally older women with lower levels of print literacy, while they had received traditional training the classes proved ineffective. These women finally understood how to prevent the problem when they saw a graphic showing their sewing machine needle in operation and in slow motion. They could speed up and slow down the process and literally see the problem happen. Once they could see the problem, and go back to see it happen again and again, they learned how to avoid it. Multimedia is entertainment... Just ask the Nintendo generation. There are approximately 30 million younger adults in America who have been raised on graphics, music and interactivity. We are not faced with evolutionary adoption of this technology but with a revolutionary expectation from the next generation. Sierra On-Line has a run-away hit dial-up computer program where people, largely younger people, can interact and play games over the telephone lines. The most severe limitation on this game is that it has to run on POTS, which is the pits. The San Francisco - Multimedia Development Group is a non-profit trade association whoÕs mission is to Òserve the businesses involved in the multimedia creative processÓ. We have approximately 175 member organizations, currently -- 40% are multimedia developers, 35% are professional service firms related to content development, 15% are technology companies, 7% are capital sources and 7% are content owners. Our membership includes game developers, corporate training specialists, information kiosk makers, teleconferencing software and hardware makers, authoring software companies, video producers, universities, and print publishers. These are the people inventing the products and services we would like to send over the lines in the not too distant future. We appreciate the fact that you are soliciting our input into our evolving infrastructure because an infrastructure to support high speed data and video services is of little value in itself. I quote from Frank Biondi, CEO of Viacom Cable in the June 8th Financial World. ÒIn the end, a pipe is just a pipe. The customer wonÕt give a damn how the information reaches him. All that matters is the message.Ó It is our intention to create a catalytic center to foster the development of content, or ÒmessagesÓ as Mr. Biondi says. What opportunities will accrue to Californians if you plan for these multimedia products and services in our evolving telecommunications infrastructure? The short answer is jobs. Knowledge worker jobs in the thousands. Jobs producing the multimedia hardware and software for export. More importantly, jobs that employ the multimedia process to assist Californians to become more productive. Jobs that allow people to earn a good living. Jobs that do not pollute. Jobs that export goods, and services, to the rest of the world. Jobs that will make California the capital of this new information age. The multimedia uses I have described have been invented by small companies, embryonic in some cases. We are at the beginning of our productive lives, our situation is similar to the telephone, movie, automotive or aerospace industries at the turn of the last century. These industries are currently the basis of CaliforniaÕs economy but when they started telephones were novelties, movies were curiosities and the first airplane flight was shorter than the wingspan of todayÕs jumbo jets. With your leadership, we can create an information economy and an export industry as important to CaliforniaÕs tomorrow as these industries are essential to California today. Tim Boyle Director San Francisco - Multimedia Development Group (SF- MDG) 415/553-2300 TESTIMONY OF RICK D. NYDEGGER23 Good morming Mr. Commissioner, distinguished Members of the Panel and fellow participants. My name is Rick D. Nydegger. I appreciate this opportunity to participate in these proceedings and to add my comments to the record of these hearings. I am appearing today on my own behalf and the views which I express are my own. I wish to first make a few introductory comments, which I will then follow with specific comments in response to the subject of this hearing, namely, standards and practices used in examination of patent applications for software-related inventions. Much has been written and said by way of criticism about overly broad patents having been granted by the PTO for software-related inventions. However, it should be remembered that these types of problems are not unique to software-related inventions, but have existed and will exist in connection with any type of new and rapidly emerging technology. Indeed, in the celebrated Telegraph case24 that was decided by the Supreme Court in 1854, the eighth claim in Samuel Morse's patent on the telegraph was ultimately invalidated as being overly broad, although granted initially by the Patent Office. However, equally important, though often overlooked, is the fact that the first seven claims in Morse's patent were upheld, thus providing broad protection for a new technology which spawned a whole new industry. In similar fashion, in 1888 Alexander Graham Bell's patent for the telephone was also challenged as being overly broad. Claim five of Bell's patent was contained in a mere five lines and simply read: The method of, and apparatus for, transmitting vocal or other sounds telegraphically, as herein described, by causing electrical undulations, similar in form to the vibrations of the air accompanying the said vocal or other sounds, substantially as set forth.25 Yet in upholding that claim, the Supreme Court said: It may be that electricity cannot be used at all for the transmission of speech except in the way Bell has discovered, and that therefore, practically, his patent gives him its exclusive use for that purpose, but that does not make his claim one for the use of electricity distinct from the particular process with which it is connected in his patent. It will, if true, show more clearly the great importance of his discovery, but it will not invalidate his patent.26 Those "skilled in the art" of prosecuting patent applications for software-related inventions will readily appreciate the similarities between the claims and the issues raised in the Telegraph and Telephone cases and the issues raised by the claims in many software-related inventions. I cite these historical examples merely to point out that criticism and charges that overly broad patents are issued by the Patent Office is not new, particularly when dealing with fundamentally new and rapidly changing technologies. Yet the fact remains that in both these cases, as in many others, protection under the patent system was broadly afforded to these emerging technologies, on which entire industries were ultimately founded. That is not to say that the U.S. patent system, as it presently exists, is without problems that need to be carefully examined. Indeed, I strongly support the increased efforts being made by the Patent Office, including these hearings, to become more "customer oriented" and to create a stronger sense of partnership with American inventors at all levels. However, when examining the problems that may exist under the patent system there is a need for temperance, and we should be slow to eliminate or narrowly circumscribe protection for any new or emerging technology simply because the "newness" of that technology makes it difficult to search, difficult to disclose, or difficult to apply statutory standards of eligibility or patentability. With these remarks in mind, I turn to some particular comments on examination standards and practices that will, it is hoped, suggest possible ways to strengthen the patent system and the way in which the patent system can serve to both reward and foster innovation, as well as continuing to strengthen our country's economy and ability to compete in an increasingly competitive global marketplace. Specifically, I wish to direct my comments to four areas: one, improving access to relevant prior art; two, improving the experience, training and retention of qualified examiners; three, reducing the present emphasis on pendency time and adopting early publication procedures; and four, expanding third-party participation in reexamination and opposition proceedings. First, improving access to relevant prior art: For "pure software" systems (e.g., application programs, computer operating systems, network operating systems, and database management systems to name a few), access to prior art other than patents or printed publications is needed because many such "pure software" techniques have not been documented or published in traditional ways. Much is already being done to rectify such problems. Efforts such as the APS Classified Search and Retrieval System and private efforts such as those of Dr. Bernard A. Galler with respect to the Software Patent Institute are commendable, and are helping to develop an adequate prior art database. The PTO has and should continue to request voluntary submission of product descriptions, user manuals, administrator guides and programming guides in softcopy from software developers, for addition to the PTO's library. The current reclassification efforts with respect to software-related inventions have been quite successful, and Director Jerry Goldberg and his team in Group 2300 of the PTO have been doing an excellent job of reclassifying software-related technology within the Patent Office. In addition, to the extent that such a source has not already been considered, a classification system which takes into account classifications proposed by the IEEE and the ACM might be considered. These classification systems represent industry efforts to classify software-related technology. Continued effort is needed in all these areas. Another way to provide patent examiners with access to the most complete up-to-date prior art is to solicit the assistance of those most interested in seeing to it that patents with overbroad claims do not issue, by providing for publication prior to grant, and by providing an opportunity for interested parties to submit relevant prior art before issuance. This is discussed further in point three, below. Point number two, improving the experience, training and retention of qualified examiners: Patent examiners who are not well qualified or trained or who lack adequate resources will not be able to adequately assess an invention's patentability. Thus, patent examiners need to have proper background in the software-related arts, and every effort needs to be made to retain well qualified and experienced examiners. One way to ensure that patent examiners have proper training in the field of software-related technology is to recognize computer science as a "science" for the purpose of serving as a patent examiner. Another important step toward improving the examining corps' performance level in the field of software-related technology is to improve the retention rate of examiners. On-the- job training builds examiner competence, and examiners should be encouraged to stay on the job. The PTO should consider conducting a comprehensive study to find ways of increasing the retention rate of well-qualified, trained and experienced examiners and to provide adequate resources in terms of physical support facilities and personnel to permit efficient and thorough examination to be carried out. Point number three, reducing the present emphasis on pendency time and adopting early publication procedures: The PTO should decrease the present emphasis on pendency time, concurrent with adopting early publication procedures. The current emphasis by the PTO on pendency time is misplaced. Since a patent is an important means for disclosing details concerning new technology, the important question is not pendency time, but rather time to publication. This concept is recognized in the patent laws of most major industrial countries, which provide for publication of an application eighteen months after the priority date. Delays in publication can mean that the technology disclosed in a patent is not available to the public in a timely fashion, which may delay further development of the technology, and leads to problems with so- called "submarine" patents. The present emphasis on reducing pendency time has a number of undesirable consequences on the examination process. For example, if a patent issues within the approximately eighteen-month pendency time as now suggested by the PTO, prior art from foreign patent tribunals is most likely not available for consideration by the U.S. examiner. Having this prior art is particularly important in the software-related arts, and would help to protect against issuance of overly broad patents. It would make for a more complete examination and higher degree of confidence in the validity of an issued patent for such inventions. It is thus suggested that consideration be given by the PTO to publishing applications eighteen months from the priority date. This publication should be contingent upon providing a search report prior to publication, to permit the applicant to amend or withdraw the application prior to publication. Following publication, the applicant should be entitled to recover damages for use of the invention after publication but prior to issuance in the event of infringement. Examination could then take place in a more contemplative environment. It should be noted that early publication can also operate as early notification to others working in the field of the potential issuance of a patent, allowing them to factor that into their business decisions, thus minimizing the problems with "submarine" patents, as noted above. Point number four, expanding third-party participation in reexamination proceedings: The PTO should consider changing the current procedures governing reexamination. The problem of patents that are issued with overbroad claims could be reduced by changing the current procedures governing reexamination. Third parties are reluctant to institute reexamination because of the essentially ex parte nature of such proceedings. The PTO should expand the ability of third party petitioners to participate in reexamination after the petition is granted. If such a reform were made, the use of reexamination would increase, and the reliance on the courts would decrease. In conclusion, Mr. Commissioner, I believe that the above proposed changes would serve to greatly strengthen the U.S. patent system in ways that would appropriately further the progress in science and the useful arts, as contemplated under the Constitution, and in ways that would continue to help U.S. industry to effectively compete by protecting investment of U.S. companies in important, new technologies of the type that is typified by the software and electronics industries. Thank you. TESTIMONY OF ORACLE CORPORATION/JERRY BAKER BEFORE THE UNITED STATES DEPART OF COMMERCE PATENT AND TRADEMARK OFFICE JANUARY 26, 1994 Good Afternoon, distinguished representatives of the United States Patent and Trademark Office and members of the public. I am Jerry Baker, Senior Vice President of Oracle Corporation, and head of the company's Product Line Development. Oracle is now a one-and-one-half billion dollar company employing over 11,000 people worldwide. At Oracle, we believe that patents are an inappropriate means for protecting software, and are concerned that the patent system is on the brink of having a devastating impact on the software industry. In our opinion, copyright and trade secret law is satisfactory to protect a developer's rights in software and to promote innovation in our industry. I commend you, Commissioner Lehman, for the foresightedness to recognize this imminent threat, and to hold these hearings. This administration has shown tremendous strength of character by raising such fundamental questions about its mission and objectives, and I applaud you for doing so. As we proceed through these hearings let us always keep sight of the U. S. Constitutional mandate for the patent system: "To promote the Progress of Science and Useful Arts." I cannot find any evidence that patents for software will tend to achieve this purpose. Indeed, every indication is to the contrary. I will attempt to explain Oracle's thesis within the framework of the questions the PTO has propounded for this hearing. First, you ask, "What aspects of . . . software-related invention should or should not be protectable through the patent system?" The examples specified in the question illustrate part of the problem. Software is fundamentally different from what the PTO is used to seeing. In many other industries, the policy rationale for patent protection is understandable. In exchange for making their inventions available to the public, patent holders are rewarded with a seventeen-year monopoly giving them exclusive right to the new technology. In cases where an inventor has committed substantial capital resources to the invention, this opportunity to monopolize the commercial application of the invention is justified not simply as a reward, but as an incentive to motivate the developer to dedicate the time and money necessary for innovation, design, production, marketing, and distribution. This policy, however, does not fit well with the software industry. Unlike many manufacturing- intensive industries, innovation and development of software products is very rapid. Although there may be substantial development expenditure, there is an absence of tooling, and production is accomplished almost instantaneously. As a result, software improvements are quickly incorporated into new versions, making product cycles very short. Because a patent takes two or more years from application to issuance, well into a product's projected life cycle, patents do not motivate companies to invest in the development, design, production, and distribution of new products. In this environment, a seventeen-year monopoly is completely out of context with industry reality. Software varies from manufacturing in another key aspect. The engineering and mechanical inventions for which patent protection was devised are often characterized by large "building block" inventions that can revolutionize a given mechanical process. Software seldom includes substantial leaps in technology, but rather consists of adept combinations of several ideas. A complex program may contain numerous established concepts and algorithms as well as a multitude of innovative ideas. Whether a software program is a good one does not generally depend as much on the newness of each specific technique, but instead depends on how well these are incorporated into the unique combination of known algorithms and methods. Patents simply should not protect such a technology. The scope of what is protectable is a core issue, with tremendous impact to anyone in the software industry. Oracle's answer to your question is that none of the cited examples should be protectable with the possible exception of Example "F", which is not truly a software innovation, but rather an otherwise patentable invention that just happens to be implemented on a computer. Next, although Oracle has not yet been a defendant in a patent infringement suit, it is probably just a matter of time before we are. Our engineers and patent counsel advise me that it may be virtually impossible to develop a complicated software product today without infringing numerous broad existing patents. Since the validity of many issued software patents is highly questionable, and because Oracle is a company with sizable resources with which to defend a lawsuit, many patent holders must be reticent to litigate an infringement action against us. Further, as a defensive strategy, Oracle has expended substantial money and effort to protect itself by selectively applying for patents which will present the best opportunities for cross-licensing between Oracle and other companies who may allege patent infringement. If such a claimant is also a software developer and marketer, we would hope to be able to use our pending patent applications to cross-license and continue our business unchanged. But not all infringement plaintiffs are in the software business, and we would be forced to either pay royalties or risk an expensive lawsuit. Thus, to answer your next question, only if patent eligibility standards were dramatically limited could we expect to see a positive implication in the industry - and most positive would be for no software to be patentable at all. Your next question takes us back to the constitutional issue: Do software patents promote innovation in the field of software? The U.S. software industry has evolved to a multi-billion dollar industry that leads the world in productivity, and accounts for substantial portion of U.S. GDP. The software industry has advanced the efficiency of other industries through the proliferation of computing and computer-controlled processes. All of these gains have come prior to the application of the patent process to software, and consequently without patent protection for software. Software companies succeed only because they continue to be innovative in bringing new and better products to the market, and these very market forces will continue to drive the software industry without the patenting of software. Finally, you ask whether a new form of protection for computer programs is needed. We do not believe one is necessary. Existing copyright law and available trade secret protections have proved well suited to protecting computer software, and they have done so in a manner that is not disruptive to software development. Copyright protects software as soon as it is written, without the expenditure of time and money on prior art searches and registration. Since computer software is considered a work of authorship under copyright law, the entire software program including each portion of code, as well as the derivatives thereof, are protected from copying. Developers may write software code without fear of infringing the rights of others, so long as they do not copy other developers' works. Copyright law encourages innovation since it allows everyone to take advantage of improvements in technology while protecting developers from having their specific works copied or appropriated. At the same time, trade secret law protects developments that have not been disclosed beyond the development team. Many companies are successful in using trade secrets to establish market prominence while the competition hurries to catch up. **** Oracle has recommended that patent protection be eliminated for computer software and computer software algorithms, because software patents are failing to achieve the constitutional mandate of promoting innovation, and indeed are having a chilling effect on innovative activity, in our industry, and because software is fundamentally different from manufactured products and these differences justify different treatment under the law. Nevertheless, if patent law continues to apply to software, we believe that fundamental changes must be made in patent policy and procedure. Our recommendations in no way endorse the use of patents for protecting software, but the recommended changes could serve to assuage the existing problems if patents must ultimately affect software development. However, we believe that making the necessary changes to the patent system will prove to be highly difficult to achieve. Patent law must be consistent throughout the world and, if it is to be applicable to software, it should encompass much shorter periods of protection than exist now, unified prior art searching capabilities, equal standards of novelty, the elimination of patent rules that allow "patent flooding," and identical standards for prior use restrictions (bar dates). Because the evolution of software moves very quickly, the term of software protection should be cut back accordingly, from the current 17 years from grant date to three years from application date (the application period must be drastically reduced). A balance of fifty years protection for direct copying of code would continue to be provided by copyright law. Also key to the success of the patent system for the software industry are the following changes: First: The prior art capabilities of PTO records must be vastly improved to confirm effectively the novelty and non-obviousness of software patent that is the subject of applications. New classifications, as well as an effort to record the current state of prior art would be necessary. This is conceptually a daunting task. Most software innovation is not recorded for public availability; instead it is held as trade secrets. The Software Patent Institute (the "SPI") has been formed to build a database to assist the PTO with finding prior art; and while the SPI's intentions are admirable, it is inconceivable that developers, small and large, will be willing to give up their trade secrets or even to devote the substantial time needed to evaluate, draft, and submit evidence of existing art to the SPI database. Second: Because of the unusual speed with which software innovations are incorporated into products, the PTO's patent review process must be made much more efficient. It should take no more than six months from application to registration. In the software industry, where a patent application typically takes two or more years to process, the patented "invention" is frequently either widely used or obsolete by the time the registration is issued and the public discovers it is protected by a patent. Third: Examiners skilled in computer science and software programming must be trained on the nature of software inventions, and the state of existing art. Many more qualified examiners must be employed at the PTO. Compensation rates equal to those provided by industry are essential to recruit qualified personnel and retain them at the PTO. Fourth: The PTO, in conjunction with industry, must establish additional committees to clearly delineate the standards of novelty and non- obviousness that will be required for software inventions to receive patents. **** Thank you for affording me the opportunity to speak today. I again commend the PTO for its willingness to face this very difficult, but extremely important, issue. RESPONSE TO THE REQUEST OF THE ASSISTANT SECRETARY OF COMMERCE AND COMMISSIONER OF PATENTS AND TRADEMARKS FOR COMMENTS ON PATENT PROTECTION FOR SOFTWARE RELATED INVENTIONS Submitted by Allan Ratner & Steven E. Koffs Ratner & Prestia P.O. Box 980 Valley Forge, PA 19482 (610) 265-6666 fax: (610) 265-8935 I. Topic A - Use of the Patent System to Protect Software Related Inventions In considering protection for software, it is of paramount importance to recognize what industries would be impacted by any potential changes in the patent laws. First, the types of products falling under the umbrella of "software related inventions". The Request for Comment refers to the "software industry - programming services, prepackaged software and computer integrated design". There is, however, no single "software industry". Certainly, there is a prepackaged software industry, and the U.S. patent system should reflect policies that encourage and protect innovation within that industry. But equally important are the many industries that produce machinery and electronic systems in which embedded microprocessors and microcontrollers implement control functions. In 1992, a single U.S. manufacturer sold nearly 250 million microcontroller chips, each of which is used to provide control functions in a hardware system. The list of products controlled using these embedded chips is virtually endless. The following is a very brief list, intended only to show the diversity of systems. Every one of these systems is controlled to some extent by software executing in the embedded microprocessor or microcontroller. Every one of them is a "software related invention." + Telephones + CT scanners and MRI systems for imaging the human body + Televisions and TV converter boxes + Electronics equipment test signal generators + Automobile subsystems, including ignition systems, antilock braking systems, traction control systems, and air bag systems + Chemical process control equipment (e.g., Petrochemical cracking) + Agricultural equipment (e.g., crop harvester) + Microwave ovens + Facsimile machines + Sewing machines + Dishwashers + Signal processing equipment + Camcorders + Automated Bank Teller machines The trend towards increased use of software in embedded chips is expected to continue as the cost of chips decreases. The decision to use the chips is typically a design choice, and is determined by such factors as the relative costs and design delays associated with implementing functions in software versus implementing the same functions in hardware such as Application Specific Integrated Circuits (ASIC). Other considerations include whether the functions of the product will change frequently, in which case software implementation reduces product life-cycle development costs. Conversely, functions that are less likely to change during the life-cycle of the product are more likely to be implemented in dedicated hardware. Thus, it is impossible to define a single industry or a single set of characteristics that apply across the board to business environments in which software is produced. Admittedly, at one end of the continuum, there are application software developers who have low capital costs, and who are able to bring their products to market rapidly. Nonetheless, at the other end of the continuum, U.S. auto manufacturers, for example, rely on software to improve the comfort and safety of their products. Few industries have higher capital costs than the auto industry, and delays in bringing new products to market are common. For example, testing of air bag software in an actual car is neither fast nor inexpensive. There are countless other industries that rely on software related inventions which do not have low capital costs or short development cycles. Any attempt to define a "software industry" is bound to fail. Furthermore, the industries that use embedded microprocessors and controllers are in need of the protections offered by the patent system that are not available through other forms of intellectual property protection, particularly copyright. Defining separate standards for patenting hardware and software is likely to result in inadequate protection for software related inventions that do not fit neatly into the precise pigeon holes of hardware systems and software systems. Although it is more common to see hardware circuitry replaced by software implementations, this is not a one way street. As computer aided design techniques improve, a growing number of hardware designs are created by implementing functions in software, from which designs for dedicated circuitry are automatically generated. Given the ability to implement many algorithms in either hardware or software elements that are functionally equivalent, there is no compelling reason for penalizing an inventor that selects one implementation of his or her inventive concept over another. On the contrary, the inventor who identifies that a software implementation is "better" (i.e., less expensive or faster to bring to the marketplace) has given something more valuable to society than the inventor who discloses a functionally equivalent, but more expensive, hardware embodiment. The fact that the inventor has disclosed a software embodiment of the invention that is easier to implement increases the value to the public, and the inventor should be rewarded accordingly. 35 U.S.C.  112, first paragraph requires that the inventor disclose the best mode of practicing the invention.. With ever greater frequency, the best mode for many machines includes software elements. To the extent that a software solution to implementing a control function is the preferred mode, 35 U.S.C.  112 requires disclosure of that software embodiment in order to secure a patent. The U.S. Patent system has been successful because inventors expect to receive protection for their inventions in exchange for disclosing the best mode of practicing the invention. Without broad protection for the inventive concepts that have been implemented in software, there would be little incentive for inventors to disclose software related inventions in any of the industries discussed above. Thus the fundamental constitutional mandated of promoting progress in the useful arts would not be met. The goal of Congress in enacting 35 U.S.C.  101 was to include "anything under the sun that is made by man." Diamond v. Chakrabarty, 447 U.S. 303, 309, quoting S. Rep. No. 1979, 82d Cong., 2d Sess., 5 (1952); H.R. Rep. No. 1923, 82d Cong., 2d Sess., 6 (1952). This protection is broad, with a limited number of exceptions for "laws of nature, physical phenomena, methods of doing business and abstract ideas". Diamond v. Diehr, 450 U.S. 175, 185, (1981). Ever since Diehr, the line dividing patentable subject mater from non-patentable subject matter has clearly been based on a distinction other than hardware versus software. The border between statutory and non-statutory matter in inventions that include mathematical algorithms has been probed through a lengthy jurisprudence. As a result, the contributions of software engineers, controls engineers and systems analysts have been rewarded and encouraged. Many hardware products and processes have been improved by enhanced control signal functionality and accuracy; many of these control improvements have been provided through addition of new software elements. II. Topic B - Standards and Practices Used in Examination of Patent Applications for Software Related Inventions The questions asked in part B reflect a response to a number of criticisms, many of which reflect the public's misunderstanding with respect to standards applied in the examination of software related inventions. Both the PTO and the Patent Bar should emphasize that hardware and software related inventions have been, and continue to be, subject to the same standards with respect to novelty and non-obviousness during examination. It has never passed muster to take a known system or process and without more, implement that system or process in software. A conventional hardware system, by itself, ported over into software is still a conventional system. There is no reason to define a higher standard of patentability for a software related invention. Perhaps some patents covering software related inventions are seen to be invalid because the code is written following well known computer programming skills. This is not, and should not be, the standard for patentability used by Examiners; this should be emphasized. The relevant field of the invention is usually never computer programming itself, even for inventions in software application programs. The field may be: systems engineering; operating system, network, or database architecture; electronics design; automated control system design; electromechanical system design; chemical process engineering; etc. The inventor very often is the system architect, the person who conceives of the system and its concepts; the programmer acts as a technician under the inventor's direction. A valid concern has been raised that Examiners do not have access to a comprehensive base of prior art. One approach to solving this problem is to improve the access to materials within the PTO's library (e.g., by reclassifying documents and adding materials), as well as improving access to on line prior art databases that increase the Examiner's productivity. These techniques are already being implemented. Perhaps the single most effective method of providing a more comprehensive base of prior art to the Examiner is to enlist the assistance of other parties who have a stake in the outcome if a patent is issued. These parties include both third parties, and the applicants themselves. With respect to third parties, the current patent law presents obstacles for third parties that would otherwise be inclined to submit prior art. During prosecution proceedings before the PTO, which are secret, third parties are seldom aware of patents under examination. Third parties are not aware of the disclosure in an application, or the subject matter being claimed. Without such knowledge, third parties, who may have the greatest incentive to search for prior art, have no basis on which to conduct such a search. Early publication of all patent applications before would enable third parties to submit prior art during the pendancy of applications. Such a change would bring the U.S. in line with most of the other patent systems in the world, which already provide for early publication. The cost to the applicant for the publication would be relatively small. The benefit to the patentee is a stronger patent, because such a pre-issuance publication may reduce the likelihood of material prior art escaping the Examiner's attention. Third parties benefit by being able to have prior art submitted during the pendancy of the original application. Additionally, third parties would be able to avoid substantial investment in technology covered by patent applications that may be held in secret for many years prior to issuance under the present patent system. The public would benefit from early publication because the information in the application becomes available at an earlier time, advancing the state of the art. Although the PTO has made efforts to reduce pendancy time, many complex applications do not issue as patents for three years or more. It is the publication of the patent disclosure that enhances the state of the art, not the grant of the patent. Increased third party participation in post- issuance Reexamination proceedings would also encourage submission of prior art by third parties. Under current Reexamination rules, a third party cannot participate in a Reexamination beyond submitting a reply to the patentee's statement. If the patentee does not file a statement, then a third party cannot participate in the proceeding after Reexamination is ordered. Under these circumstances, many third parties choose to withhold prior art and forego requesting Reexamination, because they are better able to advocate patent invalidity in court in an infringement action. The public would also benefit from greater third party participation in post-issuance Reexamination proceedings. It is in the public interest to find invalid patents, so that the technology claimed in those patents is returned to the public domain as early as possible. The interest of the applicant in obtaining a comprehensive search should not be discounted. Applicants have incentives for assisting the Examiner in the search. Under 37 C.F.R.  1.56, applicants already have a duty to disclose known material prior art. Applicants should be encouraged to assist the Examiner in other ways. For example, submission of keywords by the applicant may help the Examiner in conducting an on-line database search. Applicants should be encouraged to suggest search strategies, if known. For example, the applicant may identify a class or subclass in which relevant information may be found. In summary, the current system has been working well in the field of software for almost thirty years of my own personal knowledge. Of course improvements are always possible but they should be carefully tailored to help and improve. [Prepared Remarks from Mr. Paul Robinson, Tansin, Darcos & Co.] Good Morning Commissioner Lehman, Mr. Kushan, the staff here, members of the audience, people reading this report in the future and anyone else I've forgotten. My Name is Paul Robinson. I am Chief Programmer for Tansin A. Darcos & Company, a software development firm specializing in text processing applications; I also do work on Commercial Philosophy and metaphysics of computer systems. My special interest and my personal hobby is collecting compiler and other program sources. My reasons for this are that these all solve problems. By reading the manner and method other people have solved other problems, it gives me insight into how to solve mine. This is a common practice in the computer world in order to, as the expression goes, "Not reinvent the wheel." I assume this is common in other industries. In fact, this is most likely the reason that we have a patent system; someone is granted the exclusive right over commercial use of an invention for a limited term in exchange for telling the world about it. For most computers, every application such as word processing or spreadsheets has at least two and possibly three or more different applications fighting for market share. The fights in this industry are usually referred to by the expression "Dinosaur mating dances" as huge companies fight for market share by releasing new programs to introduce new features that the companies believe the customers want. Version 3 of Turbo Pascal was an excellent language compiler and less than 40K. Version 4 would fit on one 360K diskette. Today, Turbo Pascal for Windows version 1.5 takes 14,000K of disk space. The program that is probably the premiere application for graphics design is Corel Draw!, which has so much material it is now being released on not one, but two 500 megabyte CD-Rom disks. But there are probably still niches for smaller companies to move into. With the rapid changes in the marketplace, it is necesary to be ready to have new programs and new releases of old programs out to encourage people to move to the next release. In some cases, companies make more money from upgrades, and need to do so to stay alive. These kind of cycles mean new releases have to be out very quickly; in a matter of weeks to months. With this kind of rapid development cycle, delays in the release of a program could be fatal and the time available to create the work is sometimes barely enough. Until recently, the only legal issue that anyone had to worry about was copyright infringement. That could be avoided by creating new work from scratch. Now we have another issue altogether. A programmer can independently create something without ever knowing about any other developments, and yet be sabotaged by the discovery that the method that they used is patented. This is a standard problem that all industries have had to face, and it is part and parcel of living in an industrial society. But there is another problem. A computer program is the written instructions by a human being to tell a computer how to perform a particular task. As such, there are only two parameters: the input supplied to the program and the expected output. Everything else is literally a figment of someone's imagination. This bears clarification. A computer program is the means of manipulating the internal data paths of a computer system. There is no requirement that the manipulations have any correspondence to the real world. In this, the real world, doing anything requires the expensive movement of people and goods from one point to another, the possible refinement of materials into other materials, and the expenditure of energy and resources. Doing anything in a computer is merely the essentially cost-free movement of electron paths from one direction to another; it brings forth the apportation of the concepts of the madman Imanuel Kant into reality: a world in which anything is possible: -We can see this in the current discussions going on about violent computer games where someone goes about maiming, shredding and killing their opponents, in graphic detail, then when the game is over, nothing in the real world has changed except the clock. One of my favorites happens to be the game "DOOM" where the weapon of choice is a 12-gauge shotgun, but a chainsaw does a nice job on people close to you. -We have seen it in motion pictures such as "Total Recall", where, if one is acting within a part of a computer program, you cannot be certain what is real or what is fantasy. The movie "Brainstorm" had simulations of sexual contact apparently indistinguishable from reality. There are things that can be done within a computer program that cannot be done in the real world, or would have undesirable consequences. As such, we should ask whether the patent rules, which are designed to apply to real-world conditions where doing something requires the expenditure of energy and resources, should apply in a world where the known rules of the universe do not apply. Because the entire design starts from scratch, and the designer doesn't just get to play God, he is God. Despite the ease under which someone can do something, we still live under real-world constraints. Once a design choice is made, it is very expensive in time and effort to change it. Worse, because most programs have interactions that cover every part, a change to one part can cause unexpected and even undesirable side effects in unknown and unexpected places. Computer programs may be "the stuff that dreams are made of" but once placed into concrete form as written in software instructions, it's just as expensive to repair or change as if it was carved out of real materials. It may be necessary to change the rules on patents to comply with the conditions that exist for computer programs. There has been talk of instituting "first to file" in order to "harmonize" with the systems in other countries; I think that is not a good choice; most countries have fewer patents, and provide protection which is much narrower than our system does. This would also mean that someone who does invent a new and useful technique for use in a computer application would be unable to collect any royalties from someone else who is using the same invention, who thought of it after they did, but started using it before they filed. The two really large problems that exist in our system are probably two part: the secrecy under which patent applications are filed, and the problems if a program uses parts of several patents, which might not be discovered until later. As I mentioned earlier, computer programs are created out of the figment of someone's imagination, then mass copied, the way an original painting can be reproduced by lithograph. A single large application might have a dozen people working on it, and upwards of 50 different features, and might have upwards of 200 or more different parts, any one of those might be infringing on zero, one or more patents depending on what the claims are. I doubt seriously that all but the largest corporations have the resources to do 200 patent searches on a single software application, which would be prohibitive for a small company, because it is likely that a large program could infringe dozens of patents, due to the continued development of ever larger applications that do multiple simultaneous functions. But more than that, you can't do patent searches on works which are under application form, until after the patent has been issued. And more importantly, with more than 1,200 patents issued every week, checking them all for possible interconnection would make it impossible to do any serious work. Seventy years ago, fears that the major piano player manufacturer would tie up the entire song market and prevent other companies from creating player piano rolls caused Congress to institute compulsory licensing. This may be an idea whose time has come again. Therefore it might be considered to make two changes in the patent law with respect to computer programs: to implement a standard compulsory license, perhaps 10 percent of the manufacturer's suggested list price, and to eliminate secrecy provisions in the filing of patent applications. Either of these could certainly help the situation. Eliminating secrecy and publishing applications once filed would let people know about pending inventions: they could endeavor to avoid infringements in advance; it might also allow them to file interferences early, if it turns out that they invented the concept earlier, while it is cheap to do so; and would allow people to be aware of what is being developed which would comply with Article 1, Section 8 of the Constitution, where patent protection was designed "to encourage the improvement of the useful arts". The other option of setting a standard royalty via compulsory license would eliminate the worries of someone infringing upon an existing patent or one that is filed after their work is created. It would also grant to inventors an income stream from those who use their inventions, which started before they filed their application but after they reduced the invention to practice. It would also limit liability and exposure to sustainable limits. As it stands, if someone develops a program that infringes upon 40 patents, and they each want a 3% royalty, it isn't hard to see that 120% of the program's income is not going to be possible. TIMOTHY D. CASEY [Silicon Graphics, Inc.] TESTIMONY AT PATENT OFFICE HEARING ON PATENT PROTECTION FOR SOFTWARE RELATED INVENTIONS I am Timothy Casey, Senior Patent Counsel for Silicon Graphics, Inc., headquartered in Mountain View, California. Silicon Graphics is the world's leading supplier of visual computing systems targeted at the technical, scientific and corporate marketplace. The Company pioneered the development of color three-dimensional computing, transforming it into practical and affordable mainstream solutions that improve productivity and increase operational efficiency across a broad array of industries, even though we seem to have gained our greatest notoriety from our involvement in movies like Jurassic Park and Terminator 2. Although Silicon Graphics designs and manufacturers personal computers, workstations, servers and supercomputers based on our own RISC processing technology, a large part of our overall development effort is now focused on software, including display, communication, development tool, operating system, application and user interface technologies. Naturally, Silicon Graphics files a large number of patent applications related to both our hardware and software based inventions and has a vested interest in maintaining such protections. But rather than use my time to further expand upon the horrors or virtues of software patents, I would rather state that we are spending too much of our time in these hearings discussing the ill patient and not enough time discussing the disease. Software, as incorporated into the patent system, is not the new great villain that many people would like us to see, but rather a misunderstood giant. As I mentioned earlier, most computer system manufacturers today invest a majority of their research and developmentefforts on software technologies in order to further distinguish their hardware products from their competition. I truly hate to think of what would happen to this industry, and this Nation's economy, if less than half of this development effort was subject to patent protection. And it is also important to consider that, in practical terms, software is not really different from hardware. It is just that the Patent Office understands hardware and is better prepared to adequately examine hardware related cases. Patents have been granted on transistors, resistors, capacitors, clock circuits, filters, and the like, all necessary building block of many electronic designs, but has that seriously impeded the electronics industry? Why is software so different? Are not most software products composed of basic elemental blocks of code arranged in new ways to perform new tasks, much like any modern electronic products? The reason software patents have developed into such a controversial topic is primarily because a number of overly broad software patents have been allowed to issue. And why is that? Well, we can argue that the prior art is inadequate, and that is true. And we can argue that the statutory subject matter tests are inadequate, and that is also true. But I would argue that one of the biggest causes is the fact that Patent Office has not had the most important tool it needs to adequately examine software patents: that is examiners who have the same fundamental understanding of basic software elements as they have of basic hardware elements. I find it to be absolutely amazing that the Patent Office has issued so few overly broad software patents given the level of training of many of the examiners and the complexity of the application subject matter. While I understand that the Patent Office has already undertaken steps to hire computer science majors in the future to help solve part of this problem, which I loudly applaud, there are many additional measures that can be taken to improve the services of the Patent Office, both with respect to already issued software patents, and any applications that might be examined in the future. Some of these measures include: While I understand that the Patent Office has already undertaken steps to hire computer science majors in the future to help solve part of this problem, which I loudly applaud, there are many additional measures that can be taken to improve the services of the Patent Office, both with respect to already issued software patents, and any applications that might be examined in the future. Some of these measures include: 1. Revamping the reexamination process so that reexaminations can be used to achieve the goals for which they were originally intended. One step would be to make reexaminations an inter partes proceeding. Another would be to make them less expensive, both in terms of fees and the for mal requirements of a reexamination request, that presently force potential applicants to seek exceedingly expensive professional assistance in order to comply. It may also be in the Country's best interest if an amnesty period is implemented over the next year or so during which applicants could institute a reexamination of any software patent, based on new art, by simply filing out a one page application form and filing a minimal fee, say $500. 2. Instituting some form of pre-publication of applications for the purpose of eliciting industry comment, such as publishing issued patents on a tentative basis pending the discovery of new art during the comment period. 3. Establishing routine industry supported education programs to provide continuing education for examiners, even up to and including advanced degree study for examiners who commit to an extended tenure with the Patent Office. 4. Employing technical specialists with broad industry knowledge and allowing them to roam between examining groups so they can provide expert assistance when needed to less highly trained examiners. 5. Allowing examiners more exposure to a variety of technologies instead of pigeon-holing them in narrowly constricted examination areas. 6. Providing the examiners with better technical tools, such as networked computer systems that allow examiners to do key element searching in both text and graphics on a single screen and at the same desktop system that they use for word processing, video teleconferencing, and Internet communication. 7. Introducing legislation to turn the Patent Office into a government corporation so that the Patent Office can attract and maintain examiners at competitive pay scales without being constrained by the civil service pay guidelines, and allow the Patent Office to actually keep and utilize all of the money it raises from user fees. 8. Instituting new limitations on the maximum number of claims permitted in an issued patent, such as three independent claims and no more than 30 total claims, in order to simplify the examination process and reduce the burden of accused infringers who are often forced to prepare opinions on patents with hundreds of primarily duplicative claims. 9. Instituting per page surcharges for patent applications with more than 35 pages of text and 10 drawing figures to force applicants to be more succinctly descriptive of their inventions. As long as I am on the subject of steps that the Patent Office can undertake to improve its service to its clients, I will introduce two additional measures which should be considered. Namely, instituting a new type of expedited patent application, and regionalizing the Patent Office. Silicon Graphics recently obtained a patent on some technology that was critical to the protection of a part of one of our systems that we knew had already been duplicated by after market suppliers of such parts. Despite filing a Petition To Make Special with our application and being extremely diligent in our efforts to shepard the application through the Patent Office as soon as possible, it still took eight months from the filing of the appli cation for it to finally issue as an enforceable patent. Now you may think, `eight months, that's pretty fast,' but it would have been done in two to three months had it not been for the fact that it took three months to get from the mail room to the examiner and another four months to get from the examiner to final print. The examiner completed the entire examination of the patent in less than one month. In another similar case, we have had a patent application on a fairly simplistic mechanical assembly sitting in the Patent Office since July 1991, despite the filing of a Petition To Make Special. During the pendency of this application, that mechanical assembly was copied by a number of companies. Although this has only resulted in a small amount of competition for us in the relatively narrow market for this part, it was a greater concern for us because the knock-off products were not always of adequate quality and could cause damage to our customers systems, for which we would ultimately be responsible for correcting in order to maintain customer loyalty. This would not have been the case had this application been allowed to issue. The reason the one application took eight months and this other application has taken over 2 1/2 years is because the petition to make special process only applies to the examination and not the remainder of the Patent Office process. What is needed, therefore, is a new type of application that not only gets expedited when in front of the examiner, but throughout the entire process. I would be more than happy to pay a higher fee, such as $1,000 to $1,500, for a truly expedited application, in these types of situations. My last suggestion is that the Patent Office seriously consider working to regionalize the Patent Office. No one in Washington can truly appreciate the difficulties in communicating with the Patent Office from the west coast. Because of the time differences between the two parts of the country, and the new flexible hours program instituted by the Patent Office, which I do think is a good thing, there is only a one hour period each day, typically between 12:30 - 1:30 PST, during which a practitioner on the west coast can expect to get a hold of an examiner on the telephone. Because of this, it has sometimes taken over a month to arrange a telephone interview with an examiner. My colleagues on the east coast, however, can call at much more convenient hours, or even walk over to the Patent Office for an in person visit, something that would cost me well over $1,000 to attempt. Given these restrictions, I hate to imagine what the independent inventor or start-up organization on the west coast thinks of our patent system. Some other benefits of a regionalized Patent Office would include: 1. An ability to draw from a larger pool of potential examiners; 2. New economic growth in the parts of the country selected for the new Patent Office sites; and 3. Greater public accessibility to the Patent Office records and examiners, as well as greater exposure for the examiners to the relevant industries. I hope these suggestions prove to be a useful guide to the Patent Office and as an invitation to the Patent Office to consult with west coast companies and practitioners for additional solutions that could be implemented by the Patent Office to resolve our present difficulties, but to also raise the Patent Office to new heights of service. Thank you for this opportunity today. Testimony before the Patent and Trademark Office James R. Shay Morrison & Foerster San Francisco, California January 26, 1994 My name is Jim Shay. I am with the law firm of Morrison & Foerster in San Francisco. We represent the Multimedia Development Group, a trade assocation based in San Francisco, as well as other clients in the software and multimedia industry. My comments today, however, are my own; they do not necessarily represent the views of my firm or its clients. I am a patent attorney. I spent three years as a patent examiner before entering private practice. I have also served as in house counsel for a medical technology company. I have worked in a variety of technologies in a variety of ways: prosecution, litigation and licensing. I represent individual inventors, large corporations and investors. I believe in the value of patent protection as a tool for spurring innovation and for helping inventors, whether corporate or individual, obtain the benefit of their contribution to society. In my opinion, this principle applies as much to software-related inventions as to any tangible mechanical, chemical or electrical invention. Patent protection is appropriate for software inventions. Specifically, the software industry as a whole, and software companies and developers individually, benefit from the patent system. The "software industry" I am referring to is not just the companies whose primary products reside on floppy disks or CD-ROMS. In my view, the term "software industry" includes any supplier of products incorporating programmable microprocessors, products such as medical monitors, animated toys, automobile electronic ignitions and audio products, to name a few. Advances in microprocessor technology have made software ubiquitous. Protection of patentable inventions embodied in software is therefore of concern not only to companies writing and selling software per se but also to all manner of high-, medium- and low-tech companies serving a variety of markets. To effectively serve its purpose, the patent system must be reliable. Patent owners and potential infringers alike need to know that a patent issued by the U.S. Patent and Trademark Office is likely to be valid. The statutory presumption of validity of issued patents makes the existence of questionably valid patents a difficult problem for all affected. The high cost and uncertain outcome of patent litigation have driven more than one company to take a license under a patent that did not actually represent a novel and unobvious advance over the prior art. Litigation and/or the payment of royalties for such patents is a waste of resources for the accused infringer and for the licensee. As the PTO has acknowledged in conducting these hearings, there appears to be a particularly high amount of concern over the validity of software patents. A good example is the public reaction to the Reed et al. patent which issued in August of last year and which is currently owned by Compton's NewMedia. In my capacity as counsel to the Multimedia Development Group I participated in question and answer sessions about the Compton's patent with members of the MDG Executive Committee and with individual MDG members. Many expressed strong negative opinions about the conduct of the Compton's patent applicants before the PTO and about the ability of the PTO to examine and issue valid patents in this subject area. My review of the file history of that patent, however, showed no evidence of any particular lapse of failure on either part. Nonetheless, the consensus of nearly all to whom I spoke was that the broadest claims of the Compton's patent could not possibly be valid and that anyone associated with the multimedia industry would agree. The eventual disposition of the Compton's patent remains to be seen. The discussion surrounding the Compton's patent, however, has pointed to some possible deficiencies in the current patent system, especially as applied to software-related inventions. First, patent examiners do not have easy access to the best prior art for software- related inventions. One reason for this is the fact that inventions predating the Supreme Court's Diamond v. Diehr decision were not patented. These inventions are therefore not reflected in the PTO's patent files. Furthermore, even after the Diamond decision, patent applications were not filed for many software inventions for reasons of expense, turn-around time and reliance on copyright protection, to name a few. The best prior art, therefore, consists of actual software, operators manuals, research papers, and the like. These references are not generally accessible to patent examiners. Second, the PTO's relative lack of experience in software-related inventions makes it difficult for an examiner to determine how one of ordinary skill in the art would have approached the problem the patent claims address. Often it is the feeling that an invention would have been obvious that leads an examiner to find the most pertinent prior art references and to make the most compelling argument regarding the unpatentability of the claims. This disconnect between the gut feelings of the patent examiners and the gut feelings of skilled artisans in the software industry undermines the industry's faith in the PTO. I would now like to make some recommendations based on these observations. First, operating within the current statutory framework, I believe that the PTO and the software industry could benefit greatly from a more formal interaction. Specifically, the software industry, operating through industry groups such as the MDG, could provide the PTO with the kinds of prior art references that the PTO currently lacks. Such a program would require the industry groups to dig up and send, and the PTO to accept and classify, prior art references related to past and present software inventions. In addition, the PTO and industry groups should cooperate to train examiners working with software inventions. I am aware, for example, of training programs offered by the Software Patent Institute. I also believe that the PTO should undertake the task of teaching the software industry about the patent process so that the industry can use the existing process more effectively. Second, to the extent that the PTO is willing to support statutory changes, I believe that a system of pre-grant publication and opposition proceedings would help improve the quality of software patents. I note that the Secretary of Commerce recently stated an intention to maintain a first-to-invent system. The change I propose could be made with or without a change from a first-to-invent system to a first-to-file system. A less radical statutory change would be to open the reexamination process to provide for full participation by interested parties in addition to the patent owner. I also advocate the use of oral testimony in reexamination proceedings; experts in the field can be the best source of prior art. This change could encourage the submission of all relevant prior art instead of the current practice of withholding the best prior art for use in license negotations and in district court infringement proceedings. In conclusion, while the emphasis of my remarks has been on the deficiencies I perceive in the patent system, I should state that I believe that there is much that is right with the currrent system. My proposals would be only minor changes to a system that has served us well in promoting the useful arts. Thank you for providing me with the opportunity to present my remarks. Testimony on Patent Protection for Software-Related Inventions [Prepared remarks of the Software Publishers Association] Docket No. 931222-3322 U.S. Patent and Trademark Office Arlington, Virginia February 10, 1994 Mr. Commissioner and members of the panel, thank you for the opportunity to appear today to speak about patent protection for software-related inventions, in particular on the standards and practices used in examination of patent applications for software-related inventions.27 My name is Mark Traphagen, and I am counsel for the Software Publishers Association (SPA). Patents for software-related inventions have been highlighted by the media in recent months. For example, last year the U.S. Patent and Trademark Office (USPTO) granted a patent to Compton's New Media of Carlsbad, California for a system for retrieving textual, graphic, audio, and video information from multimedia works.28 Now, Compton's New Media is a member company, and SPA has no position on the merits of its patent, which is now being reexamined. But it is worth noting that Compton's New Media is not alone in seeking patent protection for software. Several other companies have been reported to own patents for software with important applications for multimedia works. Since 1987 more than 10,000 patents have been issued on nearly 35,000 applications filed in Classes 364 and 395, in which most software-related inventions are classified.29 In 1992 alone, nearly 8000 applications were filed in these classes, with almost 2000 patents being issued.30 Lest one think that patent applications for software patents are a phenomenon unique to the U.S., the Japanese Patent Office issued as many as 12,000 such patents in 1990,31 a figure which could make it more difficult for U.S. software companies to compete in Japan. Since it was founded in 1984, SPA has been a leader in advancing the interests of its members through copyright law. 32 Copyright law has been more popular than patents among software developers and publishers because protection is relatively inexpensive and free of formalities.33 Copyright law alone cannot protect all the aspects of intellectual property in software technology, however, because it is limited to creative expression in software code, screen displays, and other graphic output. In particular, Section 102(b) of the Copyright Act provides that: In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.34 It is precisely these functional aspects of software technology that are sought to be protected by patent law. While, like copyright law, patent law does not protect ideas in themselves, it does protect the machines, methods, processes, and apparatus that implement novel ideas. This protection is extended, however, only to innovations that satisfy the statutory requirements of novelty (is it new?) and non- obviousness (is it "obvious" to someone skilled in the relevant art?).35 SPA has over 1100 members, and represents not only large, well-known software publishers and developers, but hundreds of smaller companies and organizations as well. SPA members include not only those organization that seek patent protection, but also those whose products are potentially affected by patents held by others. SPA called on leading members in its consumer, education, and multimedia sections to join a Software Patent Working Group, which assisted SPA's Government Affairs Committee in formulating SPA's position on patent protection for software- related inventions. The success of the patent system in encouraging technological and commercial progress in other fields suggests it would prudent to try improving the patent examination process before changing the statutory underpinnings of the law. Whether patent owner or patent user, many agree that the patent examination process can be procedurally improved. In particular, the PTO faces two problems in examining the increasing number of software patent applications: (1) the lack of a comprehensive database of nonpatent prior art in software technology, and (2) training the PTO examining corps in continuing advances in software technology. SPA supports efforts to improve the patent examination process, and commits itself to the following three-step program to help the USPTO solve these problems: ¥ SPA will continue to support the efforts of the Software Patent Institute, a nonprofit organization developing a software technology prior art database for the USPTO and the public; ¥ SPA will call on its broad membership to contribute non-proprietary information about software products to the SPI; ¥ SPA will provide educational and training opportunities in the field of software technology to USPTO examiners. Many objections to the current system of patent protection for software-related inventions stem from difficulties in uncovering prior art and determining the validity of patents. Typical complaints focus on the unavailability of pertinent prior art for use by patent examiners. An expanded prior art collection would help the USPTO make more informed judgments about whether a particular invention meets the statutory tests of novelty and non-obviousness with information about prior art in the field of software-related inventions. These difficulties are not unique to software technology, but developing a comprehensive prior art database has proven more difficult for software than other disciplines, such as biotechnology. In the early days of the software industry, patent protection was not as widely used as it has been for other technologies. The primary focus, instead, was on copyright protection for the creative expression in software code, and trade secret protection for other aspects of the technology. Therefore, the most pertinent prior art may not reside in patents, but in publications and limited circulation documents, such as technical manuals. The difficulty has been compounded by two related problems, namely the inconsistent terminology found in software trade literature, and inadequate indexing and inaccessibility. The first step in SPA's program will be to continue to support the effort to build a nonpatent prior art database in the field of software technology. SPA is an executive committee member of the Software Patent Institute, which has been recognized for its efforts to provide the best available prior art information in the software technology field for use by the USPTO and the public.36 Up until now, the PTO has lacked a source of technology descriptions that concentrates on software-related materials to supplement existing patents and some published literature. To fill this need, the Institute is compiling a Database of Software Technologies from descriptions of software techniques and processes contributed by the software industry, government, and academia. The objective is to make this database available for computer aided searching to facilitate scholarship, and also to assess patentability and possible patent infringement, The Institute is gathering written descriptions of software-related technologies from published sources, such as Miller-Freeman Publications' Dr. Dobb's Journal , IBM's Technical Disclosure Bulletin, the Association for Computing Machinery's Computing Reviews, and newsletters from the Pascal User Group. The database will also draw on other technical sources, including course materials from the University of Michigan Engineering Summer Conferences, and manuals from Microsoft Corporation, Apple Computer Inc., IBM, and Hewlett-Packard. The Institute's work is now producing results that promise to improve the ability of patent examiners to conduct research into non-patent prior art. On January 15, 1994, the Institute made its prior art database available on-line, and has demonstrated it to the USPTO and the American Intellectual Patent Law Association. For the next several months, the USPTO and Institute members will use the database on a trial basis to evaluate its search capabilities, interface, and other features, after which it will be available to the public. As the second step in its program, SPA will call on its membership to contribute non-proprietary information about software prior art to the Institute for incorporation in the database. SPA is in an excellent position to assist in this effort because it is the principal trade association of the personal computer software industry. SPA has over 1100 members in North America and Europe, ranging from large, well-known companies, to hundreds of smaller companies, all of which develop and market consumer, business, and education software. The cumulative knowledge of these many diverse members is unsurpassed, and should reinforce the already significant resources incorporated in the Institute's database. The third step in SPA's program will help address concerns about the level of skill of the patent examiners handling applications for software- related inventions. SPA would like to assist the USPTO in educational and training programs designed to keep software patent examiners conversant in rapidly developing technology. To begin this effort, SPA will extend scholarships for the USPTO Group 230 to have patent examiners attend the SPA Spring Symposium in San Francisco, the largest gathering of representatives in the personal computer software industry. 37 The SPA Spring Symposium will feature many seminars devoted to emerging technologies, in particular the development of RISC and UNIX systems, wireless and interactive networks, and the role of patents in software development. The SPA program would complement the academic training now being offered by the Software Patent Institute and other groups. Jerry Goldberg, the director of the USPTO's Group 230, has been very receptive to this initiative, and in return has invited SPA's Software Patent Working Group for a tour of the PTO. SPA looks forward to a continuing relationship that will promote the flow of information between the USPTO and the software industry. In closing, the most important concern about patents for software-related inventions for SPA members, whether they be patent owners or patent users, is the integrity of patent examination. SPA is hopeful, as others have been, that the current problems of patent protection for software-related inventions can be addressed by improving the USPTO's access to nonpatent prior art and information about ongoing developments in software technology. Once again, Mr. Commissioner and members of the panel, thank you for giving SPA the opportunity to testify on this important issue. I will be happy to answer any questions you may have. Presentation by Bernard A. Galler, Software Patent Institute to the Patent & Trademark Office Hearings on Patenting of Software-Related Inventions February 11, 1994 The history of inventions in the software area is not recorded well. There are a few formal journals, such as the Annals of the History of Computing, and some textbooks, but the prior art that is needed by the United States Patent and Trademark Office (PTO) is not available in many of the forms that more mature fields support. For example, in the fields of chemistry or physics, in addition to a large number of patents available to the PTO, most research results are published in a relatively few journals. This is certainly not the case in the software community. Not only are results and inventions not published in formal journals most of the time, they are usually described, if at all, primarily in informal conference reports or newsletters. Add to that the almost complete lack of issued patents before 1981 in this field, and it is clear why PTO examiners have a difficult time finding prior art, even when previous work that is relevant is well known in the field. There are some repositories of program code, but it is very difficult to extract or abstract the innovative and non-obvious algorithms and ideas that are detailed there. What is needed is not the detailed code, but some level of description of what is in that code. Unless the author carefully documents the developing algorithm, the control flow, and the data structures, it is very difficult to discover these concepts to understand the underlying process. It is well known, however, that programmers are usually too interested in moving on to the next task to take the time to document the last one. It isnÕt difficult to understand why software results are so often not published in formal journals. Most of the work in this emerging field has been done outside academia, since software is almost always immediately applicable to the solution of problems that already exist in industry. Of course there is theoretical work in Computer Science and in Computer Engineering, but the explosion of computing in our society has led to a corresponding explosion in software techniques in advance of the theory, and in the rush to exploit these techniques, relatively little effort has been devoted to disseminating these results and techniques widely. In fact, even when this kind of information is not regarded as a trade secret, many companies are not particularly anxious to have it widely available. During the years before 1980, there was much confusion as to the kind of protection that might be available, if any, for software inventions, and there was little incentive for programmers to try to publish their work. Much of the communication that did go on occurred at thematic conferences and workshops. The reports of such conferences constitute a very valuable source of prior art, but they are not readily available to the PTO. Thus, the PTO has found it difficult to identify the relevant sources for prior art, or to collect that prior art into a usable database for the purpose of evaluating patent applications. What are the relevant sources for prior art in the software area? - Already mentioned are conference and workshop proceedings from both general and specialized conferences. These are usually sponsored by professional societies such as the Association for Computing Machinery (ACM) and the Institute of Electrical and Electronic Engineers (IEEE), or their Special Interest Groups (SIGs) or Societies. The SIGs publish newsletters, also, often containing nuggets describing new ideas and techniques which eventually prove to be important prior art. - Universities, such as Michigan and UCLA, have for many years offered short courses (lasting one or two weeks), in which leading-edge research results are presented, disclosing new ideas, concepts, and techniques. The notes which are distributed to attendees contain valuable descriptions of such work, and in time prove to be important prior art, publicly disclosed. - Manuals for commercial systems and applications often contain important descriptions of the techniques these systems and applications embody, and are a valuable source of prior art. Such sources would not be readily available to PTO examiners unless the PTO would have the funding to build an extensive library with appropriate indexing for that purpose. - A number of software vendors publish internal reports and/or research journals which are made available to their customers and are thus publicly disclosed. These reports and journals, and other materials used for the education and training of customers, often describe innovative ideas and techniques which could be used as prior art if they were available to the PTO examiners. - Government-supported research is often documented in reports generated by the Principal Investigators and published by the sponsoring government agencies. While these are public documents, it is not easy to know where to look for them. They often contain the earliest reports of significant research and applications in the software area. - Another source of material can be found in books published on various subjects in Computer Science and Computer Engineering. These include textbooks for more advanced courses, and research publications from academic institutions. It is not always easy to find the kinds of prior art that examiners need in such books, but if they were on-line (instead of only in printed form), it would be much easier to discover which books contain material relevant to a particular claimed invention. - Finally, corporate defensive disclosure publications can be important sources of relevant prior art. A company that wants to make sure that a competitor does not obtain a patent covering a process or technique that is essential to its own business might publish a description of that process or technique so as to have it publicly disclosed, without taking the additional step of applying for a patent. On the other hand, that company may not be particularly anxious to advertise its discovery or use of that process or technique, so the publication will not be very widely disseminated. If indeed a patent is later issued for that process or technique, the company can point to the disclosed art during litigation, but that is a very late stage in the cycle. Companies that rely on defensive disclosure should be encouraged to deposit their published disclosures in a database available to the PTO, so the controversial patent most likely will not be granted at all. The Software Patent Institute (SPI) is a nonprofit institution dedicated to providing information to the public, to assisting the PTO and others by providing technical support in the form of educational and training programs, and to providing access to information and retrieval resources. The primary goal of the Software Patent Institute is to provide the best available information as to prior art in the software field for utilization by the public and the PTO. We applaud the effort by Dr. Dobb's Journal of Miller Freeman Publications to make its articles available on CD-ROM, and the efforts of Ziff-Davis Publications to put a number of recent computer- related publications on CD-ROM, as well as the efforts by the IEEE and the ACM to make available abstracts of computer science articles. We also applaud the efforts of those who are working to identify, collect, and distribute copies of the patents they consider software-related, especially since many of the patents that have been identified come from a large number of PTO classes. These efforts are valuable contributions to the overall effort to document the history of software technology and to make the results available in on-line form. The Software Patent Institute, for its part, is tracking these efforts carefully so that our collection supplements, rather than duplicates, these other efforts. To track the history of an exploding industry with rapidly developing technology is a massive undertaking that will require significant efforts by a number of organizations. We are committed to being one of them. The Software Patent Institute also provides an educational resource from which the PTO and the public can obtain an enhanced understanding of the nature of software, of software engineering, and of the history of the discipline and its relationship to the patent process. Several lectures have already been given to the examiners of the PTO on aspects of software history and techniques, and several more are scheduled during the next few weeks and the coming months. We plan to offer our first one-day session on related topics to patent professionals and the general public sometime this Spring. Although there is currently a debate on the overall desirability of having software patents, the Software Patent Institute has deliberately taken no position on that question. We recognize that the patent system is in place and working, but that there is currently a problem regarding software-related patents. We are dedicated to helping alleviate that problem, independent of longer-range considerations that must eventually be resolved. The Software Patent Institute has asked people throughout the software industry, government, and academia to contribute descriptions of software techniques and processes to the Software Patent Institute database. These descriptions form the content of the SPI database and have now been made available for computer-aided searching by the PTO, and by the members of the Software Patent Institute. Access by the general public will follow shortly. The SPI database already contains many examples of each of the kinds of relevant prior art outlined above, and it is growing rapidly. Our recommendation to this panel is to issue a strong recognition and endorsement of this kind of activity -- by the Software Patent Institute and by others -- and to encourage the PTO to take advantage of the services of the Software Patent Institute as much as possible. We strongly believe that the PTO can and will do a better job than it has, if it has the right tools and the right information. For submission to the Patent & Trademark Office by Richard Stallman Each year the government creates new bureaucractic programs. Each is created for a purpose. That doesn't mean it serves that purpose or that it is worth the cost. It's hard to close down unnecessary bureaucracies, because people presume that they must do *some* good. It's easy to admit that a government program has drawbacks, but many won't seriously consider whether it does more harm than good. Thus we see, in the announcement of these hearings, the supposition that software patents are helpful. We are asked whether they "protect" software developers "enough". Patent lawyers chose the word "protection" to imply that patents are good. Now commentators feel pressure to use the same prejudiced word, lest they appear unschooled. This does its part to impede consideration of the possibility that patents are actually "too much". I'm not a lawyer. I am a programmer, and considered a good one. I'm here to explain why software patents impede software development and retard software progress. Software is like other fields of engineering in many ways. But there is a fundamental difference: computer programs are built out of ideal mathematical objects. A program always does exactly what it says. You can build a castle in the air supported by a line of zero thickness, and it will stay up. Physical machinery isn't so predictable, because physical objects are quirky. If a program says to count the numbers from one to a thousand, it will do exactly that. If you build the counter out of machinery, a belt might slip and count the number 58 twice, or a truck might go by outside and you'll skip 572. These problems make designing reliable physical machinery very hard. When we programmers put a `while' statement inside an `if' statement, we don't have to worry about whether the `while' statement will run such a long time that it will burn out the `if' statement, or that it will rub against the `if' statement and wear it out. We don't have to worry that it will vibrate at the wrong speed and the `if' statement will resonate and crack. We don't have to worry about physical replacement of the broken `if' statement. We don't have to worry about whether the `if' statement can deliver enough current to the `while' statement without a voltage drop. There are many problems of hardware design that we don't have to worry about. The result is that software is far easier to design, per component, than hardware. This is why designers today use software rather than hardware wherever they can. This is also why teams of a few people often develop computer programs of tremendous complexity. People naively say to me, "If your program is innovative, then won't *you* get *the* patent?" This question assumes that one product goes with one patent. In some fields, such as pharmaceuticals, patents often work that way. Software is at the opposite extreme: a typical patent covers many dissimilar programs and even an innovative program is likely to infringe many patents. That's because a substantial program must combine a large number of different techniques, and implement many features. Even if a few are new inventions, that still leaves plenty that are not. Each technique or feature less than two decades old is likely to be patented already by someone else. Whether it is actually patented is a matter of luck. The only way a programmer can avoid this mess is by sticking to things that are obsolete. You may not recall the state of the computer field seventeen years ago, since most people didn't pay attention back then. There were no personal computers. If you were a hobbyist, you might get a computer with a few thousand bytes of memory. With luck, it might run Basic. This shows another way software is different: it progresses very quickly. A program three years old is becoming obsolete, and one six years old looks stone-age. A twenty-year monopoly for anything in computers is absurd. When I spoke to the American Bar Association Science and Technology section, the moderator asked the audience whether they saw a need for any software monopoly lasting more than ten years. Most said no. Some of them said, "No, aside from copyright." Some said, "No, not even copyright." In other fields, a new technique may require development--building one device after another until you understand how to make the technique work. If a steel part works badly, and you think copper might be better, you can't type "replace steel with copper" and try it ten minutes later. The need to recoup this cost of this development is part of the usual argument for patents. In software, an individual technique usually doesn't need much development. What we develop are products that combine a new technique with dozens of other techniques. When a second programmer decides to use the same technique, he will have to do just as much development work as the first programmer--firstly, because he's probably using a different combination of techniques, and secondly, because the first programmer probably kept the results of development a trade secret. The patent system is supposed to help by discouraging trade secrecy. In software, patents don't do this. Today, just as in 1980, most developers publish general ideas and keep the source code secret. The Kodak Photo CD shows how this can work. The general ideas used in the Photo CD are patented; the details of the algorithm and data format are secret. Even twenty years from now, we will not know how to read a Photo CD unless someone does reverse engineering--and he will probably be sued for copyright infringement. To manufacture a physical device, you need to set up a factory--a big investment. The need for this investment is one of the arguments for patents in other fields. But mastering a CD-ROM costs just $1000. Here is a copy of the compiler that I wrote with a few friends. This program is mainly the work of four people. Another dozen helped substantially and others occasionally. The two principal developers were not working on this full-time. This compiler and its output are probably being used on more than a million computers today. Major companies such as Intel and Motorola have adopted it and now add to it. The US Air Force is funding extensions to it. Many widely used systems are compiled with it. Just a few lines of code can be enough to infringe a patent. This compiler has ten thousand pages. How many patents does it infringe? I don't know. Nobody does. Perhaps you can read the code and tell me. I know of one patent it infringes. I found it-- along with some near misses--in a list I saw by luck. I believe I have prior art for that patent, but I can't be sure what a court would say. I don't dare tell you the patent number, because if I were sued, I couldn't pay for the defense. I would lose by default. An invalid patent is a dangerous weapon. Defending a patent suit typically costs a million dollars, and the outcome depends mostly on legal technicalities. I've had at least one patentable idea in my career. I know this because someone else patented it years later. It is a feature for using abbreviations in a word processor. A couple of years ago, the users of the word processor XyWrite received a downgrade in the mail. XyWrite had an abbreviation feature; the developer removed it when threatened by the patent holder. They knew about my earlier published work; why didn't they fight the patent? Sometimes a business can't afford to have a lawsuit that will drag on for years. At those times, even if the patent is invalid, you lose. These patents are invalid because of luck. It was pure luck that these ideas were published by one person before they were patented by another. And it was luck that the ones who published didn't patent instead. This is an important point: what is patented, and what is not, is mainly a matter of luck. When you develop a large system, and you need to combine a large number of techniques and features, whether or not you can use each one is a matter of luck. The carelessness of the Patent Office in dealing with software is well known. So some people assume that, if the PTO does a better job, everything will be ok. They say that we should wait while the invalid patents spew out, and eventually the PTO will "understand software" and do the job right. There are two flaws in that suggestion: the PTO will not do a better job, and it would not solve the problem if they did. Some years ago, a professor I know patented Kirchhoff's current law, which says that the electric currents flowing into a junction equal the currents flowing out. He did this to confirm, privately, his suspicion that the PTO could not handle the field of electronics. He never tried to enforce the patent, which has since expired. (I will disclose his name if you give assurances that he and his lawyer will not get in trouble.) Kirchhoff's laws were formulated in 1845. If the PTO couldn't understand electricity after a century, how can we expect it to understand software in another decade or two? Computer scientists look at many software patents and say, "This is absurdly obvious." Defenders of the patent system reject our opinion. "You're using hindsight," they say. "You're more skilled than the typical practitioner." What we consider obvious patents are not errors; they reflect a different definition of "obvious". It won't change. The most outrageously absurd software patent of all covers using "exclusive or" (an operation of Boolean arithmetic) to modify the image on a bit- map display screen. This technique is so basic that it was done with *just one instruction* on the PDP-10 computer I used in the 1970s. I'm told this patent was upheld twice in court. When the PTO issues two patents for the same technique, as it did for the LZW data compression algorithm, that is surely a mistake. These mistakes can't be avoided because one technique can be described in different ways. It can take careful thought to see that two verbal descriptions describe the same computation. Mathematicians Atiyah and Singer once noticed that the same computation appeared, with different descriptions, in two branches of mathematics. This led them to the Atiyah-Singer Index Theorem, for which one received a presidential medal and the other a knighthood. The PTO expects an examiner to compare an application with not just one other thing, but everything known to man, in just 17 hours (average). Even if examiners were geniuses like Atiyah and Singer, they couldn't do this. What if the PTO stopped making mistakes and issued no more invalid patents? That would not solve the problem, because all *new* techniques and features--those not known today--would be patented just the same. Suppose the PTO were perfect. Suppose that it is the year 2010 and you are a software developer. You want to write a program combining 200 patentable techniques. Suppose 15 of them are new--you might patent those. Suppose 120 of them were known before 1990--those would not be patented any longer. That leaves 65 techniques probably patented by others--more than enough to make the project unfeasible. This is the gridlock we are heading for. Today's PTO mistakes are bringing us to gridlock sooner, but the ultimate result is gridlock even with a perfect PTO. I've explained how patents impede progress. Do they also encourage it? Patents may encourage a few people to look for new ideas to patent. This isn't a big help because we had plenty of innovation without patents. (Look at the journals and advertisements of 1980 and you'll see.) New ideas are not the limiting factor for progress in our field. The hard job in software is developing large systems. People developing systems have new ideas from time to time. Naturally they use these ideas. Before patents, they published the ideas too, for kudos. As long as we have a lot software developement, we will have a steady flow of new published ideas. The patent system impedes development. It makes us ask, for each design decision, "Will we get sued?" And the answer is a matter of luck. This leads to more expensive development and less of it. With less development, programmers will have fewer ideas along the way. Patents can actually reduce the number of patentable ideas that are published. You will probably hear someone today raise the issue of whether software "inventors" are "entitled" to patents just like other inventors. The answer is simple: like other inventors, they are not entitled to patents at all. Our Constitution rejects the idea of patents as an entitlement. Patents and copyrights are justified as a restriction on the public only for the sake of the public--only for promoting progress. Every two years, we elect our Congress. We don't ask who deserves to be win, because it's impossible to deserve this, and that's the wrong question anyway. Instead, we ask which Congress the nation deserves. The same applies to patent policy. We shouldn't ask who deserves a patent, because it's impossible to deserve this, and that's the wrong question anyway. The right question is how the policy affects the public. Do software patents "promote the progress of science and useful arts" as the Constitution requires? Do they promote progress enough to justify their cost--the imposition on the freedom of individuals to use what they know? A decade ago, the field of software functioned without patents. Without patents, it produced innovations such as windows, virtual reality, spreadsheets, and networks. And because of the absence of patents, programmers could develop software using these innovations. We did not ask for the change that was imposed on us. There is no doubt that software patents tie us in knots. If there's no clear and vital public need to tie us up in bureaucracy, untie us and let us get back to work! Responses to the specific questions posed by the PTO: 1. The best definition for a "software patent" is, any patent that restricts the development of new software. Regardless of the form in which this restriciton is expressed, the practical effect of such a patent is to create an obstacle to software development. For the most part, the harmfulness of a patent depends on the substance, not the form, of the patent. More precisely, the extent to which a particular software patent impedes software development depends on the class of programs it prohibits. A patent that covers a broad class of programs, or that covers a vital function of programs, is very harmful. A patent that covers fewer programs, or only obscure programs, is less harmful. A patent can be written in various ways while still prohibiting the same class of programs. The most extreme example is that a patent written to describe hardware can apply to software implementations, under the doctrine of equivalents. As a result, new criteria for patentability, based on the sort of distinctions that question 1 asks about, would have little practical effect. Forbidding patents of one form would encourage applicants to use another form, with no change in substance. Solving the problem of software patents probably requires changing the scope of patents rather than the criteria for patentability. More precisely, the best solution is to exempt software implementations running on general purpose computers from patent law--so that a developer of software for general purpose computers would ipso facto never need to worry about patents. Nonetheless, here are responses to question 1 as it was asked. 1-A. A patent covering the implementation of a particular algorithm on a general purpose computer obstructs software development and therefore is harmful. In computer science there is no meaningful distinction between "mathematical" and "non- mathematical" algorithms. Algorithms in general are a branch of mathematics. 1-B. A patent that covers only special purpose hardware implementations is not really a software patent, in that it cannot cause trouble for software development. Reportedly patents written in this form actually do cover pure software implementations, under the doctrine of equivalents. If this is true, a patent of form B is equivalent in its effect to a patent of form A, and is harmful to software development. 1-C-1. If the program covered by the patent is substantial, the patent would be narrower in breadth than the copyright on the program it covers. This means the patent would be harmless to people writing new software. Hardly anyone would apply for such a patent, since the copyright lasts longer and exists automatically. If the program patented is very short--perhaps just a few lines--then a patent of this sort might cause trouble for software development. The practical effects of such a patent would depend crucially on the precise interpretation of the patent's scope. 1-C-2. The typical software patent of today has this form. These patents interfere with software development. A patent of this form covers a class of algorithms--the class of algorithms that have in common the specific steps or elements listed in the patent. It is ironic that patenting many algorithms at once in this fashion is regarded by many as less offensive than patenting a single algorithm. 1-D. I do not see a difference in practical effect between a patent of form D-1 and a patent of form C-1; likewise for D-2 and C-2. While a program can be thought of as an abstract mathematical entity, in practice it cannot be distributed or used unless stored on a physical medium. 1-E. A patent on a data structure is harmful to software development. It also directly harms the users of software; they would have data bases that they cannot read without infringing the patent. In practice, a patent of form A or C or D can have the same effect as a patent of form E. For example, the patents covering LZW compression cover a computational process (that is to say, a class of similar algorithms); however, no one has found a way to produce the output of LZW except by using the LZW algorithm. The data format that LZW produces is thus, in effect, patented. 1-F. This sort of patent interferes with software development. 1-G. These patents interfere with software development. 2. One of the programs distributed by my project is an interpreter for the programming language PostScript. The revised "level 2" version of PostScript specifies the use of a particular data compression algorithm known as LZW. This algorithm is patented, as a result of which we cannot implement the full PostScript language. It should be noted that the LZW algorithm has been patented twice. It was developed independently by two groups of people, and there is good reason to believe both groups would have published in academic journals in the absence of software patents. We know of a superior compression algorithm that we believe is unpatented, and for some purposes we use the superior algorithm. However, no other algorithm can replace LZW for PostScript purposes, because other algorithms produce different data formats and thus do not interoperate with other implementations of PostScript. The code to implement LZW is approximately 0.2 percent of the PostScript interpreter. The rest of the interpreter is full of other algorithms, data manipulations, and features, any one of which might be patented (and perhaps some of them are). It was difficult to find any data compression algorithm of reasonable quality that was not covered by a patent. There are dozens of patents in data compression alone. Our first planned replacement for LZW was killed off by a newly issued patent, a week before the program's planned release. After another year and a half, we finally found an algorithm that seems not to be covered by the patents that we know of. 3. The current system is leading to an explosion of patents. Professor Merges of Boston University reports that, based on the amount of software business patent law firms seem to be doing and their interest in hiring lawyers with knowledge of software, the rate of filing of software patents must be accelerating rapidly. Each patent is a landmine for software developers. Eliminating patents from the field of software would make it easy to develop software again. 4. The present patent system obstructs innovation in the software field. It appears that the appropriate level of monopoly for software-related inventions is none whatever; that level of monopoly produced, through the early 80s, a high rate of that sort of innovation without hampering the development of software. I have never been involved in a patent lawsuit. I have had to withdraw programs from use because I knew of applicable patents for which I had no prior art--this has happened twice in data compression, as described above. But main effect that I see is that there are steadily fewer areas of software where I will be able to develop in the future, due to the spread of patents. I forecast this effect when I hear about newly issued patents; I don't need to wait till I myself am threatened with them. 5. No additional form of intellectual property for software is needed. The forms in use in 1980-- trade secret and narrow copyright--provided plenty of incentive for commercial software development; there is no public interest in having more. However, a new form of intellectual property for software could be an improvement if it *replaces* all the forms that currently exist. Here is a proposal for such a system: * When a program is released to the public, the developer is required to place the complete source code in escrow at the Library of Congress, where it is kept temporarily secret. * The software is then trade secret and copyrighted for four years. The power of this copyright could be as strict as anyone wishes. * Four years later, the program enters the public domain, and the escrowed source code is released by the Library of Congress, also in the public domain. * No other form of intellectual property monopoly covers software. This form of intellectual property is sufficient to enable most software companies to make a profit, because typically a four-year-old version of a program is obsolete. When version 1 of a program enters the public domain, its developer will be selling version 3 or version 4. Version 1 as public domain software will not be much competition for them. A software company that has no new version in four years is doing a bad job. With this proposal, that company might fail; but it is in danger of failing under the present system also. Besides, a badly run business ought to fail; that is a necessary part of free enterprise. By contrast, successful software companies come out with substantial improvements every year, and they would be profitable under this proposal. Robert Greene Sterne Testimony for the USPTO Public Hearings Regarding Statutory Subject Matter of Computer- Related Inventions January 27, 1994 San Jose, CA Good afternoon. I am Robert Greene Sterne. My testimony represents my own views as an attorney in private practice with over 15 years of experience representing almost exclusively US companies in high technology electronic and computer intellectual property matters. Based on my experience in the trenches, I believe that US companies of all sizes, particularly startups and those creating leading edge technologies, are served best by an intellectual property system that provides a broad scope of protection and strong enforcement remedies. Having heard much of the testimony in these hearings, I would like to state that I agree with those speakers who have stated that technological innovation is fostered by a broad scope of intellectual property protection and by strong enforcement of such exclusive rights. I don't want to re-plow this ground today. Rather, I would like to focus on a few points which I believe need further discussion so as to round out the record for these hearings. First, from a purely selfish professional viewpoint (I say this purely facetiously), I benefit financially from the uncertainty that exists concerning patent eligibility for emerging electronic technology, and from the complexity that the present patent rules create. Please, Mr. Commissioner and other panel members, maintain this lack of uncertainty and unnecessary complexity at least until I put all four of my children through graduate school. Second, the panel seems to find war stories helpful. Let me give you one that I am involved in concerning a startup who is in the process of raising 100 million dollars. Patent applications are being written and product clearance studies are being done which are absolutely critical to the financing. The venture capital people would not feel comfortable in investing this money if they did not believe that they were free of intellectual property infringement and had an excellent chance of obtaining broad patent protection for this innovation. This is not an isolated event. More and more, the financial community is requiring that the intellectual property portfolio of a start up electronic company be capable of providing a proprietary position and be free of infringement problems in order for necessary capital to be raised. As you know, startups and companies in emerging areas of electronic technology create a disproportionate number of new jobs in this economy. We need to protect this process through a strong intellectual property system that will encourage investment and creation of real wealth. My experience is that without strong intellectual property, the business community will invest in less risky ventures outside of high technology electronics. Third, the case law and the patent office position concerning so called "mathematical algorithms" which, if found, create non-statutory subject matter status for otherwise inventive electronic technology, is illogical and pernicious. No one, and I repeat no one, in my opinion, either inside or outside the patent office, can draw the bright lines that the rest of the public believes should be capable of being drawn concerning patent eligibility as it relates to mathematical algorithms. This uncertainty is unnecessary and totally unsatisfactory. For example, when I debated your solicitor on this subject before the Maryland Patent Law Association last October, he stated that the law of mathematical algorithms was so complex that even he had to review the cases each time he had to deal with the issue. This uncertainty hurts innovation in this country. On a substantive level, the alleged distinction between patentable algorithm inventions and unpatentable mathematical algorithm inventions makes no sense in reality. Every physical system and process can be represented mathematically. In fact, that is how physical systems and processes are modeled today in all industries using computer aided design and manufacturing tools. To say, that a product or process made by man is not statutory merely because the label "mathematical algorithm" is stuck to it, begs the question completely. Furthermore, all one has to do is pick up any two technical dictionaries and one will find that there is no agreement as to what the term "algorithm" and what the term "mathematical algorithm" each mean. So, in addition to not reflecting what happens in the technical world, there is the added problem that there is no definitional certainty concerning algorithm and mathematical algorithm. The Patent Office has a duty to discharge its constitutional mandate of promoting progress in the useful arts by making sure that the definition for statutory subject matter for electronic technology encompasses anything and everything under the sun made by man in this technical area. Otherwise, critical emerging areas of technology, such as, digital signal processing, voice recognition, computer graphics, compilers, multimedia, virtual reality, handwriting analysis, encrypted communications, and information retrieval, just to name a few, will be denied patent protection despite, their innovation, because a patent examiner or an infringer will be able to stick the "mathematical algorithm" label on an otherwise patentable invention. You, Mr. Commissioner, must make sure that the people reporting to you seek a broad interpretation of patentable subject matter in this electronics area like that being given to biotechnology and other emerging areas of technology. Fourth, I often say that electronics is applied functionality in the electronic domain. Implementation of this functionality is merely a design choice in most cases in terms of hardware or software. The choice of how to implement this inventive functionality depends on many factors, but it is the functionality that is the invention, and one should never forget that. We should stop the endless debate of saying that hardware inventions should be treated differently by the Patent Office than software inventions. The alleged inventive distinction between hardware and software is ludicrous to those in electronic industry. Furthermore, we have the same definitional problem that we had with algorithm and mathematical algorithm. No one can agree upon the definition of what is hardware and what is software. The reason for this is simple. As the technology evolves, the blurred boundary between hardware and software implementation changes and shifts. Fifth, opponents of so-called software patents argue that the patenting of software operates to remove well known software inventions from the public domain because the Patent Office does not have an adequate database to properly examine them. The PTO needs to continue to enhance its database in this technology, as well as in all emerging technologies, but denying patent protection for software inventions due solely to database inadequacies is akin to throwing the baby out with the bath water. The examination process needs to be improved, rather than restricting statutory subject matter for computer related inventions. Let me offer a ready made solution: Rule 56. Under Rule 56, Applicants must provide the Patent Office with the best art of which they are aware. Often, this art submitted under Rule 56 includes non-patent literature. This non-patent literature in most cases is better than the patents contained in the Patent Office database because patents, by definition, are several years behind the technical literature. Thus, the Patent Office can significantly enhance its search database by feeding in the technical literature obtained under Rule 56. Sixth, you inquired in part A about claim formats, and I will address them in detail in my written submission. Let me make only two high level comments now. First, claiming should be flexible. The goal should be to define the invention so as to fully protect the inventor, while providing the precision to the public that it critically needs to determine whether or not they infringe. The present rigidity often exhibited by the Patent Office in terms of specialized claim formats in emerging electronic areas prevents one or both of these goals from being met. Let's stop putting form over substance, and let's start putting effective claim drafting back into the picture. Let me give you one example. The so-called computer program product claim is critically needed so as to allow the patentee to charge the infringer with direct infringement where only software is being sold on media or being transmitted electronically over networks such as the electronic superhighway. The Patent Office should be seeking ways to have these types of claims made permissible, rather than engaging in a bureaucratic exercise which is tantamount to a war of delay and attrition in denying these types of claims. Seventh, your twenty year term proposal is excellent. But, it must be accompanied with a rock solid commitment from the Patent Office to significantly lower the pendency period of patent applications. Leading edge electronic companies in this valley and elsewhere now operate on product development cycles of 6 to 9 months. That is the time it takes from coming up with an idea to releasing a product into the marketplace. Our firm prepares and prosecutes around 200 US patent applications on complex electronic technology each year. We know that it usually takes two to three years to prosecute these cases through the Patent Office. This is too long. If, Mr. Commissioner, the Patent Office does not bring down this pendency period, I predict that the electronic industry will pull away from the patent system as their product cycles continue to decrease. Eighth, the patent system is of enormous benefit to the electronic industry in encouraging and protecting innovation in this country. The diversity of the US and our long immigrant history provides a unique forum for the creation and development of emerging technologies. There is no other country in the world that is a better incubator for such creativity than the US. US startup companies and those in emerging technologies must have strong intellectual property protection and enforcement abroad in order for them to compete effectively in a hostile international marketplace which currently does not provide a level playing field for them. The patent system, through the creation of the patent application, and the subsequent examination of the claims, inherently forces needed line drawing and needed disclosure of what is being protected. This precision makes it superior to other modes of intellectual property protection. By and large, the patent system is working well. The process needs improvement and enhancement. The Patent Office is doing a good job with the resources it is currently being given, but it needs more resources from the general revenues to do the job better. Thank you the opportunity to speak to you today. [Testimony of Robert Greene Sterne, February 10, 1994] Thank you, Mr. Commissioner. My name is Robert Greene Sterne and I am testifying on behalf of myself. I want to focus on five specific issues which I believe need to be explored further in order to round out the record in these hearings. These five areas deal with the preparation and prosecution of computer related patent applications. While my views are my own, they are based on the experience of the ten members of my firm who prepare and prosecute patent applications in the computer area. The experience base that is being drawn upon encompasses literally hundreds of original US cases. I mention this because you need to know the perspective from where my views come. First, I want to address whether program listings or flowcharts or pseudocode or other specific types of disclosure should be required in the patent application for the software aspects of the invention? It is tempting both for practioners and the Office to have very specific disclosure requirements concerning software. But my view is that it would be a mistake to establish specific disclosure requirements. Our experience is that there is no agreement among experienced patent attorneys or among software inventors concerning what is the optimal disclosure strategy. Moreover, as the technology races forward, the disclosure strategies change based on our experience. The patent system is very robust since it, unlike a sui generis system, can adapt to rapidly developing technology in emerging areas. I understand that to reduce printing costs and database costs the Patent Office would like to limit certain types of listings, and that many people believe that more higher level forms of representation of the invention are more effective in explaining the critical functionality and architecture and operation of the software invention. I agree with these sentiments, but believe that the system is better served by maintaining the flexibility of allowing the applicant to decide the best way of discloses the invention in the patent application. To amplify on this point, let me say a few things about the technology that will support my view. First, I agree with the opinion that machine code, such as object code, does not aid in enabling one skilled in the art to make and use the invention. But I believe that source code combined with adequate accompanying description is often sufficient to satisfy the disclosure requirements under Section 112. This is particularly true with computer programs written in higher level computer programming languages, such as Pascal and ADA. As the computer programming arts progresses, computer programs will be just as easy to read by humans as english text. In fact, it is the objective of such computer programming languages to be human readable. Thus, it would be wrong for the Office to adopt rules which would prohibit the submission of source code. Second, as an attorney in private practice, I am very sensitive and aware of deadlines and budgets, and I applaud the Patent Office's efforts in the area of enlightened management, management by objective, and total quality control. These are all good and encourage Examiners to utilize their time in the examination process in the most optimal way. However, I am quite concerned that the very complexity of these state of the art software inventions by necessity require more time for examination that is being allocated by the Office. Examiners in these areas of technologies should be careful supervised, and their performance measured, like all other examiners. However, the Office must make sure that it is allowing them the time that they need to do a quality examination job that the patent system and the public requires. Third, I applaud the efforts being made to hire examiners with significant educational and work experience in software technology. This expertise is absolutely essential for the Examination process, and the patent system is very well served by the Office raising the technical competence of the Examining corp in the software area as soon as possible. Similarly, applicants for the patent agents exam who have significant computer science backgrounds should qualify to sit for the exam. Computer science in this day and age should be considered to be a sufficient technical expertise to qualify to take the patent agents exam. But I agree with the sentiment expressed by some that there is a broad range of technical training in computer hardware and software from degrees from different educational institutions. Consequently, both in terms of hiring examiners and qualifying applicants for the agents exam the Office must carefully examine the educational qualifications of the individuals involved so that qualified people are let into the system and people without sufficient training are excluded. By necessity, this will require line drawing, but like many areas of patent law the ability to distinguish the shades of gray is the strength of the system. In other words, neither the approach of excluding all computer science people nor the policy of letting all computer science people in should be taken. Fourth, our experience in prosecuting applications on state of the art software related inventions is that the Examination process in the real emerging areas of technology is effectively being delayed pending these hearings and the political uncertainty over patents on this technology. Mr. Commissioner, you should be aware that we are encountering situations in prosecution where applications, in our opinion, are not being allowed because the Examining Corp is afraid of the political ramifications associated with possible adverse publicity to the Office if applications in these technical areas are issued. This delay and uncertainty hurts the patent system and American innovation. These political forces should be removed from the examining process and the focus should be on examination and not on a fear that the anti-software patent forces will raise a great hue and cry over the issuance of a particular patent in an emerging area of technology. Now, I don't want to be misunderstood on this point. In no way am I arguing that a patent should be issued on an invention that is too broad based on the prior art or is non- statutory based on a liberal interpretation of Section 101. But I am deadset against any type of delay that is being caused by fear of issuance of patent applications on patentable inventions merely because they involve state of the art software technology. My fifth and final point concerns your database. As other speakers have stated, one of the great benefits to the public of patent protection for software related inventions is that such inventions, which in the past have been maintained as trade secrets, will be disclosed to the public so that others will not have to reinvent the wheel. This will be of great benefit to the software industry. As an aside, the software industry in this regard is 180 degrees from what happens in another emerging area of technology, biotech, where the tradition is to publish or perish and inventors oftentimes lose their patent rights here or abroad though premature publication of their inventions in the technical literature. The biotechnology area clearly shows the benefit of rapid disclosure of technology in that competing researchers are allowed to rapidly build on the work of others and not recreate the same inventions. Turning to the database problem involving the examination of software related inventions, my view is that this database problem is not different that the problems encounter by the Office in other areas of emerging technology, such as biotech. It is critical that the Patent Office take all reasonable steps to create the most robust database possible in these emerging areas of technology, and to provide efficient and economical access to this database to members of the public both in Washington and in remote locations. The electronics superhighway being pushed by this administration could form the backbone for this remote access. The patent office should squarely embrace initiatives for building the most comprehensive database possible and for opening it up for ready access by members of the public. I know that this in practice is a tall order and one that could be very expensive. However, the benefits of providing a comprehensive database appear to outweigh the cost. Thank you for this opportunity. Testimony of Richard A. Jordan Patent Counsel Thinking Machines Corporation 245 First Street Cambridge, Massachusetts 02142 Responsive to the Patent and Trademark Office, Notice of Public Hearings And Request For Comments On Patent Protection For Software-Related Inventions, Docket #: 931222-3322 By way of background, Thinking Machines Corporation was founded in 1983 to develop, manufacture and sell "massively-parallel" supercomputer systems. Thinking Machines' products are an outgrowth of research undertaken principally by its chief scientist, W. Daniel Hillis, while he was a graduate student at the Massachusetts Institute of Technology. Since Thinking Machines announced its first product, the Connection Machine¨ Model CM-1 supercomputer, in 1986, the company has had excellent revenue growth; its revenue from massively parallel supercomputers is believed to be the largest of any company. However, it should be noted that its revenue is much less than that of a number of other companies in the computer industry, both domestic and foreign, including companies in the "traditional" supercomputer field as well as those principally known for selling computers of more conventional architectures, many of which are developing products competitive with Thinking Machines'. Over the past several years, the computing power of massively-parallel computing technology has been emphasized by a number of awards relating to Thinking Machines' technology. Since 1990, the Institute of Electrical and Electronic Engineers (IEEE) has given its Gordon Bell award for computing speed to several teams including Thinking Machines employees for programs processed on a Connection Machine supercomputer and for compiler technology. (A "compiler" is a computer program that translates a program written in a "high-level language," which is generally easily usable by even non-programmers, into "low-level" computer code that can be processed by computer hardware.) The importance of massively-parallel computing technology has also been recognized by articles in journals such as Scientific American and newspapers such as The New York Times and the Wall Street Journal. A Connection Machine supercomputer achieves its computing power through a combination of hardware and software. Unlike a conventional computer, which uses one or only a few powerful data processors on masses of data, the hardware of a Connection Machine supercomputer includes tens, hundreds or even thousands of microprocessors which operate in parallel on relatively small amounts of data distributed to them. The individual microprocessors are interconnected by a data routing network which allow them to share data as necessary. The software effectively coordinates the operations of the individual microprocessors and the routing network to achieve tremendous computing power. While the hardware is important to the computing power achieved by a massively-parallel computing system, at least as important is the advancement in software techniques. Many advancements have come in areas of development of parallel algorithms and computing techniques, the pattern of assignment of data to the processors to minimize processing time ("obvious" patterns often result in relatively poor processing times), techniques for rapidly routing data through the routing network, compiler techniques and the development of high-level languages and compilers therefor to make massively-parallel computers easy to use. Thinking Machines currently has a staff in excess of 500, of whom approximately one-third are involved in hardware and software engineering development. Of these engineers, only about thirty percent are involved in what might be traditionally referred to as hardware development, while fully seventy percent are involved in software development, including system software, compiler development, software tools and other software products. In addition, a number of other employees actively develop software in Thinking Machines' large customer service group, developing software techniques specifically for or with customers. It is manifestly evident that Thinking Machines' software development effort represents a very significant portion of its investment in massively-parallel computing technology, and Thinking Machines believes that patent protection provides an important tool to help protect this investment. Thinking Machines further has an ongoing program to encourage its developers to publish papers and articles describing new parallel processing techniques. This provides information on new uses for massively-parallel computing technology and techniques, and also may help to enhance the professional standing of its employee/authors within their professions. Published papers represent divulgation of technology for which Thinking Machines has provided often considerable investment, and Thinking Machines believes that patent protection can be an important tool to protect this investment as well, particularly in view of the substantial degree of competition developing in the massively-parallel marketplace. Thinking Machines, unlike some larger companies, does not require that its employees' papers be cleared, that is, scrutinized to determine whether they describe technology which the company may which to protect, before the papers can be sent for publication, but it does actively file for patent protection on technology to be described in such papers. Thinking Machines recognizes that computer software is also protected by copyright, but it believes that copyright will not provide the degree of protection required to protect its investment. First, the scope of copyright protection is far from clear, and has been made less clear in recent years in view of the Second Circuit's opinion in the Computer Associates case. It is generally said that copyright protects the "expression" of a work, and not its "idea." While these words are easy to say, it is very difficult to apply them in practice. Furthermore, the application of 17 U.S.C. Section 102(b), which exempts from copyright protection "any idea, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied" (emphasis added), further renders uncertain the degree of protection provided by copyright. Much of the value in the program- related techniques developed by Thinking Machines is not in the detailed computer program code, which is clearly protected by copyright, but in the algorithms and programming techniques, for which copyright protection is far less clear. Similar ambiguities are not present in patent protection. Furthermore, patent protection is important in view of the publishing by Thinking Machines' employees as described above, which disclose the algorithms and techniques to the world and particularly to the competition, and in view of the fact that copyright may not protect against reverse engineering [see, for example, Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 7 U.S.P.Q.2d 1281 (5th Cir., 1988) and NEC Corp. v. Intel Corp, 10 U.S.P.Q.2d 1177 (D.C. N.D. Cal., 1989)]. Accordingly, Thinking Machines believes that patent protection for computer program-related inventions is an important tool to protect its investment. That being said, Thinking Machines believes it important that the patent system maximize the likelihood that the patents issued are valid, that the claims are directed to new, useful and non- obvious technology in accordance with the statutory mandate. It does no one any service if patents are issued that do not meet this statutory standard. While no one can reasonably expect that any institution run by human beings will be one hundred percent perfect, we believe that enhancements can be made to improve the system. I might mention that, while we are here discussing patent issues relating to computer software- related inventions, these same problems can arise in connection with computer hardware, and, indeed, in any technology. The problems may be exacerbated somewhat in the software area, since the PTO for a number of years was reluctant to consider computer program-related inventions to be statutory subject matterÑa reluctance that to some extent continuesÑwhich delayed its development of a prior art database in this area. However, there is no industry in which all of the technology is patented or otherwise published. Several changes to U. S. procedure may be appropriate to provide for early publication of the applications. This would have two advantages. First, it would ensure more timely publication of the technology, making it available to those working in the industry. A publication delay of one to one and a half years after submission of a paper is not atypical for engineering and scientific journals, but for patents, particularly for this subject matter, a much longer delay is more typical. With developments in computer technology moving as rapidly as they are, the patent disclosure after such a lengthy delay may be somewhat less valuable as a source of technical information. Second, early publication can also operate as early notification to others working in the field of the potential issuance of a patent, allowing them to factor that into their business decisions. The potentially lengthy delays to patent issuance under current practice in the United States means that others working in the field would not be notified that a patent application is pending that may cover something they are developing until the patent actually issues, which can be a number of years after its original filing date, and perhaps after much time and money has been invested in the potentially infringing enterprise. Third, early publication followed by an examination in a more "contemplative" environment than would be possible in the current push for a reduction in the pendency period would provide a better patent upon issuance. For example, if a patent issued on the original application within the approximately eighteen-month pendency period as suggested by the PTO, the prior art from foreign patent offices would most likely not be available for consideration by the U. S. Examiner. Having this prior art is particularly important in the computer area. It makes for a more complete examination and higher degree of confidence in the validity of the patent. Typically, such prior art is not available until around 18-24 months after the priority date, and an eighteen-month pendency time would mean that the art would not be available until just around the time the U. S. patent would issue. If the art were deemed material and the application were still pending, the applicant would likely have to file a continuation application to get it considered, which could delay issuance of the U. S. patent, and publication of the technology, for an even greater amount of time and require the additional expenditure by the applicant of another filing fee. On the other hand, if the U. S. patent had already issued, the only ways to have the art considered would be by re-examination or reissue, both of which can be costly. In addition, the emphasis on a reduced pendency time places undue stress on the Patent Examining corps, which can have several undesirable consequences. From the immediate standpoint of examination of particular applications, a reduced pendency time could result in Examiners not being able to give the applications due and careful consideration, which is particularly important in a complex art such as computers. In addition, the emphasis can have a deleterious impact on training of new examiners, particularly in rapidly expanding areas such as the computer arts. These problems can be alleviated by a few, relatively simple, changes to the prosecution procedures in the PTO. First, the PTO should publish applications eighteen months from the priority date. This publication schedule would be contingent upon the PTO providing a search report some time prior to publication, to permit the applicant to amend or withdraw the application prior to publication. In addition, following publication, the applicant would be entitled to recover damages for use of the invention after publication but prior to issuance. Examination could then take place in a more contemplative environment. This procedure would give the applicant some control over whether or not the application should be published, based on some knowledge of the prior art, and compensation for use of the information after publication but before issuance (the European "provisional protection"). In addition, it gives the public the benefit of the early disclosure of the technology and the fact that a patent may issue thereon. Furthermore, it would permit a more careful and thorough examination of the application than is possible with the current procedures, which would benefit both the applicant and the public. In addition, the public should be brought into the process at some point, perhaps by way of an opposition proceeding just before or just after issuance. This could have two advantages. First, secrecy breeds suspicion, and at least partially removing the veil of secrecy from the proceedings would remove some of the mystery involved in the decisions made by the PTO. Second, art used by an opposer during an opposition may be useful in enhancing the PTO's own prior art collection. Oppositions must be conducted in strict adherence to procedures and time frames, or otherwise they could run on interminably, which also can be difficult for business decision-making. However, it is not believed that providing for oppositions with reasonable time frames would place an undue burden on the prospective patentee's patent rights, particularly if provisional protection were provided the patentee. Another way in which the system can be improved is by holding on-going dialogues, such as these hearings, to get input from the bar and others who have interests in the patent system. Wearing another hat, I am also chairman of the Electronic and Computer Law Committee of the American Intellectual Property Law Association. Our committee leadership has, for several years, been meeting twice a year, in the fall and spring, with Group Directors and others in the electrical examining groups to discuss issues of mutual concern. We expect to hold another meeting in April at which we hope to discuss, among other things, some of the issues raised by the notice for these hearings. An outgrowth of earlier meetings was a program held last October, in conjunction with the AIPLA's Annual Meeting, that was extremely well attended by examiners from the examining corps and by members of the AIPLA. At the program, a number of problems and practice issues of concern to the examining corps and to the bar were discussed in detail. Each side, so to speak, learned quite a bit of the problems and perspectives of the other. The program received quite good reviews, and we hope and expect to have more of them. Reengineering the Patent Examination System Remarks of D. C. Toedt PTO Hearings on "Software Patents" February 10-11, 1994 Introduction Good morning. My name is D. C. Toedt. As requested in the Federal Register notice of this hearing, let me summarize briefly for the record my affiliation, the nature of the organization with which I am affiliated, and the principal areas of softwarerelated business of the organization. I am a shareholder and chairman of the Patent Prosecution Practice Committee at Arnold, White & Durkee, one of the nation's largest intellectual property law firms, in the firm's Houston office. Much of my firm's practice and of my own work relates to the computer industry and in particular to software technology. My remarks will be directed to Topic B, Question 6, which asked for suggestions for improving the patent examination process. My remarks today are directed solely to selected procedural questions and not to any substantive patentability issue. These remarks represent my own views and not necessarily those of my firm or any of its clients, nor of any other organization with which I am affiliated. 38 Mr. Secretary, two weeks ago in San Jose you announced that the United States would be changing to a 20year patent term. That change will make it more important than ever to speed up the examination system, and more generally to improve it, so that patent applicants will not be frustrated by the clock ticking away on their potential patent rights before a patent is issued. The Office has been moving forward in that regard for some time and continues to do so. Many practitioners have been very impressed with the improvements in quality of the Office actions that we have been seeing over the past couple of years. We are also looking forward to the technological changes that are underway in the PTO, which should make life easier and more productive for everyone involved in patent prosecution. As you know, however, President Clinton and Vice President Gore have announced their commitment to "reinventing government." Consequently, the longterm challenge faced by the PTO is a broader oneÑthat of reengineering its examination processes.39 The Office needs to be trying to ensure, not just that is "doing things right," but that it is doing the right things. I would like to offer suggestions in that regard in three specific areas: ¥ Borrowing ÒLowEnd PatentÓ Concepts from the SecuritiesRegistration System: First, the PTO should look to the securities laws, and particularly to the SEC's registration and disclosure system, for some ideas about changes to the examination process that might prove beneficial. In particular, the Office should experiment now, within the existing statutory framework, with an optional "low end" patent that can be initially obtained without a complete substantive examination proceeding. An analogy from the securities world might be an initial lowend issuance of securities under Regulation A that can be conducted in an SEC ÒqualificationÓ proceeding as opposed to a fullblown ÒregistrationÓ proceeding. Use of analogous lowend patents would allow applicantsespecially small businessesto obtain limited protection more quickly while still preserving (for a limited time) the ability to seek broader protection later if warranted. It would also allow the Office to husband its substantive examination resources for cases with greater potential market impact. ¥ Conducting "Administrative Trials" for More Predictable Examination Timing: Second, the PTO should borrow some specific techniques from the litigation process to handle its internal scheduling and conduct of examination proceedings. To make examination timing more predictable for all concerned, the Office should experiment with conducting its substantive examinations along the lines of administrative trials. Assistant examiners would serve as "opposing counsel" (analogous to junior prosecutors in a DAÕs office) and primary examiners would serve as "judges." The Office should also use scheduling orders for examination proceedings so that all concerned will be better able to plan around defined time periods. ¥ Improving Incentives for PriorArt Searching by Applicants: Third, the PTO should enhance the positive incentives for applicants to conduct a thorough preexamination prior art search. One approach might be to modify the existing MPEP procedures for petitioning for accelerated examination so that special status and headoftheline treatment is granted automatically when a suitable search report is timely filed. Another approach might be to charge a substantial additional search fee to applicants who do not document the performance of a suitable search of their own. Patent Enforcement Participants as the Key "Customers" As a prelimnary matter, I submit that any effort to reengineer the patent examination system should be organized around the needs of the patent enforcement process. In any reengineering program, a critical question to ask is: Who are the "customers," and what do they use our "product" for? Whether or not an infringement suit is ever actually filed over a particular patent, the participants in the various aspects of patent enforcementÑby which I include licensing and designaround workÑare the real "customers" of the patent examination system. Consequently, "litigation support," in the broadest sense of that term, should be the top priority. Potential Lessons from the Securities Laws Similarities Between Patent Examinations and Securities Registrations: Why look to the securities laws for ideas? Because in some respects, a company does similar things when it files a patent application and when it issues securities: ¥ In a securities offering, the issuer is going to "the public" (broadly speaking) to obtain a capital asset to help it in its business. The asset being sought is usually cash, or perhaps other securities that are hoped to be convertible someday into cash. ¥ Likewise, in a patent application filing, the applicant is going to "the public," in the person of the Commissioner, for a capital asset to help it in its business. Here, the asset being sought is an exclusionary right that the company hopes can be translated directly or indirectly into cash. The securities laws might therefore hold some interesting lessons. It would not be the first time that the patent system had borrowed from the securities laws: The definition of "material information" used in Rule 56 (prior to recent amendments to that rule) was adapted from the definition used in the securities laws.40 LowEnd SEC Registration Proceedings: The more stringent securities ÒregistrationÓ proceedings conducted by the Securities and Exchange Commission are designed for offerings with the greatest potential dollar value to the issuer and with the greatest potential market impactÑpublic offerings. Most issuers, however, hold off on publicoffering registration proceedings, and instead do "low end" financings using various exemptions from registration, until it is more clearly advantageous to incur the associated costs. For example, under Regulation A as recently amended by the SEC,41 a wouldbe issuer of securities can elect to incur lower costs in cash, time, and trouble by going through a ÒqualificationÓ proceeding, as opposed to a fullblown ÒregistrationÓ proceeding. To do so, the issuer must be willing to settle for receiving a lowervalue asset, in a limited offering that has less of a potential impact on the capital markets. In particular, the issuer must accept and comply with a number of restrictions on the dollar amount of capital it can raise, the amount of solicitation it can engage in, the number and types of investors it can accept, and so forth. Limited SEC "Merit Review": A related point: As I understand it, the fundamental philosophy of the securities registration system is that the SEC does not expend its resources on "merit review" of individual securities offerings except when enforcement litigation is necessary. Instead, the SEC and its staff have devoted a great deal of effort over the years to developing: ¥ disclosure content requirements, which set out detailed categories of information required for various kinds of businesses and various types of offerings; ¥ disclosure format requirements for different kinds of offering documents to help the SEC staff and other readers assimilate the information quickly; and ¥ disclosure certification requirements, e.g., the requirement that financial statements be certified or at least reviewed by independent auditors. The SEC staff (in Washington and/or the regional offices) usually scrutinizes registration documents in great detail, and may issue "Office actions," but that process is intended primarily to ensure that the documents appear to comply with the applicable disclosure requirements and to be internally consistent. As a result, proposed securities registrations proceed with what patent lawyers would regard as blinding speed. Moreover, the SEC's substantivereview resources are conserved for the enforcement situations in which they are most needed and can have the most public benefit. Existing PTO Initiatives: It is encouraging that the PTO is already starting to do some things like this. The Office already requires patent applicants in certain fields to include some standardized technological information, in standardized disclosure formats, that are appropriate to the field of art in question. We see examples of this in the regulations governing nucleotide and amino acid sequence disclosures.42 The Office clearly recognizes that the same concept might be viable in other art units as well, as indicated by some of the specific disclosurerelated questions set out in the Federal Register notice of these hearings. Suggestion: Limited Examinations for "Low End" Patent Applications: More importantly, however, perhaps the PTO should take a leaf from the SEC's bookÑand stop trying to give the same level of expensive scrutiny to every single one of the thousands of patent applications that are filed each year. The Office should consider creating one or more forms of "low end patents" that can be initially obtained without a fullblown substantive examination proceeding.43 That could free up significant PTO resources, which the Office could use to increase the level of scrutiny given to patent applications that do get formally examined. Possible Characteristics of LowEnd Patents: We can be fairly imaginative about the kinds of lowend patents that could be tried. It is possible to envision a lowend patent that might include some or all of the following features: 1. A lowend patent might be granted quickly, with comparatively little "merit review" by the PTOÑperhaps on the basis of a satisfactory independent search report and possibly an analysis of references by the applicant, as in the present procedures for petitioning for accelerated examination.44 (In such an arrangement it might be a good idea to give independent search firms and patent attorneys some kind of explicit quasiofficial immunity from thirdparty liability claims arising from alleged deficiencies in their work. Most search reports and analyses would probably include warnings against thirdparty reliance in any event.) 2. Because a lowend patent would receive only a limited examination by the PTO, the patent owner might be required to assume the burden of proof of patentability in any infringement litigation and to waive the patent ownerÕs statutory right to require a challenger to prove invalidity.45 Such a burden of proof might be set at a reduced preponderanceoftheevidence level (to offset the risk of BlonderTongue collateral estoppel effects if the owner is unsuccessful in carrying that burden). By far the majority of patents are never litigated, and so the burdenofproof issue never really arises. Moreover, in many infringement suits the patent owner puts on as much evidence in support of patentability as possible anyway. As a result, putting the burden of proof of patentability on a lowend patent owner might have little practical impact. 3. A lowend patent might have a comparatively short term, perhaps seven to ten years. 4. A lowend patent might be convertible to a conventional "highend" 20year patent by filing a request for formal PTO examination prior to some date certain (e.g., expiration of the lowend patent), subject to the existing twoyear time limit for broadening reissues and associated intervening rights.46 The question of sameinvention double patenting would need to be addressed. Under the existing statute and case law, however, the Commissioner might have authority to prescribe conditions under which a terminal disclaimer could be used to address the perceived problems of sameinvention double patenting, just as terminal disclaimers can now be used in cases of obviousnesstype double patenting. 5. A lowend patent might be limited to a comparatively few claims, perhaps five or six total claims. 6. A lowend patent might permit only a short period of injunctive relief to give the patent owner a head start in the marketplaceÑsay, one to three years against any given infringer. 7. A lowend patent might limit the owner's damage awards in litigation to a reasonable royalty, perhaps with various caps on the percentage or amount of royalties collectable from any given infringer or over the life of the patent (prior to factoring in any courtordered increased damages, e.g., for willful infringement). 8. To reduce the risk of unjustified patent infringement suits, a lowend patent might require the patent owner to pay the accused infringer's costs and attorney fees if the accused infringer prevails, unless the trial court finds that the interests of justice require otherwiseÑe.g., because the patent owner proves that it exercised due diligence in determining patentability and the likelihood of infringement prior to filing suit. That might be coupled with an additional requirement that the lowend patent owner put up a suitable bond at the beginning of an infringement action, similar to a removal bond for lawsuits removed from state court to federal court,47 if so ordered by the trial court. Not all applicants would necessarily want to go for a lowend patent. One of my colleagues who practices primarily in biotech areas, however, commented that some of her clients are unsure at the time they file their patent applications whether the eventual commercial value of the invention will justify the cost. She speculated that as a result, many such clients would be delighted to accept the tradeoffs outlined above. I suspect (but of course do not know) that many other small and large businesses would feel the same way. Experimenting with LowEnd Patents Within the Existing Statutory Framework: Interestingly, the Commissioner may already be able to experiment with such concepts within the existing statutory framework, via noticeandcomment rulemaking, for applicants who wish to seek lowend patents. Section 131 of the 1952 patent statute48 requires that the Commissioner cause patent applications to be examined, but does not appear to mandate expressly that any particular level of PTO investigation or substantive scrutiny be given to patent applications. The Commissioner thus might have the authority to promulgate regulations, at least on an experimental basis and perhaps even on a permanent basis, to: ¥ create an optional lowend variation of the existing statutory patent, by prescribing specific duties and specific limitations on rights and remedies that can be voluntarily accepted by applicants who are willing to settle for such a patent for the time being. For example, such an applicant might be required to agree to carry the burden of proof of patentability in infringement litigation and to waive any right to injunctive relief or damage awards as stated in the regulations; ¥ permit an applicant who has filed a complete patent application to file a written election accepting the duties and limitations prescribed by the regulations for lowend patents. Such acceptance could have the effect of a voluntary waiver of statutory rights and remedies as stated in the regulations. The written election might additionally be required to include a search report by an independent search firm, and possibly an analysis of references comparable to that required for a petition for accelerated examination; ¥ provide for a limited examination of the application and writtenelection documents, primarily for compliance with applicable formal requirements, and for issuance of a lowend patent if those requirements are met; ¥ deem the applicant's written election to constitute a continuation application,49 with PTO action on the continuation application being suspended for a stated period of time;50 ¥ permit the applicant to file a request for a complete substantive examination of the continuation application to seek a conventional "high end" patent, prior to some date certain (e.g., "expiration" of the lowend patent), subject to broadening reissuetype limitations, intervening rights, and any stated terminaldisclaimer requirements; and ¥ deem the continuation application to be abandoned as of the specified date certain if a timely request for conversion to a highend patent is not filed. There are probably many other possibilities that could be considered in this regard. For example, the experimental regulations might be able to go even further in a procedural sense: they could provide that every patent applicant is deemed to elect a limited examination and a lowend patent, unless a specific request for a complete substantive examination is timely filed. Some of these possibilities might work, with or without finetuning, others might not. The important point is that a onesizefitsall philosophy was abandoned long ago in the securities world. It is time to think about whether we should do the same in the patent examination system to better serve the public. Conducting ÒAdministrative TrialsÓ for More Predictable Examination Timing My second suggestion is that the PTO experiment with conducting its substantive patent examinations along the lines of administrative trials. That could help improve the quality and speed of examinationsÑespecially if coupled with a limitedexamination system for lowend patent applications as discussed above. Equally important, it could make the workload more manageable for examiners, applicants, and their counsel. The Problem of "File PingPong" in the Present System: In the present patent examination system, Office actions usually arrive on busy attorneys' desks without warning, sometimes after months or even years of inactivity. Equallybusy examiners never know when a response to an Office action might show up, or when a telephone call from an attorney might be received, during the sixmonth period before an application becomes abandoned. Perhaps as a result of this state of affairs, one might wonder sometimes whether some attorneys and examiners regard the goal in patent prosecution as that of getting the file off of one's own desk and onto someone else's, instead of attempting to get the client's project finished. In any event, it can be very difficult for attorneys and examiners to plan or schedule the work that will be needed to move an examination proceeding to a conclusion, one way or another. The Difficulty ot Getting SeniorExaminer Attention: Moreover, in many cases a comparatively inexperienced assistant examiner does the actual work of examination and of drafting the Office actions that reject or allow the claims. The assistant examiner's decisions technically are only recommendations to the supervising primary examiner (SPE), who reviews and signs all Office actions. The SPE, however, may have a dozen or more assistant examiners to supervise and thus is usually especially busy. As a result, if a disagreement arises between an attorney and an assistant examiner, the attorney may sometimes feel as though it is difficult to get effective attention from the SPE. The Contrasts with Trial Work: Lawsuits work much differently. In a lawsuit the parties know that they will be set for a trial during what at least nominally is some defined period of time. Discovery periods and motion cutoff dates are keyed to the trial date. The parties and their attorneys know that they have to plan their own dockets so that they can finish their trial preparation within those defined time constraints. When a judge wants it to, a scheduling order means what it says. Anyone who has had a case here in the famed Òrocket docketÓ (the Eastern District of Virginia), or in Judge Sam KentÕs court in Galveston, Texas, can attest to that: You will get your discovery finished, you will complete your pretrial preparation, and you will go to trial, on schedule. During the trial, the parties, their counsel, and the judge are focused on bringing the matter at hand to a conclusion. The parties also know that, as a general rule, they had better take their best shot during the trial, because they normally won't get another opportunity. Realigning the Examiners' Roles: The PTO should experiment with a similar litigationlike approach, including a realignment of the roles of assistant examiners and primary examiners. In selected applications and perhaps eventually in every application: ¥ An assistant examiner should function as "counsel" who develops and puts on a case against patentability under the general tutelage of the SPE. An analogy that comes to mind is that of a junior prosecutor in a DAÕs office, trying his or her own cases under the general supervision of a more senior assistant district attorney; ¥ A primary examiner should serve as a "judge" who actually makes the decisions on patentability, instead of continuing to do (with signature authority) the very same job he or she did as an assistant examiner. Scheduling Order: A scheduling order, possibly issued by the SPE, should set out a comparatively short period of time analogous to a trial schedule. During that time period, all prosecution issues would be joined, all desired evidence and arguments would be put into the record, and a final decision on patentability would be handed down, one way or the other. Dates certain should be set within, say, a one to twomonth window for, e.g.: 1. "discovery," i.e., the applicant's filing of information under Rule 56 and the examiner's issuance of a PCTstyle search report (without a detailed written explanation of grounds for alleged unpatentability); 2. "pretrial practice," i.e., the applicant's filing of any amendments, affidavits to antedate references, expert affidavits, objective evidence of nonobviousness, and the like. The applicant's attorney and the assistant examiner might also be required to file "proposed findings of fact and conclusions of law," e.g., written analyses of the pending claims and the cited references. Examiners do this as a matter of course already.51 Moreover, existing procedures provide for attorneys to do two things that are very similar, i.e., a response to an Office action52 and a petition for accelerated examination; 53 3. "trial," e.g., a hearinglike interview with the primary examiner, in person or by phone, at which the assistant examiner and the attorney argue their respective casesÑperhaps with some participation by the inventor(s) or expert witnesses. The interview might be taperecorded and transcribed to preserve a written record; 4. "decision," i.e., the primary examiner's issuance of a firstÑand finalÑOffice action on the existing record, including a detailed writeup (or a transcribed oral decision) analogous to findings of fact and conclusions of law; and 5. "posttrial practice," e.g., a request for reconsideration, to reopen the record, or perhaps for a new trial, prior to any appeal from a rejection. An approach of this kind would look very much like familiar aspects of existing prosecution practice (and also like an abbreviated version of interference practice). Some administrative changes would be needed, e.g., to the examiners' quota system. Nevertheless, a number of potential advantages would arise: ¥ The quality of many examinations would likely go up, because more senior and experienced examiners would actually be making patentability decisions and because everyone involved would be more focused on getting the project finished; ¥ Primary examiners would be freed up to do what they do best, i.e., judging the patentability of claimed inventions; ¥ All concerned would be better able to plan their work around known trial schedules; ¥ Attorneys would probably spend less total time on prosecution of particular applications (but would spend it more effectively), thus reducing the overall cost to clients; ¥ Assistant examiners would have a new incentive to achieve primaryexaminer status, over and above the opportunity to keep on doing the same thing they have already been doing; ¥ Attorneys would have more opportunity for meaningful interaction on the merits with a senior examiner, i.e., the "judge"; ¥ SPEs would be freed from the responsibility of actually allowing or rejecting claims, and thus could spend more time coaching the assistant examiners, suggesting directions for prior art searching, and other "team building" functions; ¥ Many examiners and attorneys would probably find their work to be more interesting and challenging. It is difficult to predict what impact such changes might have on the PTO's application "throughput." I suspect that throughput would not sufferÑespecially if the some of the above recommendations about lowend patents are adoptedÑ and that it might even be improved. Even if throughput did drop somewhat, the potential improvements in quality, and the attendant benefits to the "customers" in patent enforcement and licensing, might be well worth the tradeoff. Encouraging More Exhaustive Searching by Applicants Under the present law, all Òmaterial informationÓ known to a patent applicant (or by his or her attorney or certain others) must be disclosed to the PTO.54 The Court of Appeals for the Federal Circuit has held, however, that a patent applicant generally does not have a duty to search the prior art in connection with his or her application.55 Perhaps the law on that point should be explicitly changed to impose such a duty, possibly by noticeandcomment rulemaking by the Office. The patent statute requires that an applicationÕs claims Òparticularly [point] out .Ê.Ê. the subject matter which the applicant regards as his invention.Ó56 Apparently it has always been assumed at least tacitly that, for purposes of an applicantÕs presentation of claims, this language refers to the applicantÕs subjective perspective about what he or she regards as his invention. In many other areas, howeverÑif not most areasÑthe perspective used is nominally an objective one, namely that of the hypothetical person of ordinary skill. For example, nonobviousness,57 enablement,58 and clarity of claim language59 are all measured with reference to the view of the hypothetical person of ordinary skill. It is not apparent a priori that an applicant should always be able to assert in a vacuum that he or she subjectively Òregards [the claims presented] as his invention.Ó It might be desirable instead to use a more objective standard, requiring such an assertion to include a suitable disclosure of the factual background against which it is madeÑe.g., a priorart search report. Looking at the question from another angle: The Supreme Court has consistently taken a Jeffersonian view that publicly accessible technology is regarded as a community asset, and that patent rights are a limited exception to that general rule.60 When a patent issues, it operates to prevent competitors and other members of the public from engaging in what would otherwise be lawful conduct. A patent is not supposed to issue, however, unless and until a determination has been made that the conditions for patentability are in fact met. Making that determination requires investigation; some might argue that it therefore would not be unfair per se to ask patent applicants to share in the burden of investigation. As a practical matter, however, priorart searching probably should be encouraged but not made mandatory. If searching by applicants is mandatory, then accused infringers can be expected to raise inequitableconduct challenges on grounds of alleged inadequacy of searching, even though examiners perform their own independent searches. Patent infringement controversies are complicated enough already; we should be very sure about what we are doing before we add to that complexity. A better approach would be to provide affirmative incentives for searching. One way of doing so might be to give automatic priority of examination, without the need to file a petition for accelerated examination, to applicants who submit a facially acceptable search report. Another way of encouraging searching might be to require applicants who do not submit a suitable search report to pay an additional search fee. Such a fee does not appear to be expressly ruled out by the patent statuteÕs fee provisions.61 The additional revenues from such fees might be used to pay for additional fulltime or parttime searchers working under the direction of the Examining Corps. ÒMechanicalÓ Suggestions I also have a couple of mechanical type suggestions for consideration: á An Office action should be organized so that all rejections relating to a particular claim are set out in together in a single section of the action. That will make life much easier on subsequent ÒcustomersÓ who attempt to analyze the prosecution history of a particular claim. One possible format for an Office action might be something like the following: 1. A quotation of all pertinent statutory and regulatory provisions; 2. A complete analysis of claim 1, including a statement of all objections and reasons for rejection of that claim under any statutory or regulatory provision; 3. A similar analysis of claim 2, incorporating by reference the analysis of claim 1 to the extent appropriate; 4. Etc., etc., for each claim á The legalsize front page of an Office action should not be mailed to the applicantÕs attorney. Instead, the front page should be used as an input sheet for the OfficeÕs word processing staff, who should easily be able to generate a ÒcustomÓ (and thus shorter and easier to read) front page of the actionÑon lettersized paperÑfrom the information filled in or checked off by the examiner. á All Office correspondence, including notices of missing parts, notices of drawing deficiencies, notices of allowance, etc., should be on one size of paper. Mixed paper sizes make Office correspondence difficult to handle for attorneys and secretaries (e.g., in making copies to send to applicants) and additionally makes attorneysÕ files difficult to maintain. If standard lettersized paper is too short, then use A4 paperÑ or better yet, redesign the form or perhaps even get rid of it. Conclusion Some or all of the ideas discussed above may need finetuning, and some may even prove unworkable upon further thought or in actual practice. All, however, should be fairly easy to try out in lowrisk experiments. Unless some compelling reason dictates otherwise, the Office should give them a try. If they work, great. If they don't work, then move on and try something else. Mr. Secretary, many patent practitioners are delighted that the PTO is reexamining the patent examination system. You have a wonderful opportunity here to improve and strengthen the role of patents and of the Patent and Trademark Office in "promot[ing] the progress of science and useful arts." Thank you for the chance to participate. Remarks of Hans R. Troesch January 26, 1994 Good morning. My name is Hans Troesch. I am testifying on my own behalf. My partners at Fish & Richardson asked me to mention that. Many years ago, I earned a masters degree in computer science at the University of Michigan, and for close to ten years, regardless of my various job titles, I considered myself principally to be a computer programmer. Today, I am an attorney and a member of the patent bar. I practice patent, copyright, and trade secrets law with the law firm of Fish & Richardson, and I am a partner in the firm's Silicon Valley office. I am here because I would like to offer my views on a few of the questions that the Patent Office has invited the public to address at these hearings. As a preliminary matter, I must confess deep concerns about the present fate of software inventions in the Patent Office. I believe that the logical -- almost musical -- nature of software technology provides unique opportunities for advocacy and for confusion in a system that is based on a more structural -- may I say sculptural -- view of the world. But that is not the topic for today's hearings. For today, I will merely state my hope and belief that the Patent Office will rise to the challenge of: á finding and keeping qualified examiners, á securing access to the vast body of software- related prior art that is not of record in the Patent Office, and á developing the limiting doctrines of novelty, obviousness, and enablement in ways appropriate to the peculiarly flexible genius of software technology. On today's topic, it is my view that a computer program --Êthat is, a set of instructions that is executable on a computer to achieve a resultÊ-- should be considered a "machine" within the meaning of ¤ 101 of the patent statute and should therefore be eligible for patent protection, without resort to additional and often redundant limitations to computer processors, read-only memories, or data input-output devices. On the issue of eligibility for patent protection, I dare say such a change in the law would not greatly expand the scope of protection available to inventors -- at least not to those inventors who can afford the kind of legal talent testifying at these hearings. Those of us who know what we are doing can get software-related inventions covered. The process we have to go through may be expensive, and painful to watch, be we can do it. For that reason, I would promote my suggestion principally as one that will improve the quality of the analysis of software-related inventions and the doctrines under which such inventions are examined. On the infringement side, we would have to be a bit more subtle. If we allow claims to be made to computer programs per se, we must not create a risk of infringement by traditional print media and their successors in today's world of electronic publishing. The publication for human readers, on paper or otherwise, of a patent- protected computer program, should not by itself be any kind of infringement of the patent. I would like to turn now to one of the specific questions raised by the Patent Office for today's hearing: what aspect of a mathematical algorithm, implemented on a general purpose computer, should (or should not) be protectable through the patent system? I believe that a machine, made up of computer program instructions, that usefully transforms data (or information) should be protectable under the patent laws in all its novel and non-obvious aspects. Given the importance of information processing to our economy, it would be perverse for us to continue to deny direct protection to a technology that is so essential to our information prosperity. This leads me unavoidably to the questions of what is novel and non-obvious in a computer program. I believe that our greatest challenge lies in these questions, regardless of how we answer the question previously posed. For myself, and contrary to what the law currently seems to allow, I would not consider it novel merely to transpose to a computer something previously known as being done by hand, or in one person's head, or collectively by a group of people. But if a method for transforming information is truly new, then doctrines that limit or preclude patent protection, solely because the method is a computer program, seem unwarranted. It has been suggested that allowing mathematical algorithms to be protected would remove laws of nature from the public domain and give an unwarranted, universal scope of protection to the patented technique. I find both rationales peculiar. Taking the computer programmer's informal definition -- that an algorithm is a predetermined set of steps to perform a function, and that a mathematical algorithm is one that operates on mathematical objects such as numbers, triangles, and continuously differentiable functions -- then granting protection for a new, previously unknown, and nonobvious program of computational steps withdraws nothing from the public. And if the patent reaches over a broad range of applications, that would merely correspond to the broad usefulness of the new algorithm. In any other technology, this would be grounds for praising the inventor, not for denying protection. I submit to you, that if someone were to object to a patent on the transistor on the ground that it would have too many uses, we would find that objection incomprehensible. One final point that should be kept in mind before one succumbs to alarm about the potential breadth of claims to mathematical algorithms: a naked mathematical algorithm claim would seem to be the ultimate in generic claims and therefore particularly susceptible to being rejected or invalidated, because any prior art that shows the algorithm's steps being applied in any context would invalidate the claim. It would be a very brave practitioner who would file a patent application and rely solely on a naked algorithm claim to protect his or her client. In its Example question B, the Patent Office poses the same question, but assumes the implementation of the algorithm is limited to a special purpose, rather than a general purpose, computer. If the problem is bad patents, this is not a solution. If one begins with a computer program that should be unpatentable because it is not new or because it is obvious, one should not, in my view, be able to achieve patentability merely by attaching to the program the input-output devices that are conventional for the process that the program performs. In other words, one should not be able to save an old, obvious bread baking program merely by attaching a digital thermometer to it. Conversely, if the program is new and not obvious, then the conventional addition of the necessary computer hardware and other devices is redundant to the claim, at least insofar as patentability is concerned. Such additional limitations would not in fact limit the scope of protection available to the inventor (unless, parenthetically, the claims are poorly drafted). But such a redundant addition of apparatus to a program claim does create a potentially substantial distraction for the patent examiner, who in searching the art of digital thermometers, may completely miss the point about baking bread. Finally, I would like to say a word about whether a new form of protection for computer programs is needed. The word is "Why?" Patent law can deliver predictability, definiteness, and uniformity. Under copyright law, we cannot protect our ideas, at least not without doing some violence to traditional copyright principles, and we are subject to forum shopping in 13 circuit courts of appeal. Under trade secrets law, we can protect our ideas but are subject to the law as developed in any of 50 different state courts and their federal counterparts, and are never quite sure what the protected ideas are, and are at risk of having someone rediscover or reverse engineer our inventions out from under us. And while patent law does have its drawbacks as mode of protection, under the patent laws we can get warning of what is protected, expressed with reasonable clarity, and applied with national uniformity. It would be unfortunate if such a sound concept were to be crippled because we were too slow in learning to apply its fundamental principles to the challenges of software-related inventions. Thank you. Remarks of Robert P. Sabath, President World Intellectual Property and Trade Forum PATENT OFFICE PUBLIC HEARING 26/27 JANUARY, 1994, SAN JOSE, CA Mr. Commissioner, Mr. Kushan, my name is Robert Sabath. I speak today in both my capacity as President of the World Intellectual Property and Trade Forum or WIPTF (pronounced "Whip-Tiff") and as a solo practitioner in the patent field. I am also on the Executive Committee of the California State Bar's Intellectual Property Section, but as you know, Mary O'Hare and Michael Glenn will testify at these hearings on behalf of the State Bar. Additionally, I speak as Legal Issues Editor of Quick Time Forum, a multimedia developer's publication. The primary topic today is the use of the patent system for the protection of software-related inventions. The central objective of my remarks is to encourage greater flexibility within the framework of the law in promoting the patenting of software-related inventions as well as pure software inventions. Patents themselves are the best prior art against subsequent applications for a patent grant. Anything that artificially limits the development of the body of prior art relied upon by the Patent and Trademark Office has the effect of slowing the progress of technology in critical fields. Software is a key and strategic industry for the U.S. The efforts of the U.S. goverment to promote U.S. trade interests abroad and even to advocate changes in the intellectual property laws of other countries are severely undermined, if U.S. intellectual property laws and regulations fail to encourage successes of key U.S. industries at home. One of such key industries is software. I ask for your indulgence, Honorable Commissioner, in addressing a slightly broader question than the primary topic indicated above. As a sole practitioner, I have come close to the plight of the solo inventor affected by the substantially increased PTO fees promulgated by prior administrations. Particularly the maintenance fees are believed to be a disincentive which may disuade individuals from even initiating the process of obtaining patent protection. But the cost of patenting which is borne today by inventors, is softened in Silicon Valley by the spirit of self help which has characterized the American spirit since the days of George Washington and Thomas Jefferson. An example of this self help is the Sunnyvale Patent Information Clearinghouse. Self help and necessity have additionally spawned in Silicon Valley a substantial venture capital community which is selectively supportive of the efforts of individual inventors. The spirit of self help is shown by many local firms and and entities which have opened offices in Washington, D.C. and in surrounding communities of Virginia and Maryland. But self-help has its limits. Therefore, we salute you, Mr. Commissioner and Mr. Kushan for coming here to California. We need your help, not just with regard to improving the laws and the regulatory environment as it relates to patents, but also with regard to the infrastructure in which the patent and invention process plays itself out in the United States. The U.S. government has facilities, buildings, and courthouses throughout the nation. These facilities and buildings have many purposes. Federal courthouses now hear patent law suits in San Jose as well as San Francisco and in cities throughout the country. It is clear that our country has developed elaborate mechanisms for facilitating and resolving disputes between litigants in patent law suits. However, we have done pitifully little at the federal level to enable the solo inventor to search for prior art and effectively to limit the scope of claims to fields of rightful entitlement. Mr. Commissioner, we are accordingly happy to have you here today, in this Convention Center. As a minimum, the West Coast deserves a branch office of the USPTO having at least search facilities, to support the software, the semiconductor, and the electronics industries that have developed the infrastructure of the American West so extensively. Perhaps the availability of public search rooms for inventors is not a matter for the Department of Commerce, but rather for the Department of Education. But whether the Commissioner of Patents and Trademarks takes the initiative or whether another federal agency takes the lead, it is clear that many communities in our country need access to technical collections and patents of the federal government. The facilities for obtaining prior art in Sunnyvale are clearly needed. But in most communities of America such facilities are non-existent. Moreover, solo inventors are seldom in a position to invest in state of the art CD ROM systems and computer search services in view of their high cost. The information superhighway offers a bright vision of a technological future. Will there be facilities to provide public access to information carried in this superhighway? The patent office can provide such facilities to bring the fruits of this superhighway of information to our inventors, to the young in America who thirst for knowledge and progress, and to the public at large. The physical facilities of the Department of Commerce and the USPTO are needed in our local communities to implement the purpose of serving the intellectual property laws. America wants to build its future by educating the inventors of the future. We need public search facilities for the electronic arts whereever major electronic developments are being made--in California; in Austin, Texas; in Dallas, and in Colorado, along with many other communities across America. We need biotechnology search facilities in Emeryville, California and in Cambridge, Massachusetts, and in many other communities of the nation. And we need software search facilities in the nation's software development centers including but not limited to such areas as Seattle and Silicon Valley. The German example shows that search facilities and examination facilities need not be located in the same cities. The resources and facilities of the PTO should be distributed at various locations across America to provide public access to the prior art regarding technological developments which have already become known. We salute you Mr. Commissioner for coming to California to address the vital subject of patenting software related inventions in this public forum. The California economy is improving, but it remains disastrously understimulated. Because of the size of California's economy, it can either drive or hamstring recovery on the national scale. The questions raised at this public hearing have a direct and vital bearing upon the economic well- being of California. Thus we appreciate your coming to guide these hearings. To focus more definitely on the subject of patenting software related inventions, it is my belief and that of many participants in the World Intellectual Property and Trade Forum that there is no substitute for the development of an increased body of software art available to patent examiners. With a properly classified and complete body of prior art, the searching and examination of new patent applications will be enhanced. WIPTF salutes the corrective action of the Commissioner in connection with reexamination of Compton's multimedia patent. This reexamination process shows clearly that even though applicable prior art was not initially available to the Examiner, there are mechanisms for addressing questions of patentability even after grant of a patent. But certainly it would be optimal if the applicable art had been found and addressed during actual examination. One way to insure an effective and complete body of prior art in the field of software patents is to relax the policies of the PTO with respect the patentability of mathematical algorithms. Considerable room for relaxation is available even within the bounds of current case law on the subject. Many new inventions beneficial to the developing field of software may currently not even be the subject of patent applications, because of the chilling effects of the PTO's restrictive approach to the patentability of software. Insufficient software prior art limits the ability of the PTO to examine effectively future software- related patent applications, including pure software patent applications. The distinction between hardware and software approaches to the same problems has blurred technologically; this distinction should be blurred and eliminated in the bureaucratic spaces of Patent and Trademark Offices as well. Patent examiners should rely less heavily on the Section 101 as a basis for rejecting software- related inventions. With an increased body of prior art established by greater flexibility in allowing software-related patents, examiners will be encouraged to make substantive office actions based upon technical art, rather than merely implementing policy articulated by agency representatives. One object of the patent system is to encourage progress in the arts by publication of inventions. The effect of patent grant is to add to the body of detailed technical information comprised in issued patent documents. When a Section 101 rejection is successfully asserted by the PTO, the practical effect is to deny future software developers of the benefits of full patent disclosure. This hampers the development of new ideas in many technical fields including multimedia software generally, and even biotechnology, which is to an extent dependent on progress in the field of data systems for its instrumentation to be effective. We thank you again Honorable Commissioner for coming here and conducting these hearings. The League for Programming Freedom In favor of o Free competition on the basis of competing implementations o Traditional "literal aspects" copyright doctrine Oppose o "Look and feel" o "Software patents" Activities o Talk with public officials o Work with companies o Assist in court cases o Publish articles o Serve as a point of contact Economics The patent system is an economic system It must be analyzed from an economic standpoint Different Industries Different industries have different economic factors o Market size o Market structure o Extent of competition o Development costs o Production costs o Product life cycle o Value of products o Range of possible products o Amount of research o Research costs o Value of research o Scope to perform research o Rate of technical progress o Value of patent disclosures o Cost to "work around" o Imitation costs o Degree of novelty used o Anticipated legal costs o Other forms of intellectual property o Extent of non-patent incentives o Extent of other inventive activities Economic Effects Every industry is different The impact of patents will be different In the software industry patents are harmful The Software Industry The software industry is highly competitive Software patents stifle this competition Profits taken from firms adding significant economic value Transfered to firms adding little economic value Software patents distort the market making it less efficient Innovative Software Products not ideas So much to do; so little time Problem is not "new ideas" Problem is building real products o solving customer problems o reliably and easily o integrating well with other products "Microcomputer revolution" o Microsoft o Novell o Borland o Adobe o Symantec o WordPerfect o Apple o Sun o SGI o Oracle o Sybase Software Patents Software patents granted 1990 - 1992 IBM 500 Fujitsu 50 Lotus 7 Hitachi 400 HP 50 Novell 1 AT&T/Bell 150 Sun 50 Borland 0 DEC 150 Unisys 30 NeXT 0 Toshiba 150 Apple 20 Oracle 0 Sharp 100 Texas Inst. 20 Pyramid 0 Xerox 100 Microsoft 13 SGI 0 Canon 70 Intel 10 Sybase 0 Motorola 70 Matsushita 9 Symantec 0 Wang 60 Adobe 8 WordPerfect 0 Total software patents granted (1990- 1992): 5000 Entities with fewer than 5 s/w patents: 1000 Entities with 5 or more s/w patents: 60 The Solution The patent system is an economic system Every industry has different economics Software patents harm the software industry The patent system must not be allowed to stand in the way of economic efficiency Software must be made non-patentable 1ALPHA, 146 Main St, Suite 404 Los Altos CA 94022, 415/965-0327 2Heckel, P, The Elements of Friendly Software Design, Sybex 3 Id, page 260. 4 Refac v. Lotus and Octel Communications v. Theis Research. 5 The Licensing Executives Society of which I am a member sponsored a debated e ntitled Are Patents and Copyrights Bad for Software. Stallman and Kapor taking one pos ition and a patent lawyer the pro position. When I asked as a member of LES asked to fill the fourth slot, they chose another patent lawyer because Mr. Stallman didnÕt want to debate me. Nor did the find another software developer to debate for patents. I mention the LES and I ssues as two examples of what appears to me to be a anti-patent bias in our establishment in stitutions that I do not think should go unrecorded. 6 Heckel, P, Debunking the Software Patent Myths, Communications of the ACM, Ju ne 1992. 7 Heckel, P, The Software Patent Controversy, Computer Lawyer, December 1992. 8 See my Testimony at the Public Hearings on Patent Law Harmonization, October 7, 1993, also the Computer Lawyer Articles and ACM articles. 9 Stephen E. Siwek, Harold W. Furchtgott-Roth, Economists Inc., The U.S. Software Industry: Economic Contribution in the U.S. and World Markets (March 1993). W e have submitted a copy of this study along with this statement. 10 See, e.g., LaBounty Mfg., Inc. v. U.S.I.T.C., 958 F.2d 1066, 1074 (Fed. Cir. 1992). 111 Lewis Carroll, Alice's Adventures in Wonderland, "The Walrus and the Ca rpenter", stanza 6 (1865). 122 B.1. Do patents and printed publications provide examiners with a suffi cient and representative collection of prior art to assess novelty and obviousness of sof tware related inventions? If not, how can existing collections of prior art be supplemented t o provide examiners with a complete collection of prior art? B.2. Can an accurate measurement of the ordinary level of skill in the art in t he field of computer programming be derived from printed publications and issued patents? 133 The Advisory Commission on Patent Law Reform, A Report to the Secretary of Commerce, p. 147 (August 1992). 144 At least one effort to provide such a database is underway. The Softwa re Patent Institute (SPI), a private enterprise organized in 1991, has taken on the task. According to the SPI Mission Statement published in March 1993, the SPI is "a nonprofit institut ion dedicated to providing information to the public and to assisting the USPTO and others by providing technical support in the form of educational and training programs and providin g access to information and retrieval resources. The primary goal of the SPI is to provide the best available information as to prior art in the software field for utilization by the public and the US Patent and Trademark Office (USPTO). In addition, the SPI will provide an e ducational resource from which the USPTO and the public may obtain an enhanced understandi ng of the nature of software, of software engineering, and of the history of the disc ipline and its relationship to the patent process." The SPI is believed to be assembling a "folklore" database, using the resources of the Industrial Technology Institute of Ann Arbor, Michigan. Data is being solicite d from a variety of interested parties, including computer and software manufacturers an d publishers, and independent software developers. The database will be searchable on-line b y subscribers, including the USPTO, and should be in operation during first quarter 1994. While the SPI is the only known organization currently attempting to provide a database of software related prior art, it is this effort, and not the SPI specifically, th at the IPO supports. The resource is needed, whatever the source. 155 Advisory Commission Report, Recommendations XI-E, XI-F, XI-G and XI-H, pp. 158-67. 166 B.3. Should the PTO impose a special duty on patent applicants for soft ware related inventions to disclose information relevant to their inventions (e.g., one that is higher than in other areas of technology)? 177 B.4. Do the standards governing novelty (35 U.S.C. ¤102) and obviousnes s (35 U.S.C. ¤103), as applied by the PTO and the Federal courts, accurately reflect inventi ve activity in the field of software design and development? 188 B.5. Should implementing a known process, technique, system or method o f doing business on a computer be viewed as being novel and non-obvious if, but for the use of software, the overall process, technique, system or method is well known? 199 B.6. In what ways can the PTO change examination procedures to assess n ovelty and obviousness of software related inventions? Should the PTO require patent appl icants for inventions related to software to conduct a search of prior art before filing a patent application, and to include in their application copies of relevant prior art d ocuments along with a detailed explanation that points out how the invention claimed in the ap plication is distinguishable over the supplied references? [Note: This would make the "speci al accelerated examination" practice described in MPEP 708.02 VIII standard practi ce for patent applications on software related inventions.] Given the difficulties associated with examiners assessing procedures from all fields of technology that have been implemented on a software based system, should the PT O require patent applicants to prove that their inventions are distinct over the prior ar t aside from the implementation of the process on a computer? Should the PTO be permitted to establish that a software related invention is n ot novel or is obvious using a lower standard of proof than for other areas of technology (e.g ., a standard less than prima facie)? 2010 B.7. What are the most effective ways to describe software (e.g., pseu docode, flowcharts, etc.), and how can they be implemented through the disclosure requi rements for patent applications? 2111 B.8. What difficulties do patent applicants face in complying with exis ting disclosure requirements (e.g., enablement, description, best mode) for software related in ventions? B.9. Should the PTO require patent applicants to conform to a standardized dis closure format for applications filed on software related inventions? B.10. How should the PTO handle the submission of computer program code listin gs? Should the PTO require submission of program code listings? Should they requir e submission of code listings in machine readable format only? Should program cod e listings be included in patent documents or should they be made available only through a publicly accessible database? What hardships would patent applicants face if these requ irements were imposed? B.11. Are current rules governing the submission of drawings impeding the effe ctive description of software related inventions, and if so, what changes should be m ade? [Note: Rule 96 (37 C.F.R. ¤1.96) governs the submission of computer program listings]. B.12. What difficulties might patent applicants face if they were required to fully satisfy the disclosure requirements of 35 U.S.C. ¤112, 1st paragraph (i.e., enablement, des cription, best mode), without reliance on computer program listings? 22 Proposed acceptable formats for claims drawn to a computer program stor ed on a disk are listed in the attached appendix. 23Mr. Nydegger received his undergraduate education at Brigham Young Un iversity, graduating cum laude with a Bachelor of Science in Electrical Engineering in 1974. He rec eived his Juris Doctorate cum laude in 1977 from the J. Reuben Clark Law School at Brigham Young Universi ty. Mr. Nydegger has served as Chairman of the Electronic and Computer Law Committee of the American Intellectual Property Law Association, and most recently, as a Member of the Board of Directors of the American Intellectual Property Law Association. He also currently serves as an Adjunct Professor at the University of U tah College of Law, where he has taught courses in Intellectual Property Law since 1988. He has authored and co-authored a number of articles in the field of electronic and computer law and has lectured on top ics in that field in connection with programs sponsored by the American Intellectual Property Law Association, the American Bar Association, the University of Dayton School of Law, and the Practicing Law Ins titute. He is a founding shareholder, officer and director of the Salt Lake City firm of Workman, Nydegg er & Jensen, which specializes in Intellectual Property Law and litigation. 241O'Reilly v. Morse, 56 U.S. (15 How.) 62 (1854). 25Dolbear v. American Bell Telephone Co., 126 U.S. 1 (1888). 26Id. at 534-35. 27 SPA's testimony focuses on Topic B - Question 1 of the notice published in the Federal Register, namely "Do patents and printed publications provide examiners with a sufficient and representative collection of prior art to assess novelty and obviousness of software-related inventions? If not, how can existing collections of prior art be supplemented to provide examiners with a complete collection of prior art?" 28 Patent No. 5,241,671, issued Aug. 31, 1993, reexamination ordered Dec. 14, 1993. 29 The SPI Reporter 6 (Fall 1993). 30 Id. 31 Final Report, Advisory Commission on Patent Law Reform 157 (1992). 32 In 1989, SPA testified before Congress in support of the Computer Software Rental Amendment Act, and in 1992 was closely involved in making copying computer prog rams a felony under some circumstances. This year, SPA testified before House and Sen ate judiciary subcommittees to support the Copyright Reform Act of 1993 (H.R. 897 and S. 373) , which would advance equal access to the courts for every copyright owner and contribu te to the war on software piracy. 33 A recent survey by Price Waterhouse for SPA and other associations indicate d that, of over 900 responding companies, nearly 80 percent of software developers do not have any patent protection, but that over 10 percent have filed patent applications. S oftware Industry Business Practices Survey 39 (1993). 34 17 U.S.C. 102(b). 35 Sections 102 and 103 of the Patent Act, 35 U.S.C. ¤ 101 and 103. 36 Advisory Commission Report, supra , at 159. 37 SPA is discussing similar programs for software examiners at the U.S. Copyr ight Office and trademark examining attorneys at the USPTO. 38 I understand that the ABA's Section of Intellectual Prop--er-ty Law is plan-ning to submit writ-ten comments on a num-ber of the substantive pat-ent-a-bil-i-ty issues bei ng ad-dressed at these hear--ings. For the record, I was the chair of the committee that in-i-ti-a-te d the Sec-tion's resolutions on which those comments are likely to be based, and I drafted the r es-olutions them-selves and the ac-comp-anying committee re-ports. 39 See gen--erally MICHAEL HAMMER & JAMES CHAMPY, RE-ENGINEERING THE CORPORATION: A MANI-FESTO FOR BUSINESS REVOLUTION (1993). 40 See generally 48 Fed. Reg. 5593 (1977). 41 See generally 54 Fed. Reg. 36442 (1992) (publishing final text of amend ments to Regulation A, 17 C.F.R. ¤¤ 230.251 et seq., to pro-vide wider opportunities for small businesses to raise capital in ÒqualifiedÓ offerings as opposed to Òreg-isteredÓ offerings ). 42 See generally BIOTECHNOLOGY INVENTION DISCLOSURES, 37 C.F.R. subpart G (1993). 43 A low-end patent of this kind would resemble in some ways the petit pat -ents and reg- is-tra-tion patents found in the pat-ent sys-tems of some other countries. 44 See generally MPEP ¤ 708.02, paragraph VIII. 45 ÒA patent shall be presumed valid. . . . The burden of establishing in validity of a patent or any claim thereof shall rest on the party asserting such invalidity.Ó 35 U.S.C. ¤ 282. 46 See 35 U.S.C. ¤¤ 251-252 (reissue provisions). 47 See generally 28 U.S.C. ¤ 1446(c) (procedures for removal, including bo nd requirement). 48 ÒThe Commissioner shall cause an examination to be made of the applicat ion and the alleged new invention; and if on such examination it appears that the applicant is entitled to a patent under the law, the Com-mis-sion-er shall issue a patent therefor.Ó 35 U .S.C. ¤ 131. 49 See 35ÊU.S.C. ¤Ê120 50 Cf. Suspension of action, 37 C.F.R. ¤ 1.103 (1993) (suspension of actio n by Office will be granted for good and sufficient cause and for a reasonable time specified up on petition by applicant). 51 See generally Rejection of claims, 37 C.F.R. ¤ 1.106 (1993). 52 ÒThe reply by the applicant or patent owner must distinctly and specifi cally point out the supposed errors in the examinerÕs action and must respond to every ground o f objection and rejection in the prior Office action.Ó Reply by applicant or patent owner, 37 C.F.R. ¤ 1.111(a) (1993). ÒIn amending in response to a rejection of claims in an appli cation or patent undergoing reexamination, the applicant or patent owner must clearly point out the patentable novelty which he or she thinks the claims present in view of the sta te of the art disclosed by the references cited or the objections made. He or she must also show how the amendments avoid such references or rejections.Ó Id. ¤ 1.111(c) 53 See generally MPEP ¤ 708.02, paragraph VIII. 54 See generally Duty to disclose information material to patentability, 3 7ÊC.F.R ¤ 1.56 (1993). 55. See FMC Corp. v. Hennessy Indus., Inc., 836 F.2d 521, 525-26 & n.6 (Fed . Cir. 1987) (hold-ing that "[a]s a gen-eral rule there is no duty to conduct a prior art se arch" . . . but noting that "one should not be able to cultivate ignorance, or disregard numerous warn ings that material in-for-ma-tion or prior art may exist, merely to avoid actual knowledg e of that information or prior art" and "[a]s-suming without deciding that there may be c ir-cumstances that would raise a duty to inquire"). 56 35ÊU.S.C. ¤ 112, second paragraph. 57 ÒA patent may not be obtained . . . [if] the subject matter as a whole would have been obvious to a person hav-ing ordinary skill in the art to which said subject mat ter pertains. Patentability shall not be neg-atived by the man-ner in which the invention was made." 35ÊU.S.C. ¤Ê103. Cf. also, Bausch & Lomb, Inc., v. Barnes-Hind/ Hydrocurve, In c., 796ÊF.2d 443, 447 (Fed. Cir. 1986) (noting that inventor's subjective belief of obvi-ousness, stated in infringement litigation, was not dispositive), cert. denied, 108 S. Ct. 85 (198 7). 58 See 35 U.S.C. ¤ 112 (requiring enabling, best-mode disclosure of how to make and use in-ven-tion); see generally, e.g., In re Hayes Microcomputer Products, Inc., Pa tent Lit-ig-ation, 982 F.2d 1527, 25 U.S.P.Q.2d (BNA) 1241 (Fed. Cir. 1992) (affirming jury ver-di ct of infringement of pat-ent relating to modem guard-time escape sequence and re-jec t-ing enablement- and best-mode chal-lenge; "an in-ven-tor is not required to describ e every de-tail of his in-ven-tion"). 59 See, e.g., Hybritech, Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 136 7, 1385, 231 USPQ 81, 94 (Fed. Cir. 1986), cert. denied, 480 U.S. 947 (1987). 60 See, e.g.,, Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 1 41, 981, 984-85 9 USPQ2d 1847 (1989) (holding that state law prohibiting plug-molding methods of copying unpatented boat hulls was pre-empt-ed by federal patent law, which implicitly e stablishes a federal right to copy unpatented articles; state law may not interfere with pub licÕs right to economic benefits of the most efficient way of manu-factur-ing un-patented arti cles). 61 See 35ÊU.S.C. 41 (patent fees).