United States Patent and Trademark Office

Public Hearing on Use of the Patent System to 
Protect Software-Related Inventions
Transcript of Proceedings 

Thursday, February 10, 1994
9:00 a.m. to 5:00 p.m.

Friday, February 11, 1994
9:00 a.m. to 12:30 p.m.

Before
Bruce A. Lehman
Assistant Secretary of Commerce and
Commissioner of Patents and Trademarks

Location:
The Marriott Crystal Forum
1999 Jefferson Davis Highway
Arlington, Virginia
Table of Participants

      
Before:

Bruce A. Lehman
Assistant Secretary of Commerce and
Commissioner of Patents and Trademarks
United States Patent and Trademark Office

The Panel:
Lawrence Goffney
Assistant Commissioner for Patents-Designate
United States Patent and Trademark Office
      
Micheal K. Kirk
Assistant Commissioner for External Affairs
United States Patent and Trademark Office

Jeffrey P. Kushan
Attorney-Advisor
United States Patent and Trademark Office

Michael Fleming 
Supervisory Patent Examiner
United States Patent and Trademark Office

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Witnesses

February 10, 1994

PAUL ROBINSON
Tansin A. Darcos & Company

KEITH STEPHENS
Taligent, Inc.

MARK TRAPHAGEN
Software Publishers Association

ROB LIPPINCOTT
Interactive Multimedia Association

E. ROBERT YOCHES
JEFFREY A. BERKOWITZ
Finnegan, Henderson, Farabow, Garrett & Dunner

STEPHEN L. NOE
Caterpillar, Inc.
Intellectual Property Owners, Inc.

JOHN J. HORN
Allen-Bradley

RICHARD NYDEGGER
Workman, Nydegger & Jensen

ALLAN RATNER
Philadelphia Patent Law Association
Ratner & Prestia

DIANNE CALLAN
Lotus Development Corporation
Business Software Alliance

R. DUFF THOMPSON
WordPerfect Corporation

RON REILING
Digital Equipment Corporation

RICHARD JORDAN
Thinking Machines Corporation

A. JASON MIRABITO
Boston Patent Law Association

JONATHAN BAND
Morrison & Foerster

LEONARD CHARLES SUCHYTA
Bellcore, Bell Communications Research

VERN BLANCHARD
American Multisystems

EDDIE CURRY
IMAGESOFT, INC.

February 11, 1994

D.C. TOEDT
Arnold, White and Durkee

JOSEPH HOFSTADER
League for Programming Freedom

TIMOTHY SCANLON
JOHN J. HORN
Allen-Bradley

R. LEWIS GABLE
Welsh & Katz

JOHN E. DeWALD
The Prudential Insurance Company of America

DAVID L. CLARK
Aquilino & Welsh, P.C.

ALLEN M. LO
Finnegan, Henderson, Farabow, Garrett & Dunner

SAMUAL ODDI
Northern Illinois University
College of Law

BERNARD GALLER
University of Michigan
Software Patent Institute

GREGORY AHARONIAN
Source Translation and Optimization

PROCEEDINGS
MORNING SESSION
(9:11 a.m.)

COMMISSIONER LEHMAN;:  Good morning.  My name is Bruce Lehman
and I am the Assistant Secretary of Commerce, and Commissioner
of Patents and Trademarks.
Welcome to our second round of hearings on the use of the
patent system to protect software-related inventions.  Two
weeks ago we held two days of hearings in San Jose,
California, the capital of the Silicon Valley.  Those hearings
focused on the patent system and how it was being used in the
field of software.
This round of hearings will focus on the standards of
patentability and the examination process, as well as the
treatment of the visual aspects of software under our design
and utility patent systems.
The common goal for all of our hearings is to find out how the
patent system is working for this field of technology and to
get your suggestions for making it work better.
President Clinton has made the development of and
competitiveness of high tech industries in the United States
a cornerstone of his economic program.  Promoting these
industries will lead to high tech, high wage jobs for
Americans and will ensure continued American competitiveness
in the industries of the future.
Our Secretary of Commerce, Ron Brown, has assembled an
excellent team to work on initiatives toward that end and I am
pleased to be a part of that Commerce Department technology
team.  The software industry is already meeting the
President's goals for creating competitive high tech domestic
industry.  So we've got a good thing going already.
Statistics show that since 1987 employment in the software
industry has risen at an annual rate of over 6.5 percent and
now employs well over 400,000 people.  In 1992 revenue from
the sales of programming services, pre-packaged software and
computer integrated design was over $50 billion.  U.S.
software firms dominate the world's software markets, holding
over 75 percent of the market for pre-packaged software.
It is interesting that up until the middle of this century the
wealth and economic strength of the United States came
primarily from the exploitation of our natural resources and
we had a lot of them in those days.  In the 21st Century, our
economic strength will come from tapping our most treasured
resource, the wealth of the human mind, and we will be
concentrating on conserving our natural resources.
To do this, however, we must encourage innovation and provide
our innovators with the legal protections they need to
successfully exploit their innovations.  This is especially
true in the intensively competitive and fast-paced computer
and software industry.
Indeed, innovation is the life blood of this industry.  It is
what separates successful firms from unsuccessful ones. 
Innovation, however, is a fragile commodity.  Without
effective legal protection our software industry would not
enjoy the dominance it now does in the global market, nor
would consumers enjoy the high quality and extremely usable
software products that are available on the market today.
Our intellectual property systems were established over 200
years ago to promote and protect innovation in all fields of
technology.  If these systems are functioning properly, they
will provide an appropriate level of protection and encourage
innovation.
From what we have heard recently, this may not be the case for
our patent system in the field of software-related inventions. 
This is why we are seeking public input -- to identify the
problems that exist and to hear suggestions on how to address
them.
Two weeks ago we held the first round of hearings, as I
mentioned earlier, in San Jose, California.  No clear
consensus emerged from those hearings, but many suggestions
were made regarding how the patent system could be improved
for the software industry.
Some people testified that the patent system was not working
at all, that it neither encouraged nor assisted software
development.  Others suggested that companies only sought
patents for defensive purposes.  If true, this runs counter to
one of the primary reasons for the patent system, which is to
encourage innovation.
On the other hand, several people testified that the patent
system was essential for successful software development
efforts.  We heard large and small companies tell us that
without patents they would not be able to attract or
effectively protect investments in developing new
software-related technology.  I think we also were hearing
that the industry might be on the verge of a shift to more
patent dependency and more usefulness in the patent system.
However, even people who generally supported the patent system
commented on the need to improve the quality of issued
patents.  Some people expressed skepticism over the ability of
the PTO to accurately gauge software innovation.  Others
commented that the Patent and Trademark Office does not have
access to enough prior art or that adequate collections of
prior art simply do not exist.
We are committed to addressing these concerns and to taking
whatever measures are necessary to ensure the proper function
of the patent system.  I would like to say, just yesterday, I
know, the Chairman of our House Subcommittee, Chairman William
Hughes, discussed these hearings and he indicated his
willingness to work in partnership with us, to the extent that
legislation is required to assure the proper functioning of
that system.
My goal is to ensure that patents will be instruments that you
can take to the bank literally.  From what we heard in San
Jose this may not be the case for patents in the field of
software-related inventions.
We intend to address these concerns through three levels of
action.  First, we will improve our examining operation to
ensure high quality examination.  Second, we will pursue
appropriate legislative reform to ensure the efficient
functioning of the patent system.  And finally, we intend to
work with the Judiciary to improve the interpretation of
patent rights in the context of enforcement.
Many useful suggestions were made in San Jose two weeks ago
and I expect to hear many more in the next two days -- today
and tomorrow.  For example, many people stressed the need for
reform of the reexamination process.  We recognize the need
for making reexamination a more attractive option for those
having reasons to question the validity of any particular
patent and are presently studying a number of suggestions and
proposals in that area.
Many people pointed out in San Jose that the obviousness
standard, as interpreted by our examiners and by the court,
seems to be inconsistent with the realities of the industry.
We recognize that an effectively functioning patent system
requires a standard of nonobviousness that is rigorous and
reflective of industry norms.  However, we also recognize that
the courts are the primary source of guidance on the basic
question of obviousness.
As such, we intend to work with the courts to ensure that the
obviousness standard is applied rigorously, not only in the
context of examination, but also when patents are enforced. 
I mentioned that was part of our three-part program.
Several suggestions were made regarding the improvement of our
operations.  I would like to note that we are already
responding to some of these suggestions.  For example, many
people have called for the PTO to improve its ability to find
and retrieve prior art.
One step we've taken towards this goal is the creation of our
electronic information center in Group 2300.  This facility
will provide an easily accessible structure through which we
can improve our collections of and access to the prior art.
However, extensive work with industry and other groups is
beginning to pay off in the form of specific commitments to
providing information, like in-house textbooks, old software
user manuals and access to information on early programming
techniques.
We also heard that we need to attract and retain more
qualified examiners by providing more competitive salaries and
improving the stature of the examiner position.  Toward this
end, we have just changed our standards so that we will hire
for the first time computer scientists as examiners.
We are also in the process of expanding our examiner
enrichment program to provide our examiners with greater
exposure to other aspects of the Patent and Trademark Office
and technical programs in other government agencies.  That is
just the beginning.  We have a real quality of life
improvement program underway here for our patent examiners
that hopefully will translate into better quality of
examination.
Another specific area targeted by people testifying in San
Jose was the need to improve the administrative processing of
patent applications.  People stressed the importance not only
of insuring the timely consideration of patent applications
but the timely processing at every stage of the patent
application process.  This falls squarely within our new focus
on customer service.
One example of a program that we are studying now is the
pre-examination interview.  We are conducting a trial program
to evaluate whether this step can help reduce the delays and
assist pro se inventors.
Before we hear from our first witness, I would like to
introduce you to some of the members of our own panel, people
who are here from the Patent and Trademark Office.
First, I would like to introduce on my left Michael Kirk. 
Mike is our Assistant Commissioner for External Affairs. 
Presently he's in charge of our Office of Legislation in
International Affairs.  But President Clinton has nominated
him to become Deputy Commissioner.
Under our new reorganization that we are implementing in the
Patent and Trademark Office, he will be in charge of --
basically the policy czar for the Patent and Trademark Office
and will have reporting to him not only the Office of
Legislature and International Affairs, which he now runs in
the Office of Public Affairs, but also the Solicitor's Office,
the Board of Appeals and our quality review operations so that
we can bring all of these together into a single unified
policy entity that will help work on policy aspects of these
problems and provide better service to all the people who look
to us in the Patent and Trademark Office for leadership.
On my immediate right is Lawrence Goffney, our Assistant
Commissioner for Patents-Designate, who the President has
nominated to run our patent operation, by far the largest,
over half of the whole Patent and Trademark Office, with over
5,000 employees.  And, of course, Group 2300 and this
particular subject matter falls directly under Larry Goffney's
jurisdiction.
The other fellow sitting here at the table with us is Jeff
Kushan, an attorney in our Office of Legislation,
International Affairs, who many of you may have talked with. 
He's the point man for day-to-day contact on this particular
issue.  And anybody who has any questions or follow-up on this
can get ahold of him, and his number is 703-305-9300.
I also would like to introduce somebody who is not sitting at
the table, but who is absolutely a lynch pin to this whole
effort, and that is Jerry Goldberg --- Jerry wants to stand up
-- who is our Group Director for Group 2300.
Finally, even though he is not sitting there right now, I
would like to note that Mike Fleming was in Group 2300.  There
he is right there.  Mike is going to be, anybody that has any
scheduling issues or questions or whatever, whether a hearing
is going on -- if you might, stand up again, Mike, so they can
make certain they know where you are.  Are you going to sit
there or over there?  He's going to sit right over here in the
corner.  You should just approach Mike and he'll see that you
get taken care of.
People who will be testifying over the next two days should
have received a schedule indicating the approximate time they
have been assigned to give their remarks.  A final list is
available at the entrance to the room.  I expect most of you
have already picked it up.
I would encourage all the people scheduled to testify to be
here at least 20 minutes before your assigned time slot.  The
reason for that is because we've already had a couple of
people because of this weather who can't come.  So obviously
if we have a person who can't come, that's going to move us up
a little bit.  That's been our experience so far with these
hearings, these and other similar hearings.  So please be here
at least 20 minutes before your assigned time slot.
Each person will have eleven minutes to speak.  The computer
monitor right there in front of the podium will display a
green screen for nine minutes.  Then it will turn yellow.  And
when the screen turns red we would very much like you to have
concluded your comments by that time.  I encourage everybody
to do that because it's really only fair to all the other
witnesses.  And generally speaking, these hearings have been
pretty good at that.  I hate to have to gavel people to a
halt.  So if you'd really cooperate with that, I'd really
appreciate it.  I think eleven minutes is a pretty good amount
of time.
I want to emphasize that, you know, these eleven minutes
aren't your only chance to -- they may be your only chance in
the spotlight with an audience, but they are not your only
chance to communicate with us.  You know, this isn't the court
where this is your oral argument and that's it.  We certainly
welcome further written comments.  Certainly at the Patent and
Trademark Office we like to be accessible even on a day-to-day
oral basis.  I've just introduced a bunch of people to you --
Jerry Goldberg and Jeff Kushan.
I would also like to introduce Charlie Vanhorn who is sitting
over there.  Charlie is our Chief Patent Policy guru in the
Patent Corps.  I know many of you already know these people. 
I'm sure that over the next weeks and months they look forward
to having a dialogue, continued dialogue, on these issues.
If you check the Federal Register Notice of December 20, 1993,
you will find all the information about how to send us more
comments if you want.  That notice is not only available
printed in the Federal Register, but it's also been widely
circulated through the Internet and it can be retrieved from
our FTP site, which is COMMENTS.USPTO.GOV.
Transcripts for these hearings will be available after
February 21 and paper copies will be available from our office
for $30.00 and transcripts will also be available for free
through our FTP site on the Internet.
Once again, we welcome everybody to our hearings today.  I'm
really gratified at the turnout that we've been having.  We
had a very large audience in San Jose.  We get a normal 60
people who testified and I'd say that we had at any given time
at least 100 people in the room, and probably at the maximum
we had 300 or 400 and a lot of them stuck with us.  So there's
obviously interest in the industry in this.  We're gratified
about that.
We also understand that that imposes on us an obligation to
really make these hearings meaningful and to follow up in the
ways that we've already started, that I've outlined to you in
my own opening remarks.
So with that I'd like to call our first witness to come up and
share his thoughts with us, and that's Paul Robinson, who is
the Manager of Data Processing and Chief Programmer of Tansin
A. Darcos.
PRESENTATION BY PAUL ROBINSON;
TANSIN A. DARCOS & COMPANY
MR. ROBINSON;:  Good morning, Assistant Secretary Lehman, Mr.
Kushan, the staff here, members of the audience, people
reading this report in the future and anyone else I've
forgotten.  My name is Paul Robinson.  I am Chief Programmer
for Tansin A. Darcos & Company, a software development firm
which specializes in text processing applications.
I also do work on commercial philosophy and metaphysics of
computer systems.  My special interest and my personal hobby
is collecting compiler and other program sources.  My reasons
for this are that these all solve problems.
By reading the manner and method other people solved other
problems it gives me insight into how to solve mine.  This is
a common practice in the computer world in order to, as the
expression goes, not reinvent the wheel.  I assume this is
common in other industries.  In fact, this is most likely the
reason that we have the patent system.
Someone is granted the exclusive right over commercial use of
their invention for a limited term in exchange for telling the
world about it.  For most computers, every application, such
as word processing or spreadsheets, has at least two and
possibly three or more different applications fighting for
market share.
The fights in this industry are usually referred to by the
expression dinosaur mating dances, as huge companies fight for
market share by releasing new programs to introduce new
features that the companies believe the customers want.
Version 3 of Turbo Pascal was an excellent language compiler
and less than 40K.  Version 4 would fit on one 360K diskette. 
Today, Turbo Pascal Windows Version 1.5 takes 14,000K of disk
space.
The program that is most probably the premier application for
graphics design is Corel Draw, which has so much material it
is being released on not one, but two 500 megabyte CD ROM
diskettes.  But there are probably still niches for smaller
companies to move into.
With the rapid changes in the marketplace it is necessary to
be ready to have new programs and new releases of old programs
out to encourage people to move to the next release.  In some
cases, companies make more money from upgrades and need to do
so to stay alive.  These kind of cycles mean new releases have
to out very quickly, in a matter of weeks to months.
With this kind of rapid development cycle, delays in a release
of a program could be fatal and the time available to create
the work is sometimes barely enough.  Until recently, the only
legal issue that anyone had to worry about was copyright
infringement.  This could be avoided by creating new work from
scratch.
Now we have another issue altogether.  A programmer can
independently create something without ever knowing about any
other developments, and yet be sabotaged by the discovery that
the method they have used is patented.  This is a standard
problem that all industries have had to face and it is part
and parcel of living in an industrial society.
But there is another problem.  A computer program is the
written instructions by a human being to tell a computer how
to perform a particular task.  As such, there are only two
parameters -- the input supply to the program and the expected
output.  Everything else is literally a figment of someone's
imagination.
This bears clarification.  A computer program is the means of
manipulating the internal data passed through a computer
system.  There is no requirement that the manipulations have
any correspondence to the real world.  In this, the real
world, doing anything requires the expensive movement of
people and goods from one point to another, the possible
refinement of materials into other materials and the
expenditure of energy and resources.
Doing anything in a computer is merely the essentially
cost-free movement of electron paths from one direction to
another.  It brings forth the approbation of the concepts of
the math, man and manual camped into reality, a world in which
anything is possible.
We can see this in the current discussions going on about
violent computer games where someone goes about maiming,
shredding and killing their opponents in graphic detail.  Then
when the game is over, nothing in the real world has changed
except the clock.
One of my favorites happens to be the game Doom, where the
weapon of choice is a 12-gauge shotgun, but a chain saw does
a nice job on people near you.  We have seen it in motion
pictures, such as Total Recall, where if one is acting within
a part of a computer program you cannot be certain what is
real and what is fantasy.
The movie Brainstorm had simulations of sexual contact,
apparently indistinguishable from reality.
There are things that can be done within a computer program
that cannot be done in the real world or would have
undesirable consequences.  As such, we should ask whether the
patent rules which are designed to apply to real world
conditions where doing something requires the expenditure of
energy and resources should apply where the known rules of the
universe do not apply.  Because the entire design starts from
scratch, the designer doesn't just get to play God, he is God.
Despite the ease under which someone can do something, we
still live under real world constraints.  Once a design choice
is made, it is very expensive in time and effort to change it. 
Worst, because most programs have interactions that cover
every part, a change to one part can cause unexpected and even
undesirable side effects in unknown and unexpected places.
Computer programs may be the stuff that dreams are made of, as
Shakespeare has used.  But once placed in a concrete form, as
written in software instructions, it's just as expensive to
repair or change as if it were carved out of real materials. 
It may be necessary to change the rules on patents to comply
with conditions that exist for computer programs.  I can think
of a couple of suggestions.
There has been talk of instituting first-to-file in order to
"harmonize" with the systems in other countries.  I think that
this is not a good choice.  Most countries have fewer patents
and provide protection which is much narrower than our system
does.  This would also mean that if someone does invent a new
and useful technique for use in a computer application would
be unable to collect any royalties from someone else who is
using the same invention who thought of it after they did, but
started using it before they filed.
The two really large problems that exist in our system are
probably two-part -- the secrecy under which patent
applications are filed and the problems if a program uses
parts of several patents which might not be discovered until
later.
As I mentioned earlier, computer programs are created out of
the figment of someone's imagination, then mass copied the way
an original painting can be reproduced by lithograph.  A
single large application might have a dozen people working on
it or thousands of people working on it, and upwards of 50
different features, and might have upwards of 200 or more
different parts.  Any one of those might be infringing on
zero, one or more patents, depending on what the claims are.
I doubt seriously that all but the largest corporations have
the resources to do 200 patent searches on a single software
application, which would be prohibitive for a small company
because it is likely that a large program could infringe
dozens of patents due to the continued development of ever
larger applications that do multiple simultaneous functions.
But more than that, you can't do patent searches on works
which are under application form until after the patent has
been issued.  And more importantly, with more than 1200
patents issued every week, checking them all for possible
interconnection would make it impossible to do any serious
work, although that might provide somebody with an idea for a
magazine.
Seventy years ago fears that the major piano manufacturer
would tie up the entire song market and create other companies
from creating player piano roles caused Congress to institute
compulsory licensing.  This may be an idea whose time has come
again.
Therefore, it might be considered to make two possible changes
to the patent law with respect to computer programs.  Perhaps
to implement a standard compulsory license, perhaps 10 percent
of the manufacturer's suggested list price, and to eliminate
secrecy provisions in the filing of patent applications.
Either of these could certainly help the situation. 
Eliminating secrecy and publishing applications once filed
would let people know about pending applications.  They could
endeavor to avoid infringements in advance.  It might also
allow them to file inferences early if it turns out that they
invented the concept earlier while it is still cheap to do so;
and would allow people to be aware of what is being developed,
which would comply with Article I, Section VIII of the
Constitution where patent protection was designed to
"encourage the improvement of the useful arts."
The other option of setting a standard royalty, via compulsory
license, would eliminate the worries of someone infringing
upon an existing patent or multiple patents or one that is
filed after their work is created.  It would also grant to
inventors an income stream from those who use their inventions
which started before they filed their application, but after
they reduced the invention to practice.
It would also limit liability and exposure to sustainable
limits.  As it stands, if someone develops a program that
infringes upon 40 patents and they each want a 3 percent
royalty, it isn't hard to see that 120 percent of the
program's income is not going to be possible.
Thank you.  Any questions?
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Robinson.  You
obviously put a lot of thought into that statement and had
some very interesting ideas.  Thank you very much.
I'd like to next call on Keith Stephens, corporate counsel to
Taligent, Inc.
PRESENTATION BY KEITH STEPHENS
TALIGENT, INC.
MR. STEPHENS;:  Mr. Commissioner, my name is Keith Stephens. 
I'm corporate counsel of Taligent and I will be testifying
today on behalf of Taligent, Inc.  I'm a computer scientist
and engineer by training and have earned my living as a
systems engineer, as an inventor and subsequently as a
marketing rep before I saw the light, went back to law school,
took the patent agent's exam and became an attorney. 
Currently I'm employed by Taligent to protect their
intellectual property.
Taligent is a joint venture, similar to many other small
innovative companies in the Silicon Valley.  It's increasingly
important for small ventures o be able to protect their
intellectual property.
Today I would like to talk about transforming the legal chaos
associated with software-related inventions into a system with
much better legal certainty by continuing to refine the
examination process, and issuing quality patents allowing
software investors to obtain a better return on their
investment, and encouraging investment in American software
technology.
Can I have my second slide?  I have three major points. 
First, it's important for the Patent Office to hire the best
people.  Second, to provide them with the best tools.  And
third, to tune the examination process.
The Patent Office needs to hire computer science majors and I
applaud your efforts in that area.  However, they need to get
computer science majors with industry experience.  This will
give them a historical perspective on the prior art.
In addition, they need to continue the efforts that Jerry
Goldberg and Group 2300 have made in bringing industry experts
into the Patent Office to teach classes on particular
technologies that they come into contact with.  We sent Mike
Pitel, who was a university professor at Chicago.  He came and
taught a class on object oriented programming, not just a
class to introduce them to the technology, but also to teach
the history of object oriented programming and give them a
perspective so that they would be in a better position to
examine our patents.
We also worked closely with Groups 2300, 2500 and 2600 to
bring a set of examiners out to the Silicon Valley to
introduce them firsthand to technology experts.  However, as
Tom Kronium pointed out in the Silicon Valley, this is a
two-edged sword.  As Gary Shaw quipped, this provided him with
new and innovative ways to reject our claims.
Now in addition I'd like to encourage examiner/attorney
communication.  It's so important for examiners to up front
understand exactly what the invention is that I would like to
encourage them to be more open in contacting attorneys so that
they can find out from their first source exactly what the
invention is.
Corporate America doesn't work in a vacuum.  Corporate America
-- it's always the case that we consult experts within and
without before we make any kind of a decision.  Similarly, as
an attorney, when I receive an invention disclosure I don't
just snap to a decision on that disclosure.  I'll consult the
experts within our company as well as ask general questions to
maintain confidentiality of what the state of the art is
outside.
And finally, I'll also, if I know someone in the Patent Office
that's an expert in the area, contact them and ask them what
they know about it.  Similarly, I would encourage the Patent
Office to create a human database of experts, both inside and
outside of the Patent Office, and communicate with them
through phone, Internet, querying a wider audience to
determine exactly what the prior art is.
This could be done through a contractual basis or just
generally by contacts and asking open-ended questions.  But I
would also encourage them to continue the confidential status
of patents until they issue.
Secondly, I think it's important to give the best tools to the
examiners.  It's very encouraging to see examiners starting to
get access to Internet.  Electronic mail is a tool that
everyone in the industry uses as a common practice.
I would even venture to say that had Internet been available
that the multimedia technology, state of the art, would have
made it in the Patent Office in a much more timely manner.
Secondly, commercial databases such as those in the Group
2300, Orbit, Dialogue and Lexus should be used as a regular
basis amongst examiners.  But in addition the Patent Office
should pursue getting industry databases from such companies
as AT&T and IBM, so that they can effectively search the
technical disclosure bulletins of these companies.  The result
will be quality patents and a confidence in the appropriate
claim scopes issuing in the patents.
Third, I'd like to talk about tuning the examination process. 
It's very important to standardize the examination process and
encourage examiners to take advantage of contacting attorneys
using the databases to find out what the state of the art is
in the area and inquiring of experts, both within and without
at the Patent Office to make their determination as to novelty
and obviousness.
Then in addition it would be very good to have a common format
of acceptable standards to file patent applications so that we
could electronically file patents.  This standard could be
such as WordPerfect or a word standard document that we could
transmit electronically to the PTO and eliminate a lot of the
paper shuffle associated with patent applications and speed up
the processing of these applications.
Then, too, I would encourage the improvement of practical
application of the law in the Patent Office.  Hiring people
with industry experience is naturally going to elevate the
current obviousness standard and the novelty standard once
people have a knowledge of what the prior art really teaches.
And then I would encourage the Patent Office to modify their
examination process, to remove the bias currently associated
with the reexamination process, to encourage us to utilize the
reexamination process as opposed to using a more costly
approach of going to the CAFC or other Federal District Court
type of an approach.
These changes, which are slight modifications to the current
examination process, will result in much better patents being
issued.
So in summary, I would encourage communication with attorneys
in the Patent Office, better communication with the outside
world.  I would encourage the utilization of a human database
through a setup so that the PTO could have access to better
prior art.  And then I would encourage the best possible tools
being provided to the Patent Office so that they'd be in a
better position to know what the prior art is and to also
assess what is truly new technology versus just reinventing
the wheel.
And finally, tuning the process associated with examination of
processing patent applications.  This will eliminate the
current chaos associated with software-related inventions,
improve the legal certainty associated with issued patents,
and make the PTO much prouder of their work product.
Let's remember who created the patent system and let his words
control.  Thomas Jefferson said, "Where a new invention
promises to be useful, it should be tried and afforded the
best possible protection to allow progress in the technology
and to allow the fruit of the labor to be realized by the
inventor of the technology."
This will encourage investment in software, will result in
more software-related high pay, high tech jobs and finally,
will increase American competitiveness in a global economy.
Thank you.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Stephens.  I
didn't hear in your list of proposed reforms, which actually
Mr. Robinson suggested, and that was the idea of some kind of
disclosure prior to publication of the patent, of the
information in the patent application.  Pre-publication as a
technique to make certain that we let the world know what's
going on and make sure we get the prior art.  What would be
your view about that?
MR. STEPHENS;:  My view on that is I don't think that
pre-publication is necessary to reach your common goal that I
think everyone here will agree with, is to issue the best
quality patents with claims of the scope that the inventor is
entitled to.
That can better be achieved by providing the appropriate tools
to examiners and providing them access to the experts in the
area, even possibly putting together a contractual
relationship between the Patent Office and various human
experts that are available in industry, so that the
confidentiality of the application will not be compromised.
But the information will be available to examiners to make
sure that the issuance of the patent has the appropriate
claims or the appropriate scope of claims.
COMMISSIONER LEHMAN;:  Thank you very much.  Does anyone else
have any questions?
(No audible response.)
COMMISSIONER LEHMAN;:  Next I'd like to call Mark Traphagen,
counsel to the Software Publishers Association.
PRESENTATION BY MARK TRAPHAGEN
SOFTWARE PUBLISHERS ASSOCIATION
MR. TRAPHAGEN;:  Good morning, Mr. Commissioner, members of
the panel, and those of you in the audience.  Thank you for
the opportunity to appear today to speak about patent
protection for software-related inventions.  My name is Mark
Traphagen and I am counsel for the Software Publishers
Association.
Patents for software-related inventions have been highlighted
by the media in recent months.  For example, last year the
U.S. Patent and Trademark Office granted a patent to Compton's
New Media of Carlsbad, California for a system of retrieving
information for multimedia works.
Now Compton's New Media is a member company and SPA has no
position on the merits of this patent which is now being
reexamined.  But it is worth noting that Compton's New Media
is not alone in seeking patent protection for software, as
several other companies have been reported in the trade press
to own patents for software with important applications in
multimedia.  And since 1987 more than 10,000 patents have been
issued on nearly 35,000 applications filed in classes 364 and
395.
In 1992 alone almost 2,000 patents were issued on 8,000
applications filed.  And lest one think the patent
applications for software patents are a phenomenon unique to
the United States, the Japanese Patent Office issued as many
as 12,000 such patents in 1990.
Since it was founded in 1984, SPA's been a leader in advancing
the interests of its members, primarily through copyright law. 
And copyright law has been popular, more popular than patents,
among software developers and publishers because its
protection is relatively inexpensive and free of formalities.
Copyright law alone, however, cannot protect all of the
aspects of intellectual property and software technology
because it is limited to creative expression in code, screen
displays and other graphic output.  In particular, Section
102(b) of the Copyright Act provides that "in no case does
copyright protection for an original work of authorship extend
to any idea, procedure, process, system, method of operation,
concept, principle or discovery regardless of the form in
which is described, explained, illustrated or embodied in such
work."
Now it's precisely these functional aspects of software
technology that are sought to be protected by patent law. 
While like copyright law, patent law does not protect ideas in
themselves, it does protect the machines, methods, processes,
and apparatus that implement these novel ideas.  This
protection is extended, however, only to innovations that
satisfy the statutory requirements of novelty and
nonobviousness.
SPA has over 1100 members and represents not only large,
well-known software publishers and developers, but hundreds of
smaller companies and organizations as well.  SPA members
include not only those organizations that have sought patent
protection already, but also those who will do so in the
future and those whose products are potentially affected by
patents held by others.
SPA called on the elected Board members of its consumer,
education and multimedia sections to join a software patent
working group and assist SPA's government affairs committee in
formulating our position on patent protection for
software-related inventions.
The success of the patent system in encouraging technological
and commercial progress in other fields suggests that it would
be prudent to try improving the patent examination process
before changing the statutory underpinnings of the law. 
Whether patent owner or patent user, many agree that the
patent examination process can be procedurally improved.
SPA applauds the efforts the U.S. PTO has made to make these
improvements, including those announced by you today, Mr.
Commissioner, and those that Jerry Goldberg, the Director of
Group 2300 and I have discussed earlier by telephone.
SPA supports these efforts to improve the patent examination
process and commits itself to the following three-step process
to help the U.S. PTO continue to solve these problems.
First of all, SPA will continue to support the efforts of the
Software Patent Institute, a nonprofit organization developing
a software technology prior art database.  You will be hearing
later on in the day from a Mr. Galler, who I've worked with
before on this issue and who is Chair of the Software Patent
Institute.
Second, SPA will call on its broad membership to contribute
nonproprietary information about software products to the
Software Patent Institute.
And third, SPA will provide educational and training
opportunities in the field of software technology to U.S. PTO
examiners.
Many difficulties or many objections to the current system of
patent protection for software-related inventions stem from
difficulties in uncovering prior art.  Typical complaints
focus on the unavailability of pertinent prior art and an
expanded prior art collection would help the U.S. PTO make
more informed judgments about whether a particular invention
meets the statutory tests of novelty and nonobviousness.
These difficulties are not unique to software technology, but
developing a comprehensive prior art database has proven more
difficult for software than other disciplines, such as
biotechnology.
In the early days of the software industry, patent protection
was not as widely used as it has been for other technologies. 
The primary focus instead was on copyright protection for
creative expression and trade secret protection for other
aspects of the technology.
As a result, much pertinent prior art may not reside in prior
patents but in publications and limited circulation documents
such as technical manuals.  The difficulty has been compounded
by related problems, in particular inconsistent terminology in
the technology.
The first step in SPA's program will be to continue to support
the effort to build a non-patent prior art database in the
field of software technology.  The SPA is an Executive
Committee member of the Software Patent Institute, which has
been recognized for its efforts to provide the best available
prior art in the software technology field for use by the PTO
and the public.
Up until now the PTO has lacked such a source to fill this
need.  The Institute is compiling a database of software
technologies from descriptions of software techniques and
processes contributed by the software industry, government,
and academia.
The Institute's work is now producing results that promise to
improve the ability of patent examiners to conduct research
into non-patent prior art.  On January 15th the Institute made
its prior art database available on-line and has demonstrated
it to the U.S. PTO and the American Intellectual Property Law
Association.
As the second step in its program SPA will call on its
membership to contribute nonproprietary information about
software prior art to the Institute.  SPA is in an excellent
position to assist this effort because it is the principal
trade association of the personal computer software industry.
SPA has over 1100 members in North America and Europe, ranging
from large well-known companies to hundreds of smaller
companies, all of which develop and market consumer, business
and education software.  Their cumulative knowledge is
unsurpassed and should reinforce the already significant
resources incorporated into the Institute's database.
The third step in SPA's program will help address concerns
about the level of skill of patent examiners handling
applications for software-related inventions.  SPA would like
to assist the U.S. PTO in educational and training programs
designed to keep software patent examiners conversant in this
rapidly developing technology.
To begin this effort, SPA will extend scholarships for U.S.
PTO patent examiners to attend the SPA Spring Symposium and
other conferences.  These conferences feature many seminars
devoted to emerging technologies.  The upcoming seminar in
particular includes seminars on risk unix systems, wireless
and interactive networks, and I think typically the role of
patents in software development.
The SPA program would compliment the academic training now
being offered by the Software Patent Institute and other
groups.  Mr. Goldberg, the Director of Group 2300, has been
very receptive to this initiative and in return has invited
SPA's software patent working group on a tour of the PTO.  I
am pleased to say that we will be glad to accept.
In closing, the most important concern about patents for
software-related inventions for SPA members whether they be
patent owners or patent users is the integrity of patent
examination.  SPA is hopeful, as others have been, that the
current problems of patent protection for software-related
inventions can be addressed by improving U.S. PTO's access to
non-patent prior art and information about ongoing
developments in software technology.
We look forward to a continuing relationship and a free flow
of information between the U.S. PTO and our members.  Once
again, Mr. Commissioner and members of the panel, thank you
for giving SPA the opportunity to testify on this important
issue.  I will be happy to answer any questions you may have.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Traphagen. 
Does anybody have any questions on the panel?
(No audible response.)
COMMISSIONER LEHMAN;:  If not, thank you very much for your
sharing with us.
Next I would like to ask Rob Lippincott, Executive Vice
President of the Interactive Multimedia Association to come
forward.
PRESENTATION BY ROB LIPPINCOTT
INTERACTIVE MULTIMEDIA ASSOCIATION
MR. LIPPINCOTT;:  Good morning, Mr. Commissioner, members of
the panel, ladies and gentlemen.  My name is Rob Lippincott. 
I'm Vice President for Content at Ziff/Davis Interactive,
which is an on-line information services provider and
multimedia publisher.  I also serve as Executive Vice
President of the Interactive Multimedia Association.
The Association's General Counsel, Brian Kahen, who also
directs our intellectual property project is here with me
today to answer any questions you may have.
As a traditional magazine and newsletter publisher, Ziff/Davis
has built a business on the value added by the work of editors
and writers doing research, selecting, highlighting, linking
information, by aggregating rights, by creating original
material, and by expressing the opinions which they believe
will influence the market, change the flow of business or
touch human souls.
As multimedia information publishers we have come to view
interactivity as perhaps the fundamental principle of the new
media.  It is how editors and developers use computers to
speak to people.  It's how people use computers to get the
information they need, and it's how people speak to other
people through computers.
It's how communities grow and how markets are formed, perhaps
most importantly.  Interactivity, per se, cannot be considered
a patentable process.  It's how we communicate.  It's this
perspective that I find shared by the majority of my fellow
IMA members and from which I offer the following testimony on
their behalf.
The IMA, the Interactive Multimedia Association, is a U.S.
based trade association with more than 280 member companies
and organizations, representing all of the areas of the
multimedia industry.  Its mission is to promote the
development of interactive multimedia applications and to
reduce existing barriers to the widespread use of multimedia
technology.
Multimedia draws on traditional content industries -- movies,
television and music, as well as traditional publishing --
which have been and which promise to be powerful export
industries for the United States.  These are creative
industries which function very effectively and comfortably to
date, largely dependent on the copyright law for intellectual
property protection.
And as my colleague Tom Lopez testified in San Jose, a number
of the creative people in our emerging industry feel rather
threatened by abstract process patents which they believe give
patentees leverage over content developers and publishers.
Our concern is not software patents in general, but patents
which constrain and control human expression and the flow of
information.  Under the European patent convention, patents
are not granted for "schemes, rules and methods for performing
mental acts, playing games or doing business, programs for
computers or presentations of information."
While we have similar judicially created exceptions in our
law, in certain instances they have been eroded if not
eliminated.  The result is that we have a patent system that
has in certain instances stretched the system beyond its
resources and capabilities some might argue, to in fact
regulate those abstract functions.
From the perspective of a number of our members, our
multimedia developers and producers, the patent system is a
one-size-fits-all system for creating property rights that is
indifferent to its impact on the industries it seeks to
regulate, directly or indirectly.  Software is treated in much
the same way as chemical compounds, but it has persistent
problems in the examination process.
Broad patents, especially patents that preempt functions that
cannot be designed around, should not be granted without an
extraordinary level of quality control, preferably in the form
of peer review, much as has been spoken of earlier today.
Whatever the practical limitations on the knowledge and
expertise of examiners, they ought to be able to identify such
broad claims and route the applications accordingly.  Broad
patents are inherently regulatory in nature.  It is imperative
that the claims be precise and that the examination be
thorough.  Such patents must be widely acknowledged and
respected within the field and the industries that they
affect.
Pre-grant publication for both broad and narrow patents is an
absolute necessity in the software area because the patent
database is so limited.  In Europe and Japan and virtually
everywhere else in the world patent applications are published
before the patent is granted.  Many of the patents that
trouble the multimedia industry because of their breadth would
never stand up to pre-grant publication.
In 1966 the President's Commission on the Patent System
recommended against granting patents for computer programs for
practical reasons.  "The Patent Office now cannot examine
applications for programs because of the lack of a
classification scheme and the requisite search files.  Even if
these are available, reliable searches would not be feasible
or economic because of the tremendous volume of prior art
being generated."
Twenty-eight years later, and a significant twenty-eight years
in our industry, the situation remains largely the same
because the search files have never been completely developed
and the volume of prior art has naturally grown exponentially.
However, the U.S. PTO began to grant patents on software
processes liberally without addressing the practical problems. 
Pre-grant publication is an alternative, which could in due
course elicit sufficient prior art to make such a database
feasible.
Furthermore, we have the beginnings of an information
infrastructure that can make pre-grant publication inexpensive
and effective.  The patent system should be an integral part
of this infrastructure.
The problems with subject matter and those of examination tend
to go hand-in-hand.  While we applaud the fact that last month
the PTO finally began hiring examiners with degrees in
computer science, this didn't happen until 12 years after the
PTO liberalized its policy on software.
With the PTO granting patents on multimedia designs, business
methods and educational methods by rights it should admit MBAs
and Masters in instruction design as patent examiners.  Given
past experience, we would not expect this to happen any time
soon.  But the notion suggested in question two that an
examiner trained in electrical engineering can deduce the
level of ordinary skill in these arts from reading a few
journals and patents is clearly insupportable.
The relevant art or arts should be identified by the
applicant.  The examiner should be identified with a cited art
and their final signature should, in fact, affirm that they
are skilled in those arts.
There are a number of other considerations we don't have time
to note here, but will do so in writing.  We will do so with
the understanding that other industries may feel differently
about the operation of the patent system.  Other industries
may feel the opportunity to maintain trade secret protection
outweighs the need for a better examination process.  We
respect their views because we feel that the system should be
tailored to promote innovation, not simply to validate
preconceived rights through the threat of exorbitantly
expensive lawsuits.
As the Commissioner has suggested in San Jose, there is a
dearth of economic analysis of the patent system, but there
are costs that are real, and for multimedia designers,
frightening.
Stanford Professor John Barton estimates the average cost of
patent litigation at $500,000 per claim per side.  The cost of
insurance against an inadvertent patent infringement is a
minimum of $50,000 per multimedia product with a $50,000
deductible.  That's a marketplace measure of the tax that the
patent system places on our industry.
This figure is likely to be five or ten times the cost of
conventional errors and omissions insurance which covers most
other liabilities.  This figure functions as one benchmark
that multimedia developers will look to to gauge the Patent
and Trademark Office and the administration and their efforts
to protect the expression in the multimedia age.
We look forward to working with the Patent and Trademark
Office to perfect the process that we must support as an
industry.  Thank you, Mr. Commissioner and members of the
panel, for this opportunity to express the concerns of
multimedia developers and publishers.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Lippincott. 
We appreciate your comments.  They were so thorough that I
don't have any questions.  You answered all of them.
MR. LIPPINCOTT;:  All right.
COMMISSIONER LEHMAN;:  Next, I'd like to ask Mr. Robert Yoches
from Finnegan, Henderson, Farabow, Garrett & Dunner to come
forward.
PRESENTATION BY E. ROBERT YOCHES
FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER
MR. YOCHES;:  Thank you, Mr. Commissioner.  My name is Bob
Yoches and I am with Finnegan, Henderson, Farabow, Garrett &
Dunner; and I am presenting my own views today, not the views
of the firm, and not the views of the clients of the firm.
What I would like to address specifically are Questions three
through six of topic B.  However, the testimony I give may
apply to other topics as well.
Questions three through six really address the issue of
whether the examination standard for patents on
software-related inventions should differ from patents on
other technologies.  I don't believe it should.  The primary
reason is, I don't think it's possible and I don't think it's
warranted.
I don't think it's possible because as many other witnesses in
San Jose testified, it is difficult, if not impossible, but
certainly impractical to distinguish between software-related
inventions and inventions based on other technologies. 
Certainly the history of software has arisen many times as an
evolution from hardware to firmware and finally to software.
Moreover, we found, and many witnesses have testified, that
software is ubiquitous.  It is in many different technologies
and it is in many different aspects of the life.  It is no
longer a separate and identifiable part of the technology that
can be treated differently.
More to the point though, if some distinction were made, I
fear that what would result is some sort of game playing.  In
the Patent Office we saw this in the 1970s where clever patent
agents and patent attorneys tried to get around the reluctance
of the Office to grant software-related patents by changing
the specification and claims to make it look not like a
computer, even though that's what the invention was.
Another problem that I see arising from having different
standards for examining patent applications for certain
inventions is in the area of litigation.  Because I think if
you have a higher standard for examining applications for
software-related technology that what you'll do is cheapen the
patents on the other technology, because there isn't a patent
lawyer around who when attacking a patent on a
non-software-related technology won't point out to the jury or
judge that this patent didn't receive the special treatment
that the Patent Office gives to computer patents.
Attorneys representing patentees that have a patent based on
the software-related technology will argue just the opposite,
that this patent received that special attention that the
Patent Office has reserved for computer related inventions.
The other practical problem I see in having different
standards for examination is one in the Patent Office, and
that is a training problem.  I don't need to tell you how
difficult it is to train the examiners with regard to issues
of 102 and 103 and obviousness and novelty.
If they have to learn not one, but two different standards,
and if they also have to use their judgment of when to apply
the one standard as opposed to the other standard, I think
that the training costs and the quality of examination will
drop.
There is, however, I think a larger problem in even asking the
question of having different standards and that's a
philosophical problem, because the questions are based on the
underlying assumption that there's something wrong with
software-related patents that issue from the Patent Office
now.  I don't know that that's been shown.
Certainly there's no question but software is a different
technology than other technologies, but you could make the
same argument about any technology.  I don't think that
there's been a demonstration, other than by some anecdotal
indications that the software patents are any better or worse
than patents related to any other technology.
In fact, to the contrary, I have found that especially in
Group 2300 with Director Goldberg, that there's been an
increased effort and an intense effort to improve the
examination process.  In fact, as you may know, the AIPLA and
the Patent Office held a joint program last fall, a program we
hope to continue, where there was an open dialogue between the
Office and between the practitioners to try to improve
communications and improve the examination process.
More to the point, however, changing the standard for
examining patents will not really address the problems which
have been raised.  Those are the lack of prior art and the
inability to retain examiners.
And now to the specific questions.  Question three asks
whether the Patent Office should impose a special duty, a
higher duty, on applicants having a software-related invention
to disclose information.  I'm not quite sure what's being
indicated there because the current duty is quite high.  I
assume that the additional duty would require some sort of a
search.
However, most of the places that patent attorneys search are
the same places that the patent examiners would search.  So I
don't know that you'd get a better examination process.  What
you would get, however, is a lot more charges of fraud on the
Patent Office because information that should have been
discovered wasn't discovered and given to the Patent Office. 
And as the Federal Circuit has already noted, charges of
inequitable conduct and fraud are a plague on the patent
system.
Question four asks whether the standards of novelty and
obviousness accurately reflect the inventive activity in that
area.  I think they have to.  The standards which the Patent
Office is supposed to apply are independent of a particular
technology and they involve what the state of the art is and
they involve what the level of ordinary skill in that art is.
And the way those standards are supposed to reflect the
particular technology, it's just supposed to be applied to
that technology.  So the state of the art and the computer
technology will track whatever those changes are and the level
of skill will also track those changes.
Question five asks whether we should implement, I suspect, a
per se rule, that if the underlying process is known that
merely implementing on a computer is not patentable.  Again,
I don't think so.  I think that the present legal standard
which asks the Patent Office and asks the courts to look at
the claim as a whole is the proper one because I can imagine
situations where either because of difficulties and
practicalities or because of common knowledge in the art, it
was not thought possible or a good idea to implement a certain
process on a computer.
Although I can't give you a specific example from real life,
one that came to mind on my way over here is the idea of a
product I had just seen, which is supposed to improve the
grammar and the style of writing.  Now certainly English
teachers have been doing this for years.  It's a known process
of how to improve grammar and style.
But implementing it on a computer, I suspect, is pretty
difficult.  Although there is a product out there and maybe
it's prior art now, I don't think that we should have a per se
rule saying that type of product does not merit patent
protection.
Finally, Question six addresses the general question of
whether the PTO should change its examination procedures for
novelty and obviousness in this area, and there are three
subparts.  The first asks whether the Patent Office should
require applicants to conduct a search and distinguish their
inventions from the prior art in the search.
Now the Patent Office already has a procedure for doing this
if you want to get expedited examination.  What I think will
happen is two things.  One is, if this rule existed right now
I would pay the extra fee, which is not too much, and get the
expedited examination.
I don't know whether the Patent Office examination though of
software-related patents would improve, because again the
searches that are conducted generally are from the same
database as the examiners use.
Question B asks whether the Office should impose a special
requirement on applicants to show that their inventions are
distinct over the prior art independent of their computer
implementation.  I have addressed that before.  The invention
is the invention as a whole and, indeed, part of the invention
may rely on how it was implemented by a computer.
Question C asks whether the PTO should be allowed to establish
that a software-related invention is not novel or obvious
using a lower standard, in other words, not a prime facie
case.  I'm a little confused here because I don't know what
could be a lower standard.
The prime facie case merely asks the examiner to do two
things.  One is to find art that shows each one of the claim
elements; and, two, show that there's some motivation for
combining those elements.  I suspect the lower standard could
either be removing the criteria for motivation or allowing the
examiner to reject applications based on his or her gut feel.
In my experience, both occur right now.  Whether they should
or they shouldn't is another issue.  But I don't think it's
appropriate that, again, you should be applying different
standards here.  I don't believe that the result will be any
better patents.  It will just be a longer and more drawn out
examination process.
My conclusion is this.  I believe that if you adopt more
stringent or even different examination standards for a
certain class of inventions, whether it be software-related or
others, that you'll be opening up a Pandora's Box that will
create many more problems than it's intended to solve.  Thank
you.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Yoches.
Next I'd like to ask Stephen Noe, counsel to Caterpillar,
Inc., representing Intellectual Property Owners, Inc. to come
forward and share.
PRESENTATION BY STEPHEN L. NOE
CATERPILLAR, INC.
MR. NOE;:  Thank you.  I am Stephen Noe, but I am sort of
Stephen Noe as well, Intellectual Property Council for
Caterpillar, that well-known earth moving and computer company
in Peoria, Illinois.
Today I'm representing the Intellectual Property Owners, a
nonprofit association whose members include companies,
universities, individuals who own and are interested in
intellectual properties.
My testimony has been approved by the Board of Directors for
IPO for presentation as an IPO position as well.  Caterpillar
is a member organization of the IPO and is truly an interested
party in its own right, as both a producer and major user of
computer software.
Today's hearing -- I have to thank Mr. Yoches for shortening
my necessary presentation.  But I want to amplify some of the
things he said.  Today's hearing presupposes the continued
availability of patent projection for the computer software
implemented inventions, a position strongly endorsed by the
IPO and focuses on the examination of those applications.
However, implicit in this series of hearings is the suggestion
that software is somehow different from other technologies and
must be treated in some special way.  I disagree.  Considering
some of the remarks made at the recent hearings in San Jose
and even some this morning, just agreeing on what is and what
is not software-related technology may be an exercise for
Humpty Dumpty from Alice in Wonderland where a word means just
what I choose it to mean.  Nothing more nor less.
For purposes of my testimony I'll use software or
software-related technology in the broad sense, to include
discreet software products like word processors or speaker
timing computers, highly complex custom software that controls
manufacturing systems and imbedded software that controls
engines, anti-lock braking systems, perhaps your microwave
oven.
One can readily come up with other examples, some of which may
look and feel more or less what we think of as software
traditionally, but all of which lie along a continuum of
software-related technology.  Whether an automobile engine is
controlled by a camshaft or a microprocessor it makes little
difference to the driver of that automobile who only cares
that the engine run well and reliably.
Patent policy should not be the factor that forces a
manufacturer to choose which tool to use to control that
engine.  The IPO supports treating software-related technology
like any other technology within the scope of the patent
system.  Continued patent protection of software-related
technology is important to the United States' industrial
competitiveness.
The PTO should process applications for patents on software no
differently than applications in any other technology, either
in examination procedure or in the way the statutory tests are
applied.  In particular, the IPO rejects the proposal that
software-related patent application should be subject to
special tests or standards governing novelty, nonobviousness
or disclosure.
The first noticed question related to the adequacy of prior
art.  Patents and more significantly printed publications do
provide a sufficient and representative collection of prior
art to assess novelty and obviousness.  Examiners access to
and understanding of the printed publications is the issue,
not the existence of the publications.
Several avenues are available to and should be used by the PTO
to improve its access to and its ability to apply
software-related prior art.
These include supplementing its own collections with
non-patent references, reclassifying and computerizing those
collections as necessary, encouraging the development of
readily accessible prior art collections outside the Office,
collections such as that we have heard discussed this morning
being put together by the Software Patent Institute in Ann
Arbor, Michigan, training its existing examiners in the
technical programming skills necessary to understand and
properly apply the prior art references that they do find, and
hiring as fully qualified examiners computer scientists or
others who are trained in software technology.
A number of these activities are currently being implemented
and the IPO applauds and encourages these efforts.  Jerry
Goldberg has been especially active in this area and I've
spoken with Jerry many times about this.
The hearing notice also asks if a special duty of disclosure
should apply to applicants for software-related inventions. 
Such a burden would be neither fair nor workable.  Even
knowing when the duty applies would be difficult and subject
to interpretation.  There simply is no bright line separating
software-related inventions from other inventions.
Instead, there is a continuum of software-relatedness, which
encompasses products of all descriptions.  Developers who
implement their inventions using software should not be
penalized for doing so by the patent system.
The notice then moves to focus on the PTO examination
procedures, the area that Bob Yoches specifically addressed. 
Once again, there simply should be no special standards or
tests applied to or duties imposed upon applicants in
software-related applications.
The difficulties in examining these applications result from
examiners unfamiliar with the technology attempting to examine
applications using incomplete prior art collections.  These
difficulties can and should be corrected by supplementing the
art collections and improving the expertise.
A mandatory duty to search for, disclose and discuss prior art
in software-related applications would be a powerful incentive
to characterize inventions as other than software-related in
an attempt to avoid the burdens and disadvantages of that
duty.  Examiners will try to impose the requirement;
applicants will try to avoid it; and the quality of
examination and classification will suffer.
One item of software-related technology the PTO should follow
closely and make early use of is the national information
infrastructure of the high speed data highway.  I noticed in
Commissioner Lehman's comments that this has begun.  The
Internet is being used by the PTO already.
A major problem underlying the difficulty in examining
software-related patent applications is information related. 
The PTO does not have sufficient access to the best prior art
information and the public has no convenient access to the PTO
search files.  The proposed data highway could close this
information gap, providing a common resource to searchers,
both within and outside of the PTO.
As Mr. Lippincott pointed out earlier this morning, this
technology could even offer a cost effective way to implement
early publication of pending applications, allowing interested
parties to review the applications and provide relative art. 
This approach would take advantage of the knowledge of those
most informed in the field of software technology and most
concerned about the issuance of software-related patents.
What difficulties the applicants face in complying with
existing disclosure requirements?  The best mode requirement
in U.S. law used to be a non-issue.  The best mode issue
seldom arose in patent contests.  However, recent judicial
opinions have caused quite a stir in this area and patent
practitioners have responded as they believe necessary to
protect their clients.  Some in an abundance of caution feel
the need to submit program source or object code listings.
The PTO cannot unilaterally resolve this matter.  Resolution
must await legislative or judicial clarification.  However,
the Office could begin accepting code listings on standard
machine readable media containing printable files.
The PTO should not, however, require patent applicants to
confirm to any standardized disclosure format for such
applications.  No one format can be the best for all the wide
range of software-related technology.  What would simplify
examination in the Office might well complicate others'
understanding of the resulting patent or complicate litigation
relating to that patent.
The issues commented on here today are important ones for all
of American industry, because software permeates every facet
of technology today.  Industry needs the assurance of patent
protection for innovative developments, software-related or
otherwise, to maintain and improve technological leadership. 
Software-related technology is not inherently different from
any other new technology that the patent system has faced and
adapted to in the past and will be called upon to deal with in
the future.
The problem that exists today lies not with the technology,
but with the initial PTO reluctance to meet it head on.  The
PTO resisted until the courts insisted.  Had the patent system
and the technology grown side-by-side as is the usual case,
there would be no hearings today.
Now the PTO is a bit behind the curve, but progress is being
made.  This is the time to accelerate, support and encourage
the adaptation to this technology, not to make a special case
of it.
Who can say what the next generation of innovation will bring. 
What will be the software issue of the future?  With
appropriate training, tools, and hiring practices the PTO can
examine software-related applications just as capably as
anything else and the patent law can remain technology neutral
as it must.  Thank you.
COMMISSIONER LEHMAN:  Thank you very much, Mr. Noe.  What is
IPO's position with regard to the issue of pre-publication?
MR. NOE:  I feel it supports the concept of pre-publication
provided that it's done with sufficient safeguards to the
applicant.  For example, the applicant should have the
opportunity to withdraw the application prior to publication
if that is to come to be.
COMMISSIONER LEHMAN;:  Thank you very much.
I'd just like to observe that there already are differences in
examination procedures among different examining groups and
different technologies, certainly in Group 1800 which does
biotechnology and we do a lot of searches of DNA sequences. 
We have an examination technique and procedure really that is
quite different.  So we can distinguish between the
technologies without necessarily changing legal standards
among the technologies.
Next, I'd like to call John Horn, Patent Counsel for
Allen-Bradley Corporation.  Are you representing Allen-Bradley
or yourself, Mr. Horn?
PRESENTATION BY JOHN HORN
ALLEN-BRADLEY
MR. HORN;:  I'm representing Allen-Bradley this morning, sir. 
Good morning, my name is John Horn.  I'm Patent Counsel for
Allen-Bradley Company, which is a manufacturer of industrial
automation equipment, such as programmable logic controllers
and including an increasing number of software products.
Allen-Bradley has observed a strong trend in the industrial
control business towards replacing functions accomplished by
hardware with software.  Industrial control hardware and
industrial control software can and frequently do have very
similar functionalities.
Consequently, patent claims can closely correspond between
hardware and software based inventions.  In view of the above,
we believe new software based functions should be patentable
in the same way as new hardware based inventions are
patentable.
However, we also believe that it is important that patent
examiners should look to hardware based prior art and that
previously existing hardware based functionality should always
be viewed as highly relevant to the allowability of software
based claims.  Novelty should it not be predicated on the
coding of functions previously implemented in hardware.
Although new functions which may be enabled by software's
special capabilities should be patentable when they rise to
the level of being novel and non-obvious improvements on
previous hardware based techniques.
It appears to us that inventions and patent claims focusing on
the software art form itself, such as programming techniques,
may at least temporarily require some new procedures for
identifying prior art.  Allen-Bradley supports the idea of
establishing new mechanisms for identifying prior art
pertinent to software inventions in order to assist in getting
the best prior art into the hands of the examining corps.
However, Allen-Bradley also believes that software inventions
should be treated in like fashion to inventions in other
technological fields and higher standards for patentability of
software inventions should not be adopted.  Software would
appear to us to be a new and distinct type of technological
art form.  As such, it may have some growing pains at the
Patent Office and elsewhere.
Nevertheless, software inventions need protection to promote
creativity and protect the investments of innovative
developers.  Consequently, we would like to encourage the
Patent Office as well to recognize software as independently
capable of having patentable elements, such as specialized
data structures, when such elements are novel and non-obvious.
Separately, Allen-Bradley does not believe computer program
code listings are an effective way to describe software
inventions.  In general, such listings we have found to be
arcane and too difficult to decipher to enable most software
inventions to be understood and used.
Thank you.  Allen-Bradley looks forward to working with the
Patent Office in trying to improve the patenting process.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Horn.
Next, I'd like to call forward Mr. Richard Nydegger for the
Digital Equipment Corporation.  He's going to be replacing Ron
Ryland who was scheduled to represent Digital this morning. 
You need to correct your representational status here, Mr.
Nydegger.
MR. NYDEGGER;:  Yes, I will.  Thank you.
PRESENTATION BY RICHARD NYDEGGER
WORKMAN, NYDEGGER & JENSEN
MR. NYDEGGER;:  Good morning, Mr. Commissioner, members of the
panel, and fellow participants.  My name is Rick Nydegger.  I
am a patent attorney and I practice with the law firm of
Workman, Nydegger & Jensen in Salt Lake City, which
specializes in intellectual property law.  I'm also an Adjunct
Professor of Law at the University of Utah, College of Law and
I am a past-Chair of the Electronic and Computer Law Committee
of the American Intellectual Property Law Association.  I
currently serve on the Board of that Association.
The views which I express today, however, are my own views and
I appreciate this opportunity to participate in this
proceeding and to add my comments to the record of these
hearings.
First, I wish to make a few introductory comments, which I
will then follow with specific comments in response to the
subject of this hearing, namely standards and practices used
in examination of patent applications for software-related
inventions.
Much has been written and said by way of criticism about
overly broad patents having been granted by the PTO for
software-related inventions.  However, it should be remembered
that these types of problems are not unique to
software-related inventions alone, but have existed and will
exist in connection with any type of new and rapidly emerging
technology.
Indeed, in the celebrated Telegraph case that was decided by
the Supreme Court in 1854, the eighth claim in Samuel Morris'
patent on the telegraph was ultimately invalidated as being
overly broad, although granted initially by the Patent Office.
However, equally important though often overlooked is the fact
that the first seven claims in Mr. Morris' patent were upheld,
thus providing broad protection for a new technology which
spawned a whole new industry.
In a similar fashion, in 1888 Alexander Graham Bell's patent
for the telephone was also challenged as being overly broad. 
Claim five of Bell's patent was contained in a mere five lines
which simply read, "The method of and apparatus for
transmitting vocal or other sounds telegraphically as herein
described by causing electrical emulations, similar and formal
vibrations of the air accompanying the vocal or other sounds."
Yet in upholding that claim the Supreme Court said, "It may be
that electricity cannot be used at all for the transmission of
speech except in the way Bell has discovered it.  And that,
therefore, practically his patent gives him this exclusive use
for that purpose.  But that does not make his claim one for
the use of electricity distinct from the particular process
with which it is connected in his patent.  It will, if true,
show more clearly the great importance of his discovery, but
it will not invalidate his patent."
Those skilled in the art of prosecuting patent applications
for software-related inventions will readily appreciate the
similarities between the claims and the issues raised in the
telegraph and telephone cases and the issues raised by the
claims in many software-related inventions.
I cite these historical examples merely to point out that
criticism and charges of overly broad patents that are issued
by the Patent Office are not something new, particularly when
dealing with fundamentally new and rapidly changing
technologies.
Yet the fact remains that in both these cases, as in many
others, protection under the patent system was broadly
afforded to these emerging technologies on which entire
industries were ultimately founded.
That's not to say that the U.S. patent system as it presently
exists is without problems that need to be carefully examined. 
Indeed, I strongly support the increased efforts being made by
the Patent Office, including these hearings, to become more
customer oriented and to create a stronger sense of
partnership with American inventors at all levels.
However, when examining the problems that may exist under the
patent system there is a need for temperance and we should be
slow to illuminate or narrowly circumscribe protection for any
new or emerging technology simply because the newness of that
technology makes it difficult to search, difficult to disclose
or difficult to apply statutory standards of eligibility or
patentability.
With these remarks in mind, I turn to some particular comments
on examination standards and practices that will, it is hoped,
suggest possible ways to strengthen the patent system and the
way in which the patent system can serve to both reward and
foster innovation as well as to continue to strengthen our
country's economy and the ability to compete in an
increasingly competitive global marketplace.
Specifically, I wish to direct my remaining comments to four
areas.  One, improving access to relevant prior art; two,
improving the experience, training and retention of qualified
examiners; three, reducing the present emphasis on pendency
time and adopting early publication procedures; and four,
expanding third party participation in reexamination and
opposition proceedings.
On point number one, improving access to relevant prior art,
for pure software systems such as application programs,
computer operating systems, network operating systems,
database management systems to name just a few, access to
prior art other than patents or printed publications is needed
because many such pure software techniques have not been
documented or published in traditional ways.  Much is already
being done to rectify those problems.
Efforts such as the APS classified search and retrieval
system, private efforts such as those that Dr. Bernard Galler
with respect to the Software Patent Institute and others are
commendable and are helping to develop an adequate prior art
database.
The PTO has and should continue to request voluntary
submission of product descriptions, user manuals,
administrator guides and programming guides and soft copy from
software developers for addition to the PTO's library.
The current reclassification efforts with respect to
software-related inventions have been successful.  And
Director Jerry Goldberg and his team in Group 2300 of the PTO
have been doing an excellent job of reclassifying
software-related technology within the Patent Office.
In addition to the extent that such a source has not already
been considered, a classification system which takes into
account classifications proposed by the IEEE and the ACM might
be considered.  These classification systems represent
industry efforts to classify software-related technology.
Continued effort in all of these areas is needed.  Another way
to provide patent examiners with access to the most complete
up-to-date prior art is to solicit the assistance of those
most interested in seeing to it that patents with overbroad
claims do not issue, by providing for publication prior to
grant and by providing an opportunity for interested parties
to submit relevant prior art before issuance.  This is
discussed further in point three below.
On point number two, improving the experience, training and
retention of qualified examiners, patent examiners who are not
well qualified or trained or who lack adequate resources will
not be able to adequately assess an invention's patentability.
Thus, patent examiners need to have proper background in the
software-related arts and every effort needs to be made to
retain well-qualified and experienced examiners.  One way to
ensure that patent examiners have proper training in the field
of software-related technology is to recognize computer
science as a science for the purpose of serving as a patent
examiner.  I was pleased to hear that things are moving in
that direction currently.
Another important step toward improving the examining corps'
performance level in the field of software-related technology
is to improve the retention rate of examiners.  On-the-job
training builds examiner confidence and examiners should be
encouraged to stay on the job.
I believe the PTO should consider conducting a comprehensive
study to find ways of increasing the retention rate of
well-qualified, trained and experienced examiners and to
provide adequate resources in terms of physical support
facilities and personnel to permit efficient and thorough
examination to be carried out.
On point number three, reducing the present emphasis on
pendency time and adopting early publication procedures, the
PTO should decrease the present emphasis on pendency time
concurrent with adopting early publication procedures.  The
current emphasis by the PTO on pendency time is, I believe,
misplaced since a patent is an important means for disclosing
details concerning new technology.
The important question is not pendency time, but rather time
to publication.  This concept is recognized in the patent laws
of most major industrial countries which provide for
publication of an application 18 months after the priority
date.
Delays in publication can mean that the technology disclosed
in a patent is not available to the public in a timely
fashion, which may delay further development of the technology
and may also lead to problems with so-called submarine
patents.
The present emphasis on reducing pendency time by the PTO has
a number of undesirable consequences on the examination
process.  For example, if a patent issues within the
approximately 18 month pendency time as now suggested by the
PTO, prior art from foreign patent tribunals is most likely
not available for consideration by the U.S. examiner.
Having this prior art is particularly important in the
software-related arts and would further help to protect
against issuance of overly broad patents.  It would make for
a more complete examination and higher degree of confidence in
the validity of an issued patent for such inventions.
It is thus suggested that consideration be given by the PTO to
publishing applications 18 months from the priority date. 
This publication should be contingent upon providing a search
report prior to publication to permit the applicant to amend
or withdraw the application prior to publication.
Following publication the applicant should be entitled to
recover damages for use of the invention after publication but
prior to issuance in the event of infringement.  Examination
could then take place in a more contemplated environment.
It should be noted that early publication can also operate as
an early notification to others working in the field of the
potential issuance of the patent, allowing them to factor that
into their business decisions and thus minimizing the problems
with submarine patents as noted above.
On point number four, expanding third party participation in
reexamination proceedings, the PTO should consider changing
the current procedures governing reexamination.  The problem
of patents that are issued with overbroad claims could be
reduced by changing the current procedures governing
reexamination.
Third parties are reluctant to institute reexamination because
of the essentially ex parte nature of such proceedings.  The
PTO should expand the ability of third party petitioners to
participate in reexamination after the petition for
reexamination is granted.  If such a reform were made, the use
of reexamination would increase and the reliance on the courts
would decrease.
In conclusion, Mr. Commissioner, I believe that the
above-proposed changes would serve to greatly strengthen the
U.S. patent system in ways that would appropriately further
the progress in science and useful arts as contemplated under
the Constitution and in ways that would continue to help U.S.
industry to effectively compete by protecting the investment
of U.S. companies in important new technologies of the type
typified by the software and electronics industries.  Thank
you.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Nydegger, for
those thoughts and for coming all the way from Utah to be with
us.
I'd like to mention a couple of housekeeping items at this
point.  I'd like to remind the speakers that if they have
prepared remarks it would really be helpful to us.  If you
haven't already given them to us, if you would give them
either to Jeff Kushan right here or Mike Fleming who is
circulating around here someplace, who I introduced before.
Also, for any members of the press or media who are here
interested in this, I'd like to note that Ruth Ford is our
Director of Media Relations.  I don't think she's here in the
room right now, but will be very happy to help you with
anything you need.  And you can reach her at the
Commissioner's office at 703-305-8600.
Next, I'd like to ask Allan Ratner, the President of the
Philadelphia Patent Law Association from Ratner & Prestia to
come forward.
PRESENTATION BY ALLAN RATNER
PHILADELPHIA PATENT LAW ASSOCIATION
Mr. RATNER;.  I'm Allan Ratner of Valley Forge, Pennsylvania. 
I'm representing Ratner & Prestia.  We're a firm of 13
attorneys, 7 of whom specialize and mainly work in software,
computers and sophisticated electronics.
I'm also representing the Philadelphia Patent Law Association. 
That's a 400 member association with members in New Jersey,
Pennsylvania and Delaware.  I'm familiar with the views of our
membership and I state for the record that at this time these
remarks are being considered by the Association and will be
soon acted upon by the Board.
I personally have been prosecuting and licensing
software-related inventions for more than 25 years and have
seen the continuous growth of the law and the practice and
changes in the law and the PTO practice as time goes on.  I've
seen this positive evolution continuing to better protect the
public interest and better protect the burgeoning technology,
the software technology.
My remarks -- in considering protection for software it's
important to view the industries impacted by any potential
changes in the patent law.  First, what products fall under
the umbrella of software-related inventions.  The request for
comment refers to the software industry and programming
services, prepackaged software and computer integrated design.
However, there is no single software industry.  Certainly
there is a large expanding prepackaged software industry and
the U.S. patent system should reflect policies that encourage
and protect innovation within this industry.  But equally
important are those many industries that produce machinery and
electronic systems in which imbedded microprocessors and
microcontrollers use control functions.
In 1992 a single U.S. manufacturer sold nearly 250
microcontroller chips, each of which is used to provide
control functions in a hardware system.
The list of products controlled using these imbedded chips is
virtually endless.  The following is a brief list, intended
only to show diversity.  Every one of these systems is
controlled to some extent by software executed in the imbedded
microprocessor or microcontroller.  Every one of them is a
software-related invention.
We have telephone CT scanners; MRI systems for imaging the
human body; televisions and TV converter boxes; electronic
test signal generators; automobile subsystems, including
ignition systems, anti-lock brakes, traction control, airbags;
chemical process control equipment; agricultural equipment;
microwave ovens; facsimile machines; sewing machines;
dishwashers; signal processing equipment; camcorders;
automatic bank teller machines.
We have clients in many of these fields -- small clients,
emerging companies, mid-sized companies and large companies --
all of which use patents to protect their technology.
The trend toward increased use of software in imbedded chips
is expected to continue as the cost of chips decreases.  The
decision to use chips is a design choice and is determined by
such factors as cost, design delays, comparing software
against the same functions in hardware, such as ASICS.  They
also consider whether the functions of the product will change
frequently, in which case software reduces life cycle
development costs.
Thus, it is impossible to define a single software industry. 
Admittedly, at one end of the spectrum there are application
software developers who have low capital costs and who are
able to bring their products to market rapidly.
Nonetheless, at the other end, U.S. auto manufacturers, for
example, rely on software to improve the comfort and safety of
their cars.  Few industries have higher capital costs than the
auto industry and delays in bringing new products to market
are common.
For example, testing of airbags in an actual car is neither
fast nor expensive and, of course, software controls the
operation of the airbag.  There are countless other industries
that rely on software-related inventions which do not have low
capital costs or short development cycles and any attempt to
define a software industry is bound to fail.
Furthermore, the industries that use imbedded microprocessors
and controllers are in need of the protections offered by the
patent system that are not available through other forms of IP
protection.
Defining separate standards for patenting hardware and
software is likely to result in inadequate protection for
software-related inventions that do not fit neatly into the
precise pigeon holes of hardware systems and software systems.
Although it is more common to see hardware circuitry replaced
by software implementations, this is not a one-way street.  As
computer aided design techniques improve, a growing number of
hardware designs are created by implementing functions in
software from which designs for dedicated hardware are
automatically generated.
Given the ability to implement many algorithms in either
hardware or software elements that are functionally
equivalent, there is no compelling reason for penalizing an
inventor that selects one implementation over another.  On the
contrary, the inventor who identifies that a software
implementation is better, i.e. less expensive or faster to
bring to the marketplace, has given something more valuable to
society than the inventor that discloses a functional
equivalent -- but more expensive -- hardware embodiment.
The fact that the inventor has disclosed a software embodiment
of the invention that is easier to implement increases the
value to the public and the inventor should be rewarded.
35 U.S.C. 112 requires that the inventor disclose the best
mode.  Ever increasingly, the best mode for many machines and
systems include software elements.  A software solution to a
control function may be the preferred mode.  112 requires
disclosure of that software embodiment.  Without protection
for the inventive concepts that are in software, there would
be little incentive for inventors to disclosure
software-related inventions in the United States industries.
Thus, the fundamental constitutional mandate for promoting
progress in the useful arts would not be met.  In this way the
contributions of software engineers, control engineers and
systems analysts have been rewarded and encouraged.
Coming out to Part B, they seem to reflect a response to a
number of criticisms, many of which reflect the public's
misunderstanding with respect to standards applied in the
examination of software-related inventions.
Both the PTO and the Patent Bar should emphasize that hardware
and software-related inventions have been and continue to be
subject to the same standards with respect to novelty and
unobviousness during examination.  It has never passed muster
to take a known system or a known process and without more
implement that system or process in software.  A conventional
hardware system by itself ported over into software is still
a conventional system.
There is no public policy reason to define a higher standard
of patentability for a software-related invention than for any
other invention.  Now some patents covering software-related
inventions have been questioned because the Code is written
following well-known programming skills.  This is not and
should not be the standard for patentability used by
examiners.
The relevant field of the invention is usually never computer
programming itself, even for inventions in software
application programs.  The field may be systems engineering;
operating systems; networks; database architecture; electronic
design; automatic control system design; electromechanical
system design; chemical process engineering or others.
The inventor very often is the system architect, the person
who conceives of the system and its concepts.  The programmer
acts as a technician under the inventor's direction -- a
technician.
A valid concern has been raised that examiners do not have
access to a comprehensive base of prior art.  One approach to
solving this problem is to improve the access to materials
within the PTO's library, which presently is quite extensive,
as well as improving access to on-line prior art databases
that increase the examiner's productivity.
These techniques are being implemented and more funds should
be put into them.  Perhaps the single most effective method of
providing a more comprehensive base of prior art to the
examiner is to enlist the assistance of other parties who have
a stake in the outcome if a patent is issued.  These parties
include both third parties and the applicants themselves.
With respect to third parties, the current patent law presents
obstacles for third parties who would otherwise be inclined to
submit prior art.  With adequate safeguards -- that's
important, with adequate safeguards -- early publication of
all patent applications may be one way to enable third parties
to submit prior art during the pendency of applications.  This
particular way has problems but that is being considered.
Increased third party participation in post issuance
reexamination proceedings may also encourage the submission of
prior art by third parties.  Thank you.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Ratner, for
those really thoughtful comments.
Next, I'd like to ask Dianne Callan, Deputy General Counsel of
the Lotus Development Corporation to come forward.  She will
talking with us on behalf of the Business Software Alliance.
PRESENTATION BY DIANNE CALLAN
LOTUS DEVELOPMENT CORPORATION
MS. CALLAN;:  Good morning, Mr. Secretary.  My name is Diane
Callan and I am Deputy General Counsel of Lotus Development
Corporation.  I am speaking to you this morning on behalf of
the Business Software Alliance.
On behalf of the BSA I would like to thank you for convening
this hearing to consider these important issues and we
appreciate the opportunity to speak to you.
The BSA was organized in 1988 to promote the continued growth
of the software industry through its public policy, education
and enforcement programs in the United States and in more than
50 countries throughout North America, Europe, Asia and Latin
America.
BSA members are actively involved in nearly all aspects of
microcomputer software development, including production of
operating systems, application software and networking
software.
The current BSA members who are participating in this
statement include ALDUS Corporation, Apple Computer, Inc.,
Autodesk, Inc., Intergraph Corporation, Lotus Development
Corporation, Microsoft Corporation, Novell, Inc. and
WordPerfect Corporation.
In the last five years every government, academic and industry
study of technologies that are key to America's futures have
identified the vital role to be played by the software
industry.  Software is characterized by both rapid
technological innovation and widespread use in downstream
markets.
Software innovation improves the competitiveness of other
industries which utilize software products to make them more
innovative and more competitive.  The benefits of continuous
software innovation permeate much of the American economy.
In March of last year the BSA released a study prepared by
Economists, Inc. entitled "The U.S. Software Industry/Economic
Contribution in the U.S. and World Markets."  Based on
government and industry information, the study reviewed the
economic contribution made to the American economy by U.S.
core software industry.  By core software we mean prepackaged
software, custom computer programming services and computer
integrated design.
The Economists' study found that the core industry is the
fastest growing industry in the United States, is now larger
than all but five manufacturing industries, is contributing to
the economy of virtually every state in the nation, and is
achieving tremendous success in the international marketplace.
Notwithstanding this impressive record, the software
industry's role in the growth of the nation's economy will be
even more critical in the future as new and more advanced
technologies continue to evolve.
The BSA has several views which we would like to share at this
hearing.  First of all, we believe that strong intellectual
property protection is essential to the continued health and
growth of the software industry.  Software is difficult and
expensive to create, yet easy to steal or duplicate.
Moreover, the real value of the software and the principal
assets of a software company are not its tangible factories or
raw material inventories.  Apart from its employees, buildings
and computer equipment, the assets of a software company are
intellectual property, the technology embodied in the computer
programs that are their products.
Second, the BSA does not believe that a new form of protection
for software-related inventions is necessary or desirable. 
There is, however, an urgent need to improve the operation of
the United States patent system as it pertains to
software-related inventions.
Patents continue to be issued, which do not appear to meet the
statutory mandates of novelty and nonobviousness.  And these
patents impose a substantial cost on the software industry and
on society as a whole.  Those aspects of the patent system
that permit long gestation periods for patents also cause
economic cost to society without providing commensurate
benefits.
Let me emphasize that members of the BSA have widely divergent
views as to the values of patents being granted for
software-related inventions.  However, all the members
recognize that the current patent system does not adequately
deal with such patents.
Therefore, these comments which are the minimum common points
agreed upon by the participating BSA members primarily suggest
procedural changes to the operation of the patent system to
improve its effectiveness regarding the protection of
software-related inventions.
The BSA respectfully suggests several changes to improve the
effectiveness of the system.  First, the patent system should
run for a fixed time from the filing date.  An important
problem with the patent system is the issuance of patents
after inordinately long application periods, brought about by
continuation and continuation in part applications and
occasionally interference proceedings.
Whatever the cause, the result is that the sudden appearance
of a patent years after the technology to which it relates has
been developed and commercialized is an important problem for
the industry.
At that point design around possibilities may no longer be
feasible and the patent consequently can assume an enormously
enhanced power to disrupt long established expectations for a
full 17 years from the issue date.
The BSA supports the Commissioner's intention to establish a
fixed term from the original filing date, as that would give
the patent owner a strong incentive to have her patent issued
promptly and would in any case reduce the likelihood of the
stealth patent that suddenly appears having lain hidden in the
PTO for 15 or more years.
Furthermore, the spur to an applicant to timely present all
claims and applications stemming from a single disclosure
would promote additional efficiencies in the examination
process.  The BSA is gratified to learn that the PTO will
support legislation embodying this concept.
Our second suggestion is that the examination process should
be improved as to the content of the prior art database, the
accessibility of this database to the examiners and the
training and treatment of the examiners.  Most of the prior
art regularly available to the PTO examiners comprises
collections of patents and publications.
However, especially in the field of software-related patents,
much of the relevant art exists not as patents or publications
but rather as companies internal technical manuals, reference
works, bulletins and other similar documents.
Thus, often the most relevant prior art is not readily
available to the examiners of software-related patents. 
Groups such as the Software Patent Institute have undertaken
to compile databases with these types of software-related
patent prior art.
It is important, especially in this area, that the PTO expand
the universe of the prior art on which it relies and to
improve access to that universe.  The BSA hereby offers to
provide ongoing assistance in establishing and providing
content for suitable databases as well as examiner training
and software tools for searches in these databases.
Our third suggestion is that applicants should be encouraged
to conduct a patentability search before filing and to present
the results of that search to the PTO before the application
is examined.
Because of the quantity of prior art relating to
software-related inventions, as well as the diversity of the
nature and location of such prior art, we think that the
applicant should be encouraged to conduct a reasonable prior
art search and to present those results.
Our fourth suggestion is that an opposition procedure should
be established with provisions that ensure expedited results. 
A third party may often be aware of prior art not readily
accessible to the PTO and may also be the entity with the
greatest interest in preventing the issuance of a patent
covering what is in the prior art.
The BSA believes that providing an opportunity for submissions
during prosecution, as is done in the EPO after publication of
the application and the EPO search report, would facilitate a
more complete view by the examiner of the relevant prior art.
In addition, once claims are allowed an opposition period of
sufficient duration to permit reasoned investigations
pertaining to those claims would provide the public with a
timely and efficient opportunity to submit relevant
information pertaining to the claims as they are expected to
issue.
Our position, however, is premised on some assumptions.  First
of all, the fact that a period for filing an opposition has
expired without any oppositions having been made would not in
any way affect the presumption of the validity of the patent.
Second, that any opposition activity or proceeding would take
place in an expedited manner, so that the opposition process
cannot be used, as in some countries, including Japan, to
unduly delay the issuance of the patent.
And finally, any opposition proceedings would include
appropriate procedural safeguards to limit the potential
abuses of the process.
The last suggestion that we would like to present today is
that the examination procedures should be strengthened and
expanded substantively to include non-prior art validity
issues.
The current examination process, as was discussed earlier, is
generally not viewed as a viable option by opponents to a
patent due to the largely ex parte nature of the process.  The
BSA urges that reexamination be modified to provide more of an
inter-parte proceeding, allowing opponents to a patent to feel
more comfortable in relying on the procedure to efficiently
resolve their concerns in what may be the most efficient
forum.
Further, the scope of the reexamination proceedings should be
expanded to additionally cover all prior art categories as
well as non-prior art, validity and enforceability issues. 
For example, inequitable conduct regarding an applicant's
nondisclosure of material prior art during the prosecution of
an application.
The BSA acknowledges and supports the Patent Office's intent
to forward to Congress legislation making reexamination a more
attractive vehicle for challenging a patent's validity.  We
appreciate the opportunity of speaking to you.
COMMISSIONER LEHMAN;:  Thank you very much, Ms. Callan, for
sharing that with us.  It was a sufficiently complete
statement that I really think I understand it and don't really
have any questions where you stand.
Before I call our next witness, I just want to say that since
we're running a little bit ahead, we may be able to get
through to shorten our afternoon session if we can call some
of the people who are scheduled to appear this afternoon.  I
have a list of some people -- Richard Jordan, Jonathan Band,
Vern Blanchard, and Jeffrey Berkowitz.
If any of you are here, what I'm going to do is, after the
next witness I'm going to at least call one or two of you. 
And if you're able to, then we can, you know, get your
testimony included in the morning session.
With that I'd like to call next R. Duff Thompson, who's the
Executive Vice President and General Counsel of the
WordPerfect Corporation.
PRESENTATION BY R. DUFF THOMPSON
WORDPERFECT CORPORATION
MR. THOMPSON;:  Thank you, Mr. Secretary.  My name is Duff
Thompson.  I am speaking to you today on behalf of WordPerfect
Corporation, for which I serve as the Executive Vice President
and General Counsel.  WordPerfect appreciates the opportunity
to participate in this hearing regarding the patent process. 
We certainly applaud the efforts of the Commissioner and
others to bring these issues to light.
WordPerfect Corporation is a Utah company employing
approximately 5,000 people worldwide.  It is the leading
supplier of word processing software in the world and other
key business applications.  WordPerfect is a member of the
Business Software Alliance, as has been mentioned, and we
support the positions that Ms. Callan has just expressed.
On behalf of WordPerfect, however, I want to emphasize certain
points she has made and to add a couple of others.  First,
WordPerfect Corporation believes with the Business Software
Alliance that strong intellectual property protection is
essential to the U.S. software industry to continue to grow
and provide jobs and export revenues for this country.
Because of the ease of copying, software piracy is endemic,
not only in this country but around the world.  Software
companies need vigorous intellectual property protection to
secure the fruits of their labors.
Second, like the Business Software Alliance, WordPerfect
Corporation does not believe that a suigeneris form of
protection for software-related inventions is a viable
solution to the problems that exist with the current legal
regimes, including patents.
Recent experiences of two types highlight the reasons for
these concerns.  First, the 1976 amendments to the Copyright
Act, an existing statute I might add, took well over a decade
to become enacted.  Given the number and diversity of views on
technical, financial and legal matters relating to software
protection and software patents, it seems likely that a new
statute could easily be a decade in the making.
During that time we would still have to get along with the
system we now have.  And as we know, a decade in the software
industry is virtually an eternity.  Moreover, even if a
suigeneris act were enacted, it would necessarily introduce
enormous uncertainties into the subject until years of case
law development had clarified the many inevitable issues.
We have lots of uncertain areas now within the existing legal
framework, but those uncertainties would seem very small
indeed compared to the issues that a clean slate approach to
this subject would introduce.
WordPerfect in sum believes that the existing statute,
regulations and case law are capable of providing an adequate
framework for assessing the patentability of software-related
inventions.
WordPerfect also believes, however, that two major
deficiencies in the application process which have led to
enormous expenditures of nonproductive effort and money by
software companies need to be addressed.
Time and again software companies have had to respond to
patents that should not have been issued because they are, in
fact, obvious over very close but non-cited prior art, and to
patents that issued a decade or more after the initial
application was filed during which time entire related
industries have developed, unaware of what I have called
buried land mines.
These consequences must be avoided if the health, growth and
worldwide competitiveness of the United States software
industry is to continue.
First on the issue of the obviousness of some of the patents. 
Too many software-related patents have issued despite the
existence of very close prior art, art which was not found
during the examination process.  Mr. Secretary, you, yourself,
have highlighted what has become the most glaring example of
this type of patent in the Compton New Media patent issued in
August of '93.
You ordered a reexamination of this patent because it cased a
"great deal of angst in the industry."  The PTO to its credit
departed from normal procedure when it decided to consider
additional prior art from the public during the reexamination
of the Compton patent.
This action clearly demonstrates the PTO's recognition of the
underlying problem, that much of the prior art in the area of
software-related inventions is not embodied in patents while
existing searching techniques focus on patents.
Clearly, the archive of prior art in relevant areas needs to
be significantly improved.  And the PTO's ability to access
that prior art must be greatly enhanced.
In speaking for the BSA, Diane Callan mentioned the
possibility of industry assistance to the PTO in setting up
databases for prior art with respect to software-related
inventions, in providing necessary software tools to ensure
meaningful access to those databases and in assisting with
training of examiners in these areas.
I'm here today to tell you the WordPerfect Corporation is also
ready to participate in that enterprise.  We are ready to do
our part in helping the PTO improve the examination process. 
I encourage all similarly situated software vendors to
participate in a like manner.
In addition, WordPerfect believes that giving third parties
the right to file oppositions to allowed applications would
further benefit the PTO and the public.  Oppositions would in
essence deputize the concerned public.  They would enable
people with the best knowledge of the subject matter to submit
prior art which was not located by the examiner.
In this way the PTO would be assisted, often by experts in the
field, in identifying the most relevant prior art.  At the
same time the interested public has the opportunity to prevent
the issuance of an undeserved patent that would otherwise
become a scarecrow in the art.
Again, consistent with the BSA statement, WordPerfect's
support for the availability of an opposition proceeding is
based on the expectation that first the failure of a party to
file an opposition would not in any way affect the presumption
of validity of an issued patent, either as to that party or
generally; and second, any opposition that is filed would be
completed in a relatively short period, so as not to unduly
delay the issuance of the patent.
Second, on the land mines issue a very small proportion of
patents carry a substantially and unfairly disproportionate
weight upon being granted.  These are often patents that are
issued 10, 20 or even more years after the initial application
was filed.  Often such patents rest buried in prosecution or
the public, not knowing about them, develops whole industries
related to their subject matter.
Such patents often don't really issue so much as blow up in
the unsuspecting public's collective faces.  Enormous
royalties are often demanded by their owners who have been
watching the industry develop, and in many cases drafted
claims to read on the products and processes of those
industries, taking advantage of accidental disclosures in
their applications that can be stretched and tortured to
support claims they never considered making until others made
the inventions.
The patents then go into expensive and protracted litigation. 
Two examples make this point.  The first is, in 1990 Gilbert
Hyatt's patent for a computer on a chip issued.  The original
application had been filed in 1970 when most of today's
computer companies were not yet even contemplated.  Yet
industry analysts have estimated that Hyatt's patent portfolio
may be well worth over $100 million during its 17-year life.
A second example, Jerome Lemelson owns a number of these long
hidden patents.  For example, his Patent Number 753 covering
a bar code scanner issued on July 7, 1992 from a continuation
application filed in 1989.  However, the original application
was filed in December of 1954 and was followed by 11
continuation, division and continuation in part applications.
In 1992 alone Lemelson's attorney, who according to the
American Lawyer Magazine earned more that year than all the
combined partners of Krabath, Swain & Moore and Winston &
Strong combined -- I assume to the chagrin of the partners at
Krabath, Swain & Moore and Winston & Strong -- negotiated over
$400 million in settlements regarding Lemelson's patents.
A racketeering and anti-trust suit filed against Lemelson
cites Lemelson's attorney as having written that "Some of
Lemelson's pending patent applications were being refined to
encompass explicitly the processes that manufacturers were
already using in their factories."
Even Judge J. Plager, Circuit Judge of the U.S. Court of
Appeals for the Federal Circuit acknowledged this problem in
a recent interview by the Journal of Proprietary Rights.  As
you may know, Judge Plager did not have a patent law
background prior to taking the bench on the Federal Circuit. 
Even so, during the interview on May 12, 1993 Judge Plager
supported the idea of switching to a fixed patent term from
the date of filing, noting that even in the short time that he
had been on the court, which is approximately two plus years,
he had picked up "some of the things that go on, the delays
that are built into or allowed by the system, all of the
things that you can do to game the system."
Thus, WordPerfect wholeheartedly welcomes the PTO's inquiry
into legislation which would change the life of a patent to
one that expires after a fixed period of time from the
original filing date of an application or its earliest parent.
Similarly, WordPerfect urges the PTO to support the
publication of all pending applications a fixed time after
their filing dates.  In these ways, most of the buried land
mines would be disarmed or at least have their explosive power
lessened, enabling the public to travel a safer landscape of
software development.
Finally, WordPerfect requests that the PTO consider one
additional item not mentioned in the BSA presentation.  That
is the vast extension of patent claims by unreasonable
application of the doctrine of equivalence to cover
software-related inventions which are vastly different in
spirit and content from the invention disclosed in the patent.
WordPerfect recognizes that the doctrine of equivalence has a
place in patent law and that there are times when the choice
between implementing an invention in hardware or software is
determined by a variety of factors which do not alter the
basic nature of the apparatus or process in question.
However, in other cases the basic nature of the invention as
described in a "hardware" patent is qualitatively different
from a software implementation.  In those cases I suggest the
doctrine of equivalence has been applied beyond any reasonable
scope.
Thank you for the opportunity to present these remarks.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Thompson.  I'd
like to ask you a question or two if you don't mind.
First, a fairly short one, and I think you've obviously given
us the answer, but just to put it on the record, when we were
in San Jose, one of the witnesses presented a chart and it
showed all of the patent applications that had been filed by
various computer software companies.  As might be expected, it
showed that we had, you know, the largest number in companies
like IBM, General Electric, Digital Equipment and so on.
The point was made that some of the most rapidly growing and
innovative companies in the business in the last ten years
have filed very few applications.  You got down to Microsoft
and -- I don't know -- there were maybe 13, I think, or 15
applications and the Lotus Development Corporation had about
7; WordPerfect had none.  And this was used to indicate that
-- basically as a result, I think the message was that
certainly the microcomputer industry could do just fine
without any patent protection at all.
And yet I don't hear you saying that.  Is it your view that
the industry has matured to the point that, you know, patents
should be a part of the options available to you now, even
though you have not -- obviously, any applications that you
may have pending are confidential -- but you haven't had any
issued?
MR. THOMPSON;:  We actually have had three issued.  I am not
sure where that information came from.
COMMISSIONER LEHMAN;:  I guess the information we got then was
incorrect.
MR. THOMPSON;:  Yes.  We actually have had a number issued and
we have a number in process.
This is a difficult question, Mr. Secretary, because we're
asking really at the base root whether or not we believe
patents are a helpful aspect of this industry.  I think that
it's been the position of the owners and most of the employees
of WordPerfect Corporation for a number of years that patents
are not good news for the software industry.
However, I believe the time for making that argument passed
many years ago and we are now at a point where we simply have
to say, if they are part of the landscape how can we best
ensure that they become a workable part of our business plan.
I have to say that WordPerfect Corporation has been surprised. 
There is a certain lag effect in the patent process, isn't
there?  There's not a real hurry up and let's start getting
our patent portfolio in shape.  There's a certain lag effect
here and it takes a period of years for companies to develop
process and methodology to see that patents are made a part of
the everyday development process.
And certainly that's the case of WordPerfect Corporation. 
Three years ago WordPerfect Corporation essentially had one
patent application in process.  Today we have many.  We are
considering hiring in-house patent counsel.  We consider it an
unfortunate circumstance, but a necessary circumstance.
COMMISSIONER LEHMAN;:  I gather then that the reason that
you're filing patent applications is by in large from a
defensive point of view?
MR. THOMPSON;:  Absolutely right.
COMMISSIONER LEHMAN;:  Some of the other witnesses in San Jose
indicated the same thing.
The next question I wanted to ask concerns, you referred to
the Commissioner's order of reexamination in the Compton's
Multimedia case.  Again in San Jose we heard a number of
situations listed, a number of patents which had been issued,
which some of the witnesses there, at least one or two,
thought were similarly questionable.
Obviously, one of the things that we could conceivably do is
to make better use of that, of our own powers to order
reexamination and perhaps make a review of some of the patents
that are -- where there is some question about whether or not
we have gotten all the prior art.  What would you view about
that be?  Would you encourage or discourage us from using that
Commissioner ordered reexamination?
MR. THOMPSON;:  I think that's a healthy thing for the
industry and certainly the most efficient thing that can be
done at this point in time.  As you may know, WordPerfect and
other companies are being threatened, a number of claims of
infringement on patents that we believe simply should not have
been issued and the prior art searches that we have done, I
think, would be very useful for the PTO.
COMMISSIONER LEHMAN;:  But I gather that in those cases you
haven't chosen to use the reexamination procedure yourself.
MR. THOMPSON;:  Not yet, no.
COMMISSIONER LEHMAN;:  And I asked also about that in San Jose
and I'm -- just in the interest of time; I don't want to spend
an hour on cross examination here, so I'll lead the witness a
little bit -- the answer that we got as to why companies who
feel that they have prior art that clearly might invalidate
some of these patents, they don't want to bring that to our
attention by requesting reexamination themselves is because
they think that the present procedure basically is not their
best shot for utilizing that prior art and they don't want to
disclose it in that kind of a forum.  They'd rather save it
for the infringement law suit itself.
Do you find that figures into your strategy about whether or
not to use reexamine?
MR. THOMPSON;:  I think that's right.  I believe if we had a
better sense of the reexamination process and certainly had
the sense that it was an expedited process, one which could
bootstrap us ahead of where we would be through the private
negotiations in the litigation that would be something we'd be
very attracted to.
COMMISSIONER LEHMAN;:  Well, unless any of my colleagues have
any questions, thank you very much.
MR. THOMPSON;:  Thank you.
COMMISSIONER LEHMAN;:  As I indicated, we are running a little
bit ahead of time and it would be very helpful to us in
getting through our afternoon more quickly if we could fit in
at least one or two of the afternoon people.  So I've
indicated that Richard Jordan -- is Richard Jordan here?
MR. JORDAN;:  Yes, I am, sir.
COMMISSIONER LEHMAN;:  Great.  Would you mind coming forward? 
Presumably you'll be as prepared now as this afternoon.
Richard Jordan, Patent Counsel to Thinking Machines
Corporation.  I hope you'll notice this new level of customer
service that we have here.
MR. JORDAN;:  Thank you very much.  It's very much
appreciated.
COMMISSIONER LEHMAN;:  We're on the Internet.  We've got all
our hearings printed up.  We've got refreshments in the lobby. 
We haven't yet gotten them for free, but we're working on
that.
PRESENTATION BY RICHARD JORDAN
THINKING MACHINES CORPORATION
MR. JORDAN;:  Mr. Commissioner, ladies and gentlemen, my name
is Richard Jordan.  I'm Patent Counsel with Thinking Machines
Corporation.  By way of background, Thinking Machines
Corporation was founded in 1983 to develop, manufacture and
sell massively parallel super computer systems.  Thinking
Machines products are an outgrowth of research undertaken
principally by its chief scientist, Danny Hillis while he was
a graduate student at MIT.
Since Thinking Machines announced its first product, the
Connection Machine, Model CM-1 super computer in 1986 the
company has had excellent revenue growth and revenue from
massively parallel super computers is believed to be the
largest of any company.
However, it should be noted that its revenue is much less than
that of a number of other companies in the computer industry,
both domestic and foreign, including companies in the
traditional super computer field as well as those principally
known for selling computers and more conventional
architectures, many of which I should say are developing
products that are competitive with Thinking Machines.
Over the past several years the computing power of massively
parallel computing technology has been emphasized by a number
of awards relating to Thinking Machines' technology.  Since
1990 the IEEE, the Institute of Electrical and Electronics
Engineers, has given its Gordon Novell Award for computing
speed to several teams, including Thinking Machines employees
for programs processed on a connection machine super computer
and for compiler technology.
The importance of massively parallel computing technology has
also been recognized by articles in journals such as the
Scientific American and newspapers such as the New York Times
and the Wall Street Journal.
A connection machine computer achieves its computing power
through a combination of hardware and software, unlike a
conventional computer which uses one or only a few powerful
data processors on masses of data, the hardware of a
connection machine computer includes tens, hundreds, or even
thousands of microprocessors which operate in parallel on
relatively small amounts of data that are distributed to them.
The individual microprocessors are interconnected by a data
routing network which allow them to share data as necessary
and the software effectively coordinates the operations of the
individual microprocessors and the routing network to achieve
tremendous computing power.
While the hardware is important to the computing power
achieved by a massively parallel computing system, at least as
important as the advancement in software techniques.  Many
advancements have come in the development of parallel
algorithms and computing techniques; the pattern of assignment
of data to processors to minimize processing time; techniques
for rapidly routing data through the routing network; compiler
techniques; the development of high level languages and
compilers to make massively parallel computers easy to use.
Thinking Machines currently has a staff in excess of 500, of
whom approximately one-third are involved in hardware and
software engineering development.  Of these engineers only
about 30 percent are involved in what might traditionally be
referred to as hardware development, while fully 70 percent
are involved in software development.
In addition, a number of other employees actively develop
software in Thinking Machine's large customer service group
developing software techniques specifically for or with
customers.  It is manifestly evident that Thinking Machines
software development effort represents a very significant
portion of its investment in massively parallel computing
technology and Thinking Machines believes that patent
protection provides an important tool to help protect this
investment.
Thinking Machines further has an ongoing program to encourage
its developers to publish papers and articles describing new
parallel processing techniques.  This provides information on
new uses for massively parallel computing technology and
techniques and may also help to enhance the professional
standing of its employee authors within their professions.
Published papers represent divulgation of technology for which
Thinking Machines has provided often considerable investment. 
And Thinking Machines believes that patent protection can be
an important tool to protect this investment as well,
particularly in view of the substantial degree of competition
that's developing in the marketplace.
Thinking Machines, unlike some larger companies, does not
require its employee's papers to be cleared, that is
scrutinized to determine whether they describe technology
which the company may wish to protect, before the papers can
be sent out for publication, but it does actively file for
patent protection on technology to be described in the papers.
Thinking Machines recognizes that computer software is also
protected by copyright, but it believes that copyright will
not provide the degree of protection required to protect its
investment.  First, the scope of copyright protection is far
from clear and has been made less clear in recent years in
view of the Second Circuit's opinion in the Computer
Associates case.  It's generally said that copyright protects
the expression of a work and not its idea.
While these words are easy to say, it's very difficult to
apply them in practice.  Furthermore, the application of 17
U.S.C. Section 102(b), which exempts from copyright protection
ideas, processes, methods and so forth regardless of the form
in which they're described, further renders uncertain the
degree of protection provided by copyright.
Much of the value in the program related techniques developed
by Thinking Machines is not in the detailed computer program
code, which is clearly protected by copyright, but in the
algorithms, programming techniques for which copyright
protection is far less clear.  Similar ambiguities are not
present in patent protection.
Furthermore, patent protection is important in view of the
publishing by Thinking Machine's employees, which disclosed
the algorithms and techniques to the world and particularly to
the competition and in view of the fact that copyright
protection may not protect against reverse engineering.
Accordingly, Thinking Machines believes that patent protection
for computer program related inventions is an important tool
to protect its investment.  That being said, Thinking Machines
believes it important that the patent system maximize the
likelihood that the patents issued are valid, that the claims
are directed to new, useful, and nonobvious technology in
accordance with the statutory mandate.
It does no one any service if patents are issued that do not
meet the statutory standard.  While no one can reasonably
expect that any institution run by human beings can be 100
percent perfect, we believe that enhancements can be made to
improve the system.
And I might mention that while we're here discussing patent
issues relating to computer software-related inventions, these
same problems can arise in connection with computer hardware
and indeed in any technology.  The problems may be exacerbated
somewhat in the software area since the PTO for a number of
years was reluctant to consider computer program related
inventions to be statutory subject matter -- a reluctance that
to some extent still continues -- which delayed its
development of a prior art database in this area.
However, there is no industry in which all of the technology
is patented or otherwise published.  Several changes to U.S.
procedure may be appropriate to provide for early publication
of the applications.  This would have two advantages.  First,
it would ensure more timely publication of the technology,
making it available to those working in the industry.  A
publication delay of one to one-and-a-half years after
submission to a paper is not atypical for engineering and
scientific journals, but for patents, particularly in this
subject matter, a much longer delay is more typical.
With developments in computer technology moving as rapidly as
they are, the patent disclosure after such a lengthy delay may
be somewhat less valuable as a source of technical
information.
Second, early publication can also operate as early
notification to others working in the field of the potential
issuance of a patent, allowing them to favor that into their
business decisions.
The potentially lengthy delays to patent issuance under
current practice in the United States means that others
working in the field would not be notified that a patent
application is pending that may cover something they are
developing until the patent actually issues, which can be a
number of years after its original filing date and perhaps
after much time and money has been invested in the potentially
infringing enterprise.
Third, early publication followed by an examination in a more
contemplative environment than would be possible in the
current push for a reduction in the pendency period would
provide a better patent upon issuance.  For example, if a
patent issued on the original application with the
approximately 18 month pendency period as currently suggested
by the PTO, the prior art from foreign patent offices would
most likely not be available for consideration by the U.S.
examiner.
Having this prior art is particularly important in the
computer area.  It makes for a more complete examination and
a higher degree of confidence in the validity of the patent. 
Typically such prior art is not available until around 18 to
24 months after the priority date and an 18 month pendency
time would mean that the art would not be available until just
around the time the U.S. patent would be issuing.
If the art were deemed material and the application still
pending, the applicant would likely have to file a
continuation application to get it considered, which could
delay issuance to the patent and publication of the technology
for an even greater amount of time and require additional
expenditure by the applicant of another filing fee.
On the other hand, if the U.S. patent had already issued the
only ways to have the art considered would be by reexamine or
reissue, both of which can be costly.  In addition, it puts
too much stress on the Patent Examining Corps which can have
problems with retention of examiners.
These problems can be alleviated by a few relatively simple
changes to the prosecution procedures and the PTO.  First,
they can publish the application 18 months from the priority
date, preferably with a search report so that the applicant
can have it and ideas to the likelihood of being able to get
a patent.
In addition, the public should be brought into the process at
some point, perhaps by way of an opposition proceeding just
before or after issuance.  It would alleviate the secrecy
problem, things going into the Patent Office.  But you have to
make sure that oppositions are conducted and restricted here
as to procedures and time frames, otherwise they can run on
interminably.
Another way that the system can be improved is by holding
ongoing dialogue such as these hearings to get input from the
Bar and others who have interest in the patent system.
Wearing another hat, I am also Chairman of the Electronic and
Computer Law Committee of the AIPLA and our committee
leadership has for a number of years been meeting with the
group directors and others in the electrical examining groups
to discuss issues of mutual concern.  We expect to hold
another meeting in April, of which we hope to discuss among
other things, some of the issues raised by the notice for
these hearings.
An outgrowth of earlier meetings was a program held last
October in conjunction with the AIPLA's annual meeting that
was extremely well attended by examiners from the Examining
Corps and by members of the AIPLA.
At the program a number of problems and practice issues of
concern to the Examining Corps and to the Bar were discussed
in detail.  Each side, so to speak, learned quite a bit of the
problems and perspectives of the others and the program
received quite good reviews and we hope to have more of them. 
Thank you very much.
COMMISSIONER LEHMAN;:  Thank you very much.  Those were very
helpful comments and I appreciate your be willing to give them
in advance of your prepared time.
MR. JORDAN;:  Thank you very much.
COMMISSIONER LEHMAN;:  I'm going to try to call one more
person in the morning session.  Is Jonathan Band here?
(No audible response.)
COMMISSIONER LEHMAN;:  How about Vern Blanchard?
(No audible response.)
COMMISSIONER LEHMAN;:  Jeffrey Berkowitz?  Mr. Berkowitz,
great.  Mr. Berkowitz is an attorney with Finnegan, Henderson,
Farabow, Garrett & Dunner.
Yesterday we had a meeting with the unions at the PTO and we
big -- we were sitting on the Partnership Council and we had
a big discussion about who should get represented and how many
representatives they should have on this.
It's interesting that we have a disproportionate
representation from Finnegan, Henderson, Farabow, Garrett &
Dunner.  I think this is about the fifth witness that we've
had in the course of these four days of hearings.  It will be
interesting to see this other face of the firm.
PRESENTATION BY JEFFREY A. BERKOWITZ
FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER
MR. BERKOWITZ;:  Good morning, Mr. Commissioner, and other
distinguished members to this panel.  I'm Jeffrey Berkowitz,
Associate with the intellectual property firm of Finnegan,
Henderson.  And like my colleague, Mr. Yoches, my comments
today are my own and not those of the firm.
I'd like to talk a little bit today about Question Number 10
in Topic B for today's hearing.  In Question Number 10 the PTO
asked for comments on how they should handle the submission of
computer program code listings, specifically the PTO seeks
comments on the following four items:
One, should the PTO require a submission of program code
listings;
Two, should the PTO require a submission of code listings in
machine readable format only;
Three, should program code listings be included in patent
documents or should they be made available only through a
publicly accessible database; and
Four, what hardships would patent applicants face if these
requirements were imposed?
In my opinion, the PTO should not require a submission of
program code listings.  The following discussion concerning my
opinions on the first item of Question 10 necessarily provides
my opinion on the remaining items.
Currently, applicants may file program code listings with the
PTO, and I emphasize the word "may," because these listings,
particularly when in machine readable format can take hundreds
of pages, maybe even thousands of pages.  It is clear that the
PTO must deal with substantial financial, printing and
logistical problems when an applicant chooses to submit a
program listing.
In an effort to deal with these problems, the PTO promulgated
37 C.F.R. Section 1.96 under which program listings must be
included in the application itself, either in the
specification or as part of the drawings if the listing is
under 11 pages in length.
If, however, the listing is 11 or more pages in length then
the listing may be submitted in the form of a microfiche
appendix, which will not be part of the printed patent, but
will become available to the public once the patent is issued. 
Some applicants choose to submit program code listings
regardless of the number of pages to ensure that their
applications comply with the statutory requirements of Section
112, first paragraph.
However, if a programmer of ordinary skill in the art could
write a program without undue experimentation from the
disclosure of the program list application, that is an
application for a software-related invention absent a program
listing, and if such a listing is not required to satisfy
other statutory requirements, for example, the best mode
requirement of Section 112, second paragraph, then the
applicant would not need to file a program code listing for
the invention.
Based on this reasoning, many applicants typically choose not
to file program code listings.  A requirement for program
listings would prevent applicants from filing applications
until product development is complete, which would further
delay the process of filing applications, examining
applications, and issuing patents for software-related
inventions.
In many of the software-related patent applications that I've
written and prosecuted, inventors have not yet completely
developed their software-related inventions to be patented
prior to the filing of the application.
Thus, there is no final program listing to be submitted with
the application.  This should not prevent the applicant from
filing an application on his or her invention.  In this
regard, it is important to note that in other technologies
applicants can and do file patent applications without having
completed product development.
Applicants also choose not to file program code listings
because filing the listings would make the entire program
available to the public, which in some cases may divulge
important trade secrets or other information that the
applicant may not need to specifically divulge in order to
secure patent protection.
Even if applicants choose to submit machine readable listings,
such listings may be reverse engineered.  As long as a
programmer of ordinary skill in the art can write a program
without undue experimentation from the disclosure of a
programless application and if such a listing is not required
to satisfy other statutory requirements, then the applicant
should not have to file a program code listing for the
invention and divulge important trade secrets.
Furthermore, a requirement for the submission of program code
listings, regardless of the form of the listings will only
further increase the PTO's burden in connection with both the
examination of software-related inventions as well as the
practical aspects related to storing program code listings and
making those listings available to the public.
Examiners do not have the time to study program listings,
regardless of the form in which they are submitted to the PTO,
nor does the PTO have resources to waste in storing the
program code listings and making them available to the public.
Some of the hardships associated with mandatory requirement
for submission of program listings are apparent from the above
discussion.  There are also a number of problems associated
with the current microfiche requirements that are worth
mentioning.  First is the availability and cost associated
with the microfiche appendix requirements outlined above.
When an applicant chooses to submit a program listing of 11 or
more pages, he or she must locate a company that provides the
microfiche services, a task that is not so easy, and spend
additional money to have the listing put on microfiche, a cost
that may be high depending upon the length of the program
listing.
Instead, if the PTO believes that it is necessary to require
appendices for program listings, I suggest that the PTO
consider more practical approaches, such as submission of
program listings on a CD-ROM or other mass storage device and
in a format that may be used by examiners to inspect
efficiently and effectively the program listings.
I believe these and other approaches are less expensive and
more accessible to inventors of software-related inventions
than the archaic microfiche appendices instituted in the
current rules.
Finally, I'm also concerned that requiring submission of
program code listings would lead to litigants unnecessarily
raising issues concerning a program listing should the PTO
adopt a submission requirement.  This, however, is beyond the
scope of these hearings.  Thank you for your time this morning
to present my views.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Berkowitz.
I understand that Ron Reiling is now here.  Perhaps you could
finish up the morning for us, Mr. Reiling.  Ron Reiling is
corporate counsel to the Digital Equipment Corporation.
PRESENTATION BY RON REILING
DIGITAL EQUIPMENT CORPORATION
MR. REILING;:  Good morning, Mr. Commissioner and members of
the panel.  Greetings from a snow-filled and bitterly cold
Boston.  I'm representing Digital Equipment Corporation.  We
are, as you may know, one of the larger suppliers of network
computers and software in the world and we invest heavily in
research and development to come up with new products and we
rely heavily on the patent system to protect that investment.
We are vitally interested in software-related inventions
because we spend hundreds of millions of dollars a year in
this area.  Creativity and innovation drive technology and
industrial progress.  Thus, the importance of adequately
rewarding the world's best minds by safeguarding their
software-related inventions through patents I believe will
increase dramatically in the years ahead as technological
advances in this field accelerate.
In today's global highly competitive marketplace, some believe
that we are witnessing a fundamental shift in business
history.  They are, we say, progressing from managerial
capitalism to intellectual capitalism.  They believe that the
importance of intellectual capital will ultimately cause a
dramatic shift in the wealth of the world from material
resources to those who control ideas and information, that is
intellectual property.
A fundamental feature of the patent system is that it
establishes a basis for this intellectual effort to be
regarded as an asset and to be traded in the marketplace. 
Thus, an effective patent system which promotes creativity by
providing a beneficial and stimulating environment for
inventors is essential for the information age.
This environment will produce a constant stream of new
products and competitive processes forging the growth of a
vigorous American economy.
Turning now to the specific issues, Digital believes, one,
that software-related inventions should be treated the same as
any other invention; that no legislative changes are necessary
in order to properly protect software-related inventions; that
increased training, as well as expanded content and better
classification of the prior art available to the examiners
would improve the examination process.
We feel it's important that patents can be obtained on all
software-related inventions, those at the operating system
level, at the application system level, those pertaining to
storage or the transmission of information, such as memory
data structures, packet switch networks, magnetic and optical
media.
We also believe that the standards for patentability applied
by the PTO for software-related inventions should be the same
as those applied to any other technology.  It would be a
mistake to single out any technology and treat it in a
discriminatory manner.
The issues related to software-related inventions have been
evolving for almost 20 years.  It appears that we are finally
approaching a point in this evolutionary process where
predictability may be possible.  It would be misguided in our
view to attempt to redirect software-related patenting at this
time by altering the established standards of review.
However, the PTO appears to have recently changed its standard
of review in certain of the software-related inventions by
ignoring novel software-related steps or means in the claims,
thereby finding the claims anticipated by prior art that does
not disclose the ignored claimed features.
This is basically a reversal of the PTO's longstanding claim
as a whole analysis in novelty determinations.  What's
happening in our view in these cases is that the PTO has
imported 101 type considerations back into the 102 and 103
considerations.
The PTO has also asked whether the implementing of a known
process, technique or method on a computer should be
patentable if but for the use of the software the overall
process, technique or method is known.  I believe the correct
answer is yes and that's provided, of course, the software
recitations in the claim present a new and nonobvious
invention.  It should not be the PTO policy or procedure to
exclude software limitations from novelty determinations.
On another point the PTO should not impose any special duty on
the patent applicants for software-related inventions under
Rule 56.  Such applicants should not be required to conduct a
patentability search.  After all, Rule 56 already encourages
all applicants in all technologies to examine carefully the
closest prior art information.
With respect to the way a software-related invention is
described no special requirements should be proscribed or
required.  Typically block diagrams are a useful to
communicate the software steps and functionality of
relationships of components included in software inventions.
Blocks within the diagrams should be deemed adequate
illustrations to support elements of both method and apparatus
claims.  Program code listings should not be encouraged.  They
should be accepted provided the specification standing alone
provides a clear and understandable description of the
invention.
With respect to administrative matters, we believe it is vital
that the PTO invest in quality.  The PTO has recently shown
improvements in timeliness and quality of examinations, but
further improvements are essential.  Congress should approve
the hiring and training of more examiners and ongoing
qualification assurance programs, including continuing
education requirements should be adopted.
The examiner should improve on the quality of Office actions
by including better explanations of rejections.  Providing
only conclusory statements of prior art rejections does very
little in advancing the determination of patentability.
Needless to say comprehensive patentability searches are
essential and we see some improvement in the PTO in the last
few years.  However, too often patent offices in other nations
encounter references, including U.S. references, which should
have been located but were not during the search by the PTO. 
This has to change.
Another possibility is the creation of an electronic database
where one could include software-related documentation and
make this database accessible to the public, so that people
could add to the database over the Internet, for example.
The patenting process we all agree should include public
involvement and we think the mechanisms to accomplish this are
already in place, but perhaps are not adequately utilized. 
For example, we could encourage the public to cite prior art
in accordance with Section 301 or the reexamination process
might be redefined to provide an incentive for early
challenges to issued patents.
One concept might be to substantially reduce the fees in the
first three months over a patent's life to encourage people to
use reexamination.
In conclusion, software-related patents are of great
significance to American industry.  We have a vast and vital
interest in software-related patents, in valid
software-related patents, and the industry is more than
willing to work with the PTO in accomplishing this objective. 
Thank you.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Reiling.  I
appreciate your suggestions, the idea of sort of a development
of an open-ended electronic database that you could get public
input in is a very interesting idea.
That concludes our morning set of hearings.  We're going to
reconvene promptly at 2:00 this afternoon.  I hope since we
have heard several of this afternoon's witnesses, I hope that
anybody that is in the room this morning that is going to be
here this afternoon will realize that, you know, they may be
called maybe even more than 20 minutes -- I hope more than 20
minutes -- before their assigned time schedule so that we can
conclude our business this afternoon early.
Thank you very much.
(Whereupon, at 12:06 p.m., the above-entitled hearing was
adjourned, to reconvene at 2:00 p.m., this same date.)
AFTERNOON SESSION
(2:14 p.m.)
COMMISSIONER LEHMAN;:  We're about to begin our afternoon
session of our third day of hearings on patent and
software-related inventions.  Before we call our first
witness, I'd like to note the fact for those who are here that
we have a distinguished visitor with us and that is Roland
Deer, who is a Director in the European Patent Office.
Mr. Deer, welcome to the United States.  We're glad you have
an interest in our proceeding.
(Applause.)
COMMISSIONER LEHMAN;:  We made quite a bit of progress this
morning and apparently our first witness that we had scheduled
for this afternoon, Michael DeAngeli has not arrived and,
therefore, we are going to go on to Jason Mirabito, Board
Member of the Boston Patent Law Association.  So if you would
join us, please, Mr. Mirabito, maybe we could hear from you.
PRESENTATION BY A. JASON MIRABITO
BOSTON PATENT LAW ASSOCIATION
MR. MIRABITO;:  Is that where you want me?
COMMISSIONER LEHMAN:  That's right.
MR. MIRABITO;:  I'm sorry I wasn't here this morning.  My trip
here took 24 hours to get from Boston here.
COMMISSIONER LEHMAN;:  Did it really?  I guess we had some
other people from Boston this morning who had a lot of
problems.
MR. MIRABITO;:  I missed a hearing before the Board of Appeals
this morning at 9:00, so I made it for this.
COMMISSIONER LEHMAN;:  We're sorry about that.  Just relax
now.  Tell us what you think.
MR. MIRABITO;:  Thank you.  Good afternoon, Commissioner,
gentlemen.  My name is Jason Mirabito and I am a partner at
the Boston patent law firm of Wolf, Green, Field & Sax.  I'm
here to testify on behalf of the Boston Patent Law
Association, which is an Association of some 400 members, of
which I am the past-President.
In the short time available to me today I wanted to
concentrate solely on the issues of Topic B.  While I was
trying to prepare my remarks earlier yesterday, figure out
what I wanted to say, I questioned, why is this area different
from other areas and why does this area seem to be so fraught
with problems that other areas of technology have not been.
An example of that is the biotechnology area.  I guess I came
to the conclusion that in the biotechnology area, where there
has been a lot of patent activity in the last ten years, the
general thrust is to publish.  If you don't publish, you
perish.  And perhaps in this area this is an area in which if
you do publish you do perish.  That is due, I think to some
extent to the trade secret licensing status and much computer
software.
I think what's -- I don't mean this literally, of course,
because certainly computer software programs aren't published,
but the underlying processes of them are not generally
published.
Our organization recognizes that sometimes shortcomings in
both the examination process and the process of uncovering
prior art is partly due to this trade secret status of many
software developments.  We do not believe, however, that the
difficulty in searching for prior art should militate and
argue in eliminating protection for computer software and that
software only be deprived of the protection which is
guaranteed to them and to other technology holders.
We should remember that some, I guess it's 20 years ago now,
in the '70s through until 19-, really early '80s, the issue of
computer software patentability was again before the Patent
Office and the Patent Office at that time took an attitude
which I would suggest is negative towards the patenting of
computer software.  It finally took a Supreme Court decision
to change that around.
As I see Topic B there are two main themes there.  The first
theme being what can be done to better examination and what
can be done to better the discovery of prior art.  And the
second is the disclosure of software inventions.
As to the first series of questions, we suggest that the
Patent Office needs to be appropriated more funds and the
Patent Office, like every other agency always likes to hear
that.  But I think those monies are needed to better index
software technology and to train examiners.
COMMISSIONER LEHMAN;:  Can I interrupt you?
MR. MIRABITO;:  Sure.
COMMISSIONER LEHMAN;:  You know, we don't receive appropriated
funds.  We're by law fully fee funded.  Does that mean you
think we should increase the fees to support this?
MR. MIRABITO;:  Definitely not.  I've always found it
interesting that this is one of the few agencies that's
required to be somewhat self-sufficient while every other
agency -- although I understand now the FDA, they're talking
about the FDA charging for the analysis they do.  But I've
always found that very curious that we're expected to, we the
public are expected to, fund an agency.  The defense agency
certainly does not have that problem.
I think if the Patent Office gets the required funds and gets
the better training for the examiners, particularly hiring
more computer software trained examiners, people with majors
in computer science, I think the Patent Office can do what the
biotech group did earlier and will rise to the occasion.
With respect to the issue of so-called hidden prior art, this
is a very real problem.  There are allegations that the
so-called prior art has been sitting in software programs and
on people's computers for years and years.  I think to the
extent it's true -- and I think there is some truth in it --
that it is very difficult to search some computer technology,
that the Patent Office should, as the Commissioner did
recently in the Compton's patent case, order reexamination.
We, as an organization, are in favor of an expanded
reexamination procedure within the Patent Office that would
include all the traditional reasons for unpatentability.  This
would require a slight change to the reexaminations, statute
and procedure, but not very much at all.
Secondly, I think another thing which may ameliorate the
problem that may exist with so-called bad patents being issued
is when the United States, if it does go to a publication
system, I think a publication system would eliminate some of
those problems because then people would be advised of
potential patent rights and then have a right to make
opposition to those rights.
I would suggestion this, however, in a day in which most
foreign countries have publication within 18 months of the
earliest filing date, in many instances, both in software and
other areas, one may not even get a first Office action by
that point.  This is an area in which the owner of the
technology will make a decision whether to stick with trade
secret protection or to opt the patent mode.
I think an 18-month period is too short sometimes.  What we
would suggest as a change to that would be that a period of
time after the first Office action has been issued, say three
to six to nine months there would be publication that would
then allow the applicant to see what the prior art looks like
and make a determination at that point whether or not to
continue on with it.
I would like now to turn briefly to some of the issues that
are related in the second theme, that of disclosure to the
Patent Office.  I've been practicing in this area since at
least the early 1980s when one could practice in this area or
unless you flip back to the 1960s.  I'm not that old.
One, question three posits whether the Patent Office should
impose special disclosure standards on software-related
inventions.  We firmly believe that such a disclosure
requirement would be inappropriate as there is no reason for
treating software-related inventions differently than other
patentable technology.  So long as the disclosures meet the
requirements of Section 112 and other requirements, we don't
believe there should be any other changes.
Question six questions whether the applicants for
software-related inventions ought to do a prior art search. 
Such prior art search, of course, is not required in other
areas.  We believe it would be inappropriate to require a
prior art search.  Obviously, myself and other of my
colleagues will from time to time do a prior art search for a
particular invention but not always.  We always have, of
course, our great duty of disclosure rules which would take
care of any prior art of which the attorney or the inventor is
aware is not disclosed.
Questions 7, 8 and 9 I kind of jumbled together and relate to
the most effective way to describe software and patent
applications.  This is something that myself and some of my
colleagues in the early 1980s started having to deal with. 
The issue became, well, do we include codes, do we not include
codes; do we use flow charts, are flow charts sufficient.
I've seen a tendency and a change over time.  In the very
beginning, the early '80s, we always included code because you
never know just disclosing flow charts may not be sufficient
and you don't want to get caught with a nonenabling patent.
Then we shifted over in the later times to flow charts are
sufficient.  I see now people flipping back again.  I guess
the point I'd like to make is that there is no best way. 
Certain inventions are best described by the code.  Certain
inventions are best described by flow charts or pseudo code,
and certain inventions, such as combinations of hardware and
software, are very unclear how they should be described.
The bottom line again is Section 112.  Is the description
sufficient to meet the requirements of the statute?  A related
issue to the requirements of requiring that a list patent
software -- I'm sorry -- computer software listings be
included as a requirement I think would be inappropriate.  It
is akin to me to requiring that applicants for mechanically
related inventions disclose to the Patent Office the detailed
blueprint drawings that make up the machine under issue there.
I think that would be improper in that case; it would be
proper in this case.  In addition, required computer software
listings and software-related inventions would prevent those
who wish to file an application and get a constructive date of
reduction to practice prior to writing the code.  I think that
would be another problem with that.
There are many other issues and comments we would like to make
had we had an unlimited amount of time which, of course,
doesn't exist.  But we expect our organization, and we are now
planning to give many more detailed submissions in the written
March details.
We thank you for the opportunity to have spoken to you and
wish you very good luck in what I think will be very
interesting endeavors.  Thank you.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Mirabito and
thanks to the Boston Patent Law Association.  As I recall you
testified or the Association testified in the last hearings
that we had here on -- I think it was the harmonization
hearings.  They also came before us.
MR. MIRABITO;:  That's correct.
COMMISSIONER LEHMAN;:  Thank you for putting in your work as
an Association and for, you know, going through all the
trouble to get here with the weather.
Next, I'd like to ask Jonathan Band if he's here to come
forward.  Mr. Band is an attorney with Morrison & Foerster.
PRESENTATION BY JONATHAN BAND
MORRISON & FOERSTER
MR. BAND;:  I am Jonathan Band, a partner in the intellectual
property group of the Washington, D.C. office of Morrison &
Foerster.  The views I express here today are my own.
I attended the PTO hearings two weeks ago in San Jose and I
would like to share with you three observations based not on
the testimony which you heard, but in my conversations with
many of the Silicon Valley spectators.  This is, if you will,
a report from the Peanut Gallery.
First, using Ron Lorings' perceptive classification a small
but not insignificantly minority of the audience fell into the
software patents are bad category.  While the majority fell
into the bad software patents are bad category.
By further discussions with the software patents are bad
adherence revealed that they were confused and frustrated by
the case law and patentability or software-related inventions
and that they had no confidence in the ability of the PTO to
search the prior art.
This suggests that if the PTO successfully addresses the
concerns of the bad software patents are bad people, many of
the software patents are bad people will be satisfied as well.
Second, and following from the first point, I detected a
strong mandate for serious procedural reforms that would
improve the quality of software patents and eliminate
submarine patents.  The PTO has already announced that it will
introduce legislation establishing a 20-year term from filing
and reforming the reexamination process.  These proposals met
with near universal support in San Jose.
There was also strong support for pre-grant publication of
applications and reform of the continuation and division
practice.  The PTO should give these and the many other
amendments suggested close consideration.  As the PTO reviews
these proposals, it should place the interests of the
inventing community ahead of those of the Patent Bar, the
primary beneficiaries of the current obfuscation and
litigation.
Reform of the system to make it simpler and more predictable
while eliminating the game playing and the lawsuits would be
a lasting legacy of the Clinton Administration in the
technological history of our nation.
And speaking of game playing in the Patent Bar, the current
hopelessly confusing state of the case law on the
patentability of software-related inventions means that the
success of the software patent application turns more on the
cleverness of the patent lawyer than on the quality of the
invention.  This, of course, is backwards.
The PTO should establish a commission consisting of
programmers, law professors, practitioners and jurists to
establish some order in this area.
My third observation on the San Jose hearings is that there's
an underlying concern in the inventing community that in the
past decade the pendulum may have swung too far from too
little intellectual property protection to too much
protection.
As Judge Kazinski of the Ninth Circuit has observed,
overprotecting intellectual property is as harmful as
underprotecting it.  Judge Kazinski further notes that
creativity is impossible without a rich public domain.  For
this reason the intellectual properties are full of what Judge
Kazinski calls careful balances between what's set aside for
the owner and what's left in the public domain for the rest of
us.
Because patents and copyrights are monopolies created by the
intellectual property laws, regulation of those monopolies is
the responsibility primarily of the intellectual property laws
and only secondarily of the anti-trust laws.
Given the PTO Commissioner's emerging role as the
administration's intellectual property policy advisor, the PTO
must be vigilant about maintaining the balance between
protection and competition.  Thank you for your attention.
COMMISSIONER LEHMAN;:  Thank you very much for those comments. 
I really don't have any questions.  They simply strike a
responsive chord on my own thinking.  I thought that was a
good description and analysis of our San Jose hearings.
Next, I'd like to call Michael Chakansky.  I hope he's here. 
We're running a little outside of the 20 minutes.
If not, is Paul Heckel here?  I did not see him.  Well, we're
going to have a quick hearing this afternoon.
Leonard Suchyta, from Bellcore, Bell Communications Research,
General Attorney there.
PRESENTATION BY LEONARD CHARLES SUCHYTA
BELLCORE, BELL COMMUNICATIONS RESEARCH
MR. SUCHYTA;:  Good afternoon.  My name is Leonard Charles
Suchyta.  I'm a patent attorney and I'm also the Assistant
Vice President and general attorney for the intellectual
property managers for Bell Communications Research, Inc., more
commonly known as Bellcore.
The views that I will be presenting today are the views of
Bellcore.  On behalf of Bellcore and myself, we express our
sincerest appreciation for the Patent Office permitting us to
present our views on this important matter.
A short history of Bellcore.  Bellcore is owned by and is a
research engineering organization of the seven regional
telephone companies which was established in 1984 as a result
of the divestiture of what was known as the Bell System.
Bellcore's research activities are in support of the exchange
and exchange access telecommunications services offered by
these companies and a large part of these activities are the
development and the maintenance of software systems utilized
in the provision and the administration of the exchange and
exchange access telecommunication services.
Revenues for Bellcore are roughly $1 million and they have
slightly less than 7,000 employees, most of whom are employed
in New Jersey.  Software development and maintenance is a
significant portion of these activities, in that of the 7,000
employees roughly 3,000 Bellcore employees have this type of
function.
More from a perspective point of view, there are roughly 4,500
technical employees at Bellcore with approximately 2,100
actually performing software-related services.  The software
that Bellcore develops costs in excess of tens of millions of
dollars to develop and these are protected both by patents and
copyrights as well as by trade secrets.
As a result, Bellcore views patent protections for software as
critical to the protection of the investment of Bellcore and
its owner companies and the rate payer ultimately.  Bellcore,
while not offering any detailed testimony on Topic A, would
like to set forth for the record that it strongly favors
patent protection for software-related inventions.  When
Bellcore provides its written comments it will certainly
provide detailed comments with respect to Topic A.
With respect to Topic B, Bellcore would like to address the
specific questions that were raised in the notice of the
hearing.  First of all, do the patents and the printed
publications provide examiners with a sufficient and
representative collection of the prior art to assess novelty
and obviousness.  We believe that patents and the printed
publications provide sufficient prior art.
We base this conclusion on the fact that major companies who
are actively seeking patent protection utilize patents for the
protection and also publish.  This includes Bellcore.  We
believe that publication as well as patent protection is
especially true for the computer and the telecommunications
industries.
However, we are well aware that prior art collections can
always be improved.  As a result, Bellcore has agreed that it
would voluntarily submit nonproprietary software publications
to the Patent Office's library to assist them in their
collection for prior art.
The next question that we would like to comment on is, can an
accurate measurement of the ordinary level of skill in the art
in the field of computer programming be derived from printed
publications and issued patents.  The answer is yes.
The ordinary level of skill for a software-related invention
is the same as that as for any other invention.  It makes no
difference whether they be software or hardware.  There is an
assumption that software patents are those inventions
conceived by programmers or they're somewhere down at the
programming level.  This is generally not the case and
certainly this is not the case in the case of Bellcore.
The software-related inventions for Bellcore, which we seek to
protect by patents, come from software systems designers whose
tasks are to conceive and to define the various functions and
their interrelationships which can then be combined to
comprise the software system.  The inventive aspects are
generally found with these tasks, not with the detailed coding
implementations that are left to other non-highly-technical
people.
The third question is:  Should the PTO influence a special
duty on patent applications for software-related inventions? 
We believe that the requirements of Rule 56 are sufficient and
we do not believe that software-related inventions should be
treated any differently from those afforded any other patent
application for other technology.
We would, however, be receptive to helping the examiner to
identify the areas of search or to comment on those references
where the examiner has some difficulty finding their
relevance.
The next question is:  Do the standards governing novelty and
obviousness as applied by the PTO and the federal courts
accurately reflect the inventive activity in the field of
software design and development?  Our answer is yes.
Novelty and obviousness are statutory standards that are
equally applicable to software-related inventions as well as
to other inventions.  The fact that you mentioned hardware or
software should not change that statutory standard.
The next question we'd like to address is:  Should the PTO
require applicants for software-related inventions to conduct
a search and include copies of documents?  We believe the
answer is no.
The applicant for a software-related invention should not be
required to undertake any additional obligations other than
those set forth in Rule 56 and we believe that Rule 56
adequately sets forth the standard.
The last item we'd like to comment on is the format that
software applications should take.  Should the filing of
source codes be required?  Our answer to that is, when we file
software-related applications, meeting the requirements of 35
U.S.C. 112 is sometimes very troubling.  Also sometimes
uncertain and we do not believe that the filing of the source
code serves any particular beneficial purpose, the same for
the object code.
The patentable methodologies and the techniques of
software-related inventions are really best described by some
detailed specification that's accompanied by drawings which
include flow charts and block diagrams.  To require the filing
of source code or object code would do little to meet the
requirements of Section 112 since the source code and the
object code may not even be readily understandable by those
skilled in the art or by the patent attorneys who are actually
preparing and filing the patent applications.
In fact, the source code and the object code may even serve to
obfuscate the patentable subject matter.  The obfuscation
would especially be true where the amount of the source code
or the object code filed is so large as to make it superfluous
and/or nonintelligible.
Also the source code or the object code may not be
sufficiently annotated to provide any source of information or
it just simply may not be directed to the patentable aspects
of the invention.
It is our position that the filing of the source code should
not be required and, in fact, should not even be permitted
because we believe that it will do nothing to facilitate
searching and that it is really contrary to some of the other
protections that -- I'm sorry.
Also we believe that the filing of the source code may not be
appropriate in certain circumstances since it really may
disclose the trade secret aspects of subject matter which is
not the subject of the patent application.  This certainly is
not consistent with requirements nor the objectives of the
other forms of statutory protection.
Once again, on behalf of Bellcore we thank you for permitting
us to be heard on this important matter.  And if you have any
further questions we would be more than happy to answer them. 
Thank you very much.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Suchyta.  We
appreciate the time you have put into this and Bellcore has.
I'd like to go back now and see if Michael Chakansky has
arrived.  Apparently not.  And I don't think Mr. Heckel has
arrived either.  I think we apparently are having some
transportation problems up and down the east coast here.
Did Mr. DeAngeli arrive?
(No audible response.)
COMMISSIONER LEHMAN;:  Then we'll go on to D.C. Toedt.  Oh,
I'm sorry, Vern Blanchard.  I'm sorry, I missed Mr. Blanchard. 
Sorry.
PRESENTATION BY VERN BLANCHARD
AMERICAN MULTISYSTEMS
MR. BLANCHARD;:  Good afternoon.  According to Mr. Band I
probably fall within the software patents, or bad bunch and
even on a good day I think bad software patents are bad.  So
maybe we can take it from there.
I'm CEO and janitor of what's left of American Multisystems. 
I'm hopefully representative of the smaller companies which
generally don't have the opportunity to come speak before you.
COMMISSIONER LEHMAN;:  That's one reason we went to the
Silicon Valley and we had a lot more of the people who felt
that software patents were bad out there.  So we do know a
little bit.  They don't tend to have Washington lawyers as
much.
MR. BLANCHARD;:  Well, I think that's maybe why they sent me.
COMMISSIONER LEHMAN;:  Where are you from?
MR. BLANCHARD;:  I'm from San Diego.
COMMISSIONER LEHMAN;:  I see, so you came all the way.
MR. BLANCHARD;:  Yes, I did.
COMMISSIONER LEHMAN;:  Thanks.
MR. BLANCHARD;:  The patent system was enacted to promote the
useful sciences.  You've heard arguments stating that without
the patent process the software industry won't produce and it
will ultimately fail.  My belief is that until the door for
software patents was opened judicially we had a flourishing
software industry.
I believe that unless we close that door and get back to where
we used to be, the United States will be relegated to a third
world status as far as software is concerned.  Programmers are
not a stupid bunch.  When we're faced with endless and
expensive litigation and uncertainty, we're just going to
migrate to other fields.
And you, by keeping things as they are, will cause the best
and the brightest in the software industry to go to other
activities and professions.  Our innovations will be
stillborn.  The public loses when that happens.  I'll get up
on a little high horse here.  It probably sounds a little
melodramatic, but right now we have the power --
Specifically, you have the power in changing some of the rules
that will make or break an entire industry.  I believe that
software patents must be eliminated.  The patents granted over
the last decade or so are now being used to attack developers
for selling programs that they have independently developed.
We're reaching a point where new companies are going to be
barred from the software arena because most programs will
require licenses from dozens of patents.  I've seen quite a
few of them that in my opinion are absurd and were very
obvious even at the time they were granted.
By requiring the licenses it's going to make projects
unfeasible and I was one of those particular companies. 
You're going to be inundated with platitudes from both sides
of this issue -- hopefully I'll inundate you with a few things
that will change your mind -- you'll be told of lofty
principles and moral and ethical high grounds.
But the bottom line is, the actions of the PTO affect people. 
You've heard that software patents are necessary to protect
the small company.  American Multisystems is one person. 
That's me.  I'm probably typical of many start-up companies. 
And we'll get into what my story is.
I'm a pretty good programmer.  In fact, outside of this room
I'll probably tell you I'm a great programmer and lay out a
couple other descriptions of how well I can program.  In 1991
I was approached by a client who invited me to partake in the
American dream.  If I could program a bingo program I could
taste the good life, which I did.  I thought there would be no
problem at all.  Bingo is a real simple program.  It's a
child's game, in fact.
Most computer programming classes, this is first year stuff,
you design a bingo game or a checkers game or something along
those lines, very, very simple.  Besides, I had already, as it
turned out, just by coincidence, played an electronic bingo
game back in the early '80s on some OSI computers, for those
of you that remember OSI.
Certainly patent law had nothing to do with my analysis of
whether or not I could do the project.  I abandoned all my
other projects for two years.  And what you can read into that
is I did it without pay.  I saw the opportunity and I went for
it.
Ultimately I developed a superior product.  My customers liked
it.  The competition out there respected it.  Life was good. 
And then I was introduced to the patent system.  One of my
competitors sued me for patent infringement.  And irrespective
of the fact that I always believed that software was an
expression of an idea and covered under the First Amendment --
and we won't get into legal details because I'm sure there are
probably many of my colleagues out here who will take issue
with that -- besides that the fact that playing bingo on a
computer is not novel, it's not unique.  There's nothing
inherently brilliant about it.
The program that I created is nothing more than mathematical
algorithms.  And the fact is, I did nothing ethically or
morally wrong and effectively I was put out of business.
The realities of the patent system as it relates to computer
software is this --
COMMISSIONER LEHMAN;:  You need to tell us a little more how
that happened.  There are only two ways, it seems to me that
you would be put out of business.  One is that you decided to
shut your doors in the face of the patent claims from your
competitor or two, that the competitor actually enforced their
patent in some way that caused you to go out of business.
MR. BLANCHARD;:  In fact, that's what happened.  That's what
I'm getting to.  They filed suit for patent infringement.  The
patent in question covered a hand-held calculator type device
and it was broadly written enough to where since I was a
competitor they thought they could include my program, which
happened to be run on plain vanilla, IBM-clone, off-the-shelf
Comp-USA kind of hardware.
The filed for an injunction which, of course -- the problem
with the system as it is now is judges are not particularly
literate in technical issues.  When they see a patent they
presume that it's valid, as they should.  They're in a
position if the PTO says that this is a valid patent, well, of
course, it's a valid patent.  They're not necessarily schooled
in knowing the nuances of whether a particular claim reads on
an invention or not.
So initially the small company or the people that are
defendants in these actions are behind the eight ball.  We
must, even though the burden of proof is supposed to be on the
Plaintiff showing that their patent is valid, the realities
are that judges, when they see a patent, believe that the
patent is valid.
Now what the bottom line is, is when small companies are
involved in patent litigation you have just about by filing of
the suit put most companies out of business.  My particular
situation was unique.  As it turns out, I had some legal
schooling.  Everything that could possibly have gone right,
went right in my case and yet I'm out of business and I'm in
debt over $100,000.
The mere filing of a patent infringement suit will kill most
small companies.
COMMISSIONER LEHMAN;:  Does that mean you won the suit?
MR. BLANCHARD;:  Well, yes, I'm victorious.  There was
actually -- I'll take that back.  We're still in litigation. 
The state of our suit was that they filed for a preliminary
injunction which was granted.  We, of course, countered with
points that we made stating why she should overturn it, which
she ultimately did.
And, again, everything -- in my particular case things went
well.  I was able to do most of the legal work, saving
probably hundreds of thousands of dollars.  My adversary spent
more than $450,000.  Now this was just at the very first stage
and I was into it thankfully only for $100,000.
We had prior art searches done by the League for Programming
Freedom.  We found perfect prior art.  Everything went right. 
I had experts in the industry sign on and file -- and I'll
make this brief -- on my behalf.  We had a judge who after
giving a decision that said yes, this infringes and you're
restrained actually took the time to learn about patent law
and actually realized that she had made a mistake and reversed
her decision.
That rarely a happens.  I mean, how often have you heard a
judge say, I've made a mistake, here's the new ruling.  I
mean, we even expected her to say, if you don't like it,
appeal it.  Everything went right in my particular case and
yet American Multisystems is not a viable company today.
I copied nothing as far as the code.  Very simple.  Again,
it's a very simple code, playing bingo.
COMMISSIONER LEHMAN;:  Well, is that because the preliminary
injunction was lifted so that you could continue to do
business?  Why did you go out of business then?
MR. BLANCHARD;:  The cost.  We have $100,000 in legal fees,
not including all the time and effort that we were down,
patent companies -- or the aggressor in my particular case, of
course, went out into my particular industry and waved around
the preliminary injunction.  Effectively, we no longer can
partake in that market.
The realities are, is that happens all the time.  By filing
suit against the small company -- in fact, I'm sure that there
are many patent attorneys here will tell you what a retainer
will cost and what just even answering a complaint will cost
small companies.
COMMISSIONER LEHMAN;:  Was your case, your defense, based upon
the fact, the response that you did not infringe or was it
based on the validity of the plaintiff's patent?
MR. BLANCHARD;:  Yes, we took it from all those aspects.
COMMISSIONER LEHMAN;:  And apparently there hasn't been a
final judgment, so the judge has not ruled on the
patentability claim?
MR. BLANCHARD;:  No.
COMMISSIONER LEHMAN;:  On the viability of the patent.
MR. BLANCHARD;:  At this point we're still --
COMMISSIONER LEHMAN;:  And is it your view that the patent was
-- the basis of the infringement lawsuit was not valid?
MR. BLANCHARD;:  My opinion is yes, that it was not valid.  It
was written so broadly that it covered everything from a
wristwatch, calculator, computer, laptop.
COMMISSIONER LEHMAN;:  So it fell back into the second
category that Mr. Band described as bad software patents in
your view?
MR. BLANCHARD;:  Yes.
COMMISSIONER LEHMAN;:  Did you ever think of using the
reexamination procedure which would have presumably been a lot
less costly way for you to resolve this?
MR. BLANCHARD;:  Yes.  We did consider that.  The problem with
that is, by reexamining they may very well have had a good
patent as to a particular device.  But we still did not
believe that it would read on our invention.  By going and
reexamining it and coming back with you, the PTO, saying that
it's valid we then have no chance in court.
I'm supposed to stop speaking.  But if you have any other
questions.
COMMISSIONER LEHMAN;:  Well, I've kept you going.  So if you
want to -- if you have a couple more minutes, why don't you
continue because I interrupted you unlike some of the other
witnesses.  But I wanted to flesh out what the main objections
and the main points were in your experience.
MR. BLANCHARD;:  Sure.  The problem that's unique, I believe,
to software and I've heard some of the other speakers state
that software should not be differentiated from other fields. 
I was able to complete a very complex project because of the
programming tools I had available, not because of any
technique or patent or anything else that anybody had taught
by virtue of the patents.
The innovation in software is because of the tools that we
have available to us.  We can nearly instantaneously change
things, see how they will work.  The tools provide the
innovation, not the prior coding.
The overall effect if we continue to have software patents, in
my opinion hinder, the industry, is that the PTO will obstruct
that which you were charged to promote, which was the useful
sciences.  Computer programmers, we share a program all the
time.  I invite you to log onto many of the informational
services.  We help each other.  We submit code back and forth. 
And that's how computer programmers assemble pieces of code,
bits of ideas, bits of techniques into finished products.
Where computer software is different from many of the other
fields are because of the tools that we have.  Our compilers
today do things that were unheard of even five years ago, and
not because someone had patented any particular technique. 
It's just the evolution of the software process.
So I would implore you to change the rules as to software
patents to eliminate them or at least make it so that we fall
into the bad software patents or eliminate the bad software
patents.
COMMISSIONER LEHMAN;:  Thank you very much.  Now you could
help us a little bit if you would -- since we don't have the
time to get into all the details of your case.  But I assume
since you were in litigation you have memoranda or motions and
so on and so forth --
MR. BLANCHARD;:  Yes.
COMMISSIONER LEHMAN;:  -- filed in court, maybe even a
decision of the judge.  It would be really useful to have a
record to look at as an example, you know, to find out what
was really going on there, get to the bottom of your concerns. 
Obviously to the extent that, in fact, you had a truly valid
patent there and you may have, in fact, been infringing that
patent.  That creates one circumstance.
If in fact your allegations had some merit to them or your
defense did, that the initial patent was overly broad, that
suggests that it was a bad software patent, bad software
patents are bad and maybe that we should have been doing
something about that.
But we can't really get to the heart of that until we look at
some of the more details of your case.  We hear this,
certainly this statement, made.  We've heard it in the Silicon
Valley.  We've heard it from you, that there is a real
chilling effect going on here.  I would like to get to the
bottom of that.  Is that indeed the case?
And to get some very specific examples of it if people are, in
fact, having that problem, so that we can determine whether or
not there is a serious problem of widespread scope and then to
maybe address if there is how to deal with it or are these
just idiosyncratic rare circumstances that every -- and that
happens in life.
I mean every once in a while in business sometimes, you know,
you get some bad luck.  I'm trying to determine whether this
is bad luck occasionally or whether there's some systematic
pattern of problems here.  You can help us with that by
supplying what you have.
MR. BLANCHARD;:  I've got probably five feet of filings. 
Would you like them all?
COMMISSIONER LEHMAN;:  Yes, you can send them to Jeff Kushan
here and he can stay up until 3 o'clock in the morning for a
week, which he will do.
MR. BLANCHARD;:  Thank you.
COMMISSIONER LEHMAN;:  And you got his Internet number. 
Actually, it's in the witness list, I think, or one of the
handouts that's out on the table.
Next, is Mr. Heckel here yet?
(No audible response.)
COMMISSIONER LEHMAN;:  Apparently not.  Did Mr. Chakansky
come?
(No audible response.)
COMMISSIONER LEHMAN;:  Mr. DeAngeli?
(No audible response.)
COMMISSIONER LEHMAN;:  Apparently not.  Then I guess we're
down to D.C. Toedt of Arnold, White and Durkee from Texas.  I
think people are having a hard time getting into National
Airport now and he wasn't on our list until 4:30, but I don't
think we're going to be here until 4:30.
Joseph Hofstader is here, I think.
Well, I don't know quite what to do.  I think he was the last
witness.  So actually we're at the end of witnesses here. 
Yes, sir?
MR. CURRY;:  Given that you have some time, would you allow
some informal discussion?  Just for a couple of minutes.
COMMISSIONER LEHMAN;:  Well, I would permit you to come
forward if you wanted to make a statement for a few minutes
since we have time.  Let me say this, we have a lot of stuff
to do here.  We're really busy and really crunched time wise. 
So it's not like we have all afternoon to -- we have a lot of
good things to do with our time if we do adjourn the hearing
early.  But since we do have a few minutes and since these
people didn't come, I'd be happy to let you come forward and
make a statement if you'd like.  If you'll identify yourself,
please.
PRESENTATION BY EDDIE CURRY
IMAGE SOFT, INC.
MR. CURRY;:  My name is Eddie Curry.  I'm from a company
called ImageSoft, Inc. based in New York.  We're a software
publishing company.  We are right now are involved in a patent
infringement suit which has been suggested that a patent that
we're offering is infringing on someone else's patent.  I just
want to make a couple of brief remarks if I may.  I appreciate
your allowing me to speak.
I've been in the software publishing business since 1975.  I
was at a small company in Albuquerque called Mentz.  It built
the first microcomputer.  That's where Microsoft originated. 
I've spent a lot of time watching the industry develop.
This is my first experience with patent issues.  And what I've
experienced, briefly, is that in looking at the particular
patent in question the patent is incredibly broad, making it
very difficult for us to respond in a way that we would like
to.
There is virtually no reflection of any consideration of prior
art in the patent itself, other than some oblique references
to some existing patents, which are pretty far afield from the
material that's covered in the patent itself.  But there is a
considerable body of prior art which we've been able to
document.
The dilemma is the following.  It's pretty obvious from
listening to the comments that have bee made here, it's pretty
obvious in what I've read and what I've learned, that the
reexamination process is a fundamentally flawed process from
the perspective of someone like ourselves.
We have spent to date about $120,000 just arguing over the
venue in which this case is going to be heard and we still
don't have a venue decision.  We filed an action in Federal
Court in New York.
We would like to use the reexamination process because we are
confident that if we, in fact, could have a fair and equitable
hearing of the facts that it would be very difficult for this
patent to stand.
I have spoken in the last 30 days to about six law firms in
New York City, all of whom specialize in intellectual
property, to a man, every firm, or to a firm every firm has
suggested strongly that we do not avail ourselves of the
reexamination process because they have little faith and
belief in it, because they believe it accrues largely to the
benefit of the patent holder, that it will afford an
opportunity for the patent holder to extend or otherwise
modify the coverage of the patent in ways that may not have
been anticipated at the time the patent was filed, but
certainly wouldn't accrue to our benefit or may not.
And more importantly, if we invoke that process, we are then
operating in a substantial handicap if that process produces
a result that is not in our favor in terms of litigation as we
would go forward.
Now I represent at the moment about 15 different authors of
software products.  Our business is to take small companies
such as the one you heard about here.  We specialize in
development tools.  It's a fairly high technology end of the
business.
I think the problem here is that we ought to be able to appeal
to the Patent Office, we ought to be able to appeal to the
reexamination process, we ought to have confidence that we
would have a fair and equitable hearing and if the facts bear
out that we have, in fact, infringed then we'll suffer the
consequences.
My suggestion is that at a minimum the Patent Office ought to
recognize the fact that it probably has issued some patents
that were overly broad, that probably in retrospect ought to
be reexamined, ought to be critically reexamined.  They ought
to broaden the opportunities for people such as ourselves to
participate in that process so that we don't have to be at
arm's length in terms of making submissions and then waiting
in the wings to find out what the conclusions are going to be;
and that that process ought to work and be fair and equitable.
My guess is that if we poll the people in this room we'd find
out that they would agree this is not a process to be used. 
I would further suspect that if we poll the people sitting up
here they, if they're candid, would have to admit, although
they probably may choose not to, that it's not a fair and
equitable process.
Now I think that at a minimum there ought to be a watershed
that says we're going to take into consideration that there
are people that right now are suffering from this flawed
process and do something to address that where possible.
The other problem we have is, it's not likely that you will do
anything in the near term that will help us.  So we probably
are going to be left to proceed without the reexamination
process even though we believe very strongly that we could
present a very substantial case that an error has been made.
So you can't plot a curve with only one data point, but we are
one data point.  We're spending a lot of money for reasons
that we don't fully understand.  We're convinced we shouldn't
be spending this kind of money and we don't have recourse
through the Patent Office that we can feel comfortable with. 
That's really my comment.
COMMISSIONER LEHMAN;:  Well, thank you.  I appreciate those
comments.  I think those were extremely helpful and useful
about perspective.  They certainly lend a sense of urgency to
our work here to try to get a more responsive system in place
as quickly as possible.
Let me just call the witnesses again here.  See if anybody's
come in the door.  I don't think they have.  Michael M.
DeAngeli.  Michael Chakansky.  Paul Heckel.  D.C. Toedt -- is
it Toedt? -- and Joseph Hofstader.
I think what I'm going to do in view of the fact that we're
way ahead of the schedule and we did say for people to be here
at least 20 minutes in advance, and we have a real backed up
schedule.  I have a very backed up schedule and lots of prices
and problems to deal with.
What I'm going to do is suggest that we recess the hearing
until 4:15 and that at that time I ask Mr. Kushan to reconvene
the hearing and to chair it and to take testimony from -- if
we have any of these people who manage to straggle in and at
least give them, especially since I suspect some of them are
trying to get here by plane, and it would be very unfair to
have them go through the hell of trying to fly in this weather
and then land at National Airport, get all the way here and
then not have the hearing.
So I think we at least want to give them that opportunity to
put their views on the record here in this forum.  If they
don't show up by 4:15 then we'll obviously take their
testimony in written form, either through the mail or if they
want to send it to us on electronic mail through the Internet
they can do that.
So with that I'm going to adjourn the hearing until 4:15 and
Mr. Kushan will reconvene it for any of the stragglers that
there may be.
(Recess.)
MR. KUSHAN;:  We've reached a consensus.  The two speakers
that we've identified as being here are going to testify
tomorrow morning in our a.m. session.
So unless the other three people, which I should probably read
off one last time are here, we will cancel the hearing for the
remainder of the day and reconvene in the morning.  The three
people that weren't identified before Michael DeAngeli,
Michael Chakansky, and Paul Heckel.  I don't see Paul. 
Michael DeAngeli is in California.
So we're 0 for 3.  That means that we're going to cancel for
the rest of the day today and we'll reconvene tomorrow morning
at 9:00 a.m., probably until about 12:15.  Thank you.
(Whereupon, at 3:20 p.m., the hearing in the above-entitled
matter was adjourned, to reconvene on Friday, February 11,
1994 at 9:00 a.m.)

PROCEEDINGS
MORNING SESSION
COMMISSIONER LEHMAN:  Let me just make a couple of opening
comments.  First let me introduce everyone here, in case you
don't know, I'm Bruce Lehman.  My title is the Assistant
Secretary of Commerce and Commissioner of Patents and
Trademarks.  And this is Larry Goffney, who is our Assistant
Commissioner for Patents designate.
And then we also have Mike Fleming who is one of our SPE
supervisory patent examiners.  If you have any follow-up or
any questions today to this, you can talk to Mike about it,
administrative type questions, or any other questions he can
help you with.
But the staff person for these hearings if Jeff Kushan.  His
telephone number is 703-305-9300, he's way out at the far
reaches of Northern Virginia, and he's not here today.
I think among the papers somewhere there is this Internet
address on there, too.  You can certainly find it there.
For those who weren't here, we will have a transcript of this
hearing.  The transcripts will be available after February
21st this year, and paper copies will be available for $30 and
they will be available on the Internet at our FTEP site for
free.  That site is comments, period, USPTO, period, GOB.
Also, the transcript from our December 20 Federal Register
notice will be available about the same FTEP site.
What I would like to do is that we have two witnesses from
yesterday who didn't make it.  They had problems with
airplanes.  It started yesterday and so we found ourselves
finishing very early yesterday.  So we'll start with them. 
And the first is D.C. Toedt, from Arnold, White and Durkee who
comes all the way from Texas.
Shall we just have them -- do you mind sitting in here?  And
you can turn towards us and use that microphone and talk into
it.
PRESENTATION BY MR. D.C. TOEDT;
ARNOLD, WHITE AND DURKEE
MR. TOEDT;:  First off, thank you very much for accommodating
the viscidities of travel.  I found out a little while ago
that the real reason for my trip, which was a federal circuit
oral argument this morning, was canceled.  So I'm glad this
was able to go forward.  I appreciate your working it in.
COMMISSIONER LEHMAN;:  I should say, this is the advantage of
a fully user fee funded agency.
(Laughter.)
COMMISSIONER LEHMAN;:  You've got to be there when your
customers are there.  The court is not a full user fee.
MR. TOEDT;:  As Mr. Commissioner indicated my name is D.C.
Toedt.  As requested in the Federal Register notice of this
hearing, let me summarize briefly for the record my
affiliation.
I'm a shareholder and chair of the Patent Prosecution Practice
Committee at Arnold, White and Durkee, practicing in the
firm's Houston office.  Much of my firm's practice and my own
work relates to the computer industry and to computer
software.  My remarks today, however, represent my own views
and not necessarily those of my firm nor of any of its clients
or its other attorneys.  My remarks are directed strictly to
procedural questions and not to the substantive issues that
have come up in these hearings.
For the convenience of the panel, the written version of my
remarks includes something of an executive summary beginning
on page 2.
Mr. Secretary, you mentioned just now, and in San Jose two
weeks ago, your focus on the customers of the PTO, and we're
all aware of the Clinton Administration's commitment to
reinventing government.  It sounds as though you're familiar
with the concept of reengineering.
The PTO has made considerable progress lately in improving the
quality of examinations, but the challenge faced by the Office
is broader than that.  The Office should be concerned with
doing the right things in today's high technology world, and
not just doing things right as that might have been defined
years or decades or even centuries ago.
One of the first steps, of course, is figuring out who the
customers are and what is it they want.  In the broadest
terms, the PTO's customers are the people who participate in
patent enforcement, by which I mean, not just litigants --
judges, juries, attorneys -- but companies doing license
negotiations, design work, deciding whether they can compete
with a patent owner, or whether they stay out because they
respect the patent rights.
I'd like to address three points today concerning what the PTO
can do for those customers.  Some of my suggestions frankly
even to me seem a little bit off the beaten track.  Some might
work.  Some might need fine-tuning.  Some might be wildly
impractical upon further thought or maybe in actual practice.
First, the Office should experiment within the existing
statutory framework through notice and comment rulemaking,
with borrowing some approaches from the Securities and
Exchange Commission.  In some notable respects the PTO's work
is very similar to that of the SEC.  A company or an
individual does similar things when it applies for a patent
and when it issues securities.  In each case, it's going to
the public and asking, broadly speaking, to give it an asset
for use in its business.  In effect, it's saying to the
public, let's make a deal.
The price the public levies is information in the offering
document, whether that's a patent application or a securities
prospectus.  Both the PTO and the SEC are charged with
ensuring that when a company goes to the public seeking such
an asset, the public gets what it pays for.
The U.S. securities markets are considered to be the best in
the world, so maybe there's some lessons to be had there.  And
it's interesting because the PTO and the SEC take considerably
different approaches to their work and to their respective
uses of administrative resources.
The SEC does not use a one size fits all philosophy.  If your
proposed securities offering is a limited one, a low end
offering with limited potential impact on the public, you can
use short form disclosures, streamlined SEC approval
proceedings.
If you're willing to settle for a low end asset, restrictions
on the dollar amount of the offering, the amount of
solicitation you could do and so forth, you can use a
qualification proceeding under Regulation A as recently
amended specifically for small business owners, instead of a
full blown public offering registration, or you could even be
exempt from registration entirely.
Every venture capitalist and every small business pretty much
knows it can make a lot more sense for a company to go for
such a low end securities offering first, and hold off on a
full blown public offering until it clearly makes sense.
The other difference is that the SEC tries a different way of
getting the most bang for its buck.  It prescribes fairly
detailed requirements in advance for a disclosure content and
format of an organization, and in some instances certification
by outside professional CPAs, for example.
The SEC is very selective about how it uses its investigation
and examination resources.  It doesn't do merit review of
securities offerings at all unless a problem comes up and they
have to deal with enforcement proceedings.  They save their
resources for when they can do the most good for the public.
The SEC's examination of offering documents is usually
confined to determining that the documents comply with the
extensive formal requirements.  If you're in this kind of
business, you need to disclose this, this, and this, in such
and such order.
Staff can get pretty picky about whether you've complied.  But
even so, securities offerings are approved with what we patent
lawyers would regard as blinding speed.
The Commissioner might have authority under the existing
statute to create analogous low end patents for people who
want them, like small businesses, for example, that can be
obtained quickly and inexpensively without a full blown
examination proceeding.
By regulation the Commissioner might require applicants to
file applications that conform to specified content and format
standards, depending on the argument they're in.  And an
applicant that wanted to could file a written election to
waive certain statutory rights associated with a patent, and
reduce the impact of the patent on the public.
The Commissioner could then cause a limited examination to
happen.  The statute says only that the Commissioner shall
cause an examination to be made -- and then issue the patent
quickly.
The applicant's written election might include, for example,
voluntary acceptance of limitations on statutory rights and
remedies, maybe an obligation to prove patentability in any
infringement litigation, maybe just a few claims, maybe an
independent prior art search.
If the application and the written election documents appear
to be in order, issue the patent.  Treat the written election
as a continuation application.  Suspend action on the
continuation for some period of time.  And if it turns out to
be worth it to the patent owner in the long run, the patent
owner can ask for a full blown examination to go to a
conventional, what would now be a 20-year patent, subject to
broadening of reissue limitations and intervening right
considerations.
I think many small businesses and large companies would love
to have such an option available.  One of my colleagues that
deals mostly in biotech areas said that she thought many of
her clients would be delighted to be able to get some
protection up front, and wait until it becomes more clearly
advantageous to go through a full blown proceeding.
The Office should try that out on an experimental basis.  My
written remarks go into a fair amount of more detail about
that possibility.
Now, a friend of mine who is in-house at a large company's
patent department commented that this sounds uncomfortably
like the Japanese system, where an applicant can wait years to
request examination and businesses might have to wait that
long to know whether a patent got ever issued.
I see a critical difference.  In Japan, as I understand it,
the applicant's incentive to request examination at the end of
the -- I think it's a seven-year period -- is to go from zero
protection to full protection.  Here the differential is much
smaller.  The low end patent owner has some protection
already.  So there's much less upside and much less incentive
to try and go for a full blown examination at the end of
whatever the waiting period is.
My second suggestion is that we get rid of file ping-pong in
examination proceedings.  As an attorney, I never know when an
Office action is going to hit my in box.  It could be years
after filing.  The examiner never knows when I'm going to
respond, if at all.  He never knows when I'm going to pick up
the phone and call and ask for an interview, he or she.
I sometimes wonder whether, as a result, some attorneys and
examiners unconsciously focus more on getting the file off of
their desk and onto someone else's desk, than on getting a
client's project finished.
Moreover, sometimes it can seem like it's difficult to get
meaningful attention from an SPE.  The SPEs are busy.  They
are very busy.  They might have a dozen or more assistants to
supervise.  And every now and then you get the feeling that
you're like in a situation where you're buying a car.
You talk to the salesman, and the salesman says, yeah, I think
we can do that.  But the salesman has to go off to talk to the
sales manager in the back room.  Sometimes you make the deal,
and sometimes the salesman comes back and says, sorry, we
can't do that.
It's not like that in appeals to the board.  It's not like
that in interferences.  And more particularly, it's not like
that in trial work.  If the judge wants it to, the scheduling
order means what it says.  If you're on the Eastern District
in the rocket docket, in Judge Sam Kent's court in Galveston,
you will get your pretrial work done, you will go to trial on
schedule.  You get in, you get it done.  Everybody gets very
focused because that's their one shot.
Let's try doing some patent examinations that way.  Let an
assistant examiner function like a junior prosecutor in a DA's
office.  He can try cases under the tutelage of a more
experienced attorney, but he's trying the cases.  Let a
primary examiner be the "judge."  Have discovery cutoffs for
exchanging prior art.  Do whatever claim amendments are
desired, whatever evidence of patentability against
patentability is desired.  Propose filings and conclusions
just like examiners do now, just like attorneys do now.  And
let the primary make the decision, a first and final action.
If the action is adverse, take it up on appeal.  Tape record
the hearing maybe.  It could be just a low key interview.  It
doesn't' need to be a complete adversarial proceeding. 
Transcribe it to get a written decision.  It could be a lot
like a board of appeal, a lot like an interference.
It would make life easier for attorneys, I think.  Many
examiners would probably enjoy doing administrative trials
instead of having work shoved into their in-box.  I think the
quality of the examination would go up, and the throughput
volume might even go up.
Now, my in-house friend said he thought a lot of old-time
patent lawyers would be very nervous about this, that a lot of
them like the leisurely practice, where you've got three to
six months to handle an Office action that comes in.
That is a valid concern, but it is certainly not the driving
one.
Mr. Secretary, many practitioners are delighted that the
Office is working so hard on the examination process.  You
have a wonderful opportunity to help improve the role of the
PTO in promoting the progress of science and the useful arts.
Thank you very much for the chance to participate.
COMMISSIONER LEHMAN;:  Thank you very much.  I might want to
just ask you a question, if you would bear with me for just a
second.
First, I would like to say for the record that your testimony
was extremely polished and very well delivered.  And I know
what the reason for that was.  You were a student of my
colleague Larry Goffney when he taught you at the University
of Texas.
So it's a good illustration of, you know, if this is what we
get from the student, just think what we will get from the
master.
The procedure you were talking about offers sort of a range of
options.  In a sense, some of the other countries already have
this.  In Europe some countries have sort of petty patent
systems.  The Germans have it.  And that's one of the kinds of
things that you're talking about, right?
MR. TOEDT;:  Correct.
COMMISSIONER LEHMAN;:  The advantage of that specifically for
what we're talking about today would be that at least this
would enable us to focus the examination resources on the
really critical issues and the really critical technology.
It would also have the advantage, then, I assume for the -- if
you want to use the term petty patents, whatever you want to
use -- it would have the advantage of getting that information
out there, at least, in the public domain so that people would
know that it was there, would be aware that it was lurking out
there.
Presumably they would then be able to prepare, should that --
if they disagreed with the patent claims and the patent
applicant decided to go for the full-blown patent, they would
be well-positioned then to come in to make certain that the
Patent Office had the relevant prior art and so on.
Does that sort of describe the advantages of the system that
you just outlined?
MR. TOEDT;:  Those are among them, yes, sir.
COMMISSIONER LEHMAN;:  Those are among the advantages.  That
was the answer to that.
Professor?
COMMISSIONER GOFFNEY;:  Great presentation.  Thank you very
much.
(Discussion off the record.)
COMMISSIONER LEHMAN;:  Next I'd like to call Joseph Hofstader. 
Joseph Hofstader is basically sitting in for his father,
Christian Hofstader.
MR. HOFSTADER;:  My brother.
COMMISSIONER LEHMAN;:  Oh, your brother.  I didn't think there
was anybody your father's age in the League for Programming
Freedom.  So I was really surprised at that when I was told it
was your father.  But it's your brother.  And he is here to
represent the League for Programming Freedom.
PRESENTATION BY JOSEPH HOFSTADER
LEAGUE FOR PROGRAMMING FREEDOM
MR. HOFSTADER;:  Thank you for giving me the opportunity to
testify before you today.  The League for Programming Freedom
is an organization of software developers opposed to software
patents and copyrights on user interfaces.
I would like to use this opportunity to clarify some of the
issues that were raised in an earlier round of hearings in San
Jose.  To evaluate the numerous conflicting arguments that
have been made, we must organize them within a systematic
framework.  Since the patent system is an economic system,
economics is the best framework.
What questions need to be answered?  What issues should be
confronted prior to determining whether software patents
should be granted?
The goal of the patent system is to provide science in the
useful arts.  Whether software should be patentable is
therefore a question of whether patents promote innovation and
progress in the software industry in the computer sciences. 
The economic interpretation of this question is whether
granting patents on software benefits the economy by making
the software industry more efficient.
The League for Programming Freedom asks:  Does the transfer of
economic resources, which software patents represent,
constitute a transfer whereby the resources are going to be
employed more productively?
As an example of how the patent system is dependent on
economic factors that will vary from one industry to another,
I will mention just one factor, the overall size of an
industry.
Let's imagine there are 5,000 people employed by the
candlemaking industry in the U.S. and that it has been
determined based on sound economic principles that the optimal
life for a patent in the candlemaking industry is 20 years. 
Suppose the demand for candles is twice what it actually is. 
The candle making industry would be almost twice its earlier
size, employing close to 10,000 people.
Under a set of economic assumptions reasonable for the
candlemaking or software industry, economics would then
dictate a cut in the length of patents for the candlemaking
industry.  Cutting the length of patents by one-half would
yield roughly the same incentive to invent, and thus the same
rate of progress that existed earlier.
Alternatively, we might consider cutting the length of patents
by one quarter.  In doing so, we're sending a signal to the
candlemaking industry regarding the increase net economic
value of improvements in the candlemaking process.
This signal, however, has to be effectively traded off against
the increased lack of competition.  When the size of an
industry increases, the optimal lifetime for patents needs to
be shortened.  Without knowing various factors relating to the
inventive process in the candlemaking industry, the new length
for patents is a matter of debate.
It isn't fair to directly compare the software industry to the
candlemaking industry.  The software is much larger, and it is
also much broader.  From the example of the candlemaking
industry, it should be possible to understand how the
traditional 17-year patent grant may in some industries
conceivably hurt progress by stifling competition more than it
helps progress by encouraging innovation.
The software industry employs some 6 million people.  A
significant fraction of them develop software.  More people
are probably engaged in the software development than in all
other branches of engineering combined.  As a result, in the
software industry reinvention has become commonplace, and
software patents seriously harm the competition.
In eliminating software patents, is it going to be possible to
legislatively define software?  This issue was raised
frequently at the San Jose hearings.  It is surprising that
such an argument can be to justify risking the future
efficiency of a $50 billion a year industry.
Since this argument is apparently one of the key arguments in
favor of the continued granting of software patents, the
League decided to subject it to intense scrutiny.
It is true that many things in this world form part of a
continuum.  Nonetheless, we are able to legislatively
differentiate between them.  The post office is able to
distinguish between a letter and a letter packet.  The FDA is
able to distinguish between a cheese spread and a
cheese-flavored spread.  There is no way to draw a perfect
line between drunk and sober, but the law does draw a line,
and it works.
On a larger scale, the IRS classifies capital goods into many
different categories, to determine depreciation rates, while
the Customs Service is able to classify things to apply
duties.  Considerable financial incentives exist to try to
circumvent these classification systems, yet they work.  There
is little problem with them being circumvented, or with their
complexities imposing great financial burdens.  The legal
system effectively handles disputes over occasional borderline
cases.
A legislative definition of software need not embody absolute
truth.  It need only work effectively and efficiently. 
Searching for absolute truth makes no more sense than
determining the exact definition the IRS should use for wood
pulping machinery.
The definition the League proposes is, "Software is composed
of an ideal infallible mathematical component whose outputs
are ineffective by the components they feed into."
I'm confident that the PTO and the courts would be able to
readily distinguish between software and hardware using this
definition.  The PTO is already skilled at administering a
classification system that deals with far more subtle
distinctions.
To show that it is possible to legislatively define software
patents, the League performed an ambitious experiment.  The
League examined 2,000 patents issued during a one-week period. 
We tediously analyzed the details of every software-related
patent granted in that week.  We found little difficulty
existed in identifying software-related patents.
The League then took each software-related patent and analyzed
its claim according to a number of different criteria.  These
criteria were chosen on the basis that their presence could be
used as a part of a test to identify software patents that
should not be granted.  The results of this research clearly
showed us that it would be relatively simple to legislatively
define and identify software patents.
This is not surprising, given that legislation already exists,
that it is able to successfully identify far more nebulous
concepts than the difference between software and hardware.
At the San Jose hearings, Tom Cronin of Taligent forcefully
suggested start up companies require software to attract
venture capital.  He described Taligent as a recent start up
that has succeeded in attracting a large amount of venture
capital, and for whom software patents were considered as
vital.
He failed to mention Taligent was an IBM-Apple joint venture
staffed by transferring surplus personnel from these two
companies.  Taligent is quite unique when compared to most
other startups.
The numerous two-kids-in-a-garage stories demonstrate that
successful software ventures require very little capital.  It
isn't necessary to attract large amounts of capital to produce
software, or at least it was not necessary.  Defending against
patent threats may increase this expense.
All the software companies spawned by the micro-computer
revolution gathered sufficient starting capital without any
software patents.  Microsoft, Oralent, Novelle, Adobe,
Systematic, Oracle, and WordPerfect are just a few examples.
The final prepared remark I have deals with why copyright is
the most suitable form of intellectual property protection for
the software industry.  Patents are used in other industries
to prevent companies from using, but not paying for, the
results of their rivals' research and development.  Permitting
this would be a serious disincentive against R&D investment.
Unlike every other industry subject to patents, the software
industry is unique in that its products are also subject to
copyrights.  Copyrights ensure that to be commercially
successful a company choosing to follow another must spend as
much to develop program as the original firm.  Indeed, the
history of spreadsheets, word processors, and virtually every
other software product suggests that it is actually more
expensive to follow than to lead.
A product that seeks to displace the market leader can only do
so by incorporating new features, thereby making it more
expensive to develop the original product.
Copyright is effective because it protects precisely the
product that has been developed.  It prevents other companies
from benefiting by copying your products, while at the same
time permitting them to reap the full benefits of anything
they develop.
Copyright is efficient because it enables firms to compete on
the basis of rival implementations.  This competition is vital
for the efficient allocation of economic resources.  The
traditional literal aspects of copyright doctrine is also
efficient because it has negligible administrative overhead
and presents no uncertainties.  A small start up has the
knowledge that they control what they create.
Given that copyright law effectively and efficiently achieves
the economic aims of the patent system, there is simply no
need for software patents.
This concludes the League for Programming Freedom's response
to issues raised at the San Jose hearings.  I would be happy
to take any questions you might have.
COMMISSIONER LEHMAN;:  First, are you a computer programmer
yourself, or are you just delivering Christian's --
MR. HOFSTADER;:  I'm not a programmer.  I've worked for a
high-tech firm in their legal department, though.
COMMISSIONER LEHMAN;:  So you are a lawyer?
MR. HOFSTADER;:  I'm not a lawyer, no.  I'm not a programmer,
though, either.
COMMISSIONER LEHMAN;:  You mentioned that the League had done
an analysis of 2,000 computer program patents.  Do you have
that analysis available that you could share with us?
MR. HOFSTADER;:  I don't have it with me right now.
COMMISSIONER LEHMAN;:  Does Christian have it?
MR. HOFSTADER;:  Yes.  What's happening and how I'm here right
now is that they were stuck in Boston during the snowstorm. 
So the speech got faxed to me.  The other materials are being
sent Federal Express.
COMMISSIONER LEHMAN;:  I'd be interested in following up on
that.  We have to proceed on the basis of facts and take a
look at these analyses.  We might have some of our people --
Mike Fleming and others -- might take a look at it.  And we
might even want to have some further dialogue with you, or
with the League, about that because it gets really into the
question of our prior art database and what's going on here.
So I think, rather than just sort of have a statement about
the results of this analysis, we'd really like to take a look
at it to see if we would come to the same conclusion.  If we
would, obviously it would have some impact on what we would
do.
MR. HOFSTADER;:  Okay.
COMMISSIONER LEHMAN;:  So you can pass that back.  Thank you
very much.
Now we're ready for Mr. Scanlon, Tim Scanlon.  Would you
identify where you're from?
PRESENTATION BY MR. TIMOTHY SCANLON
ALLEN-BRADLEY COMPANY
MR. SCANLON;:  Yes.  Good morning.  I'm with the Allen-Bradley
Company.  And the views that I'm expressing will be those of
the Allen-Bradley Company.
COMMISSIONER LEHMAN;:  There was an Allen-Bradley witness who
was --
MR. SCANLON;:  That was John J. Horn yesterday, who is our
legal patent counsel at our headquarters office in Milwaukee.
COMMISSIONER LEHMAN;:  Yes.  He was here, wasn't he?
MR. SCANLON;:  Yes.  He still is.  He's right there.
COMMISSIONER LEHMAN;:  Oh, yes.
MR. SCANLON;:  He may be here for longer than he wants to be
here.
COMMISSIONER LEHMAN;:  He's the guy that gave us the donuts. 
We have to pay, you know, I didn't realize they were coming
from Allen-Bradley.
(Laughter.)
COMMISSIONER LEHMAN;:  If they're coming from you, it's okay. 
This is a widely-attended event.  We can take a donut.  But we
can't take a donut from Allen-Bradley.
MR. SCANLON;:  You'd better save some for your stay in the
airport tonight.
COMMISSIONER LEHMAN;:  I'm from Wisconsin and I'm familiar
with that company pretty much.  I doubt if they support the
Clinton administration too much, but anyway.
(Laughter.)
COMMISSIONER LEHMAN;:  I'm just joking.  Go ahead, please.
COMMISSIONER LEHMAN;:  Thank you.
MR. SCANLON;:  Good morning, Commissioner Lehman and other
distinguished members of the panel, participants, and
attendees.
Thank you for providing this forum to share our views relating
to these important issues, and most importantly, thank you for
your time.
My name is Timothy Scanlon.  I'm representing the
Allen-Bradley Company.  Allen-Bradley is a world leader in
industrial automation and control.  We provide a diverse range
of hardware and software products and services to enable our
customers worldwide to compete in their respective markets.
As Allen-Bradley patent counsel John Horn presented yesterday,
there is a fast and furious trend in our industry, like other
industries, towards replacing hardware functionality with
software.  My position with Allen-Bradley is not that of legal
counsel, but rather I'm a human interface specialist within a
corporate-wide software marketing organization.  It's a little
bit different slant perspective from the past couple of days,
hopefully.
My formal education is in industrial design in human factors. 
And I've been practicing these disciplines for the past
10-plus years.  At Allen-Bradley I work with talented software
developers, communication designers, and useability
specialists to create new and innovative software user
interface solutions.
These software graphical user interface designs enable a broad
spectrum of users in the industrial control sector to interact
with complex and sophisticated technologies to do what they
really want to do, effectively perform work to satisfy their
job requirements.
In general, people don't really want to use computers, they
just want to get their work done.
So why are the visual aspects of software significant to the
Allen-Bradley company and so important to protect?  I'd like
to address three key areas of significance to help foster an
understanding of our position, and encourage appreciation for
the impact that this has on our businesses and the businesses
that use our software.
But before I address these three areas, I'd like to establish
a definition for the visual aspects of our software.
The visual aspects of our software that we'd like to protect
are what we call user interface components.  These consist of
icons, bit maps, and controls, developed specifically for our
verticals markets in industry.
These are different from platform standard components, such as
common dialogue boxes, et cetera, that are widely used across
vertical industries.  And we're not advocating protection of
commonly and generally -- widely used standards as far as the
windows controls and things of that nature.
Now back to the three key areas.  The first one is the level
of effort involved in establishing a usable graphical user
interface.  And I'd like to emphasize "usable."  What the
usability of Allen-Bradley software means to our customers
will be area number two.  And number three, how the software
graphical user interface is an extensive of Allen-Bradley's
expertise and knowledge of the industrial control and
automation industry.
There are several constraints considered during the design of
our graphical user interfaces.  Key considerations include the
accommodation of a broad spectrum of end users. 
Allen-Bradley, through extensive research and studies, has
identified six types of users for our software products.  Each
and every software product that we design is designed to
accommodate these user profiles.
The six categories of users and their educational backgrounds,
just to give you an idea of the challenge, is, at the low end,
a maintenance technician who has a high school diploma and
maybe a two-year technical school certificate in electronics.
Next would be an operator who has a high school diploma and
maybe a two-year technical degree certificate from a technical
school.
Third on the way up the scale would be an installer, somebody
who installs our equipment, whose educational background is
high school, a two-year technical certificate, and possibly an
apprenticeship.
Next would be an implementer, somebody who has a two-year
certificate, an engineering degree in computer science,
perhaps.
The last two on the high end of the scale would be a designer,
a system designer, who typically has a two-year certificate,
an engineering degree in computer science.  And at the top
level, a planner who actually plans a facility or a plant who
typically would have a Bachelor of Science in Electrical
Engineering, and possibly has completed a graduate level
education program.
The reason that I walked through these and gave these brief
profiles was to illustrate the challenges that we face when
designing graphical user interfaces.  We have to accommodate
a broad range of users in every product that we design, and we
consider these.
In addition, all of our GUIs are designed to facilitate
translation into seven languages, namely, English, French,
German, Russian, Japanese, Spanish, and Italian.  Special
considerations are made to ensure that user interface
components can accommodate expansion due to text screen
growth, for instance, following translation.
We also developed symbology to incorporate into our tool
buyers and in other areas of our software.  And it's carefully
designed for global recognition.  So we developed several
different symbols, and we actually test these.  So there's
quite a lot of money spent in developing these components.
As you can see, designing the GUI for --
COMMISSIONER LEHMAN;:  What's your status on the international
market in your exports as a percentage of your sales?
MR. SCANLON;:  Percentage of sales?  Boy, I'll tell you, that
would be tough for me to quantify, since we've been
traditionally a hardware-oriented company and we're now
growing into software.
Rather than answering it that way, I'd like to tell you what
products we have translated and --
COMMISSIONER LEHMAN;:  But I assume that a lot of your
hardware is exported?
MR. SCANLON;:  Absolutely.
COMMISSIONER LEHMAN;:  Allen-Bradley is a big export company.
MR. SCANLON;:  Yes, we're very heavily --
COMMISSIONER LEHMAN;:  My impression was, it was like 50
percent or something like that, not that much.
MR. SCANLON;:  Is that about what it is, John?
MR. HORN;:  I don't know exactly know the figures, but if I
were to take a rough guess, they are probably 20 or 30.
COMMISSIONER LEHMAN;:  Twenty or thirty?  Yes.
MR. SCANLON;:  We're very heavily entrenched in the European
markets and now starting to expand into the Asian markets at
a fast rate.
COMMISSIONER LEHMAN;:  In the area of controls, that's your
area, isn't it?
MR. SCANLON;:  Yes.
COMMISSIONER LEHMAN;:  My understanding is that there was some
proprietary French technology which basically was a software
technology, which has sort of a central position in this
industry.  Is that true?
MR. SCANLON;:  That would be the graphs set?
MR. HORN;:  Vision Recognition.
COMMISSIONER LEHMAN;:  Vision Recognition?  Do you use that?
MR. HORN;:  Oh, yes.
COMMISSIONER LEHMAN;:  And is that covered under copyright or
patents, or trade secrets, and do you license it?
MR. SCANLON;:  John?
MR. HORN;:  It is covered under -- there are hardware
components and there are software components.  So you've got
really what yesterday was referred to by one of the witnesses
as an embedded microprocessor system.
It runs software, which has been designed in France, and we do
have patents on some of the aspects of that software.  It
happens in that particular case that there isn't that much
patent coverage available because a lot of the ideas behind
that software, which I think personally would have been
patentable, actually were surfaced in academic circles 10 or
15 years ago.
COMMISSIONER LEHMAN:  I asked about the French technology
here, which you are licensing even though it has limited
intellectual property rights protection in this country, I
gather.  I mean, it doesn't have patent protection.  I assume
you license it because you have to get access to the
proprietary know how that comes along with it.  What causes
you not just to take it instead of license it?
MR. HORN;:  Well, when you say we license it, I must add that
the software is actually developed by a French subsidiary of
the company.  We bought it.
COMMISSIONER LEHMAN;:  Okay.  Well, then I guess that's the
answer.  So this is a company that's now owned by
Allen-Bradley?
MR. HORN;:  Right.  And we have a design center in France that
continues to improve this software.
COMMISSIONER LEHMAN;:  I see.  So then I guess the question
is, are other people licensing it, or are they just taking it?
MR. HORN;:  My impression is -- and I must say that I'm not an
expert on the vision industry -- is that most of it is
homegrown stuff developed by the individual vision companies
to work with their special hardware.  And again, most of these
are embedded systems.  Most of them have specialized hardware,
and then the custom software that goes with that specialized
hardware.
COMMISSIONER LEHMAN;:  One of the reasons that Allen-Bradley
is interested in a pretty strong patent protection here is
because it would -- now, I'm not saying this -- I think a yes
answer is perfectly acceptable -- because it would obviously
help them to exploit this technology which they have.
MR. HORN;:  It would help us to exploit the technology in
cases where we have major innovations in which we've made
significant major investments.  And we feel that those do
occur on occasion.
COMMISSIONER LEHMAN;:  I'm sorry to interrupt you.
MR. SCANLON;:  That's quite all right.  I'm glad that John's
able to --
COMMISSIONER LEHMAN;:  The great thing about an informal
atmosphere and having all day is that we can have this
colloquy which is helpful to us to flesh out the issues.
MR. SCANLON;:  John is based in the legal department in
Milwaukee, so he has a broader view into that.  So I'm glad he
was able to answer your questions.
So as you can see, designing the graphical user interface for
software is something that requires a significant investment. 
And I've only mentioned a few of the scenarios that we have to
design for, and some of the constraints that we deal with.
The second key point is what the usability of Allen-Bradley
software means to our customers.  We have a concept of
measuring software usability at various points during the
software development process.  And many people have probably
seen more and more about software usability as it enters the
mainstream media and gets broader and broader coverage.
We handle this through the conduct of usability studies in
controlled environments, typically usability labs, with
carefully selected test subjects that have certain user
profiles and experience.
We measure speed:  how long it takes for a person to perform
a particular task.  Accuracy:  what's the percentage of error
during that performance.  Training:  how much training is
involved to bring the individual up to a certain level of
proficiency.  Then more of a qualitative rating, which is a
level of acceptance for our software.
Usability to our customers is very important, because it means
reduced system integration time.  That is, taking the hardware
of the control system and programming it to communicate in
effect the manufacturing process.  System integration cost is
very high in the control industry, sometimes even as much as
the actual hardware cost.
With the new and more usable graphical interfaces that we are
developing, we can significantly reduce the integration cost
and enable our customers to go online faster.  This is an
important competitive advantage for Allen-Bradley.
A case in point is a product that we sell that gives
programmers the capability to program motion controllers
graphically, versus the traditional text-based method.  The
product is GML, which stands for graphical motion language. 
Our customers can perform the same tasks with GML, that is
programming motion controllers, in 20 percent of the time it
used to take them with a reduced percentage of error.
Key point number three is how the software graphical user
interface is an extension of Allen-Bradley's expertise and
knowledge of the industrial automation and control industry. 
GML is a good example of this.  At Allen-Bradley we've
developed and continue to develop graphical user interfaces
like GML for areas other than motion control.  These areas
include vision and bar code systems, logical programming
tools, statistical process data gathering and analysis tools,
operator interfaces for control in the plant floor, or
supervisory control at remote locations.  The list goes on.
We're able to create graphical user interface like GML for all
of these products because we understand these businesses.  We
understand how our customers perform work.  Consequently we
can create GUIs like graphical motion language, that create
this domain expertise -- that reflect this domain expertise
and translate the productivity tools for end users and
customers.
The problem for us is that it is very easy to take something
like our graphical user interface concepts that reflect this
domain expertise, translate it into a graphical form, and are
painstakingly refined to become globally usable and duplicated
or create knockoffs.
Given the graphical user interfaces are an important feature
of our present and future product offerings, we believe that
they are worthy of proper legal protection.  It seems to us
the existing copyright protection is not fully adequate in
view of the utilitarian aspects that are closely linked to our
unique industry-specific user interface components.
For our purposes, copyright law concentrates too heavily on
the details of expression.  We believe that design patents are
somewhat appropriate for protecting these graphically oriented
technologies, despite their focus on the ornamental aspects.
We would like to encourage the Patent Office to allow design
patent protection of graphical user interface components that
include icons, bit maps, and controls.  So we're kind of going
beyond just the icons because there's a lot more there.
We would also encourage the Patent Office to seek any
necessary legislative authority to make design patents and/or
utility patents effective for the protection of these new and
valuable uses for graphical interface components.
It looks like I'm running out of time.  I had another idea
about the parallel aspects of --
COMMISSIONER LEHMAN;:  Why don't you tell it to us?
MR. SCANLON;:  Sitting in the meetings for the past couple of
days, as a marketing person who generates market requirements
and hands those over to developers, it's very difficult to
communicate the features functionality or the behavior of
graphical user interfaces.
I see a parallel problem in the traditional medium that is
used to submit patent applications.  So possibly some lessons
could be learned.  Typically what we do is we generate market
requirements documents there, go to engineering.  They respond
with a function requirements spec.  We are now actually
building in prototypes and using some alternative approaches
to communicating the behavior, not just the visual aspects of
our software.
So there's more behavioral elements associated with that.  And
those are very important in creating these competitive user
interfaces.  So there may be something there that could be
investigated and used for the future for the U.S. Patent and
Trademark Office.
Allen-Bradley would like to support these endeavors through
continued participation in future gatherings such as this. 
Once again, thank you for your time.
COMMISSIONER LEHMAN;:  Thank you very much.  In the process,
we're big users of software technology, of course, ourselves. 
We're spending a very large sum of money automating the patent
system, and it's a big management problem for me.  Right now
we're in very much a transitional phase, not just because the
administration has changed, but because our leadership of that
whole operation, the two top people, have retired.
Actually, we have two jobs open.  Our director of information
systems position for the whole Patent and Trademark Office is
open.  If anybody has some good candidates, send them our way. 
We'll pay the top money we can pay in the Federal Government,
give them all the benefits we can.  And it's interesting work.
But one of the things that we're doing is that we're just now
starting our electronic applications system, which involves
the creation of graphical interfaces that I personally am
quite excited about.  We have a pilot program going right now. 
I think it's going to help us produce much, much better and
more usable patent applications because when you actually have
to fill out an electronic form, the interface won't let you
proceed until it gets all the information.  From step one you
can't go to step two.
And I think it will help -- and it educates the user all the
way along the line.  So we're actually in that business
ourselves, and it's a very exciting thing.  I think you've
chosen a very good profession for yourself.
MR. SCANLON;:  Thank you.  It's a lot of fun.
COMMISSIONER LEHMAN;:  Thanks.
Now I think we're done with yesterday's witnesses.  We can
start this morning.  Again, earlier, about an hour ago -- or
more than an hour ago -- I went through and called off people,
and I know some of the people here.  I'm going to do that
again so I can see who's here.
Michael Kurtz of the Oracle Corporation.  Has he come?
Daniel Kluth of Schwegman, Lundberg & Woessner.
R. Lewis Gable of Welsh & Katz is here.
Robert Greene Sterne, Sterne, Kessler, Goldstein and Fox.
John E. DeWald, Prudential was here, is still here.
David Clark of Aquilino & Welsh, who is here now, okay.
Allen M. Lo of Finnegan, Henderson, is now here.
Samual Oddi is here.
And David Webber, LNK Corporation.
Bernard Galler.  I mentioned that if he's not here, he's not
going to be here because of the snow.
Gregory Aharonian was here.
I don't see Bill Fryer here.
We have one, two, three, four, five, six people then.  I'm
going to start with R. Lewis Gable of Welsh & Katz.
Oh, David Cornwell.  I don't have him on my -- is David
Cornwell here?
(No audible response.)
COMMISSIONER LEHMAN;:  Is there anybody who was scheduled to
testify that I haven't named who is here?
(No audible response.)
COMMISSIONER LEHMAN;:  I guess not, thanks.
PRESENTATION BY MR. R. LEWIS GABLE
WELSH & KATZ
MR. GABLE;:  Mr. Secretary, Professor Goffney, and Mr.
Fleming, I'm very pleased to have dug out of my garage this
morning and to be here.  My name is Lewis Gable.  I'm an
attorney with the law firm of Welsh & Katz.  We're an
intellectual property law firm.  And our offices are in
Chicago, and also one here in Arlington, Virginia.
I have practiced patent law for 30-plus year, specializing in
the preparation and prosecution of complex electronic and
computer and software-related patent applications.
I started my career in the Patent Office where for
approximately two years I examined patents while I was going
to law school.  I have practiced through the '70s when the
entire issue of whether computer patents, computer-related
patents, was patentable subject matter under 35 U.S.C. Section
101.
I have talked, and I have written extensively about the 101
issue, some of it with Mr. Fleming on many occasions, which I
have enjoyed very much.
I have chaired the Electronic and Computer Law Committee of
the American Intellectual Property Law Association.
My comments this morning are strictly for myself, and should
not be attributed to Welsh & Katz, or any association, or of
course the clients of Welsh & Katz.
I will focus on questions 2 and 6 of topic B.  Fundamentally
both ask how can the PTO improve the quality of its
examination?
Question 2 asks, how can an examiner measure the ordinary
skill of art?  And question 6, how can the PTO improve its
examination of novelty and obviousness?
It's apparent that these questions go right to the very heart
of the obvious determinations required by the Supreme Court in
their Graham decision.
My point this morning, my focus this morning, is that the
experience level of the average patent examiner is low.  And
that the lack of experience affects the quality of patent
examination.
This is true of all arts, but it is particularly true of
software-related inventions.  And that difficulty quickly
rises in that area because of the complexity of the technology
and the difficulty really to learn it.
The positive aspect of this problem is that there is perhaps
some rather effective solutions.  I do not want my comments
this morning to be interpreted that the people employed by the
Patent Office are unqualified.  My point is that it's very
difficult to become an efficient, effective, competent patent
examiner within the tenure that many patent examiners serve in
the Office.
The average years of experience has dropped significantly
since I joined the profession perhaps about 30 years ago. 
When I joined the Patent Office, my division -- at that time
there were no groups or art units -- was comprised mostly of
experienced primary examiners.  Many of them had 10, 20, even
30 years of experience.
As a novice non-primary examiner, all of my work had to be
supervised.  And my primary examiner was John Burns.  He had
two examiners besides myself to train.  He spent a lot of time
with me, and if I made a mistake in an office action that I
was about ready to issue, he told me about it.  If I had
missed a reference, he had the uncanny ability to go right
over to the shoe, and pick that reference out, and say, this
is where such and such a feature is shown.
He gained that experience because he had been in that art
unit, or that group, that limited number of sub-classes for a
very long time.  He supervised it.  He had supervised the
examiners that had examined in that area.  And he knew,
literally in detail, all the references at issue.  And that's
a great help in examining.
Then the ratio of inexperienced, non-primary examiners to
primary examiners was very low.  However, today that ratio
literally has been turned upside down.  Any time I now receive
a patent office action, one of the first things I do is to
turn to the last page, and to see whether the examiner that
signed was a primary or non-primary examiner.  And that gives
me a good idea of how good this action is going to be.
I rarely have a primary examiner examine my applications. 
When I go in to have an interview with the examiners in the
Office, one of the things I do is I walk up and down past the
Office of the examiner, and I count the number of examiners or
non-primary examiners, and the number of primary examiners. 
Often that ratio may be 9 or 10 to 1.
That ratio tells me something about the supervision that the
non-primary examiners who will receive from the SPE in that
particular art unit.
One patent that I had examined I think illustrates the
difference between experienced and inexperienced examiners. 
I had prepared and filed a very complex application involving
the application of artificial intelligence to setting up a
printing press.
The application had 100 pages.  There were at least 25 pages
of flow diagram.  The initial Patent Office action came back
with but a single rejection, and that was that the
specification was inadequate.  There was no prior art
rejection, no references cited.  And so it was time for me to
have an interview with the examiner.
And I found out that the examiner that I had gotten had six
months of experience, and that the application had come into
this art unit, this group, and all the more experienced
examiners really didn't want to take the time to examine it. 
So it ended up literally with the least experienced examiner
in the group.
I went to the supervisor, the group director.  And he
appointed a more experienced, a senior examiner, to help her. 
And the Office action that I got back was a very fine Office
action.  The references that were cited were even better than
some of them of which I was aware of.
COMMISSIONER LEHMAN;:  You're obviously very familiar with our
Office.  You've worked in it.  You've really worked very
closely with it.  And one of the things that concerns me
about, that I'm picking up on that is a real problem -- and
it's not just in the Group 2300, but I think because of the
pressures on Group 2300 it probably has a bigger effect on
it -- and that is our performance evaluation system in the
Patent Office basically is based on numbers.  It's pushing the
papers out.  You know, how many first actions do you issue? 
How many patents are issued?  And so on and so forth.
I can see why in that situation that you've just described the
more senior people see this, and there's sort of a pecking
order.  They want to get the papers out.  They want to get
that higher performance rating.  And they get a bonus if they
get a higher performance rating.
So naturally, the low person on the totem pole is going to get
stuck with the cases obviously that are going to be harder to
move out.  So in a sense, I think our system -- my impression
is that we may well have a system that pushes these harder
cases down the totem pole to the person that doesn't have the
seniority because those are the cases that take longer.
Do you have a sense that that may be the case?  Do you think
that that evaluation system that we have, that performance
system, needs to be looked at?
MR. GABLE;:  I think you understand the system quite well.  My
impression is that experienced examiners maybe at the 12, 13,
14 level may have as many what we call bogey, or to make per
week, maybe four, five, maybe six actions per week.  And if
you get, say, a very complex, lengthy patent application,
there is no way that you can approach that and get five or six
of them out in a week.
So at least where you have complexity and length of cases,
typically like you have in 2300 or 2600, there has to be
something done to permit people to achieve -- examiners to
achieve, meet their goals, and yet be realistic in terms of
the time that a particular patent application may be examined.
It gives me great pause -- and I'm going off of my talk a
little bit here -- that when you get to the higher levels in
terms of examiners, that they may have only eight hours to
examine a very complex examination, much like the one I put
in.  And in that eight hours, you have to read 100 pages,
maybe review 40 claims.  Then you go to your shoes where you
keep your prior art, search that, come back, evaluate that,
make the critical comparisons that you do in patentability
between what is taught and what is not taught.  And then, does
that rise to the level of unobviousness?
And then you write up a report that conveys all of these
determinations.  You do this in eight hours, and it becomes an
Herculean if not an almost impossible task.
COMMISSIONER LEHMAN;:  I don't think we can underestimate the
importance of this problem.  This is our fourth day of
testimony where people are saying that we're issuing patents
when we haven't caught all the prior art.  And I think you're
pinpointing one of the reasons that that takes place.
Even though it wasn't part of your prepared statement, I think
this little colloquy and dialogue in terms of identifying some
major issues is very important.
MR. GABLE;:  It's hard to set limits on doing a good job.  It
depends -- it's so particular to a given application and also
to a given technology.
COMMISSIONER GOFFNEY;:  I'd like to ask one question about the
quality level that you find in the more experienced examiners. 
Is that manifested in 103 rejections?  Has that been your
experience?
MR. GABLE;:  Yes.  My particular complaint is that with the
younger examiners the art that is cited, the patents that are
cited, many have very little relevance to the invention that
you're claimed.  I come away and I think many of my colleagues
come away, with the idea, was the invention understood?  How
could someone cite this reference back?
I'm not talking about the situation where we disagree, where
we're hassling and bargaining with each other with regard to
the questions, is this sufficiently different, so that it will
be obvious and you can allow this claim?  The question is, is
this reference, or are these sets of references really
pertinent or even in the same ball park?
And it's not surprising, particularly with young examiners,
you come into a particular area of the technology, and you try
to learn it.  I would say the first six months, maybe a year,
is a real struggle, particularly in the very complex
technologies.  And you could have a EE degree or you could
have a computer science degree, and you will not know the
details of the technology, of the software, of the hardware,
that may be involved in what you're searching.
So it's just a struggle until you know that.  You learn this. 
It's surprising.  If you've been there two, three, four, five,
ten years, you know, you've read, you've examined yourself all
these references so that the problem of searching is much
easier.
If I know maybe -- literally you get to know a couple of
thousand patents.  And so, when you see this in an application
in front of you, you have probably a very good idea of where
the basic references are, you know where the various features
are.  And so you can short-cut a good part of the process by
just going and picking up maybe five, ten references.  And the
examination moves on.
Otherwise, if good references are not cited, you're spinning
your wheels.  You have to respond and point out that this has
very little relevance to the invention.
Typically what I've had to do is say, well, look at these
references over here.  These are really much more pertinent,
and try to move the prosecution on so that we can get to the
issues of 103 and 102 and maybe 112, first and second
paragraphs, and really deal with what is the substance of what
an examination should be about.
The difficulty with the younger examiner is that we don't
really get to the issues.  And as I said, I'm not criticizing
the examiner.  I mean, these people are well trained, they
have good degrees.  They just have not been there long enough
to absorb and know the technology thoroughly.
COMMISSIONER GOFFNEY;:  Now, just one further question.  I can
see how that might be the case with the experience with the
technology.  But I'm curious about the legal rationale that
you might get from the examiners.
MR. GABLE;:  Of course, most of it is in terms of what the
art -- I mean, the fundamental question of obviousness depends
upon a critical evaluation of the references.  And of course,
then you define the difference.
If you don't have good art to begin with in your rejection,
regardless of whether you say it's obvious or not -- in other
words, your legal conclusion -- it has no basis.  And you may
write that down very nicely on the Office action, but it makes
no sense to the person reading it trying to respond to it.
One of the other things you mentioned was some of the legal
determinations that you make.  Particularly in the 2300 area,
one of the most difficult ones is a 101 determination.  There
are perhaps maybe 40 to 50 relevant decisions.  I think it's
easy to say, and I think Mike would confirm this, that there
are no bright lines.  It is an extremely complex decision.
I find particularly with the younger examiners that, when they
give a 101 rejection, they really have not done it within the
confines or in accordance with the guidelines the Patent
Office sets out.
That is not because of any lack of training on the part of the
Office, because I know Mike is involved in extensive programs
on 101 issues within and without the Office.  But it's a
problem of just, having dealt with these very complex issues
over a sufficiently long time to absorb and to know very
intimately maybe 10 or 15 cases, and to apply, and to know how
to apply them to the claims and the facts.  It's tough.
When the ratio of non-primary to primary examiners is high,
it's difficult to adequately supervise all the novice
examiners.  Actions may come out, and I think they have, where
the SPE has to supervise 10 or more non-primary examiners. 
There is literally no way that the SPE in a particular art
unit can take a look at the work product, the Office actions,
that come across his or her desk, and to really have a good
feel for whether it represents a quality examination.
The Ps and Qs may be well stated, but the underlying very
complex decisions, which depend upon a grasp of what is
disclosed in the application and a grasp of what is disclosed
in the technology, may or may not be apparent until maybe
you've spent a couple of hours.  And simply the SPEs now do
not have a couple of hours for office action for each of their
nine or ten non-primaries.
My personal observations -- and a lot of what I've said so far
are personal -- are pretty much confirmed by some of the
personnel figures that have been provided by PTO, focusing on
the computer group 2300.  Right now there are approximately
160 examiners.  Of that total, 130 examiners, or over 80
percent, are non-primary examiners; 89 examiners of that
total, or over 55 percent, have less than two years
experience.
Appreciate that, if you don't have a primary authority, you
cannot issue yourself an office action or issue a patent.  So
your Office action has to be supervised by an SPE.  So what
you're looking at is the ratio of SPEs to the number of
non-primaries.  And the arithmetic is fairly simple.  There
are approximately on average in 2,300 10 non-primary examiners
for each SPE.  In some art units, there are as many as 14
non-primary examiners for one SPE.
The significance of this, as I've implied, is somewhat
discouraging and disturbing.  I believe it's impossible for a
single SPE to review the work output of 10 and perhaps 14
non-primary examiners.  These numbers also indicate that there
has been a massive examiner drain, particularly at the two or
three level.  I think when you say there's 55 percent with
less than two years experience, you can see that seems to be
a place when a lot of people are leaving.
After two or three years, the Patent Office pays these
non-primaries approximately $32,000 to $35,000.  And it's a
fact of life that firms and corporations can exceed that pay
significantly.
The problem is not so much with the primary or more
experienced examiners, because it seems that to some degree
the pay does catch up in later years, but the problem is that
most examiners don't wait around much past two or three years
to get to the higher salaries.
Thus the cycle continues.  An examiner comes to the PTO, is
trained for two or three years, and then he or she leaves.
Mr. Secretary, I heard your comments at the AIPLA and the IPLA
and I was very impressed with your efforts to reach out to the
examiner to make the work conditions and the work support
there better.  I certainly would encourage you to continue
that.  But I think you also have to look at the pay schedules,
particularly for young examiners.
I appreciated this time to come and talk with you this
morning.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Gable.  I
really thought that was very -- a little different perspective
than some of the other witnesses whose statements were very
valuable.  But I think you hit on some very practical issues
that we were aware were there, but I think you put them in
really sharp relief, and helped me a lot, and I'm sure
Commissioner Goffney to put them in sharp relief.  And we'll
go back and redouble our efforts to work on it.
MR. GABLE;:  Thank you.
COMMISSIONER LEHMAN;:  Thank you.
Next, Mr. John DeWald from the Prudential Insurance Company of
America.
I should add that if people have written statements, that we
would appreciate it if you'll make sure that Mike Fleming gets
them, it will help us a lot to make sure that we have the best
kind of transcript that we can have of these proceedings.
PRESENTATION BY MR. JOHN E. DeWALD
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
MR. DeWALD;:  Good morning.  My name is John DeWald.  I'm an
Assistant General Counsel at The Prudential Insurance Company
of America, and I'm responsible for its intellectual property
matters.
My remarks this morning will focus on the impact of
software-related inventions on The Prudential as a large
insurance and financial services company.  I believe our
experience in this regard is representative of the industry as
a whole.
In San Jose, my colleague and client Charlie Morgan confronted
the panel of a software patent infringement charge against his
Prudential business unit under a patent that essentially
claims a method of doing business.  A computer system is used
in that product to estimate tax contribution limits, forecast
premiums, and the like for health benefits using a 501(c)(9)
trust.
That charge is a specific example of a general issue I'd like
to discuss today.  For several years there have been
practitioners advising in trade journals, such as the National
Underwriter and Insurance Trade Weekly, and elsewhere, that
you could virtually lock in for 17 years the exclusive rights
to market a new product or service by patenting the computer
system created to support it.
Those who know the insurance industry and have no special
self-interest would probably agree that most such efforts
should fail for inability to prove novelty or nonobviousness,
or as for claiming a mere method of doing business, which is
non-statutory subject matter.
But the patent confronted by Charlie Morgan illustrates
graphically that many an insurance or financial product, even
one based squarely on the Internal Revenue code, can be
patented if the applicant simply embeds it within a computer
system.
This is relatively easy to do because in fact everybody
already uses computers to crunch the large numbers involved
with any insurance product or financial instrument.
In theory, defending against such a claim should be a
straightforward matter.  But in reality, the risks and costs
of responding are so extensive that economics alone often
dictates that many such claims be settled rather than
defended, even where the accused infringer is advised by
counsel that the patent is invalid.
The presumption of validity in favor of the patent-holder, the
so-called patentee advantage, creates economic risks far out
of proportion to the intrinsic merit of the patent.  This is
because insurance by its very nature involves contractual
obligations and risks for large numbers of policyholders and
beneficiaries, and these numbers can easily run into the
millions.
Further, to the average business person who must decide
whether or not to deal with an insurance company, the patent
itself appears to give an impartial government stamp of
approval to the patentee's allegations.  Even the informed
business person with competent legal advice does not want to
become involved in any insurer's complex, possibly costly,
patent disputes, let alone be drawn into a lawsuit.
This has a chilling effect on the market.  If customers decide
not to purchase a product, the market freezes, and the
business can die.  And all of this can happen before the
insurer has even a reasonable opportunity to obtain an
adjudication on the patent.
Even if an alleged infringer wants to contest the merits of
the patent claim, the long delays involved, the burden to
identify, locate, and produce a compelling array of prior art,
plus the cost of counsel, let alone the huge potential cost of
litigation, becomes a daunting and expensive alternative, even
beyond the expenses typically associated with patent
litigation.
This raises the nuisance value of such claims, so patentees
and their advisers expect huge sums in settlement.  Because of
all this, the patentee gets much more than the right to sue. 
Given the right circumstances, the patent holder gets in
effect a lottery ticket.
And with this result comes the social cost of diverting the
insurer's resources away from actually doing business, the
possible withdrawal of products from the market, hurting
individuals as well as companies.  And it could also mean an
increase in the cost of products to consumers to cover added
legal costs.
For mutuals like Prudential Insurance, it could also mean a
diversion of revenues which otherwise could have gone to the
policyholders as dividends.  And again, all this cost comes
without any corresponding value added to the economy or
technological benefit.
Accordingly, I'm responding to the first six questions on
Topic B as follows:
First, patents and printed publications do not provide
examiners with sufficient representative collection of prior
art to assess the novelty or obviousness of software-related
inventions, particularly in the insurance and financial area. 
For example, many program products constitute prior art by
virtue of being on sale, or the subject of public use.
It's been traditional not to publish these methods embodied in
the packages.  So the public is unaware of the nature of --
and unable to search -- this type of prior art.  The
collection of prior art must be drastically improved.  I
endorse in principle the establishment of the machine-readable
database now being organized by the Software Patent Institute. 
That project should be enthusiastically supported.
But also, much of the internal programming which companies did
in this area has been treated as, and considered a trade
secret, and not patented at all.
Finally, to the extent appropriate, that database should also
include policy filings from state insurance departments or
other regulatory agencies.
Two, for the same reasons, an accurate measurement of the
ordinary skill in computer programming, particularly in
insurance and financial services, cannot be derived from
printed publications and issued patents alone.  New products
or variations on old existing ones are constantly being
developed by the industry in response to market demands,
changing economic conditions, or changes in the law.
Internal computer programs at these companies are modified
accordingly on a continuous basis.
In view of this situation, the PTO should impose a special
duty on patent applicants for software-related inventions,
particularly in the insurance and financial services field, to
disclose information relevant to the invention.
Applicants should not be rewarded, and everyone else
penalized, for the proverbial empty head and clean heart.
As a practical matter, the manner of implementing standards of
novelty and obviousness is returning results that do not
accurately reflect software inventive activities.  We
appreciate and applaud the efforts that the Commissioner has
made in this matter.  But so far to date what's happened is
that applying a competent standard to an incompetent database
has yielded a deficient result.
Perhaps most importantly, implementing on a computer a process
technique, system, or method of doing business which is well
known but for the use of the software should not be considered
novel and nonobvious unless implementing the well known
process on a computer results in a novel and nonobvious
process.  Generally this will not be the case.
To do otherwise merely invites speculators to gain the
system --
COMMISSIONER LEHMAN;:  Can I interrupt you and ask for Mike
who is here, what kind of guidance can you give on that at the
moment to our examiners, if any?
MR. FLEMING;:  Presently we are applying the same standard as
in any computer arts.  Unfortunately, we are having to find
the particular features that are being claimed to apply an
obvious standard.  And if that happens to be a business
practice, we have to find that business practice in order to
apply a 103.  And that's been very difficult.
COMMISSIONER LEHMAN;:  Especially since business practices
aren't to be found in our patent shoes very much.
MR. FLEMING;:  Right.  Nor do we have -- sometimes understand
what the business practices are since we're trained as
technology-types and not business -- in the insurance.  And we
have a large variety of fields that these come into.
COMMISSIONER LEHMAN;:  It reminds me -- as a lawyer, one of
the most frustrating things that can ever happen to you
sometime is when you know exactly what the law is and then you
a very inexperienced adversary who may have not -- and then
they come up with all kinds of totally off-the-wall ideas that
everyone who really is an expert knows are off-the-wall.
Then when you actually try to explain this to a court, or
whatever, a judge who may be similarly inexperience, well,
judge this is something everybody knows -- he may actually --
it sometimes is very difficult to actually define and explain
and elaborate on what may to those who do it every day seem to
be obvious.
And I have a feeling that in the software area, now that we've
opened up this Pandora's box a little bit and where people
realize, hey, you can patent a lot of stuff, we're getting
people coming in with things that are really quite bizarre
patent applications, and the system just isn't used to or able
to deal with this.
I see you're shaking your head yes that you agree with it, and
I gather that's a problem that Prudential is having.
MR. DeWALD;:  Exactly, Commissioner.  Yes.
To treat the matter otherwise merely invites speculators to
gain in the system by sandwiching software into products and
services that are already well known.  In effect, large blocks
of insurance products unjustifiably become sitting targets.
There should be enough flexibility in the patent system to
reward the truly innovative software inventor without allowing
a host of free riders to cash in on the system without making
a contribution to it.
For 6.A, until the database deficiency has been rectified, the
PTO should require patent applicants to conduct diligent
search of prior art before filing and to distinguish claimed
software inventions from the resulting references.  In many
instances, the applicant may be able to identify technology
that PTO would be unable to uncover.
I realize this may impose on software applicants a burden not
imposed on others.  But nevertheless, given the importance of
this technology and the curable problems inherent in its
present treatment, this temporary burden is justified and in
the public interest.
6.B, the PTO should require software patent applicants to
prove their inventions overall are distinct over the prior
art.  If the only difference between the claimed invention and
the prior art is implementation on a computer, then the
claimed invention is not patentable unless the computer
implementation is nonobvious over the preexisting
implementation.
Anything less allows software soldiers of fortune to bootstrap
the patent system without adding value to the product, the
economy, or improving our technical body of knowledge.
6.C, as in the case of requirement applicants search, the PTO
should be permitted at least temporarily to distinguish
software-related inventions by setting a standard less than
prima facia to establish that such an invention is not novel,
or is obvious.
With the tremendous leverage afforded to the patentee in the
huge private and social costs in challenging the presumption
of validity, substance, not form, should prevail, especially
where there is not yet developed an adequate database.
The closed nature of the examination process should be
revisited.  After initial approval there ought to be
publication for opposition.  And that opposition should allow
for a meaningful internal adversarial process.  Challengers
should have a right to rebut the patentee's response.
A form which allows for the reasonable determination of
contested facts without the need to resort to multi-million
dollar litigation will enhance the integrity of both the
system and issued patents, discourage frivolous applications,
and hopefully eliminate some of the roadblocks along the
information superhighway we hear so much about these days.
Thank you very much for you attention and for the opportunity
to make these remarks today.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. DeWald.
Our next witness is David Clark.  You can come up right now --
or hold off.  I want to take about a three-minute stretch
break, and then we'll be right back.  But don't go away too
far.  We'll be right back.
(Recess.)
COMMISSIONER LEHMAN;:  Shall we proceed?  David Clark,
Aquilino and Welsh.  By the way, we have three more witnesses
after Mr. Clark.  I would think we would probably be able to
finish up by about 20 minutes after the hour, certainly by
12:30, even if we ask a lot of questions.
PRESENTATION BY DAVID L. CLARK
AQUILINO & WELSH, P.C.
MR. CLARK;:  Mr. Commissioner, members of the panel, my name
is David Clark.  I was an examiner in Group 2300 for 10 years
from 1983 to 1993.  When I left the Patent Office, I was a
supervisor in the group.
I'm currently an intellectual property attorney with the law
firm of Aquilino & Welsh.  I figure I have about one year per
minute to cover here.  I've been thinking about this process
for quite a while, so I'll try to jam it all together.
When I became a supervisor -- I guess I'm living proof of
Lou's statistics -- I had 11 people in my art unit.  I did not
have any primary examiners, and seven of the people that I was
in charge of had less than a year of experience.
The technology that we worked with in the art unit was
database technology, which is very often Ph.D. level work, and
the legal issues that we did confront in the database
technology were often the first impression as far as legal
issues go.
I relay this story because it's typical of the group at this
point, as was told to you by Lou earlier.  And I believe it
directs attention to the key problem in the group, which is
retention.  I think that many of the issues being discussed by
these hearings can be addressed at least partly by solving the
problem of retention.
For many people with computer backgrounds, the Patent Office
is not considered a career path, but rather just a stepping
stone.  The high turnover places great stress on the senior
personnel.  And the costs of constantly training new people is
extremely high.
Over the years, the resources of the group have literally been
drained as a result of this.  This has created a vicious cycle
of eroded resources and high turnover, which I think are very
closely related.
I've heard a lot of talk about hiring during these hearings. 
I don't think hiring alone will solve the problems of
retention, because the group currently hires many capable
people.  But the years of training necessary for developing
the skills of -- nuances -- understand nuances of the law, the
technology, and how the law applies to the technology, cannot
be hired.
The key resource of Group 2300 is people.  People who have
developed the skills of effectively analyzing and expressing
the technical and legal issues of these very complex
technologies.  It's my contention that all resources should be
directed towards improving these skills and maintaining these
skills within the Office once they've been attained.
I think the problem of retention can be addressed by focusing
on two things, providing tools which will lead to an effective
examination and satisfaction among the examining corps, as
well as proper recognition for the people in the groups that
improve the Office and perform a good job.
And perhaps more importantly, I think Group 2300 has to
realize that they must compete with the career alternatives
available to the examining staff.  That is, the group must
consider itself a competitor for these people's services.
First I'd like to discuss tools.  The two fundamental tools of
examining are time and efficient access of information.  The
time to examine an application in Group 2300 has remained
constant over at least the last decade that I'm aware of. 
Even though the technology has accelerated at a much faster
pace than what was going on 10 years ago.  I think this has
led to an increased dissatisfaction among the examining staff
with respect to what is attainable within that time period.
I would recommend, as you alluded to earlier, a very strong
analysis of the time constraints imposed on the examining
staff, as well as the incentives created by the present
system.  And this should include a review, at least where
possible, of similar activities on the outside.
The second tool is efficient access of information.  And this
can either be in the form of physical tools used by an
individual, or the exchange of information among people.  In
either case, the ideal is to be able to immediately access --
and I would put forth without searching for it -- relevant
art.
And then the process of examination should be just merely
review of that art, rather than -- the current process of
searching, I would say, characterizes out of control.  You're
often lucky if you can find ballpark art in many instances for
cases.
And I think that if the information is already organized
before they go to access it, this will lead to a much greater
sense of satisfaction with the job.
COMMISSIONER LEHMAN;:  How would we do that?  What do we need
to do to organize it better?  Is it still the classification
system?
MR. CLARK;:  Yes.  That's actually my next couple of topics
here.
The Office should immediately implement in Group 2300 a
dynamic, ongoing classification of the information that's
coming in and being developed.  The first step is to create a
structure which supports this effort and then to provide the
time necessary to update and maintain the system.
In this rapidly developing technology, the classification
really needs to be a lock-step with the developments as they
are coming out, instead of the typical process of every couple
of years undergoing a reclassification.
This will reduce the frustration presently experienced among
the examining staff, which I think will -- it's my belief it
will lead to more retention.  And I think that the further
that the Office is away from these ideals, the more problems
it will have with retention.
The Office should also implement existing technologies which
encourage and facilitate the flow of information both between
examiners and between examiners and outside
information-gatherers.  Each art area should be encouraged and
supported in forming a network entity for exchanging
information on an ongoing basis.  Information services within
the PTO should serve the examiners' goals in developing these
tools.
As a way to further facilitate the flow of information among
examiners, I would recommend developing discussion groups for
technology areas.  And these should be supported by the
system, the incentives in place, and management.
I can attest to the value of these because I was involved in
two discussion groups in the database and graphics processing
area when I was in the Office.  These are extremely valuable
for developing resources, exchanging ideas with respect to the
technology being examined in particular cases, and also
discussing the legal issues that surround these cases.
I think that these discussions often lead to a much greater
consistency in the examination process.  And it can be tied to
retention because it reduces the isolation of the examiner and
it puts a team concept into the process.
COMMISSIONER LEHMAN;:  Now, that sort of thing, though,
requires -- again, given how we evaluate people.
MR. CLARK;:  Right.
COMMISSIONER LEHMAN;:  They don't get any credit for
discussion groups.  So that really goes again to the criteria
that we use for judging performance.  Right now you can get
the wrong paper out the door and you get as much credit for it
as if you get the right paper out the door.
MR. CLARK;:  That's right.  In fact, the discussion groups
which we had were all supported -- well, we were not given
time by management to do these.  It was a grassroots type
effort.
There should also be a technology liaison between each
discussion group and industry and the bar for bringing in
people and receiving information relevant to that area.
I'd like to make a final comment on tool development.  I think
that the attitude which should pervade this process should be
one of empowering the examiners to define the tools that they
need for their job.  And this should be supported by
management so that they can define what their future is like
in the Office.
I have to admit that this concept was given to me by somebody
in industry because I don't think I had the mind set for it
coming out of the patent office.
The second area is recognition, both in monetary form and in
nonmonetary form.  An example of -- I know somebody who
recently left the Office who had been in the Office
approximately three or four years.  Their take-home pay
doubled when they left the Office.  And they expect increases
in salary of $15,000 to $20,000 over the next year.
I think that the gap needs to be closed to some extent, and
maybe it's not possible to close it all the way.  But with
whatever is left, as far as a gap between the outside and the
PTO, the Office is going to have to very aggressively compete
in the other areas.
Then with nonmonetary recognition, I think the system needs to
be realigned to effectively recognize the groups of people
that work together to attain the goals of the Office.
COMMISSIONER LEHMAN;:  Is it your view that the -- Mr. Gable
mentioned that we have a pay problem, particularly at that
GS -- at that sort of early middle level -- or do you think we
have a problem at every level?  Do you think that if you spend
20 years at the Patent Office and you get to be a GS-15 and
you get a bonus, that even that isn't enough?
MR. CLARK;:  I think somebody who has made that decision, at
least at this point, has signed on to whatever salary -- I
think, as far as retention goes, early on they look at the
salary that they have, the salary they could get for very
similar type of work.
COMMISSIONER LEHMAN;:  So you really agree with him that the
real problem is more in that, say, in the two to five year,
two to ten year category?
MR. CLARK;:  Yes.  I could see the upper GS levels being
relevant in terms of long-term growth within the Office, that
somebody with career alternatives who is being lured away from
the Office could look down the line and say, well, GS-15 --
you know, that economic analysis that the GS-15 makes this,
and where will I be in the same timeframe that it would take
me to attain a GS-15 level?
COMMISSIONER LEHMAN;:  Of course, it's my impression that in
terms of a non-lawyer examiner, that the options for the
really large six-figure-plus incomes are somewhat limited.  I
mean, at that point we're fairly competitive.  But if you have
the law degree, as you do -- you went to law school and became
a lawyer -- then we really become very noncompetitive, almost
at every stage.  And it's extremely hard to close that gap.
But with the at least non-lawyer examiner, my sense of it is
that within the overall context of the government's pay scale
that at least theoretically we could close the gap.
MR. CLARK;:  Right.  Yes, I think the compensation for
attorneys within the Office, that's a very sensitive subject. 
But I think that that possibly could be -- it happened
indirectly with me.  I was given certain cases because of my
legal skills, which in my case I stayed in the Office longer
as a result of that.
I think that that's what I was talking about earlier, where
maybe there are alternatives to salary, even after closing the
gap.
COMMISSIONER LEHMAN;:  You found the work itself to be more
interesting and stimulating when you've got some legal
challenges that made it worth staying there.
MR. CLARK;:  Right.
COMMISSIONER LEHMAN;:  One of the concerns I have that I'm
picking up, not at these hearings of course, but in my
discussions with Patent Office employees, is that there is a
real cultural bias in certain areas in the patent corps
against lawyers.  It's kind of like when you go to law school,
you join another group.  Did you experience that at all?
MR. CLARK;:  I think that depends.  I don't think there's an
overall bias, but I know -- and I did not personally
experience that.  I think that's a tribute to my supervisors.
COMMISSIONER GOFFNEY;:  I'm curious as to when you went to law
school.  Could you give us a little background as to when you
went to law school and finished?
MR. CLARK;:  '86 to '90.
COMMISSIONER GOFFNEY;:  I mean, during your tenure.  Did you
come here and go to law school while you were an examiner, and
when did that happen?  After the first year?  Second year?
MR. CLARK;:  Well, I was in the Office.  I joined in '83, and
for the first year and a half I just focused on examining and
reading books, actually, that I had gathered over my
undergraduate years.  And then I went and attained my master's
degree for the next two years, from '84 to '86.  Then from '86
to '90 I attended law school.
During that time, I went through the partial and full sig
programs.
COMMISSIONER GOFFNEY;:  So it was about three years after you
attained your law degree that you went out to industry, or
went out to practice?
MR. CLARK;:  Right.
COMMISSIONER GOFFNEY;:  Thank you.
COMMISSIONER LEHMAN;:  What was your undergraduate degree in?
MR. CLARK;:  Computer engineering, which was a very good
degree for what the technology is in Group 2300.
I guess just to summarize it, I think it's -- in order for
this problem to be resolved, I think the group is going to
have to be competitive, and really look into maximizing its
advantages, especially in the upgrading of the examination,
tools for the examiner, to provide a better environment.
And I think this will break this current cycle of the eroded
resources and poor retention, and hopefully start a new cycle
of much better resources, higher retention, which will be to
a more experienced staff.  And I think a better treatment of
the legal and technical issues that are creating problems in
the public domain.
COMMISSIONER LEHMAN;:  Well, I really appreciate your --
again, like Mr. Gable's testimony, I think you really focused
on some very important practical issues.  We might even want
to have you back informally for some discussions about it. 
Maybe we can get a little discussion group going of people
like you who have left the Office, and if we can get to the
bottom of why they do.
MR. CLARK;:  I'd love to participate.
COMMISSIONER LEHMAN;:  Great.  Thank you very much.
MR. CLARK;:  Thank you.
COMMISSIONER LEHMAN;:  Professor Galler has arrived, I assume. 
Great.  I think we're not quite ready yet, though.  We're
running way behind because we thought we had all the time in
the world.
Our next witness is Allen M. Lo, a student associate at
Finnegan, Henderson, Farabow, Garrett & Dunner.
PRESENTATION BY MR. ALLEN M. LO
FINNEGAN, HENDERSON, FARABOW GARRETT & DUNNER
MR. LO;:  Good morning, Mr. Commissioner.  My name is Allen
Lo.  I'm also another example of a casualty from Group 2300. 
I worked as an examiner in Group 2300 for about two and a half
years, examining patent applications involving computer
control systems, computer-aided product manufacturing, and
error correction and detection systems.
Last March I left the PTO to work for the law firm of
Finnegan, Henderson, Farabow, Garrett & Dunner, where I
currently prosecute and write patent applications, much of
which involves software-related inventions.  I currently
attend the Georgetown University Law Center as a third-year
evening student.
Today I'm speaking on my own behalf.  The views that I express
today are my own and not the views of the firm or its clients.
Mr. Commissioner, I'd like to address two different matters
this morning.  First I'd like to speak about the group's
policy regarding the patentability of claims drawn to software
stored on a disk.  Second, I'd like to supplement the comments
that Dave Clark made about what the PTO can do to improve the
quality of examination based on my own experience.
Beginning with the first issue, it's been the policy of Group
2300 that claims drawn to software stored on a disk are per se
unpatentable.  During the examination of an application
involving a software related invention, examiners in Group
2300 place claims into one of two groups:  implemented and
nonimplemented computer software.
Implemented computer software generally refers to computer
software that's claimed as being executed on a computer, which
Group 2300 treats as being patentable, subject, of course, to
the novelty and nonobviousness requirements.  For example, a
claim reciting a general purpose computer running a novel and
nonobvious computer program is treated as being a new machine,
and thus would be allowed by Group 2300.
In contrast, nonimplemented computer software refers to
computer software that is not executed on a computer.  In
other words, simply a static program.
Claims reciting nonimplemented computer software may be
directed either to the computer program itself, such as a
computer program comprising followed by either source code or
means plus function language, or to software that's stored on
a disk, such as a computer-readable medium, storing a computer
program comprising, followed by source code or means plus
function language.
Group 2300 views these claims, the nonimplemented computer
software, as per se unpatentable.
I'd like to focus my comments on one particular type of
nonimplemented computer software, and that is claims reciting
a disk that store a computer program claimed in terms of means
for performing a function, say a function -- means for
performing function A, means for performing function B, et
cetera.
Examiners in Group 2300 are trained to reject this type of
claim under 35 U.S.C. Sections 101, 102, 103, 112 first
paragraph, and 112 second paragraph.  These rejections can be
simplified, and I would generally classify them into three
different categories.
First, these kind of claims are rejected under 35 U.S.C.
Section 101 as being directed to printed matter.  The second
category, the claim is rejected under 35 U.S.C. Sections 101,
102, and 103 over a prior art disk by effectively reading out
any specific recitations in the claims directed to the
computer program, and then concluding that either the claims
are anticipated by a prior art disk, or that storing any type
of data on a disk would have been obvious.
The third category of rejections are under 35 U.S.C. Section
112 first and second paragraphs, because the disk itself is
unable to perform the recited functions, but requires a
computer to actually perform the functions, and therefore is
either indefinite, or the specification doesn't disclose how
a disk can perform the functions.
I believe that these type of rejections are either
unsupportable under the case law, or can be easily drafted to
avoid these kind of rejections.
First, with regard to the printed matter rejections, these
type of claims do not attempt to claim the mere arrangement of
words, which is really what the printed matter rejection is
all about, such as the program code itself.  But rather, these
type of claims specifically are directed to the functionality
that is provided by the computer program.  And thus the claim
really doesn't contain printed matter.
However, even if the computer program could be analogized to
printed matter, the case law does provide an exception to the
printed matter rule, which is that if there is a functional
relationship between the printed matter and the medium that
the printed matter is stored on, then those claims are not
considered printed matter -- printed matter rejections are not
applicable to those types of claims.
In the case of a computer program stored on a disk, the
computer program really transforms the disk into new disk kind
of the same way that a computer program transforms a general
purpose computer into a new machine.
With respect to the rejections over a prior art disk, it's
simply improper for the PTO to ignore any limitations in the
claim, particularly in this case where the computer program is
claimed in means plus function language.
And finally, with respect to rejections based on the disk
being unable to provide the claimed functions, the claim can
be drafted to be more specifically and particularly claimed if
actual function performed by the disk.  For example, the claim
could be drafted differently, and rather than being claimed as
a disk storing a computer program comprising means for
performing a function, means for performing a function, it
could be claimed as a disk storing a computer program
comprising a means for instructing a processor to perform the
function, means for instructing a processor to perform another
function.
So in this way it actually is claiming what it actually does,
which is really to instruct a processor.  And I think that can
avoid those types of rejections.
It should be noted that the claiming of software on a disk is
not simply a trivial exercise in claim drafting.  Patentees
have an interest in obtaining claims drawn to software stored
on a disk.
By disallowing these types of claims, patentees must obtain
patents with claims drawn to software that is run on a
computer.  When patentee seeks to enforce this type of patent,
manufacturers and sellers of infringing software would not be
liable for direct infringement, but rather it would be the
users of the software that would be liable for direct
infringement by virtue of the fact that they're running the
software, because that's what the claims really recite.
Manufacturers and sellers of infringing software would not be
liable for direct infringement, but instead they would only be
liable to the patentee under some cumbersome theory of
contributory infringement, or inducement infringement,
requiring the patentee to prove additional elements, including
knowledge and intent.
Whether or not the PTO changes its policy toward
nonimplemented computer software, I think it's important that
the PTO at least publish in the official gazette clear
guidelines and rules defining the types of software claims
which they PTO considers to be acceptable.
I believe that a lot of these guidelines are not published. 
And so a lot of this information I have is only as having been
an examiner in the group.
Turning to the matter of improving the quality of examination,
I'd like to make the following observations and suggestions.
First, as others have suggested, examiners in Group 2300 need
to receive more legal and technical training.  Many of the
examiners who attend law school eventually end up leaving the
PTO to accept more lucrative positions in private practice,
resulting in fewer and fewer examiners with legal training in
the PTO.
I would recommend at least more in-house legal courses that
teach basic legal skills, such as legal research and writing,
be offered to those examiners who don't attend law school.
Further, examiners should be invited and encouraged to attend
meetings and lectures that relate to software patenting, for
example, such as today's hearings.  Yesterday I attended, and
I didn't see any patent examiners.  I don't believe that they
were actually notified of the hearings.  And I think
attendance at these kinds of things would be helpful to
examiners, at least so that they can understand the big
picture and appreciate the issues that they are actually
facing during examination.
Further, more technical courses need to be offered to increase
the level of technical understanding within the group.  It is
awfully difficult for an examiner to appreciate the advantages
of an invention when they don't really understand what it is.
And as Dave Clark pointed out earlier, the training of
examiners is undermined if the PTO is unable to retain its
examiners.  My experience has been that examiners leave the
PTO for various reasons.  Certainly many examiners are lured
from the PTO by the higher salaries that are offered by patent
law firms.  This problem could be alleviated somewhat by
raising salaries in groups with high turnover rates, such as
Group 2300.
However, I believe that some examiners, myself included, leave
the PTO because they feel the examining function is no longer
stimulating or challenging.  Finding solutions for retaining
these types of people may be difficult, but I believe that,
for example, the Examiner Enrichment Program which you
mentioned yesterday is a definite step in the right direction.
Finally, there is natural tension between the count system and
having a high quality of examination, as you mentioned.  I
think the count system is something that is necessary.  I
think you had mentioned reevaluating the number of hours,
perhaps, that the examiners should spend on a particular case. 
I think that would be helpful.
Some of the suggestions that Dave made earlier about having
group meetings and that kind of thing, and how that doesn't
really count towards an examiner's performance, can -- those
types of meetings can be counted by the fact that PTO
oftentimes does offer write-off time.  So time that people
spend in these types of meetings, they're not really held
accountable to produce additional cases.
I'd like to thank you for allowing me this opportunity to
testify, and I can answer any questions you may have.
COMMISSIONER LEHMAN;:  Thank you very much.  I don't think I
have a need at this point, but I think that was very helpful. 
And it's very helpful, the perspective of people like you who
have been in the corps, who are young attorneys or
attorneys-to-be, because you're exactly the kind of people we
need to know what's going on with.  Thank you very much.
Our next witness is Professor Samual Oddi of the Northern
Illinois University College of Law.
PRESENTATION BY SAMUAL ODDI
NORTHERN ILLINOIS UNIVERSITY COLLEGE OF LAW
MR. ODDI;:  My name is Samual Oddi.  I'm Professor of Law at
the Northern Illinois University College of Law in DeKalb,
Illinois.
My comments are premised on research I have done into the area
of the economic impact that intellectual property has in
various spheres.  I started this research because of my
interest in the international patent system and its impact on
the economic development of Third World countries.  That study
is published in the Duke Law Journal.
Then, due to my economic research into that, I came upon a
number of economic theories which I thought had more specific
applicability, if you would, to the United States and
developed countries.
I then published an article in the American University Law
Review entitled "Invention Protection in the 21st Century
Beyond Obviousness" where I proposed a revolutionary patent
which provided an enhanced degree of protection for those very
rare revolutionary inventions which I will define in a moment.
Most pertinent to these hearings is an article that was
published very recently, late last year, in the Nebraska Law
Review entitled "On Uneasier Case for Copyright Than for
Patent Protection for Computer Programs."
COMMISSIONER LEHMAN;:  An Uneasier Case?
MR. ODDI;:  On Uneasier -- rather ungrammatical, but that's
the title which is based upon a previous use of the "uneasier"
in the copyright context.
I have heard this morning a couple of comments which I think
are very typical of what's happening in this field today. 
There is a League for Programming Freedom and perhaps a league
for insurance company freedom.  We love intellectual property,
as long as our ox isn't gored.  And there are costs.  Indeed,
there are costs.  They may be spurious lawsuits.  They may be
lack of access.
Intellectual property is always the context of access versus
incentive.  I want to talk about the positive aspect of it
this morning, about the incentives.
The question I'd like to address is whether the present regime
of intellectual property provides adequate incentives for the
creation of software-related inventions in general, and for
what I call revolutionary software-related inventions in
particular.
Now, incentives are fundamental to our intellectual property
system.  The instrumentalist intent of Article I, Section 8,
Clause 8 of the Constitution is clear:  To promote the
progress of science and useful arts.  This was not a novel
concept even 200 years ago when our Constitution was framed. 
It can be traced back to at least the Venetian patent statute
of 1474, which states -- and the language is rather
interesting and I'll quote it for you.
"Now, if provision were made for works and devices discovered
by men of great genius apt to invent and discover ingenious
devices so that others who may see them could not build them
and take the inventor's honor away, more men would then by
their genius would discover and would build devices of great
utility and benefit to our commonwealth."
Again, this idea of the incentive being provided.  The
underlying assumption of providing the patent incentive of
exclusivity for the creation of inventions is that in the
absence of such an incentive and inadequate number of
inventions would be provided.  This would be to the detriment
of society.
Now, there are costs associated with that.  We are willing to
suffer the indignity of the patent, the copyright monopoly, in
order to achieve these inventions.  However, as all of us
know, many inventions would still be created, even if there
were no patent system.
After all the aphorism, necessity is the mother of invention,
still rings true.  The market will induce many inventions with
such factors as lead time, learning curve advantage, market
recognition, among others, often being sufficient incentives.
Thus we can distinguish patent-induced inventions, that is,
those which are actually induced by the availability of a
patent, from market-induced inventions, which do not rely upon
this patent system for their creation.  The market drives
them.
Economists tell us that if patents were limited to those of
the market-induced variety, the result would be a net benefit
to society.  The problem is that the patent system protects
all inventions.  It boils down to a question of whether
society should pay for something that it would otherwise get
for nothing.  So we built in costs because we inherently
protect all types of inventions.
Now, the Supreme Court recognized this in Graham versus John
Deere in the context of discussing the standard for invention. 
And I quote:  "The inherent problem was to develop some means
of weeding out those inventions which would not be disclosed
or devised but for the inducement of the patent."
The requirement, however, that an invention not be obvious to
one skilled in the art is at best a fickle tool for weeding. 
There are of course many inventions that would satisfy, and do
satisfy, the nonobvious requirement, which are induced by the
market rather than the patent system.  These tend to be
inventions which are of a high benefit/cost ratio variety.
That is, those which are in the product line of the
enterprise, and which fit into existing product lines which
you need to develop for competitive purpose, or else you're
going to be out of business whether or not you're going to
patent it.
Now, in my view, the important category inventions that rely
upon the patent system for their creation are revolutionary
inventions.  These inventions, as defined by Professor F.H.
Chair, who is an economist at Harvard, are those that
revolutionize production or consumption.  These are the
industry-creating and job-creating inventions.
Examples will include telephones, geography, black and white
television, transistor, and there are many, many others.  The
revolutionary inventions tend to require the patent system for
inducement because of their uncertain benefit/cost ratio. 
They do not lend themselves to a bottom-line type of analysis
because of the uncertainty involved in even creating a viable
invention.
There's a final class of patent-inducing inventions.  These
are the detailed inventions that companies will typically use
in a defensive manner to carve out some small area, and they
tend not to be very important because there is competition. 
So they are not extremely costly.
Now, if revolutionary inventions are the important category,
how does the present patent system deal with them?  In my
view, it deals with them poorly.  And indeed, discriminates
against them with respect to requirements of patent law.  One,
the statutory subject matter requirement, and two, the utility
requirement.
Because revolutionary inventions tend to be at the cutting
edge of knowledge and very close to discoveries of scientific
principles or laws of nature, they may tend to run afoul of
Section 101 definition of statutory subject matter.
In addition, as such inventions tend to be at an early stage
of development where full utility has not been fully
determined, they may have difficulty in complying with the
utility requirement as rather rigidly defined in Brennar
versus Manson.
Now, statutory subject matter has plagued software inventions,
as all of you know.  Benson and Flute are still lurking out
there somewhere, although narrowly interpreted by the Court of
Appeals for the Federal Circuit, and also the Patent and
Trademark Office.
The utility requirement may also present some problems for
these cutting edge software inventions.  On the other hand,
market-induced inventions have little trouble satisfying
statutory subject matter in utility requirements.  The only
filtering aspect is the nonobvious standard.  And as you also
know, secondary consideration, such as commercial success, may
even open up the filter with respect to many market-induced,
because the market loves these.  They were needed in the first
place.
Now, let me change gears a bit and talk just a moment about
copyrights.  It is clear that literary and artistic works tend
to require the inducement of copyright -- novels, poetry,
musical compositions.  To a lesser extent, factual work, such
as compilations that require the expenditure of sweat of the
brow, may need some inducement.
But, the category of works requiring the least incentive would
seem to be utilitarian works that provide a function outside
of expression.
I would suggest three dimensional lamp bases, for example. 
And of particular relevance here, computer programs.  It
seemed quite clear that there was a tremendous market
incentive to create, for example, application programs.  This
symbiotic relationship between hardware and software drives
development in both directions.
Now, if I can be permitted to generalization, present
copyright law provides excessive incentives for the creation
of software in general.  There is a low substantive standard,
originality, for protection.  The scope of protection might be
quite broad, and is inherently ambiguous.  Little information
is conveyed when programs are published in object form.  And
the cost of acquisition is negligible.
Now, notable examples of excess protection in the copyright
sphere would include Welan, the Lotus case, lingering
linguistic charm of look and feel.  The Second Circuit case of
Computer Associate versus Altay at least attempts to provide
a filtering form of analysis to eliminate some functional
features of utilitarian programs.
However, there are inherent difficulties in attempting to use
a literary form of copyright infringement analysis in the
context of a utilitarian work.  Nonetheless, does the
copyright system, even as presently interpreted, provide an
adequate system of protection for what may be called
revolutionary software?
It seems clear to me that reasonable business people would not
rely on copyright alone for the protection of revolutionary
developments.  The important aspects of such developments
would reside in the ideas contained therein, which would be
subject to strong attack under even the most generous and
ambiguous literary forms of analysis.
What then about trade secrets?  Trade secrets, particularly in
combination with copyright, provide a relatively strong regime
of protection for programs.  However, with respect to
revolutionary software, once the idea has been conveyed
publicly, there is no misappropriation, and competitors would
be free to use these basic ideas, which indeed make the
software revolutionary.
Finally, a word about suigenerous protection. There's been a
lot said about that, a lot published about providing a
suigenerous protection for computer software.  This may or may
not be a good idea.  Such a system may solve certain problems,
but will create others.
In any event, with respect to revolutionary software, it does
not provide an adequate solution.  None of the proposals I
have seen have the temerity to suggest the protection of
ideas.
Now, my general conclusion is that the current regime of
intellectual property -- let me state my general conclusion
once more.  My general conclusion that the current regime of
intellectual property inadequately protects revolutionary
software invention.
What then would I recommend?  As a minimalist position, I
would urge the Patent and Trademark Office to stay the course. 
The law with respect to the patentability of software-related
inventions seems to be advancing in a desirable manner under
the benign leadership of the Court of Appeals for the Federal
Circuit in its application by the PTO.
It would be nice to have Benson and Flute overruled
legislatively.  To the extent that statutory subject matter
would include, as indicated in the Shakovardy decision,
"anything under the sun made by man."
It would also seem desirable to have Deere clarified as to the
definition of a process so that it was made clear that there
is no transformational requirement.
Also, it may be helpful, if this comes into issue, to look at
the definition of utility again.  The Manson standard, in my
view, is far too narrow.  It impacts adversely on
revolutionary types of invention.
In closing, I'd like to say a few words about the economic
importance of revolutionary inventions, and in particular
revolutionary software inventions.  The United States is the
current recognized leader in software development. 
Nonetheless, in my view, it will not retain that leadership if
development is concentrated in the creation of new game
programs or further adaptations of application programs.
The future lies in those revolutionary inventions that will
change how we do business, consume, communicate, whatever. 
This may be with reference to the information superhighway,
interactive media, data compression, and more importantly, for
uses that haven't even been thought about at this time.
Along this line, it should be noted that Americans are
probably the most creative individuals in the world.  Look at
the number of Nobel prizes awarded to Americans.  Look at the
number of revolutionary inventions created here, even though
they may be commercialized elsewhere.
In addition, Americans are noted for their entrepreneurship. 
Small businesses create the vast majority of the jobs in this
country today.  The downsizing of major corporations is
unfortunate, but it is a reality.
It is also known that entrepreneurs are willing to risk
capital in the development of inventions that do not have a
bottom line driven benefits/cost ratio.  It is this
risk-taking of the entrepreneur, when coupled with the
creativity of the individual, that is likely to produce
revolutionary inventions.
This is particularly pertinent to the software industry, which
still tends to be a cottage industry and requires relatively
little capital investment -- only access to a computer, a
creative mind, and an entrepreneurial experience.  We should
build upon our leadership in the software area and exploit the
creativity and entrepreneurship of those already working in
this field and those who will enter this field.
Thus, I would urge that the policies be adopted so that an
adequate system of protection for revolutionary inventions,
particularly in the software field, can be maintained and
implemented.
Thank you.
COMMISSIONER LEHMAN;:  Thank you very much, Professor Oddi. 
I was all set to ask you a question that I think you sort of
answered at the very end.  But when you talked about the
incentive of the patent system and really focused on the
incentive of the patent system as a means of inducing
invention.
We, not only in this forum -- and in this forum we heard it,
but definitely in San Jose and here and other places -- the
patent system also is a mechanism for inducing investment as
well.  I gather that -- as I said, I think at the end you sort
of clarified that, but you can tell me whether I'm right or
not in terms of my interpretation of your analysis -- and that
is that you indicated that actually investment in
run-of-the-mill -- that the present system actually encourages
investment in the run-of-the-mill technology as opposed to the
really innovative breakthrough technology.  So that actually
an analysis which really focuses on innovation, and a system
which focuses on innovation, are still the preferred system.
MR. ODDI;:  Yes.  Let me clarify.  When I talk about inducing,
I'm talking at all stages, not at the creation stage, which is
what I primarily focused on today.  In my article I go in and
talk about at the innovation stage -- commercialization
stage -- economists like to call it innovation when it goes
into production.  It's actually commercialized.
Yes, those would be induced, too, because certainly the basic
idea has to be implemented.  And we need incentives all the
way throughout the development.
COMMISSIONER LEHMAN;:  We also heard in San Jose quite a bit
of criticism of the way we implement Section 101, and that
we're really spending too much time on very artificial
determinations.  And I think to some degree that was an
underlay of some of Mr. Lo's comments, too, working day to day
on this, in fact to the point where he was in a sense almost
offering suggestions as to how we might further refine these,
to some degree, semantic distinctions simply so they'll create
fewer problems.
And I gather that that's something that you think really does
need review.
MR. ODDI;:  I certainly do.  So I think Section 101 should not
be a filter for inventions.  And it was mentioned here
earlier, the methods of doing business -- well, in my view,
that is an arbitrary categorization based upon 19th century
formalistic jurisprudence, which today we know that the United
States is a great service industry.  And I think there's a
great deal of creativity in the service industry.
And certainly if somebody comes up with a revolutionary
invention in the field of how you do business in the
insurance, or whatever business, I think our society benefits
at the margin from having that invention, rather than having
people invest in that so that we will have it, because it will
be a more efficient way of doing business.  We will have value
added, and I think that's important to our economic
development.
COMMISSIONER LEHMAN;:  Well, actually in San Jose I think one
of the things that came out, quite apart from whether or not
inventions get -- applications are rejected inappropriately on
these grounds, which would be your thrust -- that the mere
fact that we spend so much time worrying about it takes away
from the -- focuses our attention on the wrong issue, which is
really nonobviousness --
MR. ODDI;:  Yes, I know that.
COMMISSIONER LEHMAN;:  -- as opposed to, you know, trying to
fit this square peg in the round hole.
MR. ODDI;:  My only comment on that, that I think the
nonobvious standard ought to be a rigorous high standard
because it is the only mechanism that we have for filtering
out these costly inventions, which the market would otherwise
create.
COMMISSIONER LEHMAN;:  Well, I think that really goes to the
core of what you're talking about too.  I got the impression
there's a fair amount of satisfaction with the direction of
the Court of Appeals for the Federal Circuit on that.  That
would not necessarily be my view of --
MR. ODDI;:  With a caveat about secondary considerations and
other -- because that tends to show you that the market really
was a factor in the creation of it.  I'd like to see a more
objective evaluation of the nonobvious issue based upon the
prior art, rather than what happens post hoc.
COMMISSIONER LEHMAN;:  I really want to thank you for coming
all the way out here.  I hope you're not snowed in forever.
MR. ODDI;:  I hope not.
COMMISSIONER LEHMAN;:  You're used to it, though, in Illinois.
MR. ODDI;:  Right.  Thank you very much.
COMMISSIONER LEHMAN;:  Next, actually, because we've
dilly-dallied around, we've supplied time for Bernard Galler
of the University of Michigan Software Patent Institute to get
here.  So if Professor Galler would come forward?
MR. GALLER;:  Yes.  One plane canceled, one late.  The taxi
drivers couldn't find the place.  But I got here.
COMMISSIONER LEHMAN;:  Great.  The Federal Government is
closed today.
MR. GALLER;:  I heard that it was closed, but I had confidence
that you would continue with these hearings.
(Laughter.)
PRESENTATION BY BERNARD GALLER
UNIVERSITY OF MICHIGAN SOFTWARE PATENT INSTITUTE
MR. GALLER;:  I'll introduce myself.  I'm Bernie Galler,
Professor of Computer Science at the University of Michigan,
and former president of the ACM.  But I'm here today as the
founder and chairman of the Software Patent Institute in Ann
Arbor, Michigan.  And I'm speaking here as Software Patent
Institute representative.
The history of inventions in the software area is not recorded
well.  There are a few formal journals, such as the Annals of
the History of Computing, and some textbooks.  But the prior
art that is needed by the PTO is not available in many of the
forms that more mature fields support.
For example, in the fields of chemistry or physics, in
addition to a large number of patents available to the PTO,
most researchers' results are published in a relatively few
journals.
This is not the case in the software community.  Not only are
the results and inventions not published in formal journals
most of the time, they usually described if at all, primarily
in informal conference reports or newsletters.  Add to that
the almost complete lack of issued patents before 1981 in this
field, and it is clear why PTO examiners have a difficult time
finding prior art, even when previous work that is relevant is
well-known in the field.
There are some repositories of program code, but it's very
difficult to extract, or abstract, the innovative and
nonobvious algorithms and ideas that are detailed there.
What is needed is not the detailed code, but some level of
description of what is in that code.  Unless the author
carefully documents the developing algorithm, the control flow
and the data structures, it's very difficult to discover these
concepts to understand the underlying process.
It is well known, however, that programmers are usually too
interested in moving on to the next task to take the time to
document the last one.
It isn't difficult to understand why software results are so
often not published in formal journals.  Most of the work in
this emerging field has been done outside academia, since
software is almost always immediately applicable to the
solution of problems that already exist in industry.
Of course, there is theoretical work in computer science and
compute engineering.  But the explosion of computing in our
society has led to a corresponding explosion in software
techniques in advance of the theory.  And in the rush to
exploit these techniques, relatively little effort has been
devoted to disseminating these results and techniques widely.
In fact, even when this kind of information is not regarded as
a trade secret, many companies are not particularly anxious to
have it made widely available.
During the years before 1980, there was much confusion as to
the kind of protection that might be available, if any, for
software inventions.  And there was little incentive for
programmers to try to publish their work.  Much of the
communication that did go on occurred at thematic conferences
and workshops.  The reports of such conferences constitute a
very valuable source of prior art, but they are not readily
available to the PTO.
Thus, the PTO has found it difficult to identify the relevant
sources for prior art, or to collect that prior art into a
usable database for the purpose of evaluating patent
applications.
What are the relevant sources for prior art in the software
area?  I already mentioned our conference and workshop
proceedings from both general and specialized conferences. 
These are usually sponsored by professional societies such as
the ACM and the IEEE, and special interest groups, the sigs,
or societies.  And the sigs publish newsletters also, often
containing nuggets describing new ideas and techniques which
eventually prove to be important prior art.
Universities such as Michigan and UCLA have for many years
offered short courses lasting one or two weeks in which
leading edge research results are presented, disclosing new
ideas, concepts, and techniques.  The notes which are
distributed to attendees contain valuable descriptions of such
work and in time prove to be important prior art publicly
disclosed.
Manuals for commercial systems and applications often contain
important descriptions of the techniques these systems and
applications embody, and are a valuable source of prior art. 
Such sources would not be readily available to PTO examiners
unless the PTO would have the funding to build an extensive
library with appropriate indexing for that purpose.
A number of software vendors publish internal reports and/or
research journals, which are made available to their
customers, and are thus publicly disclosed.  These reports and
journals and other materials used for the education and
training of customers often describe innovative ideas and
techniques which could be used as prior art if they were
available to the PTO examiners.
Government sponsored research is often documented in reports
generated by the principal investigators and published by the
sponsoring government agencies.  While these are public
documents, it's not easy to know where to look for them.  They
often contain the earliest reports of significant research and
applications in the software area.
Another source of material can be found in books published on
various subjects in computer science and computer engineering. 
These include textbooks for the more advanced courses, and
research publications from academic institutions.
It is not always easy to find the kinds of prior art that
examiners need in such books.  But if they were on-line
instead of only in printed form, it would be much easier to
discover which books contain material relevant to a particular
claimed invention.
Finally, corporate defense of disclosure publications can be
important sources of relevant prior art.  A company that wants
to make sure that a competitor does not obtain a patent
covering a process or technique that is essential to its own
business might publish a description of that process or
technique to have it publicly disclosed without taking the
additional step of applying for a patent.  And there are
well-known examples of this.
On the other hand, that company may not be particularly
anxious to advertise its discovery or use of that process or
technique, so the publication would not be very widely
disseminated.  There are also well-known examples of that.
If indeed a patent is later issued for that process or
technique, the company can point to the disclosed art during
litigation, but that is a very late stage in the cycle.
Companies that rely on defense of disclosure should be
encouraged to deposit their published disclosures in a
database available to the PTO so the controversial patent most
likely will not be granted at all.
Well, the Software Patent Institute is a nonprofit institution
dedicated to providing information to the public, to assisting
the PTO and others by providing technical support in the form
of educational and training programs, and to providing access
to information and retrieval sources.
The primary goal of the Software Patent Institute is to
provide the best available information as to prior art in the
software field for utilization by the public and the PTO.
We applaud the efforts by Dr. Dobb's journal of Miller
Friedman publications to make its articles available on CD
ROM.  And the efforts of Ziff/Davis Publications to put a
number of recent computer-related publications on CD ROM, as
well as the efforts by the IEEE and the ACM to make available
abstractive computer science articles.
We also applaud the efforts of those who are working to
identify, collect, and distribute copies of the patents they
consider software-related, especially since many of the
patents that have been identified come from a large number of
PTO classes.  These efforts are valuable contributions to the
overall effort to document the history of software technology,
and to make the results available in online form.
The Software Patent Institute, for its part, is tracking these
efforts carefully so that our collection supplements rather
than duplicates these other efforts.  To track the history of
an exploding industry with rapidly developing technology is a
massive undertaking that will require significant efforts by
a number of organizations.  We are committed to being one of
them.
The Software Patent Institute also provides an educational
resource from which the PTO and the public can obtain an
enhanced understanding of the nature of software, of software
engineering, and of the history of the discipline and its
relationship to the patent process.
Several lectures have already been given to the examiners of
the PTO on aspects of software history and techniques.  And
several more are scheduled during the next few weeks and the
coming months.  We will have a professor from Carnegie Mellon
there next week, and a professor from Michigan there the week
after that, lecturing to the examiners.  And we hope to
continue that.
We plan to offer our first one-day session on related topics
to patent professionals and the general public sometime this
spring.
Although there is a current debate on the overall desirability
of having software patents, the Software Patent Institute has
deliberately taken no position on that question.  We recognize
that the patent system is in place, and working, but that
there is currently a problem regarding software-related
patents.  We are dedicated to helping alleviate that problem
independent of longer-range considerations that must
eventually be resolved.
The Software Patent Institute has asked people throughout the
software industry, government, and academia, to contribute
descriptions of software techniques and processes to the
Software Patent Institute database.  These descriptions form
the content of the SPI database, and have now been made
available for computer-aided searching by the PTO, and by
members of the Software Patent Institute.  Access by the
general public will follow shortly.
The SPI database already contains many examples of each of the
kinds of relevant prior art outlined above, and it is growing
rapidly.
Our recommendation to this panel is to issue a strong
recognition and endorsement of this kind of activity by the
Software Patent Institute and by others, and to encourage the
PTO to take advantage of the services of the Software Patent
Institute as much as possible.
We strongly believe that the PTO can and will do a better job
than it has if it has the right tools and the right
information.
I thank you for being able to talk to you, and I certainly
would answer questions.
COMMISSIONER LEHMAN;:  Thank you very much, Professor Galler.
One of the issues that came up earlier today was the whole
question of the classification system that we have right now,
that it very rapidly gets out of date.  And this makes it very
difficult for examiners even to take advantage of the
information that's already in our patent files.
Obviously you're struggling with that, working with that, as
you try to organize this new database.  Maybe you could expand
on that, about, do we have a problem?  What's the nature of
the problem?  And maybe you have some suggestions about it.
MR. GALLER;:  Well, for the time being we're providing full
text search with whatever words the patent examiners know
about.
What's really needed down the line, though, is a thesaurus
kind of help, which says, if you're looking with this term,
you really ought to be looking for those, also, and here are
some additional suggestions.  Here are some related articles
or entries that you may not have thought about, but they might
be close to what you want.
There are an awful lot of database techniques that are
well-known here which we certainly will start to use once we
have a process that is working and bringing in the revenue
that we need to keep going.
But is this kind of -- well, two things.  One is, the database
service can provide such help.  Here are some suggestions for
what you want to do.
The other thing is, as we give these lectures and other people
give lectures, and the examiners become more
technology-knowledgeable, they themselves will expand their
knowledge of how to search.  What are the relevant terms? 
What are the relevant things they ought to be knowing about?
The classification that the PTO has doesn't help.  You know,
from the computer science point of view, it's not a very good
classification.  But it exists.  And we can hope to help map
it into more coherent, technology-based classifications.  And
we certainly plan to do that.
COMMISSIONER LEHMAN;:  Thank you very much.  We look forward
to cooperating with you and working with you.
MR. GALLER;:  Thank you.
COMMISSIONER GOFFNEY;:  Bernie, Jerry Goldberg, who is the
director of Group 2300, certainly endorses your activity, as
do we.  He wasn't here, wasn't able to get here today, but he
has told me a lot about your work, and it's certainly
appreciated.
MR. GALLER;:  Well, he's been very helpful to us in helping us
understand the problems of the Patent Office, absolutely.
COMMISSIONER GOFFNEY;:  Thank you.
COMMISSIONER LEHMAN;:  Thank you very much.
We're getting there.  Finally, unless Professor Fryer has
arrived -- he hasn't.  I know him personally, and I don't see
him.
Then finally, we're at Gregory Aharonian, who has waited very
patiently for two days now.  He was also in San Jose.
PRESENTATION BY GREGORY AHARONIAN
SOURCE TRANSLATION AND OPTIMIZATION
MR. AHARONIAN;:  Before I address the topic -- I'll mainly be
speaking about software prior art -- there were three kind of
little tidbits that came out of other discussions I thought
I'd share with everyone.
About a year ago, a group either with the German Patent Office
or the European Patent Office did a study of the maintenance
fee renewal process for German patents.  In Germany I guess
they're done every year as opposed to being done every three
or four years, as in the U.S.  So that from an economic
analysis point of view, yearly data is very easy to analyze.
They found that for the computer software industry -- no, for
the computer industry as a whole, that the average length of
the patent was about six or seven years before they
effectively stopped renewing the patent.  So these talks about
lowering the patent life, I mean you could go down as far as
about seven years.  And if you actually look at renewal rates,
it would have absolutely no impact.
It's a little known study, but it's one that probably should
be circulated more widely.
The second thing that was also talked about is, there are a
growing number of investment funds in New York City that are
pooling money to find people with patents so they can go chase
lawsuits and stuff.  So that all these problems we're talking
about are going to get a lot worse because there's going to be
a lot more floating around to play these games.  Especially in
the field of software, there's a definite window of time
before it gets really messy with the monies being thrown into
this stuff.
And the third is a patent I just came across out of Microsoft
that -- I had seen something in there that I had never seen
before.  In the preamble to the specification, they said that
part of the patent specification contained copyrighted
material.  And there was a warning in there of some sort.
It was the first time I've actually seen anything copyrighted
inside of a patent.  And I'm wondering if this is going to be
a whole new family of hybrid copyright patent things that are
going to confuse everyone to death.
COMMISSIONER GOFFNEY;:  Did that happen to be code that was in
there?
MR. AHARONIAN;:  I didn't look.  I was just examining
something over at the Public Search Room, and the first page
had this paragraph that I Xeroxed because it was just
something I'd never seen before.
PARTICIPANT:  For clarification, it's a notice that says that,
for purposes -- that you can copy this patent application or
patent, once it issues, for any purpose you want related to
the patent application.  But you can't -- all other copyright
rights are reserved.  And it's a common practice by
practitioners.
MR. AHARONIAN;:  I'd never seen it before, and I thought it
was kind of interesting.  A couple of us were chuckling.
I'm here to talk about software prior art, and I happen to
know a little bit about the subject.
Software prior art comes up in six areas of activities.  In
the information disclosure document, when the applicant files
a document, during the patent examination when the examiner is
dealing with issues of novelty and obviousness, during
reexaminations when somebody is going to challenge it,
infringement lawsuits, and the circuit court decisions.
Each of these need to have access to what's been done in the
field before.  Actually, in terms of economic activities,
which dwarfs all software prior art activities, there's just
some general software technology trends for reuse, well, they
have actually the same question:  What is out there that
exists that can be used?
For many years now, at least eight years now, I've been
maintaining a very large -- the largest software prior art
reuse database in the country.  I have information over 15,000
computer programs coming out in government, corporate, and
university facilities, 5,000 patents, and over 100,000
abstracts to articles in the field.
This is in a sense an active collection.  Each of the items
are items that I've actively sought out to include in my
database and examined either in depth or just briefly to look
at them.
I'm located in the Boston area, and in this modern era I'm
located on the Internet.
One of the things I do is that every year or two years I
publish a directory of -- what I call the Government Source
Code Directory -- since a lot of the public domain software,
a lot of the university software, even a lot of the corporate
software is actually funded under government contract, except
for obviously corporate commercial software.
The current directory has the titles to about 10,000 programs. 
It's actually a pretty good guide to both what is
state-of-the-art, what is historical, how to classify
software.  It's just such a large body of information that
there is a lot you can do with it.
I run a business of helping companies get at the software,
helping them reuse it in their business practices, helping
them examine the technology inside of it, things of that
nature.  It's a very rich source material.  This country
spends about $50 billion a year developing this stuff.  And
there are a lot of good programmers working here, so that
there's a tremendous wealth of technology available.
I also, in recent years, as software patenting has become
active, and I tend to share a lot in the information I have,
I've started up something called Internet Patent News Service,
where each week I mail out over the Internet the titles and
numbers to the most recent patents and the most recent gazette
that happens to hit the Boston Public Library where I do a lot
of my research.
I have about 1,000 subscribers around the world, many of which
are actually rebroadcast sites, gopher sites where they
collect the information and make it available -- 880 of the
subscribers get the news service, where I, for example,
announce the PTO hearings and other such things.  Nine hundred
or so are electronic, most of which are software.  There is a
tremendous demand on the Internet for software patenting
information.  These people would kill for almost anything.
I have all types of people, government agencies, people in 35
states, 28 countries, corporations, universities, and one of
the Texas patent depositories got tired of getting their data
so late down there they just figured they'd get it through me.
This is a map that was collected by one of the Internet node
maintainers of traffic flow over the Internet.  And it's kind
of a pretty picture which I like showing to people.  But it
also kind of shows both the sites where a lot of software
activity is going on in the U.S., where I track a lot of the
software.  That does come out, where a lot of the software
prior art is being made, and where actually a lot of my Patent
News Service subscribers are.
It's all pretty much the same thing.  And not surprisingly,
there are heavy concentrations in New York, Boston, and
Washington on the East Coast, obviously.  And then up on the
West Coast, it's the Bay Area, Silicon Valley, and down in LA,
San Diego.  There's a decent movement in Texas and somewhere
in the Midwest.  But for the most part, it's regionalized into
the five big tech cities of the country that are up there.
Where do you find software prior art?  Well, the sources I
find out when I'm traveling around the country are in these
seven categories:  technical reports, both government,
corporate, and academic; journal articles; conference
proceedings; theses and books -- and universities theses are
probably one of the most richest sources of software prior
art, in a timely sense; commercial products; Internet files;
bulletin board systems, which are in many cases not part of
the Internet formally but tend to store growing mounts of
information; and in software patents.
Each of those sources of information have a legacy of history
behind the organizations involved with them.  And you have to
learn about them to learn how to search through them.
What types of software prior art do I search for?  Well,
obviously, source code is the most obvious one to look for,
since that is the best description of a program.
Then there are object libraries and executables.  There are
flow charts and state charts.  There are pseudo-code which you
see in a lot of journal articles.  There are patent claims. 
Obvious things, obvious description of those software.
Then there are some things that kind of border on the software
field, the SPICE and VHDL circuit description languages, and
with the growing convergence of hardware and software, they
too become prior art of a sort that have to be searched for,
even though to most people concerned searching for software
prior art, they would not look in such sources.
Then spreadsheets and numerical data also can be considered
software as a form.
Now, when I think of software prior art -- and what follows is
a series of slides that I'm going to give you a tour of where
I hang out most of my life.  When I think of software prior
arts, I think of dusty, grungy old basements.  That's where
most of this type of literature can be found.  You have to
look for it.  But this is where you're going to find it a lot
of times -- dark basements, with endless stacks of materials
that you have to search through one by one.
Most of this stuff is not on computer databases at all.  The
only way you're going to really find any of this stuff is to
pull out these volumes one by one and flip through them.  It's
a very tedious, lengthy process.  It's the only way it really
can be done.
This happens to be a collection of books dealing purely with
software.  So in some cases, the information is fairly
compact.  These I think are programming language books in a
variety of languages.  I think those green books up top are
all the ADA books.
In some cases, the information is tightly concentrated, and it
does make the search easier.
In other cases, for example, the bookcases you see in the
background, are for the subject matters of physics and
engineering.  Normally you wouldn't consider searching through
such stacks for software, especially since they're really not
in software.  But there is a growing amount of software prior
art in such subjects.  Physicists do a lot of cutting edge
software development that does qualify as prior art.  And when
you deal with stacks like that, the books are very scattered
in there and it takes a long time to go through them all.
Another source is journals.  This is a series of journals. 
And most of the journals up there come from one of the leading
societies, the ACM.  I think the third and fourth rows up
there are mostly the ACM journals.
But there are a variety of other journals in related fields to
software that all have to be searched through, all coming out
every month, all potentially sources of prior art.  And each
journal has a family of editors and reviewers behind it,
associations behind it.  There are certain styles of software
in there.  Knowing that is very important to tracking software
prior art.
The journals you just saw up there were one current month's
work for all the journal from like A to Z.  There are
tremendous numbers of them.  These are all the back journals. 
In this case, for those familiar with searching for such
stuff, the IEEE has the previous journals around.  They just
use lots of different colors for their journal covers, and you
can usually identify which section of the library deals with
them.  But in each case you have to flip through each one of
these volumes to find stuff.
Then there are collections of technical reports.  And these
tend to be even more unorganized and scattered about.  But
even there, there is structure to how they are kept.  If
you'll see, in the middle you'll see some white journals with
a colorful band across them.  Those happen to belong to the
Electric Power Research Institute, and they actually do some
software development which they've had patents on.  So you
have to search through all of them.
Next to them are some orange journals which are characteristic
of the Japanese Atomic Energy Research Institute.  And again,
they have software.  In that case, it's even more difficult to
search for that stuff because their reports tend to be all in
Japanese except for an English abstract in source code and
usually FORTRAN or something.  And you know, I can read
FORTRAN, but I'm still trying to learn to read Japanese.
But again, it's there and it's something that has to be dealt
with.
These are again even older technical reports.  These are so
old that they've lost most of their colors.  The orange ones
are the NASA reports, and NASA tends to have bright orange and
dull blue covers.  The middle ones are from a European defense
group, AGARD, that has a lot of software prior art.
Endless number of these in these libraries all over the
country, that require one to go through them.
In some cases, the volumes of reports are so great that no
library could contain them all, and you reduce them down with
microfiche.  This happens to be one subsection of a collection
of microfiche for NASA technical reports.
Again, you have to go through each one of these one by one,
stick them into the microfiche reader, and examine them to see
if they have prior art, flow charts, whatever.  It's not a fun
process, and I've got a fair number of cuts on my fingers over
the years from going through these things.
Again, here are more cabinets of microfiche.  And in the
background you see microform, which is a different type of
film, with its set of printers.  And it's just endless volumes
of these things.
One of the richest sources of software prior art are
university theses, because they tend to let their students do
things that are as wacky as wacky can be, mainly because
students are there to learn how to do wacky things as opposed
to doing anything really meaningful.  So a lot of the ideas --
I mean, something like Compton's patents I initially laughed
at it because I've seen theses in the '80s that did all types
of things with CD ROMs, because back then they were first
coming out.  And some student said, hey, there's a new CD ROM,
let me try doing something educational with it.
Unfortunately most thesis information is not on any database,
and it's very hard to find short of actually going to each
university and flipping through these reports one by one.  It
can be a pain.
And finally, there is in the academic community, even in the
corporate research community, the preprint system where people
tend to distribute copies of their reports before they're
published, or in many cases they don't even get published,
they just pass them out anyway.
These things are very unorganized, and you tend to find them
in stacks on carts.  I think this is actually an IBM library
in the Boston area I happened to be floating through. 
Searching that stuff is a pain.
Now, increasingly computers are making an impact on the
library world.  This is the main reference section for one
such library.  But in terms of prior art, most of the really
interesting stuff predates most databases so that, while such
computer systems will help in the future, they really won't
help in the past.
Of course, I complain about a lot of the places I hang out. 
But this happens to be out the window of one of the MIT
libraries, and during the summer it's a very pretty view.  So
it is somewhat relaxing sometimes in doing my prior art
searches.
Now, in San Jose -- and once again I'd like to reiterate it
out here -- recent developments in the hardware design world
are really blurring the distinctions between hardware and
software.  And I'll disagree with some of the others who say
that there are such distinctions.  While this will have an
impact on patenting issues and procedures, it has a great
impact on software prior art because it opens up tremendous
sections of hardware research over the past 20 years as
potential software prior art.
There exists programs that allow me to scan in circuits what
anyone would consider to be a pure piece of hardware, and turn
them into a software algorithm.  That means that in building
a software prior art database you have to include all of the
hardware prior art that exists out there because nowadays it
can be turned into software.
And based on some counts I've made, there's at least twice as
much hardware prior art as there is software prior art, so it
basically triples the size of such an effort.
This is just a little article on a company in Germany that
combined case tools, which is basically software engineering,
with their hardware design tools, so that within one
environment for the most part the engineer doesn't even care
what the end result will be, hardware or software.  He's just
worrying about processes and algorithms and devices and things
like that.  At the end he pushes a button to get out a chip or
a computer program.  So that this issue of prior art is
becoming more complicated even as we're holding these
hearings.
Building prior art databases is not for amateurs.  I mean,
over the past ten years at least eight government efforts have
tried to do similar things, and they all have failed for a
variety of reasons.  It's a very complicated process.  There
are at least 10 different knowledge classification schemes
I've had to learn over the years, Library of Congress, IEEE
has one, ACM has one, I have two, the Patent Office has one,
there's the Dewey decimal system.
When you're going through all these sources of information out
there, each one classifies its stuff differently.  And to do
these searches effectively and cost-efficiently, you have to
know each one.  It's a tremendous amount of information.
There have been suggestions that the Internet could be a
substitute.  I'm very skeptical.  I think that doing prior art
searches and requests over the Internet has actually caused
more problems than it will solve.
In recent months a variety of different people have actually
asked me how much it would cost to build a truly useful
software prior art database.  My guess is, based on what I've
been doing over the past eight years, is that you need a
minimum of $10 million, plus $2 million a year as maintenance.
Now, that might seem a lot, but remember, this is to track a
$50 billion a year development process.  And out of that, $10
million is fairly minor.  But given the vast amount of
literature that already exists out there, you're going to need
a very rapid development effort to catch up with all of that,
plus future development efforts to do so into the future.
With the databases I already have in my knowledge, I could
reject about a quarter of all existing software patents.  So
I would think there is indeed a problem.  And most people have
recognized that.
As a kind of incentive to the Patent Office, if they're
considering actually building such databases, the software
prior art database would have even greater benefits to the
U.S. software development community.  And you could score a
fair number of brownie points by helping them out at the same
time.
The last slide illustrates some of the problems we're now
facing with software patents.  This is from the January 4th,
1994 Official Gazette.  And it's a patent from IBM for
choosing items off of a menu.
Now, the Official Gazette includes the first claim and a
diagram of the best mode embodiment.  And it is inconceivable
to me that in 1994 the best mode embodiment of a menu
selection system is what appears in the Gazette and what
appears in the patent.  I haven't examined this patent in
detail, but I suspect what we see there reflects what's in the
rest of it.
Those type of menu selection systems date back to the '60s. 
And the fact that something was issued with such diagrams
makes me kind of nervous that the problem is even worse than
we think it is.
But like I said, you flip open recent Gazettes, and you'll see
patents in there that are truly questionable.
That's it.
COMMISSIONER LEHMAN;:  Thank you very much, Mr. Aharonian.
Well, I think we did pretty well today for a snowy day.  We
actually got all but a handful of people that were supposed to
testify, and we got a couple more from yesterday.  And I want
to thank everybody for coming through the snow.
As I indicated, this hearing transcript will be made available
after February 21st.  But we're happy to accept more
supplemental information, either written information that can
be sent directly to us, or information that can be sent to
Jeff Kushan on the Internet.
We're always open to information at any time, even two, three
years from now if you -- you know, reelect President Clinton,
we'll be available for information even then, and then maybe
President Gore, and then maybe President Hillary Clinton.  By
then we'll have the prior art database completely resolved,
that problem.
So anyway, thank you very much, and have a good day.
(Whereupon, the hearing in the above-entitled matter was
adjourned.)

Due to the inclement weather, a number of speakers were unable
to attend or provide oral remarks.  Prepared remarks from
these individuals has been included in the transcripts in
response to their request.

PREPARED REMARKS FROM ROBERT GREENE STERNE
Thank you, Mr. Commissioner.
My name is Robert Greene Sterne and I am testifying on behalf
of myself.  I want to focus on five specific issues which I
believe need to be explored further in order to round out the
record in these hearings.  These  five areas deal with the
preparation and prosecution of computer related patent
applications.  
While my views are my own, they are based on the experience of
the ten members of my firm who prepare and prosecute patent
applications in the computer area.  The experience base that
is being drawn upon encompasses literally hundreds of original
US cases.  I mention this because you need to know the
perspective from where my views come.
First, I want to address whether program listings or
flowcharts or pseudocode or other specific types of disclosure
should be required in the patent application for the software
aspects of the invention?  It is tempting both for practioners
and the Office to have very specific disclosure requirements
concerning software. But my view is that it would be a mistake
to establish specific disclosure requirements.  Our experience
is that there is no agreement among experienced patent
attorneys or among software inventors concerning what is the
optimal disclosure strategy.  Moreover, as the technology
races forward, the disclosure strategies change based on our
experience.  The patent system is very robust since it, unlike
a sui generis system, can adapt to rapidly developing
technology in emerging areas.  I understand that to reduce
printing costs and database costs the Patent Office would like
to limit certain types of listings, and that many people
believe that more higher level forms of representation of the
invention are more effective in explaining the critical
functionality and architecture and operation of the software
invention.  I agree with these sentiments, but believe that
the system is better served by maintaining the flexibility of
allowing the applicant to decide the best way of discloses the
invention in the patent application.
To amplify on this point, let me say a few things about the
technology that will support my view.  First, I agree with the
opinion that machine code, such as object code, does not aid
in enabling one skilled in the art to make and use the
invention.  But I believe that source code combined with
adequate accompanying description is often sufficient to
satisfy the disclosure requirements under Section 112.  This
is particularly true with computer programs written in higher
level computer programming languages, such as Pascal and ADA. 
As the computer programming arts progresses, computer programs
will be just as easy to read by humans as english text.  In
fact, it is the objective of such computer programming
languages to be human readable.  Thus, it would be wrong for
the Office to adopt rules which would prohibit the submission
of source code.
Second, as an attorney in private practice, I am very
sensitive and aware of deadlines and budgets, and I applaud
the Patent Office's efforts in the area of enlightened
management, management by objective, and total quality
control.  These are all good and encourage Examiners to
utilize their time in the examination process in the most
optimal way. However, I am quite concerned that the very
complexity of these state of the art software inventions by
necessity require more time for examination that is being
allocated by the Office.  Examiners in these areas of
technologies should be careful supervised, and their
performance measured, like all other examiners.  However, the
Office must make sure that it is allowing them the time that
they need to do a quality examination job that the patent
system and the public requires.
Third, I applaud the efforts being made to hire examiners with
significant educational and work experience in software
technology.  This expertise is absolutely essential for the
Examination process, and the patent system is very well served
by the Office raising the technical competence of the
Examining corp in the software area as soon as possible. 
Similarly, applicants for the patent agents exam who have
significant computer science backgrounds should qualify to sit
for the exam.  Computer science in this day and age should be
considered to be a sufficient technical expertise to qualify
to take the patent agents exam.  But I agree with the
sentiment expressed by some that there is a broad range of
technical training in computer hardware and software from
degrees from different educational institutions. 
Consequently, both in terms of hiring examiners and qualifying
applicants for the agents exam the Office must carefully
examine the educational qualifications of the individuals
involved so that qualified people are let into the system and
people without sufficient training are excluded.  By
necessity, this will require line drawing, but like many areas
of patent law the ability to distinguish the shades of gray is
the strength of the system.  In other words, neither the
approach of excluding all computer science people nor the
policy of letting all computer science people in should be
taken.
Fourth, our experience in prosecuting applications on state of
the art software related inventions is that the Examination
process in the real emerging areas of technology is
effectively being delayed pending these hearings and the
political uncertainty over patents on this technology.  Mr.
Commissioner, you should be aware that we are encountering
situations in prosecution where applications, in our opinion,
are not being allowed because the Examining Corp is afraid of
the political ramifications associated with possible adverse
publicity to the Office if applications in these technical
areas are issued.  This delay and uncertainty hurts the patent
system and American innovation.  These political forces should
be removed from the examining process and the focus should be
on examination and not on a fear that the anti-software patent
forces will raise a great hue and cry over the issuance of a
particular patent in an emerging area of technology.  Now, I
don't want to be misunderstood on this point.  In no way am I
arguing that a patent should be issued on an invention that is
too broad based on the prior art  or is non-statutory based on
a liberal interpretation of Section 101.  But I am deadset
against any type of delay that is being caused by fear of
issuance of patent applications on patentable inventions
merely because they involve state of the art software
technology.
My fifth and final point concerns your database.  As other
speakers have stated, one of the great benefits to the public
of patent protection for software related inventions is that
such inventions, which in the past have been maintained as
trade secrets, will be disclosed to the public so that others
will not have to reinvent the wheel.  This will be of great
benefit to the software industry.  As an aside, the software
industry in this regard is 180 degrees from what happens in
another emerging area of technology, biotech, where the
tradition is to publish or perish and inventors oftentimes
lose their patent rights here or abroad though premature
publication of their inventions in the technical literature. 
The biotechnology area clearly shows the benefit of rapid
disclosure of technology in that competing researchers are
allowed to rapidly build on the work of others and not
recreate the same inventions.
Turning to the database problem involving the examination of
software related inventions, my view is that this database
problem is not different that the problems encounter by the
Office in other areas of emerging technology, such as biotech. 
It is critical that the Patent Office take all reasonable
steps to create the most robust database possible in these
emerging areas of technology, and to provide efficient and
economical access to this database to members of the public
both in Washington and in remote locations.  The electronics
superhighway being pushed by this administration could form
the backbone for this remote access.  The patent office should
squarely embrace initiatives for building the most
comprehensive database possible and for opening it up for
ready access by members of the public.  I know that this in
practice is a tall order and one that could be very expensive. 
However, the benefits of providing a comprehensive database
appear to outweigh the cost.
Thank you for this opportunity.

PREPARED REMARKS FROM MR. DANIEL J. KLUTH
TESTIMONY OF DANIEL J. KLUTH
AT THE PUBLIC HEARINGS BY THE 
U.S. DEPARTMENT OF COMMERCE 
PATENT & TRADEMARK OFFICE ON 
PATENT PROTECTION FOR SOFTWARE-RELATED INVENTIONS
February 11, 1994 Marriot Crystal Forum, Arlington, VA.
Good morning ladies and gentlemen.  My name is Daniel J. Kluth
and I am a patent attorney with Schwegman, Lundberg &
Woessner, P.A. of Minneapolis, Minnesota.  I am the chair of
the Software Protection Committee of the Minnesota
Intellectual Property Law Association and I am the Chair of
the Government Relations Committee of the Minnesota Software
Association.  Although I am the chair of these two Committees,
I must point out that my remarks today do not have the
complete endorsement of these organizations.  I have polled
many of the members of these two organizations and,
specifically, the Software Protection Committee, and I will
try to convey the impressions I received.
The USPTO has been kind enough to allow me some extra time
today to address both Topic B (Standards and Practices used in
Examination of Patent Applications for Software Related
Inventions) and Topic C (Significance of and Protection for
Visual Aspects of Software Related Inventions).  Thus, I will
speak on both topics. 
First, Topic B.  In reviewing the testimony given in the San
Jose hearing last month, many concerns were voiced about the
quality of the examination process and the issuance of
seemingly overbroad and invalid software patents.  I won't
belabor that point.  I would like to point out, however, that
I believe establishing new rules in the CFR or new or special
procedures in the MPEP for software inventions would be wrong. 
Software patent applicants should stand on the same footing as
any other technology groups or classes.  I do not believe
there is any basis in the current statutes which would allow
special burdens to be placed on software applicants.  The
first insurmountable barrier would be how to decide if a
patent application is a "software" patent.
Because there already has been so much comment in this area,
I thought I would focus on questions 7-12 of Topic B.  This
set of questions deals with the problem of effectively and
meaningfully disclosing software-related inventions.
A patent application must teach one skilled in the art how to
make and use the invention (enablement) and the best mode in
which an invention may be practiced.  Failure to disclose the
invention and teach the best mode robs the public of its part
of the bargain in the patent system.
In many instances, the application is filed with a source code
appendix in accordance with 37 CFR Section 1.96, either in
paper form or on microfiche.  This is one of the few rules
promulgated by the USPTO which provides special consideration
to a technology class: namely software.
As an aside, I would like to point out that a lot of the
testimony presented in January and yesterday was directed to
areas outside of the control of the USPTO.  Many comments, if
acted upon, would require changes to statutes and in one or
two extreme cases, an amendment to the Constitution.  But
improving the quality of examination of software patents is
very much in the sphere of authority of the Patent Office and
in some cases, can be done without rule changes.  Simple
refinements in procedure and using existing statutes and rules
will suffice.  This is particularly true in the area of
disclosures.  The source code appendix has proven in many
instances to be a burden on the USPTO and does not appear to
provide the applicant with a better patent application.  I
suggest that we eliminate Rule 96 and place the burden on the
applicant to do a better job in explaining the software
operation in the body of the specification.  
Many patent applicants provide the source code in a patent
application as a "backstop" to their application to satisfy
both the best mode and the enablement requirements.  I will
first discuss enablement. Applicants hope that they can
overcome an enablement rejection from the USPTO on their
software patent application by relying on the source code to
overcome the rejection.  This reliance actually works against
the public interest in permitting lax disclosures or poorly
written disclosures in the body of the specification.  By
eliminating Rule 96, the applicants would be forced to do a
better job of describing their invention.
In many cases, Rule 96 encourages this poor practice.  In many
cases, the source code appendix does not teach the public
anything unless an expert is hired to decode, decompile or
flow chart the appendix.  Unfortunately, Rule 96 has become a
de facto standard.  By itself, eliminating Rule 96 would
return the earlier practice of submitting source code listings
in the body of the specification.  This practice was a
terrible burden on the public and the USPTO in creating many
jumbo patent applications.  But this practice should never
have been allowed to flourish since it violates the
requirements under 35 USC Section 112 which requires that the
applicant describe the invention in clear and concise terms. 
Patent applications filed with the source code embodiment in
the specification should be rejected as not being concise and
the rules allowing substitute specifications be invoked to
clean up the application.  This procedure would be still
useful in the case of rush-filed applications, especially if
the U.S. adopts a first-to-file system.  Applicants who file
source code listings [only if necessary] in the body of the
specification would be required to follow up with a concise
substitute specification.
Source code listings are also submitted to satisfy the best
mode requirement.  But best mode is an objective standard
which can rarely be tested in the USPTO examination process. 
This determination is made during litigation and is assisted
by the discovery practice to determine the inventor's state of
mind and to determine if the best mode was suppressed or
concealed.  In all other technology areas for patents, the
best mode for practicing the invention is a comparison of the
specification to information obtained during discovery. 
Software patents should be treated the same as other
technology areas and the specification should stand alone
without reliance on a source code appendix.  Allowing for and
even encouraging the submission of source code listings also
hurts the public by discouraging some applicants from filing
software patent applications for fear of losing trade secret
protection for the non-patentable aspects of the software
disclosed in the source code appendix.  In short, source code
listings are similar to the submission of a model of the
invention which is no longer required or even allowed. 
Eliminating Rule 96 is consistent with my position that no
special burdens or rules be carved out for software-related
technology or patent applications.
Once the source code is gone, how best to describe software? 
Question 9 asks the question in effect "Should the PTO require
a standardized disclosure format for software patent
applications?"
Patent applicants already are granted a broad range of
disclosure options in all other technology classes.  Requiring
a standard submission format would place a heavy burden on the
application since different software is best described in
different ways.  In many cases, high level pseudo-code is more
descriptive than flow charts.  State diagrams are often better
for sequential operation descriptions.  All these forms should
still be allowed.
It is true that many players in the software industry have
complained about the readability of the patent applications. 
But the existing drawing requirements in the CFR require that
the claimed invention be shown in a drawing (with some limited
exceptions).  This rule should be used by examiners to improve
the disclosures and allow the submission of drawings taken
from the description in the specification..
Another existing rule which is used very little in my
experience is the discretionary authority of Examiners to
require that the Abstract and the Summary of the Invention
sections of the patent application be amended to reflect the
allowed claims.  The use of this tool by the Patent Office may
work to improve the readability of many software patents
thereby diffusing much unfounded criticism of overbroad
software patents in the software industry. And now I would
like to address my remarks to Topic C:  The Significance of
and Protection for Visual Aspects of Software- Related
Inventions.
I will not go into a lengthy history of the development of
this issue, but I have followed the topic with great interest
ever since the first icon design patents issued to Xerox
Corporation in June of 1988.  In August of 1988, Steven
Lundberg and I published an article in the Computer Lawyer
entitled "Design Patents: A New Form of Intellectual Property
Protection for Computer Software", which was later republished
in the JPOS.  This article and the ensuing interest in the
matter resulted in a single letter being written to the
Commissioner of Patents and Trademarks opposing this form of
protection.  I learned through an FOIA request that other
letters were also received, but they were all supportive. 
This led to a chain of events in which the pending Xerox
design patent applications were rejected under 35 USC Section
171 and that those rejections led to the Patent Office Board
of Patent Appeals and Interferences decision In re Strijland
and other decisions.
The strict holding in the Strijland decision was that the
Xerox design patent applications as originally filed did not
show an article of manufacture and, hence, were deficient. 
The later amendments to the application to describe the icons
for use on a computer screen were rejected as new matter by
the Board.
The Strijland decision went beyond the holding to suggest that
if Xerox had shown a three-dimensional article of manufacture
on which the icon was displayed, this would be proper subject
matter under 35 USC Section 171 and the article of manufacture
was then a programmed computer screen display.
To date, the Patent Office has not issued any comments on the
Strijland decision or the other related cases.  The Patent
Office is instead suspending all prosecution of these cases
even if they comply with the Strijland requirements.
My position is that the Strijland decision was correct in
stating that the application as originally filed did not
disclose an article of manufacture if you adopt their position
that the word ICON is not limited to the computer field.  If
an application for an icon or a screen display properly
describes the article of manufacture in the title or
description as being software for a programmed computer screen
display, I believe this is enough to pass muster under 35 USC
Section 171.
This leads me to my second point which is that the Board
misconstrued what is the article of manufacture.  I contend
that the article of manufacture is the software, not the
programmed screen display.  This is consistent with the test
for infringement for a design patent which as stated in the
Supreme Court case of Gorham v. White reads:
"If in the eye of the ordinary observer, giving such attention
as a purchaser usually gives, two designs are substantially
the same, if the resemblance is such as to deceive such an
observer, inducing him to purchase one supposing it to be the
other, the first one patented is infringed by the other".
So, like in the trademark infringement test, inducement of an
ordinary purchaser is key.  
The point is that an ordinary purchaser of software would not
be induced to purchase one computer thinking it to be another. 
The purchaser would confuse the software.  This clarity of
definition of the article of manufacture harmonizes the
infringement test with the other issue in the Strijland
decision: namely - the dicta which required future cases to
show a three-dimensional computer screen adorned by the icon. 
This is not necessary since the article of manufacture, the
software, defies a three-dimensional drawing.
The drawing requirements of 37 CFR are not rigid in their
requirement of a three-dimensional object and the statute, 35
USC Section 171, does not require it.  The Patent Office has
not required it in type font design patents, game board design
patents and watch faces, to name a few.  To require
three-dimensional drawings for icon or screen display design
patent application is setting an extra burden for these cases
which is unjustified.  
In summary, I believe that the holding in the Strijland
decision can be satisfied by describing the icon designs as
for display on a screen display of a programmed computer.  I
do not believe the dicta of the Strijland decision need be
followed since three- dimensional drawings are not required,
and I believe that the article of manufacture is the software.
Finally, I have detected very little concern in the software
industry for the issuance of design patents for screen
displays.  35 USC Section 171 should not be used as a
gatekeeper in this regard since the requirements of novelty
and non-obviousness under 35 USC Sections 102 and 103 will
ferret out designs that are not worthy of protection. Thank
you,
Daniel J. Kluth
 

Index to Participant Testimony

AHARONIAN         61
BAND        30
BERKOWITZ         25
BLANCHARD         32, 33, 34, 35
CALLAN      17
CLARK       50, 51, 52, 53
CURRY       35
DeWALD      48, 50
FLEMING     49, 50
GABLE       45, 46, 47, 48
GALLER      58, 60
GOFFNEY     39, 47, 52, 53, 60, 61
HOFSTADER         39, 41
HORN        13, 43
JORDAN      22, 24
KLUTH       65
KUSHAN      36
LEHMAN
1, 5, 6, 8, 9, 10, 11, 13, 14, 16, 17, 19, 21, 22, 24, 25,
26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 39, 41, 42,
43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 55, 57, 58, 60,
64
LIPPINCOTT        8, 10
LO    53
MIRABITO          28, 29, 30
NOE   11
NYDEGGER          14
ODDI        55, 57, 58
RATNER      16
REILING     26
ROBINSON          3
SCANLON     41, 42, 43, 44, 45
STEPHENS          5, 6
STERNE      64
SUCHYTA     31
THOMPSON          19, 21, 22
TOEDT       37, 39
TRAPHAGEN         6
YOCHES      10