COMPUTER SOFTWARE March 1990 INTELLECTUAL PROPERTY Computer Software and Intellectual Property BACKGROU ND PAPER NTIS order 92 169242 Recommended Citation U S Congress Office of Technology Assessment Computer Software and intellectual Property--Background Paper OTA-BP-CIT-61 Washington DC U S Government Printing Office March 1990 For sale by the Superintendent of Documents U S Government Printing Office Washington DC 20402-9325 order form can be found in the back of this report In the past programming was viewed as a support activity for computer hardware or as a hobby for hackers As the software industry matured it has become less driven by technology and more concerned with the needs of users and the demands of the market Today software is a lucrative industry of its own amounting to some $60 billion per year in domestic sales and services Internationally the United States dominates the software market holding the edge in innovation over Western Europe Japan and the Soviet Union Accompanying this growth and maturity has come concern about the amount and type of intellectual-property protection available for software This background paper examines existing intellectual-property protection for computer software-copyrights patents and trade secrets--and provides an overview of the often conflicting views and concerns of various stakeholders It was prepared in response to a request from the Subcommittee on Courts Intellectual Property and the Administration of Justice of the House Committee on the Judiciary OTA gratefully acknowledges the contributions of the many experts within and outside the government who reviewed or contributed to this document As with all OTA publications however the content is the responsibility of OTA and does not necessarily constitute the consensus or endorsement of reviewers or the Technology Assessment Board JOHN H GIBBONS Director Reviewers and Other Contributors Reviewers Other Contributors Anne W Branscomb Program on Information Resources Policy Harvard University Dam E Cartwrightt I I I Academic Computing Services Syracuse University Joseph Farrell Department of Economics University of California at Berkeley Francis D Fisher Cambridge MA Steven W Gilbert EDUCOM Gerald Goldberg U S Patent and Trademark Office Brian Kahin Science Technology and Public Policy program Kenneth B Allen Information Industry Association Harvard University Karen G Bandy Communication and Information Technologies program Michael S Keplinger U S Patent and Trademark Office Ronald S Laurie Irell Manella Peter Menell Georgetown University Law Center Steven J Metalitz Information Industry Association Eric Schwartz U S Copyright Office Lee Skillington U S Patent and Trademark Office Oliver R Smoot Computer and Business Equipment Manufacturers Association CBEMA Douglas R Weimer Congressional Research Service American Law Division Milton R Wessel Georgetown University Law Center Ronald Palenski Association of Data Processing Service Organizations ADAPSO Ron Reiling Digital Equipment Corp Pamela Samuelson University of Pittsburgh and Emory University Kenneth A Wasch Software Publishers Association Ingrid A Voorhees Computer and Business Equipment Manufacturers Association CBEMA OTA Reviewers and Contributors D Linda Garcia Communication and Information Technologies Program Elizabeth Miller Communication and Information Technologies program Kevin O'Connor Biological Applications Program Fred W Weingarten Communication and Information Technologies Program Robert Weissler Industry Technology and Employment Program Fred B Wood Communication and Information Technologies Program NOTE OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by outside reviewers and other contributors These individuals do not however necessarily approve disapprove or endorse this background paper The paper is the sole responsibility of OTA not of those who so ably assisted us OTA Project Staff-Computer Software and Intellectual Property John Andelin Assistant Director OTA Science Information and Natural Resources Division James W Curlin Manager Commuication and Information Technologies Program Project Staff Joan D Winston Policy Analyst AM M Hironaka Research Assistant Elizabeth Emanuel Administrative Assistant Jo Anne Price Secretary Karolyn St Clair Secretary Contents Chapter 1 Summary Overview and Issues me m mP 'age Overview 1 1 Questions for Consideration 3 Questions About Definitions 3 Questions About Industry Structure and the Natureof Innovation 3 Questions About Protection and Enforcement 3 Chapter 2 Changing Technical and Market Environments 5 Chapter 3 The Intellectual Property Bargain and Software 7 Copyright 7 Patent 8 Trade Secret 9 Chapter 4 Controversies Over Software Protection 11 Legal Cases 11 Stakeholders and Their Concerns o o e o o 12 Individual Software Creators and the Software Industry 13 Software Users Academic Community 14 14 Some Private Efforts To Sort Things Out O O OO 15 Chapter 5 International Issues e o e e ee e ooo eaee o co e eao a maa 17 Appendix A Legal protection for Computer Software e mom 19 Appendix B International Protection for Computer Software 25 Chapter 1 Summary Overview and Issues l This study draws on prior and ongoing OTA assessments Intellectual Property rights in an Age of Electronics and Information April 1986 Copyright and Home Copying Technology Challenges the Law October 1989 Information Technology R D Critical Trends and Issues February 1985 and Information Technology and Research ongoing The health and vitality of the software industry are crucial to the computer industry to government and to the economy as a whole In 1988 domestic revenues for software and related services amounted to about $60 billion Over the past 30 years software costs have increased as a share of total informationsystem costs Software development costs today2 amount to over half of the cost for new systems Software is a critical component in the successful operation of the computer system after all without software computers would be unusable Software is vital to defense and civilian agency operations and to industrial sectors as diverse as telecommunications electronics transportation manufacturing 3 and finance The United States has 70 percent of the world software market but this may be in jeopardy in the future as other countries' software industries develop Legal protections for computer software can affect the pace of technological advance in software and the extent to which these advances are disseminated and used in the economy as well as affect developments in the computer-hardware industry Software protections affect the openness of standards and interfaces which are important components of firms' competitive strategies in both the software and hardware industries Thus the economic implications of under-protecting or overprotecting software extend far beyond the software industry alone This background paper reviews copyright patent and trade secret protections discusses current issues regarding legal protection for computer software and identifies some of the normative and positive questions that Congress should consider in its continuing oversight of computers software and intellectual property OVERVIEW Basic questions about the detailed implementation of intellectual-property protection for software-what to protect how much for how long against what fiom whom --are difficult to answer Software does not fit comfortably into the traditional intellectual-property frameworks of 4copyright which protects works of 5authorship or patent which protects inventions This problem is shown in the current round of look and feel copyright suits and in the controversy over patent protection l This paper uses the term software to refer to sets of instructions-computer programs--for computers whether these are stored in punched cards magnetic tape disks read-only memory ROM random-access memory RAM semiconductor chips or on Paper Sometimes the 'software is taken to mean data sets documentation and training support as well as programs see Software Technology Nov 6 1989 attachment to U S Congress Office of Technology Assessment Intellectual-Property Protection for Computer Software Staff Paper Nov 2 1989 In some ways software and databases are merging and in the future it may be hard to distinguish between a program and its data For example the data for some artificial-intelligence programs are themselves logical rules and structures However as used here software does not include electronic databases see ch 2 footnote 12 for more on databases 2 When software maintenance costs are added software costs can amount to 90 percent of total costs over the life of an information system Barry W Boehm @wureEng ineering Economics Englewood Cliffs NJ Prentice-Hall Inc 1981 p 18 cited in Bugs in the Program Problems in Federal Government Computer Software Development and Regulation staff study by the Subcommittee on Investigations and Oversight Transmitted to the Committee on Science Space and Technology U S House of Representatives Aug 3 1989 3 For example software is critical to telecommunications In 1965 the software in a telephone switching machine consisted of about loo ooo lin of code Ttiay switch software can have over 2 million lines of code This pattern of increasing size and complexity is similar for PBX hardware and modems Eric E Sumner Telecommunications Technology in the 1990s Tefecommuru cutwns vol 23 No 1 January 1989 pp 37-38 4 A 1980 amendment to the Copyright Act of 1976 made explicit provisions for computer programs as literary works of authorship Public Law %-517 94 Stat 3-15 3028 This followed recommendations made by the National Commission on New Technological Uses of Copyrighted Works CONTU 5 me mv s jwt mwcr of a pa is llmit t a P ess machine article of manufacture or composition of matter that is novel nonobvious and usefhl or to new and useful improvements to these classes of patentable subject matter The Supreme Comt hasnot ruled whether computer programs per se are patentable subject matter but has ruled that computer-implemented algorithms that am deemed mathematical algorithms per se are not statutory subject matter Federal courts have thus held that a computer processor algorithm is statutory subject matter unless it falls within a judicially determincxl exception like the one for mathematical algorithms per se See U S Patent and Trademark Offke Patentable Subject Matter Mathematical Algorithms and Computer Rograms 1106 O G 4 Sept 5 1989 roc -1- 2 Computer Software and Intellectual Property for inventions involving computer programs and algorithms 6 Software is not unique in this respect New technologies have challenged traditional intellec7 tual-property frameworks before Often traditional protection devices have been able to accommodate new technologies successfully For example the first copyright statute dealt only with maps charts and books but copyright has been able to deal with the hard questions posed by works like engravings musical compositions photographs and so 8 forth But some commentators believe that new electronic technologies including software pose more severe challenges to copyright in part because it is increasingly difficult to extract and freely use ideas that are communicated only in the form of9 expressions conveying intellectual-property rights as are conventional computers instead it is trained It is becoming harder to distinguish between a program and the data on which it operates expert systems are designed to draw on a knowledge base of detailed information about an area of application e g medical diagnostics industrial processes in order to make decisions The knowledge base or data for these artificial-intelligence programs are themselves logical rules and structures not just numerical values A third problem is compounding the problem of rapid technological change The legal and technical communities do not have consistent definitions for terms like algorithm or interface that make up computer and computational parlance For example one common technical definition of the term algorithm is a set of rules which specify a sequence of ll actions to be taken to solve a problem But other definitions are also used within the technical community some computer scientists consider algorithms to be simply abstract computer programs and believe that distinctions between algorithms and programs only capture differences in degrees of 12 abstraction Without agreement on a common language and definitions protection issues become extremely difficult Another problem in determining where software fits in the intellectual-property system is that computer software and hardware technologies are changing rapidly both qualitatively and quantitatively This makes the crafting and refining of software protections akin to aiming at a target that isn't there yet or doesn't yet exist Each time one controversy 10 or set of questions is resolved another arises For example future advances in computers and compuFinally the international scope of software martation especially in artificial intelligence and interkets complicates matters requiring domestic laws to active computing will require a change in the definitions of software and data a new type of be harmonized13 with treaty obligations and laws of other nations Although the United States is still computer called a neural net is not programmed In this paper OTA sometimes uses phrases like patents for software-related inventions software-related patents or patenting algorithms to 6 refer generally to patent protection for computer-imp l emented processes and algorithms The United States Patent and Trademark Office PTO considers terms like software patents to be a misnomer because they maybe interpreted to mean that computer programs per se i e the sequence of coded instructions itself are patentable as opposed to the underlying computer processesthey carry out---see previous footnote M Keplinger G Goldberg and L Skillington PTO comments on draft paper Dec 18 1989 pp 1-2 7 These have included Phonorecords sound recordings motion pictures reprography audio and videocassette recorders and genetic engineering For a discussion of the latter challenge--the issue of patenting living organisms U S Congress Office of Technology Asessment New Developments in Biotechnology Patenting Life-Special Report OTA-BA--370 Washington DC U S Government Printing Office April 1989 s% my L Ws % ck Lynch and Mark R Steinberg Silicon Epics md BinwY B ds rmining the Proper Scope of Copyright Protection for Computer Programs UCLA Luw Review vol 34 June-August 1987 pp 1493-1594 esp pp 1495-1499 9 F-is Fisher 'The Electronic Lumberyard and Buil m' Rights Technology Copyrights Patents and Aca me ''Change vol 21 No 3 h y JUDC 1989 pp 13-21 Some believe that looking at sotlware and other types of intellectual property in isolation will not prove satisfactory Instead they suggest that the changing nature of information expressions and their communication and use must be examined broadly along with economic incentives for creating and dissemkdn g intellectual propemy Francis D Fkher personal communicatkm Dec 8 1989 see also Anne W Bransco mb who Owna Creativity Property Righta in the Information Age Technology Review vol 91 No 4 May June 1988 pp 3945 lq$- curreat sofhvarc opyright controversies involve making the distinction between protected expression and unprotected idea Future techno-legal catnwersies might involve works authored by tivanced artifxial-intclli systems Milton Wessel Georgetown Univemity Law C utter personal CCMWUIliCdOtl NOV 28 1989 llc-r Sc We ad Tec @y Dictio M B Widkm cd New y NY W R Chambem Ltd 1988 p 23 ma-wcrxi t $v tive leg fuims g em f g thms d Wt _ see Allen Newell 'Il c Models Am Bmkem Tk Models Are Broken University of Pimburgh Law Review vol 47 No 4 summer 1986 pp 1023-1035 laM tilat Copyright treaties like Bane can provide shlN@wOUS for computer Soflware in many countll'es Relatively few countries provide patent protection for sofhvare-related inventions In any even patents usually provide potcction only in the country where issued Chapter I-Summary Overview and Issues the leader in software development European and Japanese competitors are advancing rapidly especially in targeted areas like artificial intelligence The prospect of unified markets and standards in Western Europe after 1992 poses a significant competitive challenge for U S software developers One example of how intellectual-property protections for software will help shape competition in these new international markets is in their influence 14 on standards and interfaces If the way a program interfaces with people user interface interfaces with other programs software interface or interfaces with computers machine interface is protected it will be more difficult for industry to agree on standard conventions to make programs compati15 ble with one another Standards and interfaces will help determine the extent to which various countries' as well as different companies' software and hardware are compatible The degree of compatibility will shape the future of global information networks and will determine the ease of access QUESTIONS FOR CONSIDERATION In its oversight of policies to protect computer software and related technologies Congress may find the following questions helpful 3 types of works and inventions In what ways are they similar Can software be examined apart from other types of electronic information For software and other forms of electronic information is it useful to talk about policies to reward and compensate producers rather than to protect their intellectual property Questions About Industry Structure and the Nature of Innovation Does it make sense to refer to software ox the software industry in aggregate What are the different types of software and segments of the industry Should some be treated differently Where and how has innovation in software occurred Who creates new software techniques Commercializes or disseminates them Is this changing Does the current statutory scheme of copyright and patent protection adequately stimulate creativity and innovation in software If so can it be assumed that what worked before will work in the future Does the current scheme create sufficient economic incentives for investment in software research and development For commercialization of R D results If so will it continue to do so Is the current scheme sufficient to maintain U S leadership in software in a world market Questions About Definitions Terms like interface and algorithm or mathematical algorithm do not have uniform meanings for the computer and legal professions What terminology can be developed or adopted to discuss and analyze software issues so that the legal and software professions and policymakers can meet on common ground How can it be ensured that the definitions used and distinctions sought will be meaningful as technology changes In what ways are functional works like computer software and algorithms different from other Questions About Protection and Enforcement What aspects of software and or algorithms should be protected Do concepts like lead time have a different meaning for software or algorithms than for other WMndardsmechanisrns differ in the United States and abroad In the European Economic Co unity stand ddevelopment alm t always concmm dejure standards In the United States the term standard is most often used to mean de facto voluntary standard or dominant product Oliver Smoot Computer and Business Equipment Manufacturers Association CBEMA personal communication Dec 7 1989 1 's tim of ace9 in different aWlic on ftwme packa s is issue au USCTS find common interfaces attractive when these allow their current hardware and sofiware to be compatible with new products or make learning how to use new software easier Some software developers want heir programs to have user interfaces e g the way commands are invoked or look and feel soflware interfaces e g degree of data portability between programs or machine interfaces e g o rating systems n-to he PWW@ simil to or in common with others' programs in order to gain a larger potential market But other developers such as those who are fwst to market a radically innovative program may see their interfaces as critical parts of their competitive advantage These developers may want to protect their interfaces in order to reap economic rewards for developing them 4 Computer Software and Intellectual Proper types of works and inventions What does this Does fair use need to be interpreted differently imply for the duration needed for protection for software than for other types of copyrighted works Are special rules needed for uses of How feasible will enforcement of protections for software as opposed to other types of works and software and or algorithms be Will courts be able technologies in education and research to draw the distinctions needed Where will the burden of proof be in enforcing Who speaks for the public interest in issues rights Will they fall equitably on individuals involving computer software and other forms of large firms and small firms electronic information Chapter 2 Changing Technical and Market Environments Twenty-five years ago computers and software were not mass-marketed retail items The mainframes and minicomputers of the day were relatively few in number compared to the number of microcomputers PCs in use today These machines were run by expert staff using expensive often custom3 developed software In the late 1960s the independent software industry began to flourish By 1988 U S independent software developers' revenues exceeded $25 billion up from $20 billion in 4 1987 About 40 percent of these revenues were from 5 foreign sales Domestic revenues from all software and related services totaled over $50 billion in 1987 and were6 expected to increase to about $60 billion a for 1988 The United States currently commands 7 70 percent share of the world software market The fortunes of computer-software and computerhardware developers are closely intertwined A computer may gain popularity if plentiful and or novel software is available Conversely lack of suitable application software programs designed to perform specialized tasks for users can be a barrier to the market success of a new computer or can limit 8 the effective use of a computer Scarcity of application software can impede the use of a whole class of computers software to make most effective use of massively parallel processors and other supercom- Changes in computer hardware and software technologies and markets have shaped concerns about protection for computer software and ideas about what kinds of protection are needed Computer hardware technologies have changed dramatically over the past decade With these changes have come important changes in how software is developed sold and used Consequently some software developers have modified their ideas about what aspects of software need the most protection For example as writing and checking lines of program instructions code becomes more automated through computer-aided software development some software producers propose to protect the logic and idea of a program not just the effort required to write code and check debug it Others are concerned that computer-aided software development will make it easier to disguise copying Technological change also challenges traditional copyright concepts For example with developments in artificial intelligence and in interactive software and database systems it will likely become increasingly difficult to draw the line between l derivative works and new creations and to determine what constitutes authorship 2 IA derivative Work's is a work based on one or more preexisting works e g a translation abridgement or other form of transformation or adaptation See Title 17 U S C 101 Section 117 allows the rightful owner of a piece of software to make a copy or adaptation if the new copy or adaptation is for archival purposes a backup copy or is an essential step in utilizing the program in the computer zFor -e in active SOftWare it is i nCreaSiI@y difficult to determine where the programmer's expression ends and Ihe user's contribution begins-the computer mediates and intermingles the creative efforts of both Interactive computer-based works may generate new questions about ownership and originality See discussion and example of a hypothetical interactive music-composition program Minstrel in U S Congress Office of Technology Assessmen Intellectual Property Rights in an Age of Electronics and J#ormution OTA-CIT- 302 Melbourne FL Kreiger Publishing co April 1986 pp 70-73 3AMtOU@ me l ively so@isticated users e g in universities or research organizations did develop and maintain their own prosr s most application softwiuv for specific tasks like inventoxy control or number crunching was either provided by hardware manufacturers or custom-developed umkr ccmtract Almost all operating-system software to run the computer and control its input outpu and logic functions was provided by computer-hardware manufacturers d ci on of -sing WmiW gmfitims ADAPSO figUIW on industry performance 1989 These data for non-captive fi s excludes the value of software produced in-house by hardware manufacturers nwenues are split about evenly between application and operating-system software Su s Intemadonal Trade Commission 'The Effects of Greater Economic Integration Within the European Community on the United States July 1989 ch 4 p 39 @xnputer and Business Equipment Manufacturers Association The Computer Business Equipment Soffware and Services and Teleconvnuru 'cutions industry 1960-1996 Washington DC CBEMA Industry Marketing Statistics 1987 table 4-3 p 99 7commission of the European Communities Green Paper on Copyright and the Challenge of Technology-Copyright Issues Requiring Immediate Action ' June 1988 pp 171-172 Sk ftw me cntic t may ind tri rs ile productivity wth for softw t hnology Ilm been relatively s1OW there is some concern that software could become a bottleneck-or the Ahilles heel of the information age Ian M Ross President AT T Bell Laboratories keynote address 1988 Bicentennial Engineering Conference Sydney Australia Feb 23 1988 -5- 6 Computer Software and Intellectual property g puters is currently scarce On another front application-software developers can find the existing installed base of older computers and earlier programs e g spreadsheet database or wordprocessing programs a barrier to adoption of new programs designed for more advanced machines They may also need to upgrade their products periodically these new versions must be compatible with new hardware and also with older versions of 10 the product System software programs including operating systems that make the computer usable and control its performance can be an important factor in hardware firms' competitive strategies For example product competition in PC markets is based in part on differences in system features e g processing speed ways of shipping data for processing in different parts of the computer graphics capabilities and user-interface features e g pictoral icon manual mouse or keystroke macro commands for functions such as moving the cursor or saving a file These advantages are acquired from shrewdly mixing hardware and software designs When Congress created the National Commission on New Technological Uses of Copyrighted Works CONTU in 1974 the PC revolution had not yet begun to bring desktop computing power to the millions of individuals that now use it By the time CONTU issued its final report in 1978 the PC revolution was under way creating anew generation of computer users who were not primarily programmers or computer experts The rapid proliferation of PCs in homes offices and schools created a very large retail market for application software-for word processing spreadsheets even games-as well as a lucrative market for PC operating-system software In 1988 domestic revenues for PC applill cation software reached almost $3 billion The widespread use of PCs also facilitated the growing 12 use of online databases Rapid growth and technological innovation made markets for PCs and PC software quite volatile compared to the mainframe and minicomputer markets a decade earlier Some new hardware and software firms would introduce new products enjoy brief success then go out of business within the space of a few years Other firms built on early successes and went on to become industry leaders A few years after introducing a successful product however they might find a substantial fraction of their potential market taken by competitors offering similar-sometimes improved--products often at a lower price The volatility of PC markets has focused new attention on questions about how best to provide intellectual-property protection for software as well as hardware At the same time the history of the computer hardware and software industries illustrate the complex relationship between intellectual-property protection and stimulation of creativity 9A recent press briefing by the Lnstitute of Electrical and Electronic Engineers reported that while U S supercomputer manufactmms are focusing on new hardware developments to stay ahead of Japanese competitors they are giving little attention to software to exploit the hardware's speed and power As a result a superwmputer's speed in solving problems may be only 1 to 2 percent of its advertised peak speed Software SolutionJ'Science vol 246 No 4930 Nov 3 1989 pp 574-575 See also The Computer Spectrum Congxtter vol 22 No 11 Nov 11 1989 pp 61-62 l% uccessive generations of upgrades tend to be increasingly complex For example one sofiware developer's fmt database-management package had several thousand lines of code and took a single developer its than a year to create The most recent version designed to accept data fdes created under earlier versions of the package has hundreds of thousands of lines of code and has taken a team of developers several years to create Ruthann Quindlen installed Base Becoming Obstacle toSofiware Companies' Success ''f@nvorld vol 11 No 36 S@ 4 1989 P 82 llb Stephens SOftWare Publishers Association personal COm altiction Oct 2 1989 12 elw onicd b is acoll tion of information sto ad ws@ y e ec icm s Commission of thehopean mtltlkh ' PaperonCopyright and the Challenge of Technology-Copyright Issues RequiringImmediateA ction June 1988 p 205 Databasescanbeeopyrightcd as works of compilafwm the copyright extends to the material contributed by the author of the compilation or to the author's creative efforts in selecting ordering and arranging preexisting material not to the preexisting material per se or ideas included in the compihtt ion Domestic revenues for on-line business databases alone amounted to $6 5 billion in 1988 Information Industry Association data 1989 Chapter 3 The Intellectual Property Bargain and Software plicitly extended to all forms of computer programs was established in the 1980 amendments to the 4 Copyright Act Even then CONTU recognized certain difficulties in applying copyright which does not protect ideas processes or procedures to software which is inherently functional A particular concern was the impossibility of establishing a precise line between the copyrightable expression in a program and the noncopyrightable processes it implements--the distinction between expression and idea 5 CONTU assumed that most copyright infringements in the then-immediate future would be simply copying but recognized that technological advances would raise more difficult questions in c determining the scope of copyright CONTU concluded however that these questions should be answered on a case-by-case basis by the Federal 7 courts Many continue to believe that traditional copyright principles should continue to be applied to software because difficulties in distinguishing between idea and expression are not unique to software and because copyright law has been able to embrace many new forms of authorship within existing g principles In the United States an intellectual property bargain underlies the concept of intellectualproperty protection This bargain between creators and society balances two social objectives 1 it encourages the production and dissemination of new works and inventions by providing economic incentives to creators and 2 it promotes access to and l use of these works and inventions Thus the limited monopoly granted to authors by copyright and to inventors by patents is a quid-pro-quo arrangement to serve the public interest rather than a system established primarily to guarantee income to creators See app A for reviews of copyright patent and trade secret protections as they pertain to software COPYRIGHT Copyright is granted to2 authors for the creation of certain classes of works The economic underpinnings of copyright assume that to profit from a work the author will publish or otherwise disseminate it to 3 the public Copyrights which are relatively easy to obtain and long-lasting compared to patents are intended only to protect the expression in a work from unauthorized copying not to protect the underlying ideas or functionality from use Even expression is not protected from independent creation The 1986 OTA report Intellectual Property Rights in an Age of Electronics and Information discussed the increasing difficulties of applying 9 copyright to functional works such as programs Some of these difficulties are shown today by ongoing look and feel 1 and structure sequence The recommendation by the National Commission on New Technological Uses of Copyrighted Works CONTU that copyright protection be ex- l jec U S Constitution art I sec 8 cl 8 For a discussion of this bargain and the public interest in intellectual property protection xx U S ConPss Gffke of Technology Assessment Intellectual Property Rights in an Age of Electronics and Informatwn OTA-CIT-302 and Copyright and Home Copying Technology Challenges the fuw OTA-CIT-422 Washington DC U S Government Printing Office October 1989 ch 3 z Title 17 U S C 102 a 3 See OTA-CIT-302 op cit foomote 1 p 7 and ch 6 Copyright inheres in a work as soon as it is created and also exists for unpublished works 4 CONTU recommended that programs be protected as literary works CONTU'S definition of 'computer program was added to Sec 101 of the @@@t At of 19'76 and a new Sec 117 was added limiting computer-program copyright holders' exclusive rights S w r S Me ll AII ysis of the Scope of Copyright Protection for Application I%ograms Stanford L uw Review VOL 41 1989 P 1W7 6 Fi R fi Ofthe N -Ssion 011 New Technological Uses of Copyrighted Works July 31 1978 PP 22-23 7 Ibid p 23 S For diw ion of s view Mo n David Gold rg and John F B leigh @pyri@t ROWUCXI fm Computer o s AIPLA uarter Journal vol 17 No 3 1989 pp 294-322 Goldberg and Burleigh argue that the courts have as Congress intended conscientiously applied traditional coPY@t iP SOfiWWC C S d fm tie most Pam we r ching prep and well-feasoned results ibid p 296 9 s A-c 302 op cit footno 1 pp 78 85 The 1986 po i ntifl ps of cop@@table works works of cmatd fm theh OWl intrinsic value works of fact such as databases whose value lies in an accurate representation of reality and works of function such as computer PO-S which U inf-tttioII to describe or implement a process procedure or algorithm ltl'' is o n mmthe v of sc ndisplays feel to mean the way the programmSp'@ whn tie r l tsoPtions m m commands User interfac imluding graphic icons or combinations of keystrokes to represent functions like save or delete are part of look and fal -7- 8 Computer Software and Intellectual Property and organization copyright suits Moreover market changes like the almost-hundredfold increase in PC use since CONTU make the financial stakes much higher PATENT Copyright protects the expression of an idea application of an Patent protects the technological ll idea in a machine or process A patent precludes practice of the invention e g making using or selling the claimed invention by others even if they invent it independently But the requirement for patentability is stringent the invention must be useful novel and nonobvious compared to prior discoveries the prior art that are patented 12 in the public domain or otherwise widely known While publication is not required for copyright patent is granted in exchange for full disclosure of what the inventor considers the best way of implementing or 13 practicing the invention The purpose of the patent is to teach others and thereby stimulate technological progress as they seek to build on or invent around the discovery The availability of patent protection for softwarerelated inventions was unclear generally considered 14 not applicable until the early 1980s Since 1981 there has been renewed interest in patents for 15 software-related inventions Over the past 7 years patents have been issued for software-related inventions such as linear-programming algorithms spellchecking routines logic-ordering operations for spreadsheet programs brokerage cash-management lG systems and bank college-savings systems In the last year some patent lawsuits concerning software-related inventions and controversies concerning patents for algorithms have become highly visible These lawsuits and specific controversies have focused concerns over the appropriateness of patent protection for software-related inventions and algorithms These concerns arise both from lack of belief that patents in computer-program processes encourage technological progress as well as from the practical problems that software-related inventions and algorithms raise for patent-system administration One of these problems is the incomplete stock of prior art available to patent examiners in evaluating patent applications for processes involving computers especially those involving software and I 'rhe stitutw sub-t m er of a patent is hrnit to a process machine article of manufacture or composition of maner that is novel nonobvious and useful or to new and usefi d improvements to these classes of patentable sub t matter For an overview of patents including a discussion of criteria for patentability and how a patent is obtained see U S Congress Office of Technology Assessment New Developments in Biotechnology Patenting Life---speciui Report GTA-BA-370 Washington DC U S Government Printing Offke April 1989 ch 3 IZAIIhCIu@ 1 origi progr are gener ly eligible for copyright the fractionof programs potentially able toq lfy for patent prtiwtion is much smaller For one thing the U S Patent and Trademark Office pTO position is that computer programs per se are not patentable as opposed to patentable computer processes and algorithms see footnote 15 below In the early 1980s some commentators estimated that over 90 percent ofcomputer-progrm inventions would not in principle meet the patent requirement that the invention be nonobvious compared to the prior art Therefore they estimated that patent protection would only be relevant to about 1 percent of all software Findings of ABA Ropnetary Rights in Software Committee 1983 cited in Cary H Sherman Hamish R Sandti and Mm D Guren Compufcr Sofnvare Protection La-w Washington DC The Bureau of National Affairs Inc 1989 pp 401408 and note 41 OTA NOTE The 90 percent and 1 percent figures do not refer to the percentage of patent applications that result in a patent being issued lg e s i c on di l illusmates one fiplemenmtlm of tie invention Othem may bC possible The p-t application must describe tk invention adequately to allow a person of ordinary skill in the particular area of technology to make and use the invention 141n 1972 tie su me COUII stated that certain inventions performed by computers could be patentable subject matter Gottschulk v BeMon U S 63 1972 A 1981 Supreme Court decision Diumond v Diehr 450 U S 175 1981 helped clear the way for patent protection for some software-related inventions by clarifying the circumstances under which inventions perfonrwd by computers could be patentable subject matter 15'rhe Supreme Com hm not 1 t whether compu r prog r w constitute pa n le sub t m@r Mently PI' piitUtt CX@IEIS carry out a two-part test for mathematical-algorithm statutory sub@t matter the test is intended to be consistent with legislative history and case-law For examination purposes mathematical algorithms are considered to refer to methods of calculation mathematical formulas and mathematical procedures generally and no distinction is made between man-made mathematical algorithms and mathematical algorithms representing discoveries of scientific principles and laws of nature which have never been statutory subject matter For a process claim involving a mathematical algorithm to be patentable the claim excluding the algorithm is required to be statutory subject matter-i e the claim must be for a process machine etc Trivial post-solution activity like displaying a number is not sufficient Patentable Subject Matter Mathematical Algorithms and Computer Rograms 1106 O G 4 Sept 5 1989 also containedin PatentProtectfonfor CompurerSojlwure The h'ewS@'eguur Michael S KeplingerandRcmald S Laurie eds Englewood Cliffs NJ Prentice Hall Law and Business 1989 pp 942 lbIn MS p r OTA sometimes uses phrases like patents for 30ftwm-rekd hlventhts soflvvare-related patents ' or patenting algoritbrns to refer generally to patent protection for computer-implemented processes and algorithms The U S Patent and Trademark Offkx PI'0 considers terms like softwarepatents to be a misnomer because they may be interpreted to mean that a computer programmer se i e the sequence ofc wkd inshuctions itself is patentable as opposed to the underlying computer process it carries out M Keplinger G Goldberg and L Skillington PTO comments m draft paper Dec 18 1989 pp 1-2 Chapter 3-The Intellectual Property Bargain and Software 17 algorithms The published literature does not completely embody the development of the fields of software and computer science In many cases important prior art exists only in product form and is not described in 18print form such as articles in technical journals Another problem is the lack of special classifications or cross-references to issued patents As a result it is virtually impossible to find let alone count or profile all software-related or algorithmic patents This means that patent examiners and the public have no effective way of searching and studying such patents Another problem is the long time lag between patent application and issuance compared to quickmoving software life cycles Someone may develop and bring a software package to market unaware that it will infringe on a patent applied for by another developer but not yet granted These are called landmine patents and can occur in other areas of l9 technology besides software TRADE SECRET Trade secret protection provided under individual State laws protects against use or willful disclosure of the secret by others but not against 9 independent discovery Most foreign nations outside of Western Europe do not have extensive trade-secret laws However most developed countries do have some form of legal protection for 20 confidential business information and contracts or licenses can often provide equivalent protection abroad Trade-secret information maintains its status so 21 long as the information is not publicly disclosed Unlike copyright or patent there is no limitation on its duration Trade secret has been the favorite mechanism to protect mainframe and minicomputer software and its underlying ideas logic and structure because programs are licensed to specific customers not the mass market Mass-marketed PC software is sometimes released with shrink wrap licenses intended to maintain trade-secret status see app A Software that is protected effectively as a trade secret does not become prior art This can adversely affect patent examinations and lead to reinventing the wheel 17kti in p fig software-related inventkms and algorithms is relatively new Copyrighted software deposited atthe Copyright offi is not redily searchable for patent purposes Also trade secrecy has been a major form of software protection and trade-secret information may not constitute part of the prior art llterefore the prior art readily searchable by patent examiners and the public has gaps This potentially allows patents to issue for computer-processinventions that are already known in the industry or that represent only minor improvements However the ITO is working to improve the file of prior art for search puposes l d -C kII hfanell personal communication Dec 21 1989 19HOWvw n o em lieve thiu ting ses swi problems for software-related inventions because of a combination of factors 1 tie decentralized nature of the soflware industry 2 difficulties in determining the prior W and 3 the rapid rate of sofhwe-pmduct development and short product life cycles compared to the time mxpired for processing a patent application Brian Kahin Harvard University personal communication Dec 1 198% and Brian Kti 'l'he Case Against 'Sotlware Patents' personal communication on Dec 1 1989 %1 ichael Keplirtger Gerald Goldberg and Lee Skillington Patent and Trademark Office personal communication Dec 18 1989 21'n mamtain tmk-seaet protection for software developers may require that employees or transferees hold the information in confidence Chapter 4 Controversies Over Software Protection Legal protection for computer hardware is usually provided by patentor trade secret this combination served fairly well to protect major hardware advances as well as more-incremental developments Protection for computer programs does not fit neatlyl within the traditional forms of intellectual property As a result the process by which software developers and users the courts and policymakers have attempted to determine what should or should not be protected and what is or is not protected has been controversial LEGAL CASES The litigation that has shaped copyright protection for software has come in three stages or ''waves The first wave of litigation considered whether computer programs were protectable at all This was settled by the 1980 software amendment to the 1976 Copyright Act 94 Stat 3015 3028 which confirmed that copyright applied to computer programs The second wave explored which aspects of a program are protectable and which are not Court cases have decided that program source code object code audiovisual screen displays and microcode 3 are protected by copyright The third and continuing wave deals with the more ambiguous aspects of what in a program is protectable e g look and feel and how to determine if two programs are substantially similar 4 Copyright and patent lawsuits continue to test and explore the boundaries of the current laws Many in industry and in the legal profession believe that if properly applied copyrights and or patents are 5 adequate to protect software They argue moreover that sui generis approaches risk obsolescence and lack the predictability provided by legal precedent argument by analogy to prior decisions as well as an established treaty structure providing 7 international protection Others consider the development of sui generis protections or significant modifications of current protection are preferable to forcing software to fit models that are suited to other types of works and discoveries but maybe ill-suited 8 for software At the same time that some are calling for major revisions in software protection others are arguing that the current system is not broken and lsome observers have characterized the d lculty as due to software's being too much of a writing to fit comfortably into tie Pmt SYm too much of a machine to fit comfortably in the copyright system Pamela Samuelson Why the hmk and Feel of Sofiwsre User Interfaces Should Not Be Protected By Copyright Law Communicti ons of rhe ACM vol 23 No 5 May 1989 pp 563- 572 Others consider that software's fit is no more uncomfortable than that of some other works and argue that the courts can successfully apply traditional copyright principles to software cases Anthony L Clapes Patrick Lynch and Mark R Steinberg Silicon Epics and Binary Bards DeteminingtheRoper Scope of Copyright Rotation for Computer Rograms UCLA LuwReview vol 34 June-August 1987 Morton David Goldberg and John F Burleigh Copyright Rotection for Computer Programs ''AWLA Quurterty Journal vol 17 No 3 1989 pp 2%-297 2S ond T Nirnmer and Patricia kauthtW Classification of Computer Software for Ugal Protection international Perspectives Internadond Luwyer vol 21 Summer 1987 pp 733-754 3F a er discWim of wh cm @@ Cv H Sheman H R Sandiwn d D Guren Computer so ae PrOttYdOn Luw Washingmn DC The Bureau of National Affairs Inc 1989 sections 203 5 c -203 7 c The copyrightability of microcode as a computer program was upheld in February 1989 See discussion of NEC Corp v Inrel Corp 10 USPQ 2d 1177 N D Cal 1989 in Goldberg and Burleigh op cit foomote 1 pp 309-311 4 s ti s l is a bjwtive t- f Cop@@t ifingenlent A plfitiff must w he kg inm w WXXSS to h COpJ@htd work and that there is substantial similarity between the works at the level of protected expression An allegedly infringing work need not be 100 percent identical to another in order to infringe its copyright but deciding how similar works must be to prove infringement can be troublesome even for conventional literary works like plays or novels For computer programs the 'ordinary observer making the determination may need to be a technical expert For discussion see Susan A Dunn Defmingthe Scope of Copyright Protection for Computer Software ' Sta@ordLmv Review vol 38 Jsnuary 1986 pp 497-534 and Clapea et al op cit footnote 1 pp 1568-1573 In detemirdng substantial similarity between a copyrighted work and an accused work courts look at the worka considered as a whole For programs this means the detailed design not just individual lines of code Clapes et al op cit footno 1 p 1570 SF me dix iom of vieW focming -@t clap op cit foofnti 1 d Md g d Burkigh W cit f-k 1 6SUi gem is a X d to kscribe a law that is of its own kind of ChSS %r example tk Beme Convention p'ovides reciprocal copyright protection in 79 countries sw f exampk Pamela Samuelson CONTU Revisited The Case Against Cumputer Programs in Machine-Readable Form Duke Luw Journul Septemk 1984 p 663-769 andl%er S Menell TailoringLegal Protection for computer Software SruqfordLuwReview vol 39 No 6 July 1987 pp 1329-1372 -11- 12 Computer Software and Intellectual Property does not need fixing --or at least can be fine9 tuned within the existing legal framework The extent of copyright protection for the logic underlying a program as well as its structure and lo interfaces raises complex issues Some of these issues are currently the subject of well-publicized copyright lawsuits What may be at stake in these cases is the extent to which copyright should be interpreted to give patent-like protection especially since copyright applies for a much longer time and lacks patent's standards for novelty nonobviousness specificity of claim and disclosure Patent protection for algorithms also raises complex isll sues Ongoing patent suits concerning softwarerelated inventions and the recent publicity given to some patents for algorithms have stimulated debates concerning the extent to which software-related and algorithmic inventions should be included in the patent system and whether or not computer processes and algorithms are different enough from other technologies to warrant special provisions e g shorter duration pre-issuance notice etc These debates focus on two questions 1 the longer term question of whether patent or patent-like protection for software-related inventions and or algorithms is generally desirable and 2 the near-term questions of how well current United States Patent and Trademark OffIce PTO procedures are working and how to improve the comprehensiveness of the prior art available to patent examiners and private searchers see app A STAKEHOLDERS AND THEIR CONCERNS There is a public interest in the form and level of software protection and its effects on innovation technology transfer and economic growth At a micro level software users have specific expectations and concerns but they are also concerned with software quality as for any other product and with support and consultation for using the software Many users consider technological anti-copying devices that curtail a program's use or prevent modification of the software or their ability to make 12 backup copies as undesirable Rather than having to learn a unique set of commands and features for each program users want to learn universal skills applicable to many programs Cost is a factor especially for schools or businesses that have to buy dozens of the same software package for their terminals Devising or enforcing protections even against literal copying by private individuals is complicated by public sentiment that noncommer13 cial private copying is acceptable The software industry is concerned with unauthorized private copying and with commercial piracy But issues that arise in one segment of the 9For exmple a -t fom nve by the Computer Science and Technology Board CSTB kgm with a mmt mat it w not v to challenge the legal framework for intellectual-property law which isn't broken and doesn't need fixing Lewis Branscmnb opening remarks Intellectual Property Issues in Software A Strategic Forum CSTB Nov 31-Dee 1 1989 OTA NOTE Based on discussions at the CSTB forum and comments received by OTA on a draft of this paper the semantic dividing line between modifications' and 'free-tuning' seems to be that the fwst might be interpreted to include statutory changes to copyright and paten or sui generis forms of protection while 'free-tuning would imply incremental judicial refinements through specific cases Based on reviewer comments on a draft of this paper a substantial portion of the controversy over whether software's fit in the current system is 'neat' or 'comfortable seems to be motivated by concerns that any discussions of less-than-perfect fit are intended to support modification rather than fine-tuning 1 for example Dennis S Karjala Copyright Computer Software and the New Rotectionism Jurirnetrics Journal vol 27 fall 1987 pp 33-% and Peter S Menell An Analysis of the Scope of Copyright Protection for Application Programs Sranjord Luw Review vol 41 1989 pp 1045-1104 lFor ex ple see Donald Chisum Patentability of Algorithms University of Pittsburgh I%W Review vol 47 summer 1986 pp 959-1022 Chisum argues against exclusion of mathematical algorithms from patentable subject matter Gotrschalk v Benson and concludes that lack of unambiguous patent protection for algorithms may ''induce attempts to rely on other sources of law such as copyright and trade secrets that are inherently less suited to the protection of new tedtnologicai ideas with widespread potential uses ibid p 1020 l onventio wi om is mat Con-er res15tmce 1 many ftw prod s to stop copy -pm ting qplication-software k 13A 1985 OTA smey fo d hat tie majority of re ndents consi it a le to compu r pmgr s with friends in ord tO m e COpiC9 fortheirown use U S Congress Office of Technology Assessment Intellectual Property Rights in an Age of Electronics andl onnation OTA-CIT302 Melbourne FL Kreiger Publishing Co April 1986 table H-1 Chapter Controversies Over Software Protection 13 software14 industry may not be as important in another Therefore policy issues must be analyzed normatively taking different industry structures incentives and economics into account key copyrights and patents Another concern is that bottleneck patents or broad interpretations of copyright protection may block progress in the 15 industry as a whole Individual Software Creators and the Software Industry Software competitors and the industry as a whole are concerned with shared access to state-of-the-art knowledge and diffusion of information about programs and programming so that programmers can build on each others' work rather than reinvent the wheel or rewrite a matrix-multiplication subroulb tine for each new application The pace of innovation can be speeded up if competitors are able to build on others' advances The PC revolution was in large part driven by the desire to decentralize control and knowledge of computing-to bring powerful tools to the desktop of millions of users rather than have them cloistered in the hands of a few computer specialists Part of the hacker ethic and practices that produced the innovative machines and software that brought about this PC revolution were based on principles of free access and use of software and innovative techniques Almost 15 years after the beginning of the revolution the hacker ethic is at odds with the need for income from production of software which leads developers 17 to seek increased software protection Creators of commercial software are concerned about profitability An important rationale for intellectual-property protection for software is to give commercial software developers adequate market incentives to invest the time and resources needed to produce and disseminate innovative products Direct revenue losses due to commercial piracy are not the only concerns of developers Developers want to gain and maintain a competitive advantage in the marketplace One powerful source of market advantage is lead time the first company out with an innovative computer program benefits from its head start Trends in software technology like computeraided software development are eroding lead-time advantages Another market advantage is user and or machine interfaces Here however the industry's goals of expanding the market and a fro's goal of maintaining market share can be at odds see below and ch 1 footnote 15 There are several types of interface compatibilities hardware-to-user software-to-user hardware-to-hardware software-to-hardware and software-to-software e g between an operating system and application programs Compatibility and openness in interface standards are important to the industry as a whole There is a concern that too much protection could raise barriers to entry for small entrepreneurial companies if large corporations with more financial and legal resources hold A major concern of most PC-software developers is private copying of an entire program by one's current or prospective customers e g making an unauthorized copy of a spreadsheet program for a friend A major concern of most vendors is literal copying of an entire program for sale by pirate competitors These concerns can be dealt with fairly straightforwardly-at least in theory-by copyright law in practice enforcement especially over pri- W%r example commercial piracy is agreat concern for PC-software developers Eleventh-Amendment States' rights private mpying and software-rental issues are also very important to them The sofiware-rental issues stem iimn developers' co ms that most rented software is rented to copy -than to try before buying ' PC-software developers perceive theirweapons against unauthorized private copying and commercial piracy to be education moral suaaion including amnesties for unauthorized users and litigation Ken Waach Software F%blishers Association perscmal C4XMlUUiCiltim Aug 28 1989 By contra% velopem of hard-wired microcode ' fmware are unlikely to womy about private individuals making copies at home at least with Y availabk technology 1% need for at 1- some degree of compatibility for4 'network' technologies like SOftw are-whether through informal de facto industry standds of formalized ones--i s an important consideration in making policy choices about desirable levels of protection and how these are achieved Some consider that extending copyright protection to user interfaces and the look and feel of programs might lead competitors to offer incompatible but otherwise similar products locking in users to particular product lines rather than competing on price and performance features of an industq-standard product On the other hand these types of protection could lead to competition in product design producing major advances See Joseph Fandl StmddmtI on and IntellectualRoperty Jurimezrics Journul vol 30 No 1 fall 1989 pp 35-50 lqor e it may be wasteful duplication of effort to have to create an entirely new user interface each time a progr is written 17SCC StWUI hvy Huc ers Heroes of the Compurer Revofusion Garden City NY Anchor FrwJDoubleday 1984 especi ly ch z 14 o Computer Software and Intellectual Property 18 vate copying or overseas piracy is difficult products with their existing hardware and software Copying software is easy and inexpensive More-Users care about having reasonable rights e g over private copying of software seems as natu-being able to make a backup copy of an expensive ral as making home audiotapes or videotapes topiece of software some need the ability to modif many individuals and allows them to avoid expen- packaged' software in order to use it efficiently o sive purchases Some individuals and businessesmeet other specialized needs engage in commercial piracy making and selling 19 unauthorized copies of software Most businesses and individuals who use soft The legal status of some software-engineeringware tools to create other products or services wan practices is not clear under copyright Some practi-a stable and predictable legal environment so the tioners think that 'clean room' reverse-engineering know what uses are permitted and which are not an procedures might be acceptable practices underwhich must be licensed from developers A 198 copyright because a second program that is devel-survey of nearly 200 management-information oped independently without access to the pro-system MIS executives showed that almost one tected expression in a prior program does not third reported that look-and-feel lawsuits will 20 infringe the copyright of the previous one This iscause them to shy away from software clones 2 controversial however because clean-room prac-legal uncertainties about patented computer proc 21 tices vary Some reverse-engineering steps likeesses may have a similar effect particularly because de-compiling object code or dis-assembling assem-patents ' use rights affect the buyer as well as the bly-language code in order to analyze the program'sdeveloper functions generally involve making one or more copies of the code as an intermediate step in the 22 The software work force who use and or create process of creating a new one software as part of their jobs want to have transferable skills thus they are concerned sometimes only Software Users indirectly with standards for programming languages and external consistency of user interfaces Millions of individuals and thousands of busi For example learning a new word-processing nesses rely on purchased software products for their package is easier if it has commands and functions day-to-day activities and livelihood They care about similar to other packages one already knows But the price quality functionality ease of use and users also want more powerful software with imvariety of software products available Thus they proved functions Sometimes consistent stancare about the health of and level of competition in dard interfaces can conflict with ease of use and the software industry They also want common x ground' compatibility that allows them to use new improved functionality 18A tie of thumb in the software indus is that at least one unauthorized copy exists for every authorized saleOf a computer program Some so m publkhers think the number of unauthorized copies is even higher-fkom 3 to 7 for every legitimate copy sold Estimate by the Software Publishers Association cited in Peter H Uwis Cracking Down on Sofiware pirates New York Times July 9 1989 p F1O l Fstim of lmws V- and w of los s may somewh eve- a it is n cl- hat each un oii COpy displaces a Sale Software Publishers Association SPA estimated that PC-software producers lost about $1 billion in sales to piracy defined to include both copying forpersortal useandcopying for commercial profit in 1986 The bus Development Corp estimates that over half $160 million of the potential sales for its bus 1-2-3 package am lost every year Micropro International estimated that it lost $177 million in potential sales for Wordstar in 1984 compared to $67 million in actual revenues Industry estimates cited in Anne W Branscomb Who Owns Creativity Ropexty Rights in the Information Age l'echnofogy Review vol 91 No 4 May June 1988 2% mas e Ufivmity college of Law Cater for st y of Law ie d Tw Ao@y Mil n R WCSd Director Thc 'StruC@ Sequence and Organization' and 'Imok and Feel' Questions LaST Frontier Conference Report June 1989 pp 8-12 ZIIn Om Vmion a fiw - velqmat tem reds he e code of a pm d tes a dmcfiption of its f ct ions i e extraCtS the ifrom the expression The source code may have km obtained by reverse-compiling or reverse-assembling object code The fnt team's functional description is passed to a second team which designs a new program without contamination from the original code 22The recent decision in fkmito Bours nc v Thunder Crujt Bours Inc 109 S Ct 971 9 U S P Q M BNA 1847 1989 hm rtised con ovew over the Supreme Court's likely view of reverse engineering of computer programs seethe articles of D C Td Arthur LAne and Allen R Grogan in The Compurer Lawyer vol 6 No 7 July 1989 pp 14-36 Sherman et al op cit footnote 3 Sec 210 8 question the validity of a clean room defense to a claim of infringement Mich l ex r titicism Builds Over Impact of Look-and-Feel Litigation Compuferworid vol 23 No 18 May 1 1989 p 14 24s Jo @din $ c tu WeCmsi ency ' co c om of t ACM VO1 32 No 10 October 1989 pp 1164-1173 Chapter 4-Controversies Over Software Protection 15 Academic Community Academic research communities value free access to and exchange of information Academic software and computer-science researchers and developers motivated by other than commercial potential e g professional prestige tenure publication in scholarly journals tend to view intellectual-property protection somewhat differently than do commercial developers However universities and their faculties are increasingly interested in commercializing technology and obtaining revenue for use of their intellectual property Many in the academic community are concerned that what they see as over-protection such as copyright protection for look and feel' and patenting of software processes and algorithms might hamper research and long-term growth in their fields Some believe that the artistic expression of a user interface should be protected but not the way commands are invoked at the user interface They believe that forcing developers to contrive meaningless variations in interfaces solely to avoid legal entanglements25 will hinder software research and development Software 2bis used by students and educators in all disciplines Cost quality and variety are important and educational institutions face difficult problems in providing equitable student access to software e g 22 000 university students may each need access to 500 dollars' worth of software-how should this be accomplished 27 This and other issues like ethical software use in education are the focus of a joint project by the EDUCOM software initiative EDUCOM is a nonprofit consortium of 650 colleges and universities and ADAPSO the computer software and services industry associa% tion In contrast to major commercial software packages faculties in a number of disciplines develop small software programs to help teach students The incentives to develop and use 'small' software differ significantly from those for commercial software as do the means of distribution e g 29 over academic computer networks SOME PRIVATE EFFORTS TO SORT THINGS OUT In March 1989 several members of the legal and software-development communities met at an MIT Communications Forum session on software patent30 ing The session focused on the PC-software industry Participants reviewed the history of software development and patentability and stated different views about the merits of software patents and their effects on innovation and creativity In February 1989 the Arizona State University College of Law Center for the Study of Law Science and Technology convened a group of conferees to identify areas of agreement in the legal academic community concerning copyright princi31 ples for computer software The conferees reached consensus on several points Courts will have to adapt traditional copyright principles to a new and different technology 32 The phrase structure sequence and organization is unhelpful to describe expressive elements of programs It does not distinguish Mex op cit foomo 23 Grudin op cit footnote 24 offers opposing views %%me students and educators may use 'educational software' programs which are like books in that they convey information albeit interactively They may use professional or business sofiware programs for graphics numerical calculation number-crunching and word processing They may also use 'discipline-specific sofiware often created with Federal funding for research and problem-solving in fields like physics mathematics biology engineering economics geography and architect Dm Cartwri@t Syracuse University personal communication Aug 30 1989 2sSee for example Using Software A Guide to the Ethical and Legal Use of Software for Members of the Academic Community ' EDUCOM and ADAPSO 1987 and can 'Intellectual Property' BeRotected Change spezial issue May June 1989 %teven Gilbat EDUCOM personal communication Dec 11 1989 %iassachusetts Institute of Technology Communications Forum Software Patents A Horrible Mistake ' Cambridge MA Seminar notes Mar 23 1989 The panel consisted of Daniel Bricklin Sofiware Garden Inc Stephen D Kahn Weil Gotshal Manges Lindsey Kiang Digital Equipment Corp Robert Merges Boston University school of Law Pamela Samuelson University of Pittsburgh School of Law R Duff Thompson WordRrfect Corp Brian Ktthin moderator and Gail Kosloff rapporteur 31 T Fron@ co Report op cit foomote 20 The conferees were Donald S Chisum University of Washington Rochelle Cooper Dreyfuss NYU Paul Goldstein Stanford Robert A Gotman University of Rnnsylvania Dennis S Karjala Arizona State University Edmund W Kitch Univesity of Virginia Peter S Menell Georgetown University Leo J Raakind University of Minnesota Jerome H Reichman Vanderbilt University and Pamela SamuelSon Emory University University of Pittsburgh Others from the academic and business communities attended parts of the conference as presenters or observers %id p 2 16 o Computer Software and Intellectual property expressions from processes or procedures Moreover computer programs are functional works thus technological constraints on using 33 them limits the scope of available protection Courts have extended copyright protection 34 beyond the exact text of a work Achieving compatibility between programs that serve as software-to-software or hardwareto-software interfaces35is a legitimate goal for software competitors Some programdevelopment practices that extract logic and use it in developing another 36 program do not infringe copyright Copyright law provides a mechanism for protecting user interfaces but the protection should be limited so that for example aspects that optimize in a way that has no viable substitute i e are functionally optimal are 37 not protected In other3g important areas consensus was not reached The extent to which copyright law protects interface aspects that are not functionally optimal see last item above The extent to which human factors analysis can be relied on to determine the scope of copyright protection What the optimal level of software protection is If a sui generis protection regime is desirable ssIbid p 6 341bid 351bid p 7 %id pp 8-11 Conferees believed that iimited Copyhlg f pWpOSeS of exti on and study of a program's unprotected elements including dittawxmbly or ckxxnpiling to get pseudo-source wde from object code would fall within the terms of fair use 3TIbid pp 12-17 %id pp 2-17 Chapter 5 International Issues Software is an important positive part of America's position in international trade A study by the United States International Trade Commission ITC estimates that in 1987 almost 40 percent of U S softwarel developers' revenues came from foreign sales Indirectly computer software contributes to the efficiency of other businesses and manufacturers competing in international com2 merce As the software industry evolves on an international scale intellectual-property issues will continue to grow in importance Currently the United States is in the forefront of software development However we must be sensitive to shifts in the world economy such as the changes in the European Economic Community proposed for 1992 As global networks develop hardware and software standards will also become more important Piracy abroad can reduce the economic incentives to invest in software development4 and can give rise to diplomatic and trade problems Lack of adequate intellectual-property protection abroad makes it more difficult to protect U S works and inventions in foreign markets while strong software protection in the United States benefits both foreign and domestic producers Lack of protection might also complicate North-South technology transfer to lessdeveloped countries LDCS and East-West transfer to Eastern Europe and the People's Republic of China In some of these countries commercial software piracy has become ingrained making software companies less willing to make state-of5 the-art software available Many of the nations where commercial piracy is widespread are Third World countries who may be trying to develop a computer industry of their own or who cannot afford to pay full price for software U S producers however lose revenues through this piracy and may be unable to develop legitimate markets in these countries The global nature of the software industry must be recognized when considering domestic intellectual property protection For example U S treaty obligations under the Berne Convention Universal Copyright Convention and Paris Convention mean that domestic laws will protect foreign fins along with domestic firms in the U S markets If U S law differs substantially from international norms of copyright and patent protection U S software producers may find it difficult to have their claims for intellectual property protection recognized in foreign countries Intellectual property law is important to encourage and to protect U S works and inventions internationally The United States is attempting to include intellectual property in the General Agreement on Tariffs and Trade GATT treaty and is engaged in bilateral negotiations as well App B reviews mechanisms for international intellectualproperty protection and looks at some issues concerning international competition and trade IU S t ti Trade commission 'The Effects of Greater Economic Integration Within the European Community on the United States JUIY 1989 ch 4 p 39 ZAS me co en tornotm wormtiion technologies are fast becoming the raw material of the global economy n ew information technologies are changing the way the manufacturing sector conducts business just as radically as they are changing the character of the service industries The manufacturing sector is relying more and more on services as inputs including R D engineering sales accounting finance and even management Clarence J Brown 'The Globalization of Information Technologies The Washington Quarterly winter 1988 pp 90 95 S'IIIUS stiong U S laws benefit forei commtitors as foreig software suppliers grow stronger this may become more impommt For tir discussions of international conventions and a lengthier treatment of other international issues see app B 41Vorldwi@ piracy fmcomputer software and hardware is estimated to have cost producers $4 billion in 1986 this figure is based primtily on firms' ownestirnates of losses Estimate based on a study performed by the U S International Trade Commission Foreign Protection oflntellectuaf Property Rights and the Effect on U S Industry and Trade February 1988 table 4-1 p 4-3 'Ile Intemationtd Intellectual Property Alliance estimated that software piracy in 11 problem countries amounted to $547 million in 1988 International Intellectual Property Alliance Trade Losses Due to Piracy and Other Market Access Barriers Affecting the U S Copyright Industries A Report to the United States Trade Representative on 12 'Roblem Countries' April 1989 p viii 5FW ex ple ple's Republic of china h no copyright law of its own although it is currently drafting one Witi provisions for softw e and is not a member of international conventions One study sponsored by several industry groups has estimated that software piracy in the Rople's Republic of China cost U S developers some $300 million in 1988 international Intellectual Roperty Alliance op cit footnote 4 -17- Appendix A Legal Protection for Computer Software Computer software can be protected under copyright patent or trade secret law or under some combination of these This appendix briefly reviews these forms of protection with emphasis on applications to computer software A related sui generis form of protection for semiconductorchip mask designs is provided via the Semiconductor Chip Protection Act of 1984 1 The Act protects the designs of the mask works used to lay out integrated circuit designs in semiconductor chips 2 this doctrine certain unauthorized uses such as copying for the purposes of teaching scholarship or research may be considered fair use ' not copyright infringements Whether an instance of copying is a fair use instead of an infringement is determined by the courts taking four statutory criteria into account 1 the purpose and character of the use 2 the nature of the copyrighted work 3 the amount and substantiality of the portion used in relation to the work as a whole and 4 the effect of5 the use on the potential value of or market for the work Another statutory limitation on the rights of software copyright holders is given by section 117 of the copyright law added in the 1980 amendment Copyright The current copyright law is enacted in the Copyright Act of 1976 as amended Title 17 U S C ch 1-8 90 Stat 2541 A 1980 amendment made explicit provisions for computer programs as literary works of authorship Public Law %-517 94 Stat 3-15 3028 Copyright protects original works of authorship from unauthor- it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided ized uses including reproduction copying making 1 that such new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other reamer or 2 that such new copy or adaptation is for archival Purposes Only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful derivative works adaptation public distribution public performance and display 3 Generally the term of copyright for new works is the life of the author plus 50 years or 75 years for works made for hire e g by art employee of a firrn 4 Copyright has been the form of software protection favored by most nations see app B Obtaining a copyright is easy inexpensive and quick compared to the requirements for obtaining a patent see next section on patents Since copyright is administered under Federal law unlike trade secret protection it is uniform in all the States The duration of copyright protection is very long compared to the expected economic or technical lifetimes of computer programs This limitation clarifies the right of a user who legitimately owns a software product to make backup copies of the software to protect against damage or loss to load the software onto the hard disk of a computer for easier or more efficient use and to make adaptations if necessary to make the program usable on a computer e g compiling it inserting default formats or directory paths The doctrine of fair use is one of several statutory limitations on copyright holders' exclusive rights Under l blic Law 98-62 1 98 Stat 3347 3356 2 Cq H s m ish R Sadimn Marc D G n co r So@are Protectin washingt DC The Bureau of National Affairs Inc 1989 part 300 Rotection for an original mask work extends for 10 years from the time it is registered the duration takes into account the relatively short useful econcxnic life of a particular chip The Act was developed in a period when chip design and mask-work production was a very labor-intensive and time-consuming step in chip manufacture so that protection from copying of the mask work confemcd a significant competitive advantage The Act does not provide protection for the underlying iti or against indepmdent creation reverse engineering or instances where the design was not copied Patent protection also applies to chips but patents require public disclosure of the invention Also the layout of a chip will rarely satisfy the levels of novelty and nonobviousness required by patent law which protects invention not effoxt 3 An original work is one that does not have the same expression as a preexisting work an identical but independently created wodt is not a copyright infringement The originality neceasiuy to support a copyright merely calls for independent creation not novelty Melvin B Nimmer N unmer on Copyright New York NY Matthew Bender 1982 vol 1 sec 201 A cited in U S Congress Of of Technology Assessment Intellectual Property Rights in an Age qfElectronics and Iqfo rmation Melbourne FL Kreiger Publishing Co April 1986 OTA-CIT-302 ch 3 foomote 10 chapter 3 of the 1986 report discusses intellectual property concepts A derivative work is a work based on one or more preexisting works such as a translation abridgement condensation etc Copyright Act sec 101 4S cw t L 302 f rdiscuionofu so copyright law see U S Congress Office of Technology Assessment CoPYri8 a Ho Copying Technology Ckzilenges the fuw OTA-CIT-422 Washington DC U S Government Printing Office October 1989 ch 3 S@@@t Act of 1976 cho 1 sec 107 Compu@ softwm can PRSfXIt Some pafdCdSr prObkIW h aSsCSsing what is fair u For e ple a ccxnpetitor who de-compiles a copyrighted object ode program in order to study the unprotected ideas it embodies will necessarily make a copy of the entire program see app A foomote 7 -19- 20 Computer Software and Intellectual Property etc It does not permit making and distributing multiple copies for school or office use Copyright does not confer rights over ideas-only the expression of an idea is protected not the underlying idea itself 6 A copyright holder e g a software developer might consider this to be a disadvantage because his copyright will not preclude a competitor from creating a new work embodying the same idea so long as the competitor does not incorporate copyrighted expression from the first program into the second program For software copyright may also allow clean room reverseengineering practices 7 In this type of reverse engineering one team of software developers studies the code of a copyrighted program to extract the underlying functionality ideas A second team who has never had access to the copyrighted code then creates a new program based on the first team's functional specifications For some computer software writing the code may be relatively trivial so that the true innovation and market advantage lie in the program's logical structure or in its interfaces The extent to which these are protectable expression as opposed to uncopyrightable ideas is the focus of the latest round of court cases Disputes Over Copyrightability There has been considerable disagreement over what features of a computer program are or should be copyrightable The distinction between idea and expression can be very tricky to make even for some traditional literary works like books and plays For software which is intrinsically functional idea and expression are closely interwoven even in theory In practice it is extremely difficult to separate which elements of a program are the expression and which are the underlying idea 8 There is substantial disagreement among legal scholars and among software developers and computer scientists as to whether copyright should protect only against literal or near-literal copying e g mechanical translations paraphrasing and disguised copying or should also protect a program's structure sequence and organization9 and user interfaces including look and feel as well For example some in the computer and legal professions believe that a program's look and feel should not be protected by copyright instead these individuals think that protection for look and feel is better suited to a patent framework 10 Others however are critical of patent protection for computer processes in programs ll Many in the computer and legal professions believe that traditional rules of copyright law adapt very comfortably to new forms of expression like computer latest programs 12These individuals believe that there is considerable room for expression in even detailed aspects of a program like its design logic structure and flow 13 and that the courts can be and generally have been successful in adapting traditional copyright principles to software-infringement cases even those involving ideav -expression or structure sequence and organization questions 14 Therefore they think that copyright is viable--and vital-as a vehicle for protecting computer 'kno case doescopyrightprotection foranoriginal work of authorship extend to any idea proce dure process system method of o-on n@Pt principle or discovery regardless of the form in which it is descriw explained illustrated or embodied in snxh work Copyright Act of 1976 ch 1 sec la b T- ci has found copying for the puxpose of reverse engineering to be sanctioned by section 117 of copyright AcL V V Q 655 F Supp 750 E D LA 1987 affkned 847 F 2d 255 1988 cited by Brian Kahin personal COmlnUniCiltiOll Dec 1 1989 S rexmple i sion w n o w v J e rato s w 797 F 1222 3rd Cir 1%6 dati 107 S ct 877 1987 held that the underlying puxpose of a program is its id- and everything else is expmasion given that more than one way to achieve the purpose is possible Under this interpretation virtuaUy any elements of the program's structure sequence or organization would be considered copyrightable By con- the decision in Pb w Cotton coop Assoc v Goodpustnre Co urer Service Inc 807 F 2nd 1256 5th Cir cert denied 108 S Ct 80 1987 held that only line-by-line program design or literal code were protectable David C Godbey Comment hgal Documents As A Metaphor for Computer Programs in Copyright Anaiysis-A Critique of Whek m and Pkins CortonJ' The Compucer Lavyer vol 6 No 8 August 1989 pp 1-10 9Recent court decisions have varied in determining the extent to which program structure sequence and organization should be protected by copyright The term look and feel originated in an article that focused attention on software user interfaces Jack Russo and Douglas K Derwin Copyright in the 'Imok and Feel' of Computer Software The Computer Luwyer vol 2 No 2 February 1985 There is no statutory orcase-lawdefmition although a kindred phrase total concept and feel ''has been adopted by appellate courts Pamela Samuelson Why the Look and Feel of Software User Interfaces Should Not Be Protected By Copyright Law ' Communicurions of the ACIU VO1 32 No 5 May 1989 pp 563-572 l e ent is ' l f l is mom id- Wxept th expession c howev v on hat did not m-t a novel and nonobvious advance over prior work would not be patentable see seaion on patents Thus most user-interface improvements would not be protected under either patent or copyright if look and feel is not accepted by the wmrta See Computer Scientists Protest SoftwareLitigation ' Internatwnai Computer Luw Adviser June 1989 p 22 and Pamela SamuelSon ibid llFor exmple see Brian Kahin 'Ilie Impact of Software Patents Educom Review winter 1989 PP 28-31 12For adiscusim of ition d a t of Ping views thony L c- p ck Lynch W R s in g silicon Epics Binary Bards UCfA L uw Review vol 34 June-August 1987 pp 1493-1594 seep 1501 Is% Ws et al ibid PP 1549-1558 ld cla set ibid especially pp 1546-1554 d 1575-1584 % SO David Goldberg and John F Burleigh Copyright Rotection for Computer Programs Is the Sky Falling AIPfA Quur@rfy Journal vol 17 No 3 1989 pp 2%-297 Goidberg and Budeigh argue that even if not all court cases have been cmrect or clearly articulated the same is true ofpatent cases forsoftware-related inventions and would be true for any sui generis forms of protection ibid p 2% Appendix legal Protection for Computer Software o21 software and that arguments for hybrid or sui generis protections are based on faulty premises 15 Before the current copyright law and 1980 amendment there was considerable disagreement as to whether programs could be copyrighted as writings and if so what forms of computer software were copyrightable-e g whether only the higher-level-language or source code could be copyrighted as opposed to code in assembly language or machine language the object code Some arguments-which may have distracted attention from more fundamental issues--were based on the presumed inability of humans to read lower level languages or binary object code according to this rationale only higher level languages expressed writings for human readers eligible for copyright protection 16 These arguments were misguided because human programmers can and do read programs albeit with more17 difficulty in assembly language and machine language The 1980 amendment with reference to programs as statements used directly or indirectly in a computer sec 101 and adaptations for purpose of use in a computer sec 117 as well as the explicit 1976 provisions for works that can be perceived reproduced communicated either directly or with the aid of a machine or device sec 101 resolved much of this confusion Court cases have held that computer pro- source code object code microcode 18 flow charts and audiovisual screen displays-are protected 19 grams Patent A patent protects an invention including application of the underlying idea from copying and from independent creation for a period of 17 years It protects against literal infringement making using or selling the claimed invention and also against infringement by equivalent inventions whether or not the infringing inventor had prior knowledge of the patented invention The statutory subject matter of a patent is limited to a process machine article of manufacture or composition of matter that is novel nonobvious and useful or to new and useful improvements to these classes of patentable subject matter The requirements for a patentable invention are relatively stringent patents don't reward hard work per se The patent requirements for novelty and nonobviousness are a finer screen than the originality criterion of copyright All original software is eligible for copyright as with any other statutory work of authorship and copyright inheres in a work as soon as it is created Although patents are being granted for software-related inventions 20 only a small fraction of software is likely to contain a computer process meeting the tests of novelty and nonobviousness 21 1501-1505 1548-1561 and 1583-84 See also Goldberg and Burleigh ibid PP 317-322 l e de that a work must be re le by a human tiience had its origins in White-Sm th Music Publishing CO J@OLfO MUSLC CO 2W Us 1 15w clw et o op cit fmok 12 eswi ly pp V 1908 which ruled that player piano rolls could not be copyrighted For a discussion of the readability requirement see Copyright Protection of Computer Rogram Object Code ''Harvard Law Review vol 96 May 1983 pp 1723-1744 Christopher M Mislow Computer Microcode Testing the Limits of Software Copyrightability Boston University h Review vol 65 July 1985 pp 733-805 and the dissent of Commissioner Hersey in the National Commission on New Technological Uses of Copyrighted Works CONTU Final Report July 31 1978 17A e pmgr is tie progr as titten by the programmer Writing in lower-level languages like assembly language Cm be tediOUS so programmers usually use a higher-level language like Fortran For example a Fortran instruction to add an input V to a variable SPEED would be SPEED SPEED V A Fortran program must be compiled before it is executed by the computer the compiler translates each Fortran instruction into many bin machine-language instructions Similarly a program written in assembly language must be assembled before it is executed An assembly-language program generally consists of symbolic statements each one of which cormponds to one basic operation of the computer For example to add V to SPEED would require statements like LD RO$PEED load SPEED into Register O LD RI V load V into Register 1 AD ROJU add contents of Register 1 to Register O Assembly-language programs can't be directly understood by the computer so an assembler has to translate them into machine language In the 1950s-1960s computer programs were usually entered in the computer in the form of punched cards As this source deck was keypunched the 80 characters of code on each card were printed at the top for verification and debugging purposes When the program was compiled the resulting object deck contained only punched holes This may have contributed to the assumption that object-code programs could not be read by humans 18Mcmfi govms r on of the computer within one cycle of the computer's internal clock it is part of the computers oper g sYstem @W@ ility of mic e WM upheld in NEC COT V htei Cop 645 F Supp 590 N D Cal 1986 vacated 835 F 2d 1546 9th Cir 1988 lgsh ennan et al op cit footnote 2 sees 203 5 c -203 7 c W the United States certain types of computer-implemented processes and algorithms can be patented The Supreme Court has not ruled on whether computer programs per se are patentable subject matter but has Nled that computer-implemented algorithms that are deemed mathematical algorithms per se are not statutory subject matter Federal courts have thus held that a computer processor algorithm is statutory subject matter unless it falls within a judicially detcmnined exception like the one for''mathematicat algorithms per se See U S Patent and Trademark Office Patentable Subject Matter Mathematical Algorithms and Computer Rograms 1106 O G 4 Sept 5 1989 In this paper OTA sometimes uses phrases like patents for softwaremlated inventions software-related patertts or patenting algorithms to refer erally to patent protection for computer-implemented processes and algorithms The U S Patent and Trademark Office pTO considers terms like software patents to be a misnomer because they may be interpreted to mean that a computer program per se i e the sequence of coded instructions itself is patentable as opposed to the underlying computer process it carries out M Keplinger G Goldberg and L Skillington PT'0 comments on - paper Dec 18 1989 pp 1-2 zl wtim World b Il m rty Organization pla fractional 1 percent Cited in I ngrid M Arckens Obtaining Intmnadonrd M@p@ for fiw N Laws d kternational Copyright Conventions Federal Communi catio u Law Journai vol 38 August 9 22 Computer Software and Intellectual Property An advantage of patent protection for the discoverer of In principle prior art consists of inventions previously a software-related invention is that the patent will protect known sold or used including those described in othe all the claims for the invention taken as a whole Many patents and published articles see 35 U S C 102 I of these processes would likely not be protectable under practice prior art is most often previously issued patents copyright because they would be considered part of the Because the bulk of software continues to be protected b unprotected idea A single computer program may copyright and or trade secret because much of the histor consist of a number of patentable processes and algo- of software development is not in the published literature rithms At the same time the claimed invention might be and because relatively few patents for software-related executed by a number of copyrighted programs Depend- inventions were granted prior to the 1980 the availabl ing on how carefully claims are constructed the computa- and locatable prior art is less complete and relatively mor tional logic and processes-even the algorithm itself-- difficult to compile or search than the prior art for other Carl be protected technical fields PTO classifies patents for softwarerelated inventions according to the field of the proces The United States Patent and Trademark office PTO chimed making it difficult to find or track patents for issues patents on inventions that are determined to meet computer-program processes Also nonpatent prior a statutory requirements see above the first of which is for software-related inventions is often in nonwritten statutory subject matter Because of the judicially created form existing only as software products Thus there i exception for mathematical algorithms see footnote more risk that invalid patents may issue for widely know 20 computer processes that are solely mathematical or obvious computer-program processes algorithms- mathematical algorithms per se--are not Patents under examination are not disclosed so a considered to be statutory subject matter However competitor may put considerable effort into developing a software-related inventions claiming a new or improved program that unknowingly duplicates computer processes process which can include an algorithm perhaps even a for which one or more patents are pending The problem mathematical one can be statutory subject matter if the of timing and product life cycles is not unique to the patent claims excluding the mathematical algorithm are computer and software industries but it is especially otherwise statutory Therefore they can be patented if the troublesome in industries as fast-paced as these Finally other requirements of novelty and nonobviousness are the process of getting a patent is expensive and lengthy m e tz compared to copyright or trade secret protection AlFrom the viewpoint of the software industry and though turnaround time in PTO is decreasing a patent still society as a whole some unattractive elements of patents may take years to issue in an industry where products have for software-related inventions are procedural and have short economic lifetimes Enforcement can be difficult to do with the prior art and patent searches The prior art and time-consuming and litigation for infringement runs is the body of publicly known technical information the risk of finding one's patent invalid against which the patentability of an invention is evaluated Even if a discovery is novel compared to the prior Problems With Terms and Models art it must also be nonobvious This means that if the differences between the subject matter sought to be Use of the term algorithm 25 has been subject to patented and the prior art are such that the subject matter controversy largely because computer scientists lawas a whole would have been obvious at the time the yers and the courts have used different definitions of computer-related terms and different models of how invention was made to a person having ordinary skill in programming is done Often the legal definitions or the art ' then the invention is not patentable 23 22 The Supreme Court has not ruled as to whether computer programs per se constitute patentable subject matter Currently PTO patent examiners carry out a two-part test for mathematical-algorithm statutory subject matter the test is intended to be consistent witb legislative history and case-law For examination purposes mathematical algorithms are considered to refer to methods of calculation mathematical formulas and mathematical procedures generally and no distinction is made between man-made mathematical algorithms and mathematical algorithms representing discoveries of scientific principles and laws of nature which have never been statutory subject matter For a process claim involving a mathematical algorithm to be patentable the claim excluding the algorithm is required to be statutory subject matter-i e the claim must be for a process machine etc Trivial post-solution activity like displaying a number is not sufficient Patentable Subject Matter Mathematical Algorithms and Computer ProgramsJ' 1106 0 G 4 Sept 5 1989 also cmtindtiPmmProtection$or ComputerSo@are The New Sufeguurd Michael S Keplinger and Ronald S Laurie eds Englewood Cliffs NJ Prentice Hall Law and Business 1989 pp 942 35 U S C S tion 103 S IW@ KS OII Kuyton on pure Washington DC Patent Resources Institute Inc 1983 ch 5 PTO categorizes ptits by some 350 classes each with some 350 subclasses classification is done accordhtg to Stitmal el Many software-related patents are chssifkl in classes 364 235 and 340 but not ail patents in these classes are sotlware-related PTO places patents drawn solely to computer processes that are not classifiable in other areas of technology in Class 340 Subclass 300 M Keplinger G Goldberg and L Skillington FTO comments on draft paper Dec 18 1989 p 4 fiA common definition of the term ufgorithm is a set of ruks which specify a sequence of actions to be taken to solve a problem or carry out a FOCCSSI fich we is w iscIY d biwuly Afmti so that in @cipk it can be carried out by machine Chambers Science and Technology Dictionary Peter M B Walker cd New York NY W R Chambcm Ltd 1988 p 23 Appendix A-Legal Protection for Computer Software interpretations have been inexact or at odds with common use of the terms by mathematicians computer scientists and programmers Thus legal battles have included arguments over distinctions between mathematical and nonmathematical algorithms mathematical algorithms and numerical equations equations and laws of nature or basic truths algorithms and mental steps etc 26 While algorithms may be numerical or non-numerical algorithms are all mathematical constructs Therefore making distinctions between mathematical and nonmathematical algorithms or even between algorithms and27 computer programs is problematic for the long term Moreover while a particular algorithm may describe a new or improved method of carrying out an operation like a Fourier transform or even the most computationally efficient it may not describe the only method Trade Secret Trade secret law protects the owners of certain information against its misappropriation Others who have not obtained the information by improper means are free to use the information and associated ideas Unlike copyright or patent there is no limitation on its duration Trade secret has been the traditional favorite form of protection for main amframe and minicomputer software From the viewpoint of a software developer the advantages to trade secret are that it protects a program's underlying ideas logic and structure not just expression as in copyright It avoids formalities of registration or application and lengthy waits for protection Enforcement is relatively clear-cut and injunctions or compensatory relief is available for those who can prove misappropriation of trade secrets On the other hand trade secret protection doesn't protect against independent creation reverse engineering or accidental disclosure of the secret Also it can be costly or impossible to maintain secrecy and the lack of uniformity in State and national laws can be frustrating 23 In the United States trade secrets are protected by individual State laws although there is a Uniform Trade Secrets Act enacted in many States with minor variations Although most developed nations have some form of protection for confidential business information most foreign nations outside of Western Europe do not have trade secret laws per se However much of what trade secret law does can be accomplished by contract and by enforcing licensing terms against disclosure When software is protected by trade secret it maintains that status so long as it is not publicly disclosed For society this canx lead to a lack of knowledge about the state-of-the-art In turn this can adversely affect prior art for patent examinations and lead to reinventing the wheel rather than building on or around prior advances Maintaining Software as a Trade Secret For software or anything to be protected as a trade secret it must not be generally known to a competitor there must bean effort to maintain its secrecy and those to whom the secret is disclosed must have a duty not to mistreat the information However if they do and a third party gets hold of it then in many jurisdictions the third party has no duty to respect the trade secret Trade secret protection became popular long before the wide proliferation of personal computers PCs Markets for mainframe and minicomputer software were smaller then and much software was custom-developed for particular clients or small market niches Some parts of the software market still work like this In these types of markets trade secret software has relatively limited exposure usually to users with contractual obligations to the developer Often software is delivered to the client in a lower-level language like machine code sometimes called object code with contractual agreements prohibiting the client from reverse-compiling it to yield equivalent code in a more easily analyzed higher-level language like Fortran 29 26F me w -e e a he tem m ematic gori M synonymous with a m hematicd formula such ss sin 2a 2 sin a cos a or a law of nature such as E mass speed of light squared For discussions see Donald S Chisum The Patentability of Algorithms University of Pittsburgh Luw Review vol 47 No 4 summer 1986 pp 959-992 and Supreme Court cases Gottschalk v Benson 409 U S 63 1972 Purker v FZook 437 U S 584 1978 and Diumond v Diehr 450 U S 381 1981 ForaWmp scimtist' swFtive on leg Cmfusionsmsulting from s lemodels for gori s dcompu rprogr s s Allen Newell TM Models Are Broken The Models Are Broken University of Pittsburgh Luw Review vol 47 No 4 summer 1986 pp 1023-1035 Some think that new and useful algorithms including mathematical algorithms should constitute subject matter eligible for patent protection see Donald S Chisum ibid pp 959-1022 A recent decision by the Court of Appeals for the Federal Circuit In re hvuhashi et al CAFC 89-1019 decided Nov 7 1989 reversedPTO'S rejection of a patent application in which the algorithm constituted the bulk of the invention Some observers consider that this decision which limited patent protection for the algorithm only to ita use in the particular apparatus described in the claims will further ease the way for patent protection for algorithms See Edmund L Andrews Patents Algorithm Ruling May Aid Software The New York Times Nov 11 1989 business section p 36 2SBY nw Ptit fi u in exc ge for fil diScIm of the p entee's beat method of practicing the invention But me comider that in practice claims are sometimes so broad that they don'treally show the state-of-the-art B Kahin personal communication Dec 1 1989 2gAb t con m agreements trade seaet does not protect against reverse engineering %e Copyright Offkx has special release provisions for deposit of software with trade secrets Depositors may use object code remove trade-secret pare% etc 24 Computer Software and Intellectual Property PC software by contrast is mass-marketed to hundreds of thousands of customers 30 To help maintain tradesecret status PC software is often published in object code and distributed with a shrink-wrap license which every purchaser is supposed to agree to on opening the package Whe Copyright The shrink-wrap license may contain language and terms that purport to create a duty by the user to maintain the trade-secret information but some question whether this would stand up in court 31 Offke has special release provisions for posit of soflwam with trwk secrets Depositors may use object code remove trade-secret parts etc 31- mew B--b who c ty Tec @y evi y Ju lgg p As SO shma et d Of Cit f 2 a 309 4 g Anne Branscomb believes that statutory clarification is needed for the status of trade secrets within copyrighted works Anne W Branscmb - co-tmka@h Dec 8 1989 Appendix B International Protection for Computer Software Intellectual-property issues are of growing international concern Problems like commercial piracyl that occur in domestic markets have international counterparts The United States currently enjoys a strong competitive position in international software markets and appropriate intellectual-property protections and enforcement can help maintain our position and reduce piracy With an emphasis on software protections this appendix briefly reviews existing multilateral and bilateral treaties that help protect the intellectual property of a U S national via copyright and patent 2 international Conventions and Treaties Copyright is the predominant form of software protection in the United States and abroad In most countries computer programs per se are not in principle eligible for patent protection although interpretations of these policies vary in practice among the various patent offices and courts However in some countries including the United States certain types of computer-implemented processes and algorithms can be patented 3 Copyright and patent protections abroad are substantially similar in form to those in the United States and have most of the same advantages and liabilities Sui generis protection for software has been proposed but has not had much of an international impact thus far 4 Copyright Copyright protection abroad is provided for U S nationals principally through the Berne Convention and the Universal Copyright Convention 5 The United States formally joined the Berne Convention in March 1989 The treaty was first established in 1886 and is the primary multilateral agreement in the world dealing with copyright It is administered by the World Intellectual Property Organization WIPO an agency of the United Nations Berne's fundamental principle of national treatment requires each member nation to provide the same protection to works of nationals of other member nations as it does to works of its own nationals Berne requires that a nation provide certain minimum rights in order to join the convention including moral rights for the author6 and automatic protection thus eliminating the former l$4pir y h fj ctie wtjon and e of copfight material without the consent of author or publisher ' by Publishers Association andthe httemationall%kmtionof l%onogram and Videograrn Producers on Behalfofthe U K Anti-Piracy Group 1986 cited in Mark L Damschmeder IntelleetualPmperty Rights andtheGAT1' United States Goals inthe Uruguay Round VmderbihJottrna of Transnurwnal L aw vol 22 No 2 1988 p 368 footnote 1 In this paper OTAuaesthe term piracy to mean unauthorized commercial reproduction and sale not unauthorized private noncommercial copying For adiscussionofthe legal status of private copying see U S Congress Office of Technology Assessment Copyright andHome Copying Technology Challenges the Law OTA-CIT422 Washington DC U S Government Printing Office October 1989 ch 3 -y a few countries have extensive trade secret laws 3W Su-e CO h not ruled on Whetir computer programs per se are patentable subject matter but has ruled that computer-implemented algorithms that are deemed mathematical algorithms per se are not statutory subject matter Courts have thus held that a computer process or algorithm is statutory subject matter unless it falls within a judicially determined exception like the one for mathematical algorithms per se U S Patent and Trademark Office PTO examiners use atwo-parttestto decide whether patent claims containing ''mathematical algorithms are statutory subject matter U S Patent and Trademark Office Patentable Subject Matter Mathematical Algorithms and Computer Programs 1106 O G 4 Sept 5 1989 Inthispaper OTAsometimes uses phrases like patents for software-related inventions software-related patents or patenting algorithms to refer generally to patent protection for computer-implemented processes and algorithms ThePTO considers terms like software patents to be a misnomer because they may be interpreted to mean that a computer program per se i e the sequence of coded instructions itself is patentable as opposed to the underlying cumputer process it carries out M Kephnger G Goldberg and L Skillington PTO comments on draft paper Dec 18 1989 pp 1-2 gm World til t PrOptmy org on WIPG proposed sui generis Mcxkl Provisions on the ROtection of Computer Software providing a mixture of patent and copyright protection The model provisions were not based on the principle of national protection instead giving computer software explicit and absolute rights and protection in all signatmy nations Intended as a guideline for national legislatures the model provisions have W been adopted 5whi e cW@@t - extend simil twtion in most co es e n o differ es West Germ y for example compllt eoasidered a functional work and must meet a relatively high standard of originality One estunate suggests that 90 percent of programs will fail to meet that standard From the lnkusso case cited by Ian A Staines An Assessment of the European Commission's Proposal for a Council Directive on the bgal Rotection of Computer programs The Computer Luwyer vol 6 No 9 September 1989 p 21 6MOMI @ts 'C e fmrn the eccmomic rights of the author and concern what are usually called rights of paternity and integrity The right of -V is right to k n- as author of a work the right of integrity is the right to object to distortion other alteration of a work or derogatory actton prejudicial to the author's honor or reputation in relation to a work Micle 6bis of the Beme convention provides that authors shall have the rights of paternity and integrity Congress concluded that present law including unfair competition law and State and common law protection such as libel defamation or misrepresentation provides sufficient moral rights to fulfill the obligations of the Beme Convention Therefore it is not necessary for the implementatlo n act to include additional moral rights U S Copyright Office Circular 93a The United States Joins theBerne Union February 1989 p 3 Under the Constitution the United States does not accept a natural right theory of copyright giving inherent moral rights to the fruits of one's own labm 'Ihe United States has Wcally considered economic incentives for creativity as the basis for copyright protection -2s- 26 Computer Software and Intellectual Property U S requirements for formal notice and registration 7 The latter two provisions were perceived as substantial barriers to entry by the United States The United States is also a member of the UniversaI Copyright Convention UCC which was established and adopted by the United States in 1955 It is administered by the United Nations Educational Scientific and Cultural organization UNESCO an agency of the United Nations The United States withdrew 8 from UNESCO in 1984 but adheres to the Convention UCC is also based on the principle of national treatment but it provides less protection than the Berne Convention and has lower minimum standards In nations that agree to both Berne and UCC Berne takes precedence The Berne Convention is recognized in 79 nations which gives U S nationals protection in 24 countries where there was no previous copyright agreement 9 The United States has bilateral copyright agreements with 33 nations as well often in addition to common Berne or UCC membership 10 Japan the members of the European Community EC Australia and Canada are members of both conventions while the Soviet Union is a member of the UCC only ll While this leaves a large number of nations in which U S works are not protected the geographic scope of copyright protection is broad The procedures are simple once copyright exists for a work in a member nation it applies in all other signatory nations according to their own laws Computer programs are not specifically mentioned in either convention but are commonly agreed to be included 12 Patent Securing patent protection in foreign countries is a much more difficult process than obtaining a copyright Patents for any invention are difficult to obtain due to the rigorous standards of novelty and nonobviousness A patent must be applied for in each country where 13it is to be valid-there is no universal patent process This results in expenditures of time money and expert help needed for dealing with differences in languages and requirements In most countries software per se is not considered patentable In many countries including the United States patents can be obtained for computerimplemented processes and algorithms see footnote 3 In some nations including Canada the USSR and members of the European Economic community a patent will not be granted if the novel step is the computer program itself although in these countries merely having a computer program as part of the invention need not automatically disqualify it from patent consideration 14 The United States is a member of the oldest and most extensive patent treaty the Paris Convention established in 1883 This Convention is based on national treatment where both domestics and foreigners are accorded the same treatment However there is no requirement that software-related inventions be considered patentable Other conventions exist that make international patent protection more convenient although still not easy Through the European Patent Convention EPC a single application for a patent is valid in up to 11 Western European member nations The patentee must pay an extra fee for each country included but only goes through a single application and examination The EPC does not however provide uniform protection a patent is subject to the existing laws in each of the member countries A second convention is the Patent Cooperation Treaty which provides for 1 an international search report for prior art 2 a preliminary examination report for some countries and 3 the option to delay applying for a foreign 7The Berne Convention Implementation Act has repealed the mandatory copyright notice requirement theencircled c w Md me of @pfi@t OW@ ad e ed u m t to mgist a WOk at the Cop@@t Offkx AMMMgh foreign authors need not register them are si lcant incentives for a U S citizen to register because for them registration is a precondition for a copyright lawsuit award for attorney's feea and statutory damages U S Copyright Mice Circular 93a op cit footnote 6 p 3 United States is active on an intergovernmental committee for the UCC and also contributes to and supports the copyright-related activities of UNESCO 9 Fi fi U S copyright Office Circular 93 Highlights of U S AdMWMX to the Beme Convention April 1989 and Circular93a op cit footnote 6 Additional members may have joined since these circulars were publiskl 1 s cw t lu C m 38a ternation Copyright Relations of the Uni d SES JulY 1989 111'bid 12 for exmple In@ M Arckens Ob ning b ternationd Copyright tection for software National hlWS and hmxnational Copyright Conventions Fe ral Communi cutions Law Journal vol 38 August 1986 pp 283-300 Max W Laun Improving the International Framework for the Protection of Computer Softwiue University of Pittsburgh Luw Review vol 48 summer 1987 pp 1151-1184 There are questions however about exactly what protection extends to i e is look and feel protected by copyrigh what is inclwkd in fair use etc similar to the debates curren tly occurring in the United States over cupyright protection for software 13 e E mt vmtim s in mm 1 1 vide mu hinationd rCCO@tiOXI of a p-t The Patent office EPO makes it somewhat easier to obtain patent rights in Europe 14 c- awgm isnot pata ble but vmtion involving a pu p w d n mj ol l@tt IIIG COMpUm S per se are unpatentable In Brazil computer programs are not patentable but semiconductor-chip fmware is patemabie in New Zealand canputer p-s cm k ptieti ly indi tly by patenting hardware programmed in accdance with the program South Africa has a statutory exclusion for computer programs In the USSR patent applications are not accepted for ex ammation if the claimed subject matter is an algdhrn or computer pm- Baxter-Sinnott Workf Luw and Pr@ice vol 2A New York NY Matthew Bender 1985 pp 2A-10 to 2A-12 Appendix B--International Protection for Computer Software 27 patent for up to 30 months after the initial filing An applicant must still file in each country or region such as theEC separately but has greater assurance of being Trade Secret Trade secret has been the traditionally favored method of protection forr mainframe and minicomputer software developers in the United States However most countries outside the United States and Western Europe do not recognize either domestic or international trade secret protection although they may have laws concerning confidential business information that may be similar if less extensive Japan is developing a trade secret law however it is not formulated to protect software 15 No international conventions for trade secret exist The validity of trade secret protection for mass-marketed software commonly used for PC software is questionable in the United States and there are signs that shrink-wrap licensing may not be considered valid in the European Community in the future lb Bilateral Negotiations Bilateral agreements are another way to protect intellectual property abroad In 1984 Congress amended the Trade and Tariff Act of 1974 to require that intellectualProperty protection be considered in awarding benefits under the Generalized System of Preference GSP for trading partners 17 Another clause of the 1974 Act section 301 gave the president the power to restrict imports in retaliation for foreign trade practices that unfairly restrain U S trade This was strengthened in the Omnibus Trade and Competitiveness Act in 1988 The amendment known as Special 301 directs the U S Trade Representative USTR to identify priority countries that provide inadequate or ineffective intellectual-property protection If it is determined that sufficient progress is not being made by these nations the USTR may bring an unfair trade practice case against the offending country 18 These pieces of legislation attempt to move countries with historically weak protection towards international standdards For example the Republic of Korea Singapore and Taiwan have recently negotiated intellectual-property agreements with the United States The United States began bilateral negotiations with each nation in the early 1980s Then the United States began to apply trade leverage around 1985 often through the GSP system or section 301 of the Trade Act Maintaining relations with the United States is important to each of these countries for economic and security reasons Singapore and Taiwan as emerging centers of high technology in the Region will benefit from stronger protection laws The laws of all three nations protect software expressly under copyright and to the extent established by international standards although only Korea has joined the Paris Convention and the UCC 19 Trade and Competitiveness Issues in the Global Economy If the reasons for domestic intellectual property protection are principally economic the same is true for international protection Software protection has both direct and indirect effects on trade and competitiveness Commercial piracy and loss of royalties result in direct revenue losses to U S firms and the U S economy Appropriate intellectual-property protection can encourage investment and innovation and indirectly strengthen the U S economic position in high technology and in the business and manufacturing industries supported by computers and software 20 The United States is the world's leading innovator and producer of computer software Estimates of market shares volume and revenues vary but one European study estimates that the United States supplies 70 percent of the world's software and accounts for half the world demand 21 Another article claims that IBM the largest software developer in the world accounts for 60 percent of volume in world software sales and perhaps 70 percent of world operating profits 22 Western Europe is estimated to have 10 percent of world sales and the Japanese 15 percent The Soviet Union contributes practically no sales 15 ela L 1 ' Tmtedons for Software Under U S and Japanese Law A Comparative Analysis Boston College Internutiond and vol 7 summer 1984 p 390 16 1 J tt ' - 1 me pact of unific m on Non-E pter comp es lmer Com@rer @ Advisor iiy 1989 p 5 See also the section on mahmhing software as a trade secret in app A 1 ch l c w T i m e @ 1 c s euec pr e Rig s Glo co ens GIo co@fict B@der d hl Westview Press 1988 especially p 6 and Robert P Be o Protecting Intellectual Property Rights Washington DC American Enterprise Institute Cowywrative L uw Review 1987 p 11 Goals Bilaterally Intellectual Roperty and 'Special 301 ' Business America vol 110 No 19 Sept 25 1989 p 6 1 partmks were all taken fkom Gadbaw and Richards op cit footnote 17 chs 8 9 10 20 @ prqerty rights promote innovation and intellectual creativity Their protection and enforcement are essential to the expansion of 18 Pursuing U S temlatioaal trade investment emnomie developmen and the beneficial distribution of technology United States Proposal for Negotiatba on %-Related Aspects of intellectual Roperty Rights ' Internazionul Computerhw Advisor June 1989 p 13 21 @nmissionof the Eurqean -unities GreenPaperon Copyright and the Challenge of Technology--Copyright Issues Requiring Immediate AcdoaL June 1988 pp 171-172 -t- cited in Byiinsky ' @ Tech Race who's - Fortune vol 114 t 13 1986 p 28 28 Computer Software and Intellectual Property to the West trying instead to catch up with Western state-of-the-art 23 The United States is also the international leader in electronic databases two-thirds of all databases available on world markets are U S -based 24 According to one estimate the total revenues generated for the U S computer and data processing industries from foreign markets came to $22 billion in 1987 approximately $8 billion of that was from S OftWare 25 fledgling domestic programming industry The advanced nations argue that strong software protection will encourage both domestic innovation and foreign investment for some nations this argument may be well received but for others whose development as a high-technology center is much further in the future if at all there is less urgency International Piracy and the Third World Intellectual property has been included in the current Uruguay Round of GATT negotiations scheduled to conclude in 1990 The GATT General Agreement on Tariffs and Trade is the major document regulating trade in the world and has not traditionally included intellectual property within its sphere 28 'The objective of a GATT intellectual property agreement would be to reduce distortions of and impediments to legitimate trade in goods and services caused by deficient levels of protection and enforcement29 of intellectual property rights ' the U S position states The European Economic Community Japan and several other nations have also submitted proposals in support of including intellectual property issues in the GATT negotiations and the United States is trying to get support from nations such as South Korea and Singapore that already have developed intellectualproperty laws 30 Commercial piracy results in direct revenue losses to U S firms through loss of sales loss of royalties and or loss of investment opportunities 26 However redress of piracy abroad is often difficult and can involve issues of technology transfer and assistance to developing nations Most of the industrialized developed countries have strong intellectual-property protections whereas many of the lesser-developed countries either do not have strong intellectual-property laws or do not enforce them Nimmer and Krauthaus27 give two possible reasons for this lack of enforceable protection The first is uncertainty about the ambiguous position of software in relation to copyright or patent protection The United States spent several years deciding whether and how much to protect software in the realms of copyright and patent More recently Western Europe and Japan have developed protection schemes for software In the Third World where software development itself is much younger legal solutions to protection may be slower than in the more advanced nations The second is a North-South trade and technology transfer issue with the views of advanced nations in conflict with those of the lesser-developed nations Advanced nations want to protect the computer and software industries that are strong sectors in their economies and want to promote free trade to benefit from these investments lesser-developed countries want lowcost access to technology in order to promote and modernize business Many also want to encourage a GATT Negotiations If a GATT agreement is reached the parties would adopt laws with a sufficient amount of intellectualproperty Protection-' 'sufficient to be determined relative to domestic law and international standards It would cover patents copyrights trademarks trade secrets and semiconductor mask works 31 Conciliation and dispute settlement procedures would be invoked when informal meetings fail to settle differences between two nations Finally strong enforcement measures would allow border control and the withdrawal of GATT concessions if the terms fail to be honored Enforcement is a particularly important issue to many U S software manufacturers since currently there is often little they can do and few remedies against foreign infringers 32 231bidm 24 arence J Brown 'The Globalization of Information Technologies The Washington Quarrerly vol 11 winter 1988 p 94 23U S - mid Trade Commission 'he Effects of Greater Economic Integration Within the European Community on the United States July 1989 ch 4 p 39 MA tiler MOW md discussion of the many ways through which companies experience revenue 10SS can be found in a stUdY by tie U S International Trwie Commi ssion Foreign Protection of Xntekctual Roperty Rights and the Effect on U S Industry and Trade ' Febmary 1988 ch 4 2T ymond T Nimmer mdp cia Krauthaus Classification of Gmputer ftware for hgtd tectiOIX hlttiiOXld ves ''lnternationd Luwyer vol 21 summer 1987 pp 733-754 2sHowev in tie -g round of negotiations the 'fbkyo Round an antkounterfeiting cde w diw- 'United States proposal for Negotiations op cit footn 20 p 13 Wadbaw and Richards op cit footnote 17 chs 8 and 9 slText of P su tt by the United sties to GA printed in Uni Swes pro- for Negotiations '' Op Cit fOOtlltXe 20 pp 15-16 32 s op cit foomote 1 Gadbaw and Richards op cit footnote 17 ch 2 and Dana Williamson Addressing Inadequate Intellectual -IW protection in the Uruguay Round ' Busines s America vol 110 No 9 Sept 25 1989 pp 4-5 Appendix B--International Protection for Computer Software 29 Innovation and Competition Continued innovation is of great importance to a high-technology industry such as software Intellectualproperty protection encourages innovation by providing incentives for creation and providing some security for investors This promotes international competition if innovation increases domestically the United States can continue to outshine foreign competitors The United States is thus far the leading and most innovative software producer in the world Not only has the industry developed earlier here than in other countries but there is also a large installed hardware base and domestic market which makes investment less risky So far U S industry's position in the world market and the individualistic approach and enterprise of start-up companies have kept the United States ahead of all competition However there is fear of foreign competition especially from the Japanese 33 The Japanese are funding efforts in programming R D they planned to spend $125 billion over 10 years according to one estimate 34 Artificial intelligence is a major project in Japan known as the fifth generation project the general goal is to make computers think more like humans Some U S researchers fear that Japanese experience in this area could give them a head start in parallel processing and other cutting edge programming techniques ss -k H - at points OUt hOW tk hp$UMSC took control of the initially American semiconductor industry and arc XWW ti world leaks Thomas Kiky W@ Tech Heresy New EngfandBusiness vol 10 Novanbcr 1988 pp 62-66 Also see hwcy Balkntine Bushby Palmer and woO Japancac Software The Next Competitive C%a nge ' pmpamd for ADAPSO January 1989 Brown op cit foomotc 24 p 90 This document is from the holdings of The National Security Archive Suite 701 Gelman Library The George Washington University 2130 H Street NW Washington D C 20037 Phone 202 994-7000 Fax 202 994-7005 nsarchiv@gwu edu