Computer Software and Intellectual Property

March 1990

OTA-BP-CIT-61

NTIS order #PB92-169242
Recommended Citation:

U.S. Congress, Office of Technology Assessment, Computer Software and intellectual

Property--Background Paper, OTA-BP-CIT-61 (Washington, DC: U.S. Government Printing Office, March 1990).

For sale by the Superintendent of Documents

U.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)
In the past, programming was viewed as a support activity for computer hardware or as

a hobby for “hackers.” As the software industry matured, it has become less driven by

technology and more concerned with the needs of users and the demands of the market. Today

software is a lucrative industry of its own, amounting to some $60 billion per year in domestic

sales and services. Internationally, the United States dominates the software market, holding

the edge in innovation over Western Europe, Japan, and the Soviet Union. Accompanying this

growth and maturity has come concern about the amount and type of intellectual-property

protection available for software.

This background paper examines existing intellectual-property protection for computer

software-copyrights, patents, and trade secrets—and provides an overview of the often

conflicting views and concerns of various stakeholders. It was prepared in response to a

request from the Subcommittee on Courts, Intellectual Property, and the Administration of

Justice of the House Committee on the Judiciary.

OTA gratefully acknowledges the contributions of the many experts, within and outside

the government, who reviewed or contributed to this document. As with all OTA publications,

however, the content is the responsibility of OTA and does not necessarily constitute the

consensus or endorsement of reviewers or the Technology Assessment Board.

~

JOHN H. GIBBONS Director
Reviewers and Other Contributors

Reviewers

Anne W. Branscomb

Program on Information Resources Policy

Harvard University

Dam E. Cartwright,II I

Academic Computing Services

Syracuse University

Joseph Farrell

Department of Economics

University of California at Berkeley

Francis D. Fisher

Cambridge, MA

Steven W. Gilbert

EDUCOM

Gerald Goldberg

U.S. Patent and Trademark Office

Brian Kahin

Science, Technology and Public Policy program

Harvard University

Michael S. Keplinger

U.S. Patent and Trademark Office

Ronald S. Laurie

Irell & Manella

Peter Menell

Georgetown University Law Center

Steven J. Metalitz

Information Industry Association

Eric Schwartz

U.S. Copyright Office

Lee Skillington

U.S. Patent and Trademark Office

Oliver R. Smoot

Computer and Business Equipment

Manufacturers Association (CBEMA)

Douglas R. Weimer

Congressional Research Service

American Law Division

Milton R. Wessel

Georgetown University Law Center

Other Contributors

Kenneth B. Allen

Information Industry Association

Ronald Palenski

Association of Data Processing

Service Organizations (ADAPSO)

Ron Reiling

Digital Equipment Corp.

Pamela Samuelson

University of Pittsburgh and

Emory University

Kenneth A. Wasch

Software Publishers Association

Ingrid A. Voorhees

Computer and Business Equipment

Manufacturers Association (CBEMA)

OTA Reviewers and Contributors

Karen G. Bandy

Communication and Information

Technologies program

D. Linda Garcia

Communication and Information

Technologies Program

Elizabeth Miller

Communication and Information

Technologies program

Kevin O’Connor

Biological Applications Program

Fred W. Weingarten

Communication and Information

Technologies Program

Robert Weissler

Industry, Technology, and

Employment Program

Fred B. Wood

Communication and Information

Technologies Program

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by outside reviewers and other

contributors. These individuals do not however, necessarily approve, disapprove, or endorse this background paper. The paper

is the sole responsibility of OTA, not of those who so ably assisted us.
OTA Project Staff-Computer Software and Intellectual Property

John Andelin, Assistant Director, OTA

Science, Information, and Natural Resources Division

James W. Curlin, Manager

Commuication and Information Technologies Program

Project Staff

Joan D. Winston, Policy Analyst

AM M. Hironaka Research Assistant

Elizabeth Emanuel, Administrative Assistant

Jo Anne Price, Secretary

Karolyn St. Clair, Secretary
Contents

Chapter 1: Summary, Overview, and Issues P

● .*. *.*. ... ... ... me**   ** *m **** *. **m Overview. . . . . . . . . . . . . . . . . . .

● . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Questions for Consideration. . . . . . . . . . . . . . . . . . . . . . . . . .

Questions About Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Questions About Industry Structure and the Natureof Innovation . . . . . . . . . . . . . . . . . . . . .

Questions About Protection and Enforcement . . . . . . . . . . .

Chapter 2: Changing Technical and Market Environments. . . . . . . . . . . . . . . . . . . . . . . .

● *.*.....**.*.********* Chapter 3: The Intellectual Property Bargain and Software

● .*.....*********.***** Copyright. . . . . . . . . . . . . . . . . . . . . . . . .

Patent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Trade Secret. . . . . . . “”“”““”“““““ . . . . . . . . . . . . . . . . . . . . . . . . . . . ● . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 4: Controversies Over Software Protection . . . . . . . . . . . . . . . . . . . .

. * . . . . . . * . * * * * * * * . * * * .***.*.** Legal Cases . . . . . . . . . .

. . . . . . . . . . . . . . .

Stakeholders and Their Concerns,.,.. ~ ~;; ;”o”.”o”.”e”.”. ”o”o” “ “ . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . Individual Software Creators and the Software Industry

Software Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

Academic Community . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Some Private Efforts To Sort Things Out . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . ... ... .., ... .. O. O.OO Chapter 5: International Issues*.*e*** o

.

e

. e**. *ee*. .*e*ooo eaee*o* co*e*eao*a ** maa

Appendix A: Legal protection for Computer Software

● .*. ..*** ***e **mom********* Appendix B: International Protection for Computer Software

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 Chapter 1

Summary, Overview, and Issues

The health and vitality of the softwarel industry

are crucial to the computer industry, to government,

and to the economy as a whole. In 1988, domestic

revenues for software and related services amounted

to about $60 billion. Over the past 30 years, software

costs have increased as a share of total informationsystem costs. Software development costs today

amount to over half of the cost for new systems.2

Software is a critical component in the successful

operation of the computer system; after all, without

software, computers would be unusable. Software is

vital to defense and civilian agency operations, and

to industrial sectors as diverse as telecommunications, electronics, transportation, manufacturing,

and finance.3 The United States has 70 percent of the

world software market, but this may be in jeopardy

in the future as other countries’ software industries

develop.

Legal protections for computer software can

affect the pace of technological advance in software

and the extent to which these advances are disseminated and used in the economy, as well as affect

developments in the computer-hardware industry.

Software protections affect the “openness” of standards and interfaces, which are important components of firms’ competitive strategies in both the

software and hardware industries. Thus, the economic implications of under-protecting or overprotecting software extend far beyond the software

industry alone.

This study draws on prior and ongoing OTA

assessments: Intellectual Property rights in an Age

of Electronics and Information (April 1986), Copyright and Home Copying: Technology Challenges

the Law (October 1989), Information Technology

R&D: Critical Trends and Issues (February 1985),

and Information Technology and Research (ongoing).

This background paper reviews copyright, patent,

and trade secret protections; discusses current issues

regarding legal protection for computer software;

and identifies some of the normative and positive

questions that Congress should consider in its

continuing oversight of computers, software, and

intellectual property.

OVERVIEW

Basic questions about the detailed implementation of intellectual-property protection- for software-what to protect? how much? for how long?

against what? fiom whom ?—are difficult to answer.

Software does not fit comfortably into the traditional

intellectual-property frameworks of copyright

(which protects works of authorship)4 or patent

(which protects inventions).5 This problem is shown

in the current round of “look and feel” copyright

suits and in the controversy over patent protection

lThis paper uses the term “software” to refer to sets of instructions-computer programs—for computers, whether these are stored in punched cards,

magnetic tape, disks, read-only memory (ROM), random-access memory (RAM), semiconductor chips. or on Paper.

Sometimes the *’software” is taken to mean data sets, documentation, and training support as well as programs (see “Software Technology,” Nov. 6,

1989, attachment to U.S. Congress, Office of Technology Assessment, “Intellectual-Property Protection for Computer Software,” Staff Paper, Nov. 2,

1989). In some ways software and databases are merging, and in the future it may be hard to distinguish between a program and its data. (For example,

the “data” for some artificial-intelligence programs are themselves logical rules and structures.) However, as used here, “software” does not include

electronic databases (see ch. 2, footnote 12 for more on databases).

2 When software maintenance costs are added, software costs can amount to 90 percent of total costs over the life of an information system. (Barry

W. Boehm,&@wureEng ineering Economics (Englewood Cliffs, NJ: Prentice-Hall, Inc., 1981), p. 18, cited in “Bugs in the Program: Problems in Federal

Government Computer Software Development and Regulation,” staff study by the Subcommittee on Investigations and Oversight, Transmitted to the

Committee on Science, Space, and Technology, U.S. House of Representatives, Aug. 3, 1989.)

3 For example, software is critical to telecommunications. In 1965, the software in a telephone switching machine consisted of about loo~ooo lin~

of code. Ttiay, switch software can have over 2 million lines of code. This pattern of increasing size and complexity is similar for PBX hardware and

modems. (Eric E. Sumner, “Telecommunications Technology in the 1990s,” Tefecommuru“cutwns, vol. 23, No. 1, January 1989, pp. 37-38.)

4 A 1980 amendment to the Copyright Act of 1976 made explicit provisions for computer programs as (literary) works of authorship (Public Law

%-517, 94 Stat. 3-15, 3028). This followed recommendations made by the National Commission on New Technological Uses of Copyrighted Works

(CONTU).

5 me ~mv s~jwt mwcr of a pa= is llmit~ t. a Process, machine, article of manufacture, or composition of matter that is novel, nonobvious?

and usefhl, or to new and useful improvements to these classes of patentable subject matter.

The Supreme Comt hasnot ruled whether computer programs per se are patentable subject matter, but has ruled that computer-implemented algorithms

that am deemed “mathematical” algorithms per se are not statutory subject matter. Federal courts have thus held that a computer processor algorithm

is statutory subject matter unless it falls within a judicially determincxl exception like the one for “mathematical algorithms” per se. (See U.S. Patent

and Trademark Offke, “Patentable Subject Matter: Mathematical Algorithms and Computer Rograms,” 1106 O.G. 4, Sept. 5, 1989).

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2 ● Computer Software and Intellectual Property

for inventions involving computer programs and

algorithms.6

Software is not unique in this respect. New

technologies have challenged traditional intellectual-property frameworks before.7 Often, traditional

protection devices have been able to accommodate

new technologies successfully. For example, the

first copyright statute dealt only with maps, charts,

and books, but copyright has been able to deal with

the “hard questions” posed by works like engravings, musical compositions, photographs, and so

forth.8 But some commentators believe that new

electronic technologies (including software) pose

more severe challenges to copyright, in part because

it is increasingly difficult to extract and freely use

ideas that are communicated only in the form of

expressions conveying intellectual-property rights.9

Another problem in determining where software

fits in the intellectual-property system is that computer software and hardware technologies are changing rapidly, both qualitatively and quantitatively.

This makes the crafting and refining of software

protections akin to aiming at a target that isn’t there

yet (or doesn’t yet exist). Each time one controversy

or set of questions is resolved, another arises.10 For

example, future advances in computers and computation, especially in artificial intelligence and interactive computing, will require a change in the

definitions of “software” and “data”: a new type of

computer, called a “neural net,” is not programmed

as are conventional computers; instead, it is

“trained.” It is becoming harder to distinguish

between a program and the data on which it operates:

expert systems are designed to draw on a knowledge

base of detailed information about an area of

application (e.g., medical diagnostics, industrial

processes) in order to make “decisions.” The knowledge base or “data” for these artificial-intelligence

programs are themselves logical rules and structures, not just numerical values.

A third problem is compounding the problem of

rapid technological change. The legal and technical

communities do not have consistent definitions for

terms like “algorithm” or “interface” that make up

computer and computational parlance. For example,

one common technical definition of the term algorithm is: “a set of rules which specify a sequence of

actions to be taken to solve a problem.”ll But other

definitions are also used within the technical community: some computer scientists consider algorithms to be simply abstract computer programs, and

believe that distinctions between algorithms and

programs only capture differences in degrees of

abstraction. 12 Without agreement on a common

language and definitions, protection issues become

extremely difficult.

Finally, the international scope of software markets complicates matters, requiring domestic laws to

be harmonized with treaty obligations and laws of

other nations.13 Although the United States is still

6 In this paper, OTA sometimes uses phrases like “patents for software-related inventions,””” "software-related patents,” or “patenting algorithms” to

refer generally to patent protection for computer-imp l emented processes and algorithms. The United States Patent and Trademark Office (PTO) considers

terms like “software patents” to be a misnomer because they maybe interpreted to mean that computer programs per se (i.e., the sequence of coded

instructions itself) are patentable, as opposed to the underlying computer processesthey carry out---see previous footnote. (M. Keplinger, G. Goldberg,

and L. Skillington, PTO, comments on draft paper, Dec. 18, 1989, pp. 1-2.)

7These have included Phonorecords (sound recordings), motion pictures, reprography, audio and videocassette recorders, and genetic engineering.

For a discussion of the latter challenge--the issue of patenting living organisms U.S. Congress, Office of Technology Asessment, New

Developments in Biotechnology: Patenting Life-Special Report, OTA-BA--370 (Washington, DC: U.S. Government Printing Office, April 1989).

s% ~~my L. ~Ws, %~ck Lynch, and Mark R. Steinberg, “Silicon Epics md BinwY B~ds: ~~rmining the Proper Scope of Copyright

Protection for Computer Programs,” UCLA Luw Review, vol. 34, June-August 1987, pp. 1493-1594, esp. pp. 1495-1499.

9* F-is~Fisher, ‘The Electronic Lumberyard and Buil&m’ Rights: Technology, Copyrights, Patents, and Aca&me,’’Change, vol. 21,

No. 3, h&y/JUDC 1989, pp. 13-21.

Some believe that looking at sotlware and other types of intellectual property in isolation will not prove satisfactory. Instead, they suggest that the

changing nature of information expressions, and their communication and use must be examined broadly, along with economic incentives for creating

and dissemkdn g intellectual propemy. (Francis D. Fkher, personal communicatkm, Dec. 8, 1989; see also Anne W. Branscomb, “who Owna

Creativity? Property Righta in the Information Age,” Technology Review, vol. 91, No. 4, May/June 1988, pp. 3945.)

lq$- curreat sofhvarc+opyright controversies involve making the distinction between (protected) expression and (unprotected) idea Future

techno-legal catnwersies might involve works “authored” by tivanced artifxial-intclli~ systems. (Milton Wessel, Georgetown Univemity Law

C!utter, personal CCMWUIliCdOtl, NOV. 28. 1989.)

llc-r~ Sc~We ad Tec~@y Dictio~,~M.B. Widkm (cd.) (New y~, NY: W & R Chambem, Ltd., 1988), p. 23.

~~ma-wcrxi~t~$v~tive ~ leg~=fuims~~g~~~]em~~f~~g~thms ~d~Wt~~_, see Allen Newell,

“’Il)c Models Am Bmkem Tk Models Are Broken!” University of Pimburgh Law Review, vol. 47, No. 4, summer 1986, pp. 1023-1035.

laM~tilat~~ Copyright treaties like Bane can provide shlN@wOUS ~“ for computer Soflware in many countll‘es. Relatively few countries

provide patent protection for sofhvare-related inventions. In any even~ patents usually provide potcction only in the country where issued
Chapter I-Summary, Overview, and Issues ● 3

the leader in software development, European and

Japanese competitors are advancing rapidly, especially in targeted areas like artificial intelligence.

The prospect of unified markets and standards in

Western Europe after 1992 poses a significant

competitive challenge for U.S. software developers.

One example of how intellectual-property protections for software will help shape competition in

these new international markets is in their influence

on standards14 and interfaces. If the way a program

interfaces with people (user interface), interfaces

with other programs (software interface), or interfaces with computers (machine interface) is protected, it will be more difficult for industry to agree

on standard conventions to make programs compatible with one another.15 Standards and interfaces will

help determine the extent to which various countries’, as well as different companies’, software and

hardware are compatible. The degree of compatibility will shape the future of global information

networks, and will determine the ease of access.

QUESTIONS FOR

CONSIDERATION

In its oversight of policies to protect computer

software and related technologies, Congress may

find the following questions helpful.

Questions About Definitions

Terms like “interface” and “algorithm” (or “mathematical algorithm”) do not have uniform meanings for the computer and legal professions. What

terminology can be developed or adopted to

discuss and analyze software issues, so that the

legal and software professions, and policymakers,

can meet on common ground?

How can it be ensured that the definitions used

and distinctions sought will be meaningful as

technology changes?

In what ways are functional works like computer

software and algorithms different from other

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types of works and inventions? In what ways are

they similar? Can software be examined apart

from other types of electronic information?

For software and other forms of electronic information, is it useful to talk about policies to

“reward and compensate” producers, rather than

to “protect” their intellectual property?

Questions About Industry Structure

and the Nature of Innovation

Does it make sense to refer to “software” ox

“software industry” in aggregate? What are

different types of software and segments of

the

the

the

industry? Should some be treated differently?

Where and how has innovation in software

occurred? Who creates new software techniques?

Commercializes or disseminates them? Is this

changing?

Does the current statutory scheme of copyright

and patent protection adequately stimulate creativity and innovation in software? If so, can it be

assumed that “what worked before will work in

the future”?

Does the current scheme create sufficient economic incentives for investment in software

research and development? For commercialization of R&D results? If so, will it continue to do

so?

Is the current scheme sufficient to maintain U.S.

leadership in software in a world market?

Questions About Protection

and Enforcement

What aspects of software and/or algorithms

should be protected?

Do concepts like “lead time” have a different

meaning for software or algorithms than for other

WMndardsmechanisrns differ in the United States and abroad. In the European Economic Co~unity, stand~ddevelopment alm~t always concmm

dejure standards. In the United States, the term “standard” is most often used to mean “de facto (voluntary) standard” or “dominant product.” (Oliver

Smoot, Computer and Business Equipment Manufacturers Association (CBEMA), personal communication, Dec. 7, 1989.)

1~’s~~~tim” of ~~ace9 in different aWlic~on ~ftwme packa~s is ~ issue ~au~ USCTS find common interfaces attractive when these

allow their current hardware and sofiware to be compatible with new products or make learning how to use new software easier.

Some software developers want (heir programs to have user interfaces (e.g., the way commands are invoked, or “look and feel”), soflware interfaces

(e.g., degree of data portability between programs), or machine interfaces (e.g., o~rating systems n-to ~he PWW@ simil~ to or in common

with others’ programs in order to gain a larger potential market. But other developers, such as those who are fwst to market a radically innovative program,

may see their interfaces as critical parts of their competitive advantage, These developers may want to protect their interfaces in order to reap economic

rewards for developing them.
4 ● Computer Software and Intellectual Proper

types of works and inventions? What does this .

imply for the duration needed for protection?

How feasible will enforcement of protections for

software and/or algorithms be? Will courts be able

to draw the distinctions needed?

Where will the burden of proof be in enforcing .

rights? Will they fall equitably on individuals,

large firms, and small firms?

Does “fair use” need to be interpreted differently

for software than for other types of copyrighted

works? Are special rules needed for uses of

software (as opposed to other types of works and

technologies) in education and research?

Who speaks for the public interest in issues

involving computer software and other forms of

electronic information?
Chapter 2

Changing Technical and Market Environments

Changes in computer hardware and software

technologies and markets have shaped concerns

about protection for computer software and ideas

about what kinds of protection are needed.

Computer hardware technologies have changed

dramatically over the past decade. With these

changes have come important changes in how

software is developed, sold, and used. Consequently, some software developers have modified

their ideas about what aspects of software need the

most protection. For example, as writing and checking lines of program instructions (“code”) becomes

more automated through computer-aided software

development, some software producers propose to

protect the logic and idea of a program, not just the

effort required to write code and check (“debug”) it.

Others are concerned that computer-aided software

development will make it easier to “disguise”

copying.

Technological change also challenges traditional

copyright concepts. For example, with developments in artificial intelligence and in interactive

software and database systems, it will likely become

increasingly difficult to draw the line between

derivative worksl and new creations, and to determine what constitutes “authorship.”2

Twenty-five years ago, computers and software

were not mass-marketed, retail items. The mainframes and minicomputers of the day were relatively

few in number, compared to the number of microcomputers (PCs) in use today. These machines were

run by expert staff using expensive, often customdeveloped, software.3 In the late 1960s, the “independent” software industry began to flourish. By

1988, U.S. independent software developers’ revenues exceeded $25 billion, up from $20 billion in

1987.4 About 40 percent of these revenues were from

foreign sales.5 Domestic revenues from all software

and related services totaled over $50 billion in 1987,

and were expected to increase to about $60 billion

for 1988.6 The United States currently commands a

70 percent share of the world software market.7

The fortunes of computer-software and computerhardware developers are closely intertwined. A

computer may gain popularity if plentiful and/or

novel software is available. Conversely, lack of

suitable application software (programs designed to

perform specialized tasks for users) can be a barrier

to the market success of a new computer or can limit

the effective use of a computer.8 Scarcity of application software can impede the use of a whole class of

computers: software to make most effective use of

massively parallel processors and other supercomIA “derivative Work’s is a work based on one or more preexisting works (e.g., a translation, abridgement, or other form of transformation or

adaptation). (See Title 17, U.S.C. 101.) Section 117 allows the rightful owner of a piece of software to make a copy or adaptation if the new copy or

adaptation is for archival purposes (a “backup” copy) or is an essential step in utilizing the program in the computer.

zFor -ein~active SOftWare, it is i.nCreaSiI@y difficult to determine where the programmer’s expression ends and Ihe user’s contribution

begins-the computer mediates and intermingles the creative efforts of both. Interactive computer-based works may generate new questions about

ownership and originality. See discussion and example of a hypothetical interactive music-composition program, “Minstrel,” in U.S. Congress, Office

of Technology Assessmen~ Intellectual Property Rights in an Age of Electronics and J#ormution, OTA-CIT- 302 (Melbourne, FL: Kreiger Publishing

co., April 1986), pp. 70-73.

3AMtOU@ ~me ~l~ively so@isticated users (e.g., in universities or research organizations) did develop and maintain their own prosr~s, most

application softwiuv for specific tasks like inventoxy control or number crunching was either provided by hardware manufacturers or custom-developed

umkr ccmtract. Almost all operating-system software to run the computer and control its input, outpu~ and logic functions was provided by

computer-hardware manufacturers.

d~ci~on of~-sing WmiW ~gmfitims (ADAPSO) figUIW on industry performance, 1989. These data for “non-captive” fi~s

excludes the value of software produced in-house by hardware manufacturers; nwenues are split about evenly between application and operating-system

software.

Su.s. Intemadonal Trade Commission, ‘The Effects of Greater Economic Integration Within the European Community on the United States,” July

1989, ch. 4, p. 39.

@xnputer and Business Equipment Manufacturers Association, The Computer, Business Equipment, Soffware and Services, and

Teleconvnuru ‘cutions industry, 1960-1996 (Washington, DC: CBEMA, Industry Marketing Statistics, 1987), table 4-3, p. 99.

7commission of the European Communities, “Green Paper on Copyright and the Challenge of Technology-Copyright Issues Requiring Immediate

Action:’ June 1988, pp. 171-172.

Sk. ~ftw= ~~me ~ cntic~ t. ~ may ind~tri~ ~~rs, ~ile productivity ~wth for softw~ t~hnology Ilm been relatively s1OW,

there is some concern that software could become a bottleneck-or the “Ahilles heel of the information age.” (Ian M. Ross, President, AT&T Bell

Laboratories, keynote address, 1988 Bicentennial Engineering Conference, Sydney, Australia Feb. 23, 1988.)

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6 . Computer Software and Intellectual property

puters is currently scarce.g On another front, application-software developers can find the existing “installed base” of older computers and earlier programs (e.g., spreadsheet, database, or wordprocessing programs) a barrier to adoption of new

programs designed for more advanced machines.

They may also need to upgrade their products

periodically; these new versions must be compatible

with new hardware and also with older versions of

the product.10

System software (programs, including operating

systems, that make the computer usable and control

its performance) can be an important factor in

hardware firms’ competitive strategies. For example, product competition in PC markets is based in

part on differences in system features (e.g., processing speed, ways of shipping data for processing in

different parts of the computer, graphics capabilities) and user-interface features (e.g., pictoral

“icon,” manual “mouse,” or keystroke “macro”

commands for functions such as moving the cursor

or saving a file). These advantages are acquired from

shrewdly mixing hardware and software designs.

When Congress created the National Commission

on New Technological Uses of Copyrighted Works

(CONTU) in 1974, the “PC revolution” had not yet

begun to bring desktop computing power to the

millions of individuals that now use it. By the time

CONTU issued its final report in 1978, the PC

revolution was under way, creating anew generation

of computer users who were not primarily programmers or computer experts. The rapid proliferation of

PCs in homes, offices, and schools created a very

large retail market for application software-for

word processing, spreadsheets, even games-as

well as a lucrative market for PC operating-system

software. In 1988, domestic revenues for PC application software reached almost $3 billion.ll The

widespread use of PCs also facilitated the growing

use of online databases.12

Rapid growth and technological innovation made

markets for PCs and PC software quite volatile,

compared to the mainframe and minicomputer

markets a decade earlier. Some new hardware and

software firms would introduce ,new products, enjoy

brief success, then go out of business within the

space of a few years. Other firms built on early

successes and went on to become industry leaders.

A few years after introducing a successful product,

however, they might find a substantial fraction of

their potential market taken by competitors offering

similar-sometimes improved—products, often at a

lower price. The volatility of PC markets has

focused new attention on questions about how best

to provide intellectual-property protection for software, as well as hardware. At the same time, the

history of the computer hardware and software

industries illustrate the complex relationship between intellectual-property protection and stimulation of creativity.

9A recent press briefing by the Lnstitute of Electrical and Electronic Engineers reported that while U.S. supercomputer manufactmms are focusing

on new hardware developments to stay ahead of Japanese competitors, they are giving little attention to software to exploit the hardware’s speed and

power. As a result, a superwmputer’s speed in solving problems may be only 1 to 2 percent of its advertised peak speed. (“Software SolutionJ’Science,

vol. 246, No. 4930, Nov. 3, 1989, pp. 574-575.) See also: “The Computer Spectrum,” Congxtter, vol. 22, No. 11, Nov. 11, 1989, pp. 61-62.

l%uccessive generations of upgrades tend to be increasingly complex. For example, one sofiware developer’s fmt database-management package

had several thousand lines of code and took a single developer its than a year to create. The most recent version, designed to accept data fdes created

under earlier versions of the package, has hundreds of thousands of lines of code and has taken a team of developers several years to create. (Ruthann

Quindlen, “installed Base Becoming Obstacle to Sofiware Companies’ Success,’’ f@nvorld, vol. 11, No. 36, S@. 4,1989, P. 82.)

llb Stephens, SOftWare Publishers Association, personal COm.altiction, Oct. 2, 1989.

12~ “elw~onicd~b=”is acoll~tion of information sto~ ad ~ws@~y e~ec~icm~s. (Commission of thehopean ~mtltlkh,‘~~

PaperonCopyright and the Challenge of Technology-Copyright Issues RequiringImmediateA ction,” June 1988, p. 205.) Databasescanbeeopyrightcd

as works of compilafwm the copyright extends to the material contributed by the author of the compilation, or to the author’s creative efforts in selecting,

ordering, and arranging preexisting material, not to the preexisting material per se or ideas included in the compihtt.ion. Domestic revenues for on-line

business databases alone amounted to $6.5 billion in 1988 (Information Industry Association data 1989).
Chapter 3

The Intellectual Property Bargain and Software

In the United States, an “intellectual property

bargain” underlies the concept of intellectualproperty protection. This “bargain” between creators and society balances two social objectives: 1) it

encourages the production and dissemination of new

works and inventions (by providing economic incentives to creators), and 2) it promotes access to and

use of these works and inventions.l Thus, the limited

monopoly granted to authors by copyright and to

inventors by patents is a quid-pro-quo arrangement

to serve the public interest, rather than a system

established primarily to guarantee income to creators. (See app. A for reviews of copyright, patent,

and trade secret protections as they pertain to

software.)

COPYRIGHT

Copyright is granted to authors for the creation of

certain classes of works.2 The economic underpinnings of copyright assume that to profit from a work,

the author will publish or otherwise disseminate it to

the public.3 Copyrights, which are relatively easy to

obtain and long-lasting compared to patents, are

intended only to protect the expression in a work

from unauthorized copying, not to protect the

underlying ideas or functionality from use. Even

“expression” is not protected from independent

creation.

The recommendation by the National Commission on New Technological Uses of Copyrighted

Works (CONTU) that copyright protection be explicitly extended to all forms of computer programs

was established in the 1980 amendments to the

Copyright Act.4 Even then, CONTU recognized

certain difficulties in applying copyright (which

does not protect ideas, processes, or procedures) to

software, which is inherently functional. A particular concern was the impossibility of establishing a

precise line between the copyrightable “expression”

in a program and the noncopyrightable processes it

implements—the distinction between “expression”

and “idea.”5 CONTU assumed that most copyright

infringements in the then-immediate future would

be “simply copying,” but recognized that technological advances would raise more difficult questions in

determining the scope of copyright.c CONTU concluded, however, that these questions should be

answered on a case-by-case basis by the Federal

courts. 7 Many continue to believe that traditional

copyright principles should continue to be applied to

software, because difficulties in distinguishing between idea and expression are not unique to software

and because copyright law has been able to embrace

many new forms of authorship within existing

principles. g

The 1986 OTA report, Intellectual Property

Rights in an Age of Electronics and Information,

discussed the increasing difficulties of applying

copyright to functional works such as programs.9

Some of these difficulties are shown today by

ongoing “look and feel”1° and “structure, sequence,

l!jec U.S. Constitution, art. I, sec. 8, cl. 8. For a discussion of this bargain and the public interest in intellectual property protection, xx U.S. ConPss,

Gffke of Technology Assessment, Intellectual Property Rights in an Age of Electronics and Informatwn, OTA-CIT-302; and Copyright and Home

Copying: Technology Challenges the fuw, OTA-CIT-422 (Washington, DC: U.S. Government Printing Office, October 1989), ch. 3.

z Title 17, U.S.C. 102(a).

3 See OTA-CIT-302, op. cit., foomote 1, p. 7 and ch. 6. Copyright inheres in a work as soon as it is created and also exists for unpublished works.

4 CONTU recommended that programs be protected as literary works. CONTU’S definition of ● ’computer program” was added to Sec. 101 of the

@@@t At of 19’76 and a new Sec. 117 was added limiting computer-program copyright holders’ exclusive rights.

S w ~r S. Me~ll, “AII ~~ysis of the Scope of Copyright Protection for Application I%ograms,” Stanford L.uw Review, VOL 41, 1989. P. 1W7.

6“Fi~ R~fi Ofthe N~~~ -Ssion 011 New Technological Uses of Copyrighted Works,” July 31.1978. PP. 22-23.

7 Ibid., p. 23.

S For diw=ion of ~s view, ~Mo~n David Gold~rg and John F. B~leigh, “@pyri@t ROWUCXI fm Computer ~o~~s,” AIPLA ~uarter~

Journal, vol. 17, No. 3, 1989, pp. 294-322. Goldberg and Burleigh argue that the courts have (as Congress intended) conscientiously applied traditional

coPY@t ~iP~~ ~ SOfiWWC C=S ~d, fm tie most Pam we r~ching prep= and well-feasoned results (ibid., p. 296).

9 s= ~A-c~.302, op. cit., footno~ 1, pp. 78.85. The 1986 ~po~ i~ntifl~ ~~ps of cop@@table works: works of ~, cmatd fm theh OWl

intrinsic value; works of fact, such as databases, whose value lies in an accurate representation of reality; and works of function, such as computer

PO-S, which U= inf-tttioII to describe or implement a process, procedure, or algorithm.

ltl’’~”is o~ ~n~mmthe v~~ofsc~ndisplays, “feel”to mean the way the program mSp’@ whn tie ~r~l~tsoPtions m ~~m

commands. User interfac+ imluding graphic icons or combinations of keystrokes to represent functions like “save” or “delete,” are part of “look and

fal.”

-7-
8 . Computer Software and Intellectual Property

and organization” copyright suits. Moreover, market

changes, like the almost-hundredfold increase in PC

use since CONTU, make the financial stakes much

higher.

PATENT

Copyright protects the expression of an idea.

Patent protects the technological application of an

idea in a machine or process.ll A patent precludes

“practice” of the invention (e.g., making, using, or

selling the claimed invention) by others, even if they

invent it independently. But the requirement for

patentability is stringent: the invention must be

useful, novel, and nonobvious compared to prior

discoveries (the “prior art”) that are patented, in the

public domain, or otherwise widely known.12 While

publication is not required for copyright, patent is

granted in exchange for full disclosure of what the

inventor considers the best way of implementing or

practicing the invention.13 The purpose of the patent

is to “teach” others and thereby stimulate technological progress as they seek to build on (or invent

around) the discovery.

The availability of patent protection for softwarerelated inventions was unclear (generally considered

“not applicable”) until the early 1980s.14 Since 1981,

there has been renewed interest in patents for

software-related inventions.15 Over the past 7 years,

patents have been issued for software-related inventions such as linear-programming algorithms, spellchecking routines, logic-ordering operations for

spreadsheet programs, brokerage cash-management

systems, and bank college-savings systems.lG

In the last year, some patent lawsuits concerning

software-related inventions and controversies concerning patents for algorithms have become highly

visible. These lawsuits and specific controversies

have focused concerns over the appropriateness of

patent protection for software-related inventions and

algorithms. These concerns arise both from lack of

belief that patents in computer-program processes

encourage technological progress, as well as from

the practical problems that software-related inventions and algorithms raise for patent-system administration.

One of these problems is the incomplete stock of

“prior art” available to patent examiners in evaluating patent applications for processes involving

computers, especially those involving software and

I ~’rhe stitutw sub-t m~er of a patent is hrnit~ to a process, machine, article of manufacture, or composition of maner that is novel, nonobvious,

and useful, or to new and usefi.d improvements to these classes of patentable sub~t matter.

For an overview of patents, including a discussion of criteria for patentability and how a patent is obtained, see U.S. Congress, Office of Technology

Assessment, New Developments in Biotechnology: Patenting Life---speciui Report, GTA-BA-370 (Washington, DC: U.S. Government Printing Offke,

April 1989), ch.3.

IZAIIhCIu@ ~1 “origi~” progr~ are gener~ly eligible for copyright, the fraction of programs potentially able to q~lfy for patent prtiwtion is

much smaller. For one thing, the U.S. Patent and Trademark Office (pTO) position is that computer programs per se are not patentable, as opposed to

patentable computer processes and algorithms (see footnote 15 below).

In the early 1980s, some commentators estimated that over 90 percent of computer-progrm inventions would not in principle meet the patent

requirement that the invention be nonobvious, compared to the prior art. Therefore, they estimated that patent protection would only be relevant to about

1 percent of all software. (Findings of ABA Ropnetary Rights in Software Committee (1983), cited in Cary H. Sherman, Hamish R. Sandti, and Mm

D. Guren, Compufcr Sofnvare Protection La-w (Washington, DC: The Bureau of National Affairs, Inc., 1989), pp. 401408 and note 41.) (OTA NOTE:

The 90 percent and 1 percent figures do not refer to the percentage of patent applications that result in a patent being issued.)

lg~e s~i~c~on di=l~ illusmates one fiplemenmtlm of tie invention; Othem may bC possible. The p-t application must describe tk

invention adequately to allow a person of “ordinary” skill (in the particular area of technology) to make and use the invention.

141n 1972, tie su~me COUII stated that certain inventions performed by computers could be patentable subject matter (Gottschulk v. BeMon, ~

U.S. 63 (1972)), A 1981 Supreme Court decision (Diumond v. Diehr, 450 U.S. 175 (1981)) helped clear the way for patent protection for some

software-related inventions by clarifying the circumstances under which inventions perfonrwd by computers could be patentable subject matter.

15’rhe Supreme Com hm not ~1~ ~ t. whether compu~r prog~ ~r w constitute pa~n~le sub~t m@r. Mently, PI’() piitUtt CX@IEIS

carry out a two-part test for mathematical-algorithm statutory sub@t matter; the test is intended to be consistent with legislative history and case-law.

For examination purposes, “mathematical algorithms” are considered to refer to “methods of calculation, mathematical formulas, and mathematical

procedures generally,” and no distinction is made between man-made mathematical algorithms and mathematical algorithms representing discoveries

of scientific principles and laws of nature (which have never been statutory subject matter). For a process claim involving a mathematical algorithm to

be patentable, the claim excluding the algorithm is required to be statutory subject matter-i.e., the claim must be for a process, machine, etc. Trivial

post-solution activity like displaying a number is not sufficient. (“Patentable Subject Matter: Mathematical Algorithms and Computer Rograms,” 1106

O.G. 4, Sept. 5, 1989; also contained in PatentProtectfonfor CompurerSojlwure: The h’ewS@’eguur& Michael S, KeplingerandRcmald S. Laurie (eds.)

(Englewood Cliffs, NJ; Prentice Hall Law and Business, 1989), pp. 942.)

lbIn MS p~r, OTA sometimes uses phrases like “patents for !30ftwm-rekd hlventhts, ““soflvvare-related patents:’ or “patenting algoritbrns” to

refer generally to patent protection for computer-implemented processes and algorithms. The U.S. Patent and Trademark Offkx (PI’0) considers terms

like “softwarepatents” to be a misnomer because they may be interpreted to mean that a computer programmer se (i.e., the sequence of c.wkd inshuctions

itself) is patentable, as opposed to the underlying computer process it carries out. (M. Keplinger, G. Goldberg, and L. Skillington, PTO, comments (m

draft paper, Dec. 18, 1989, pp. 1-2.)
Chapter 3-The Intellectual Property Bargain and Software ● 9

algorithms. 17 The published literature does not

completely embody the development of the fields of

software and computer science. In many cases,

important prior art exists only in product form and is

not described in print form such as articles in

technical journals.18 Another problem is the lack of

special classifications or cross-references to issued

patents. As a result, it is virtually impossible to find,

let alone count or profile, all software-related or

algorithmic patents. This means that patent examiners and the public have no effective way of searching

and studying such patents.

Another problem is the long time lag between

patent application and issuance, compared to quickmoving software life cycles. Someone may develop

and bring a software package to market, unaware

that it will infringe on a patent applied for by another

developer, but not yet granted. These are called

“landmine patents,” and can occur in other areas of

technology besides software.l9

TRADE SECRET

Trade secret protection, provided under individual State laws, protects against use or willful

disclosure of the secret by others (but not against

independent discovery). Most foreign nations outside of Western Europe do not have extensive

trade-secret laws. However, most developed countries do have some form of legal protection for

confidential business information20 and contracts or

licenses can often provide equivalent protection

abroad.

Trade-secret information maintains its status so

long as the information is not publicly disclosed.21

Unlike copyright or patent, there is no limitation on

its duration. Trade secret has been the favorite

mechanism to protect mainframe and minicomputer

software and its underlying ideas, logic, and structure because programs are licensed to specific

customers, not the mass market. Mass-marketed PC

software is sometimes released with “shrink wrap”

licenses intended to maintain trade-secret status (see

app. A). Software that is protected effectively as a

trade secret does not become prior art. This can

adversely affect patent examinations and lead to

“reinventing the wheel.”

17kti~ in p~fig software-related inventkms and algorithms is relatively new. Copyrighted software deposited at the Copyright offi~ is not

redily searchable for patent purposes. Also, trade secrecy has been a major form of software protection, and trade-secret information may not constitute

part of the prior art, llterefore, the prior art readily searchable by patent examiners and the public has gaps. This potentially allows patents to issue for

computer-processinventions that are already known in the industry or that represent only minor improvements. However, the ITO is working to improve

the file of prior art for search puposes.

l~~~d -C, kII & hfanell~ personal communication, Dec. 21, 1989.

19HOWvw, ~n o~em ~lieve thiu ting ~ses swi~ problems for software-related inventions because of a combination of factors: 1) tie

decentralized nature of the soflware industry, 2) difficulties in determining the prior W, and 3) the rapid rate of sofhwe-pmduct development and short

product life cycles, compared to the time mxpired for processing a patent application. (Brian Kahin, Harvard University, personal communication, Dec.

1, 198% and Brian Kti “’l’he Case Against ‘Sotlware Patents’,” personal communication on Dec. 1, 1989.)

%1.ichael Keplirtger, Gerald Goldberg, and Lee Skillington, Patent and Trademark Office, personal communication, Dec. 18, 1989.

21’n) “ mamtain tmk-seaet protection for software, developers may require that employees or transferees hold the information in confidence.
Chapter 4

Controversies Over Software Protection

Legal protection for computer hardware is usually

provided by patentor trade secret; this combination

served fairly well to protect major hardware advances, as well as more-incremental developments.

Protection for computer programs does not fit neatly

within the traditional forms of intellectual property.l

As a result, the process by which software developers and users, the courts, and policymakers have

attempted to determine what should or should not be

protected, and what is or is not protected, has been

controversial.

LEGAL CASES

The litigation that has shaped copyright protection for software has come in three stages or

‘‘waves. The first wave of litigation considered

whether computer programs were protectable at all.

This was settled by the 1980 software amendment to

the 1976 Copyright Act (94 Stat. 3015, 3028), which

confirmed that copyright applied to computer programs. The second wave explored which aspects of

a program are protectable and which are not. Court

cases have decided that program source code, object

code, audiovisual (screen) displays, and microcode

are protected by copyright.3 The third and continuing wave deals with the more ambiguous aspects of

what in a program is protectable (e.g., “look and

feel”), and how to determine if two programs are

“substantially similar.”4

Copyright and patent lawsuits continue to test and

explore the boundaries of the current laws. Many in

industry and in the legal profession believe that if

properly applied, copyrights and/or patents are

adequate to protect software.5 They argue, moreover, that sui generis approaches risk obsolescence

and lack the predictability provided by legal precedent (argument by analogy to prior decisions), as

well as an established treaty structure providing

international protection.7 Others consider the development of sui generis protections or significant

modifications of current protection are preferable to

forcing software to fit models that are suited to other

types of works and discoveries but maybe ill-suited

for software.8 At the same time that some are calling

for major revisions in software protection, others are

arguing that the current system is not broken and

lsome observers have characterized the d~lculty as due to software’s being “too much of a writing to fit comfortably into tie Pmt SYm ~

too much of a machine to fit comfortably in the copyright system. ” (Pamela Samuelson, “Why the hmk and Feel of Sofiwsre User Interfaces Should

Not Be Protected By Copyright Law,” Communicti”ons of rhe ACM, vol. 23, No. 5, May 1989, pp. 563- 572.)

Others consider that software’s “fit” is no more uncomfortable than that of some other works and argue that the courts can successfully apply

traditional copyright principles to software cases. Anthony L. Clapes, Patrick Lynch, and Mark R. Steinberg, “Silicon Epics and Binary Bards:

DeteminingtheRoper Scope of Copyright Rotation for Computer Rograms,” UCLA LuwReview, vol. 34, June-August 1987; Morton David Goldberg

and John F. Burleigh, “Copyright Rotection for Computer Programs,’’AWLA Quurterty Journal, vol. 17, No. 3, 1989, pp. 2%-297.

2S= ~~ond T. Nirnmer and Patricia kauthtW “Classification of Computer Software for Ugal Protection: international Perspectives,”

Internadond Luwyer, vol. 21, Summer 1987, pp. 733-754

3F~ a ~er~ discWim of wh~ cm ~ ~@@ ~Cv H. Sheman, H~~ R. Sandiwn, ~d * D. Guren, Computer so~ae PrOttYdOn

Luw (Washingmn, DC: The Bureau of National Affairs, Inc., 1989), sections 203.5(c)-203.7(c).

The copyrightability of microcode as a “computer program” was upheld in February 1989. See discussion of NEC Corp. v. Inrel Corp. (10 USPQ

2d 1177 (N,D. Cal. 1989)) in Goldberg and Burleigh, op. cit., foomote 1, pp. 309-311.)

4 s~~ti~ s~l~~ is a ~bjwtive t- f~ Cop@@t ifingenlent. A plfitiff must &)w ~~ he ~kg~ inm~ w WXXSS to h COpJ@htd

work and that there is substantial similarity between the works at the level of protected expression. An allegedly infringing work need not be 100 percent

identical to another in order to infringe its copyright, but deciding how similar works must be to prove infringement can be troublesome, even for

conventional literary works like plays or novels. For computer programs, the ‘ordinary observer” making the determination may need to be a technical

expert. For discussion see Susan A. Dunn, “Defmingthe Scope of Copyright Protection for Computer Software,’ Sta@ordLmv Review, vol. 38, Jsnuary

1986, pp. 497-534; and Clapea et al., op. cit., footnote 1, pp. 1568-1573.

In detemirdng substantial similarity between a copyrighted work and an accused work, courts look at the worka considered as a whole. For programs,

this means the detailed design, not just individual lines of code (Clapes et al., op cit., footno~ 1, p. 1570).

SF~ me dix~iom of~vieW, focming ~ -@t,~clap ~ ~., op. cit., foofnti 1; ~d (Md~g dBurkigh, W, cit., f-k 1.

6SUi gem~ is a ~X~d to (kscribe a law that is “of its own kind of ChSS. ”

%r example, tk Beme Convention p’ovides reciprocal copyright protection in 79 countries.

sw, f~ exampk, Pamela Samuelson, “CONTU Revisited: The Case Against Cumputer Programs in Machine-Readable Form, Duke Luw Journul,

Septemk 1984, p. 663-769; andl%er S. Menell, “TailoringLegal Protection for computer Software,” SruqfordLuwReview, vol. 39, No. 6, July 1987,

pp. 1329-1372.

-11-
12 ● Computer Software and Intellectual Property

does not need fixing --or at least, can be “finetuned” within the existing legal framework.9

The extent of copyright protection for the logic

underlying a program, as well as its structure and

interfaces, raises complex issues.lo Some of these

issues are currently the subject of well-publicized

copyright lawsuits. What may be at stake in these

cases is the extent to which copyright should be

interpreted to give patent-like protection, especially

since copyright applies for a much longer time and

lacks patent’s standards for novelty, nonobviousness, specificity of claim, and disclosure. Patent

protection for algorithms also raises complex issues.

ll Ongoing patent suits concerning softwarerelated inventions and the recent publicity given to

some patents for algorithms have stimulated debates

concerning the extent to which software-related and

algorithmic inventions should be included in the

patent system, and whether or not computer processes and algorithms are different enough from other

technologies to warrant special provisions (e.g.,

shorter duration, pre-issuance notice, etc.). These

debates focus on two questions:

1.

2.

the longer term question of whether patent (or

patent-like) protection for software-related inventions and/or algorithms is generally desirable; and

the near-term questions of how well current

United States Patent and Trademark OffIce

(PTO) procedures are working and how to

improve the comprehensiveness of the prior art

available to patent examiners and private

searchers (see app. A).

STAKEHOLDERS AND THEIR

CONCERNS

There is a public interest in the form and level of

software protection and its effects on innovation,

technology transfer, and economic growth. At a

micro level, software users have specific expectations and concerns, but they are also concerned with

software quality (as for any other product) and with

support and consultation for using the software.

Many users consider technological anti-copying

devices that curtail a program’s use, or prevent

modification of the software, or,their ability to make

backup copies as undesirable.12 Rather than having

to learn a unique set of commands and features for

each program, users want to learn universal skills

applicable to many programs. Cost is a factor,

especially for schools or businesses that have to buy

dozens of the same software package for their

terminals. Devising or enforcing protections, even

against literal copying by private individuals, is

complicated by public sentiment that noncommercial private copying is acceptable.13

The software industry is concerned with unauthorized private copying and with commercial

piracy. But issues that arise in one segment of the

9For exmple, a -t fom ~nve~ by the Computer Science and Technology Board (CSTB) kgm with a ~mmt mat it w= not ~v~~

to challenge the legal framework for intellectual-property law, which “isn’t broken and doesn’t need fixing.” (Lewis Branscmnb, opening remarks,

“Intellectual Property Issues in Software: A Strategic Forum, ” CSTB, Nov. 31-Dee. 1, 1989.)

OTA NOTE: Based on discussions at the CSTB forum and comments received by OTA on a draft of this paper, the semantic dividing line between

“modifications’ and ‘free-tuning’ seems to be that the fwst might be interpreted to include statutory changes to copyright and paten~ or sui generis

forms of protection, while ‘free-tuning” would imply incremental judicial refinements through specific cases. Based on reviewer comments on a draft

of this paper, a substantial portion of the controversy over whether software’s fit in the current system is ‘neat’ or ‘comfortable” seems to be motivated

by concerns that any discussions of less-than-perfect fit are intended to support “modification” rather than “fine-tuning.”

1~~ for example: Dennis S. Karjala, “Copyright, Computer Software, and the New Rotectionism,” Jurirnetrics Journal, vol. 27, fall 1987, pp.

33-%; and Peter S. Menell, “An Analysis of the Scope of Copyright Protection for Application Programs, ” Sranjord Luw Review, vol. 41, 1989, pp.

1045-1104.

~lFor ex~ple, see Donald Chisum, “Patentability of Algorithms,” University of Pittsburgh I%W Review, vol. 47, summer 1986, pp. 959-1022.

Chisum argues against exclusion of “mathematical” algorithms from patentable subject matter (Gotrschalk v. Benson) and concludes that lack of

unambiguous patent protection for algorithms may ‘‘induce attempts to rely on other sources of law, such as copyright and trade secrets, that are

inherently less suited to the protection of new tedtnologicai ideas with widespread potential uses” (ibid., p. 1020).

l~onventio~ wi~om is mat Con-er res15tmce 1~ many ~ftw~ prod~s to stop copy -pm~ting qplication-software~k~~.

13A 1985 OTA smey fo~d hat tie majority of re~ndents consi~~ it a~~le to~compu~r pmgr~s with friends in ord~ tO m~e COpiC9

fortheirown use. ( U.S. Congress, Office of Technology Assessment, Intellectual Property Rights in an Age of Electronics andl~onnation, OTA-CIT302 (Melbourne, FL: Kreiger Publishing Co., April 1986), table H-1.)
Chapter Controversies Over Software Protection ● 13

software industry may not be as important in

another.14 Therefore, policy issues must be analyzed

normatively, taking different industry structures,

incentives, and economics into account.

Individual Software Creators and the

Software Industry

Creators of commercial software are concerned

about profitability. An important rationale for intellectual-property protection for software is to give

commercial software developers adequate market

incentives to invest the time and resources needed to

produce and disseminate innovative products. Direct

revenue losses due to commercial piracy are not the

only concerns of developers. Developers want to

gain and maintain a competitive advantage in the

marketplace. One powerful source of market advantage is lead time: the first company out with an

innovative computer program benefits from its head

start. Trends in software technology, like computeraided software development, are eroding lead-time

advantages. Another market advantage is user and/

or machine interfaces. Here, however, the industry’s

goals of expanding the market and a fro’s goal of

maintaining market share can be at odds (see below

and ch. 1, footnote 15).

There are several types of interface “compatibilities”: hardware-to-user, software-to-user, hardware-to-hardware, software-to-hardware, and software-to-software (e.g., between an operating system

and application programs). Compatibility and

“openness” in interface standards are important to

the industry as a whole. There is a concern that too

much protection could raise barriers to entry for

small, entrepreneurial companies if large corporations with more financial and legal resources hold

key copyrights and patents. Another concern is that

“bottleneck” patents or broad interpretations of

copyright protection may block progress in the

industry as a whole.15

Software competitors, and the industry as a whole,

are concerned with shared access to state-of-the-art

knowledge and diffusion of information about programs and programming, so that programmers can

build on each others’ work, rather than reinvent the

wheel (or rewrite a matrix-multiplication subroutine) for each new application.lb The pace of

innovation can be speeded up if competitors are able

to build on others’ advances. The “PC revolution”

was in large part driven by the desire to decentralize

control and knowledge of computing-to bring

powerful tools to the desktop of millions of users,

rather than have them cloistered in the hands of a few

computer specialists. Part of the “hacker ethic” and

practices that produced the innovative machines and

software that brought about this PC revolution were

based on principles of free access and use of

software and innovative techniques. Almost 15

years after the beginning of the “revolution,” the

“hacker ethic” is at odds with the need for income

from production of software which leads developers

to seek increased software protection.17

A major concern of most PC-software developers

is private copying of an entire program by one’s

current or prospective customers (e.g., making an

unauthorized copy of a spreadsheet program for a

friend). A major concern of most vendors is literal

copying of an entire program for sale by “pirate”

competitors. These concerns can be dealt with fairly

straightforwardly-at least in theory-by copyright

law; in practice, enforcement, especially over priW%r example, commercial piracy is a great concern for PC-software developers; Eleventh-Amendment (States’ rights), private+mpying, and

software-rental issues are also very important to them. The sofiware-rental issues stem iimn developers’ co=ms that most rented software is rented

to copy, -than to “try before buying. ’ PC-software developers perceive theirweapons against unauthorized private copying and commercial piracy

to be education, moral suaaion (including “amnesties” for unauthorized users) and litigation. (Ken Waach, Software F%blishers Association, perscmal

C4XMlUUiCiltim Aug. 28, 1989.)

By contra% &velopem of hard-wired microcode (’”fmware”) are unlikely to womy about private individuals making copies at home, at least with

~~Y availabk technology.

1% need for at 1- some degree of compatibility for 4 ‘network’ technologies like SOftw are-whether through informal (de facto) industry

standds of formalized ones--i s an important consideration in making policy choices about desirable levels of protection and how these are achieved.

Some consider that extending copyright protection to user interfaces and the “look and feel” of programs might lead competitors to offer incompatible

but otherwise similar products (“locking in” users to particular product lines), rather than competing on price and performance features of an

industq-standard product. On the other hand, these types of protection could lead to competition in product design, producing major advances. (See

Joseph Fandl, “StmddmtI “ “on and Intellectual Roperty,” Jurimezrics Journul, vol. 30, No. 1, fall 1989, pp. 35-50.)

lqor e~~, it may be wasteful duplication of effort to have to create an entirely new user interface each time a progr~ is written.

17SCC StWUI hvy, Huc&ers: Heroes of the Compurer Revofusion (Garden City, NY: Anchor FrwJDoubleday, 1984). especi~ly ch. z.
14 •. Computer Software and Intellectual Property

vate copying or overseas piracy, is difficult.18

Copying software is easy and inexpensive. Moreover, private copying of software seems as “natural” as making home audiotapes or videotapes to

many individuals, and allows them to avoid expensive purchases. Some individuals and businesses

engage in commercial piracy, making and selling

unauthorized copies of software.19

The legal status of some software-engineering

practices is not clear under copyright. Some practitioners think that ‘clean room’ reverse-engineering

procedures might be acceptable practices under

copyright because a second program that is developed “independently” without access to the protected expression in a prior program does not

infringe the copyright of the previous one.20 This is

controversial, however, because clean-room practices vary.21 Some reverse-engineering steps like

de-compiling object code (or dis-assembling assembly-language code) in order to analyze the program’s

functions generally involve making one or more

copies of the code as an intermediate step in the

process of creating a “new” one.22

Software Users

Millions of individuals and thousands of businesses rely on purchased software products for their

day-to-day activities and livelihood. They care about

the price, quality, functionality, ease of use, and

variety of software products available. Thus, they

care about the health of and level of competition in

the software industry. They also want “common

ground’ (compatibility) that allows them to use new

products with their existing hardware and software

Users care about having “reasonable” rights (e.g

being able to make a backup copy of an expensive

piece of software); some need the ability to modif

“packaged’ software in order to use it efficiently o

meet other specialized needs.

Most businesses and individuals who use soft

ware tools to create other products or services wan

a stable and predictable legal environment so the

know what uses are permitted and which are not, an

which must be licensed from developers. A 198

survey of nearly 200 management-information

system (MIS) executives showed that almost one

third reported that“look-and-feel” lawsuits will

cause them to shy away from software clones.2

legal uncertainties about patented computer proc

esses may have a similar effect, particularly because

patents ‘ “use” rights affect the buyer as well as the

developer.

The “software work force” who use and/or create

software as part of their jobs want to have transferable skills; thus they are concerned, sometimes only

indirectly, with standards for programming languages and external consistency of user interfaces.

(For example, learning a new word-processing

package is easier if it has commands and functions

similar to other packages one already knows.) But

users also want more powerful software with improved functions. Sometimes consistent (“standard”) interfaces can conflict with ease of use and

improved functionality.x

18A tie of thumb in the software indus~ is that at least one unauthorized copy exists for every authorized sale Of a computer program. Some so*m

publkhers think the number of unauthorized copies is even higher-fkom 3 to 7 for every legitimate copy sold. (Estimate by the Software Publishers

Association cited in Peter H. Uwis, “Cracking Down on Sofiware pirates,” New York Times, July 9, 1989, p. F1O.)

l!?Fstim~. of lmws V- and ~w~ of los~s may & somewh~ eve- ~a~ it is n~ cl-hat each un~~oii~ COpy displaces a Sale. ~

Software Publishers Association (SPA) estimated that PC-software producers lost about $1 billion in sales to “piracy” (defined to include both copying

forpersortal useandcopying for commercial profit) in 1986. The bus Development Corp. estimates that over half ($160 million) of the potential sales

for its bus 1-2-3 package am lost every year. Micropro International estimated that it lost $177 million in potential sales for Wordstar in 1984, compared

to $67 million in actual revenues. (Industry estimates cited in Anne W. Branscomb, “Who Owns Creativity? Ropexty Rights in the Information Age,”

!l’echnofogy Review, vol. 91, No. 4, May/June 1988.)

2%= ~mas~e Ufivmity college of Law, Cater for~ st~y of Law, &ie~, ~d Tw&Ao@y (Mil~n R. WCSd, Director), “Thc ‘StruC@,

Sequence and Organization’ and ‘Imok and Feel’ Questions,” LaST Frontier Conference Report, June 1989, pp. 8-12.

ZIIn Om Vmion, a ~fiw=-~velqmat tem reds he ~~e code of a pm~~ ~d ~tes a dmcfiption of its f~ct.ions (i.e., extraCtS the ifrom the expression). The source code may have km obtained by reverse-compiling or reverse-assembling object code. The fnt team’s functional

description is passed to a second team, which designs a new program without “contamination” from the original code.

22The recent decision in fkmito Bours, )nc. v. Thunder Crujt Bours, Inc., 109 S. Ct. 971,9 U. S.P.Q. M (BNA) 1847 (1989) hm rtised con~ovew

over the Supreme Court’s likely view of reverse engineering of computer programs (seethe articles of D. C. Td, Arthur LAne, and Allen R. Grogan

in The Compurer Lawyer, vol. 6, No.7, July 1989, pp. 14-36). Sherman et al., op. cit., footnote 3, Sec. 210.8, question the validity of a “clean room”

defense to a claim of infringement.

~Mich~l ~ex~~r, “titicism Builds Over Impact of Look-and-Feel Litigation,”Compuferworid, vol. 23, No. 18, May 1, 1989, p. 14.

24s= Jo~~~@din, $ ~~ c=~~tu= ~~WeCmsi~ency,’ co~~c~om of t& ACM, VO1. 32, No. 10, October 1989, pp. 1164-1173.
Chapter 4-Controversies Over Software Protection . 15

Academic Community

Academic research communities value free access

to and exchange of information. Academic software

and computer-science researchers and developers,

motivated by other than commercial potential (e.g.,

professional prestige, tenure, publication in scholarly journals), tend to view intellectual-property

protection somewhat differently than do commercial

developers. However, universities and their faculties

are increasingly interested in commercializing technology and obtaining revenue for use of their

intellectual property.

Many in the academic community are concerned

that what they see as “over-protection” (such as

copyright protection for “look and feel’ and patenting of software processes and algorithms) might

hamper research and long-term growth in their

fields. Some believe that the artistic expression of a

user interface should be protected, but not the way

commands are invoked at the user interface. They

believe that forcing developers to contrive meaningless variations in interfaces solely to avoid legal

entanglements will hinder software research and

development. 25

Software is used by students and educators in all

disciplines. 2b Cost, quality, and variety are important, and educational institutions face difficult problems in providing equitable student access to software (e.g., 22,000 university students may each need

access to 500 dollars’ worth of software-how

should this be accomplished?) .27 This and other

issues like ethical software use in education, are the

focus of a joint project by the EDUCOM software

initiative (EDUCOM is a nonprofit consortium of

650 colleges and universities) and ADAPSO (the

computer software and services industry association).% In contrast to major commercial software

packages, faculties in a number of disciplines

develop “small” software programs to help teach

students. The incentives to develop and use ‘small’

software differ significantly from those for commercial software, as do the means of distribution (e.g.,

over academic computer networks).29

SOME PRIVATE EFFORTS

TO SORT THINGS OUT

In March 1989, several members of the legal and

software-development communities met at an MIT

Communications Forum session on software patenting.30 The session focused on the PC-software

industry. Participants reviewed the history of software development and patentability, and stated

different views about the merits of software patents

and their effects on innovation and creativity.

In February 1989, the Arizona State University

College of Law, Center for the Study of Law,

Science, and Technology convened a group of

conferees to identify areas of agreement in the legal

academic community concerning copyright principles for computer software.31 The conferees reached

consensus on several points:

. Courts will have to adapt traditional copyright

principles to a new and different technology .32

. The phrase “structure, sequence, and organization” is unhelpful to describe expressive elements of programs. It does not distinguish

~Mex~~, op. cit., foomo~ 23. Grudin (op. cit., footnote 24) offers opposing views.

%%me students and educators may use ‘educational software’ programs, which are like books in that they convey information, albeit interactively.

They may use “professional” or “business” sofiware programs for graphics, numerical calculation (number-crunching), and word processing. They

may also use ‘discipline-specific” sofiware (often created with Federal funding) for research and problem-solving in fields like physics, mathematics,

biology, engineering, economics, geography, and architect.

~Dm Cartwri@t, Syracuse University, personal communication, Aug. 30, 1989.

2sSee for example, “Using Software: A Guide to the Ethical and Legal Use of Software for Members of the Academic Community,’ EDUCOM and

ADAPSO, 1987; and “can ‘Intellectual Property’ Be Rotected?” Change (spezial issue), May/June 1989.

%teven Gilbat EDUCOM, personal communication, Dec. 11, 1989.

%iassachusetts Institute of Technology Communications Forum, “Software Patents: A Horrible Mistake?’ (Cambridge, MA: Seminar notes, Mar.

23, 1989). The panel consisted of: Daniel Bricklin (Sofiware Garden, Inc.), Stephen D. Kahn (Weil, Gotshal & Manges), Lindsey Kiang (Digital

Equipment Corp.), Robert Merges (Boston University school of Law), Pamela Samuelson (University of Pittsburgh School of Law), R. Duff Thompson

(WordRrfect Corp.), Brian Ktthin (moderator), and Gail Kosloff (rapporteur),

31~T Fron@ co~~ Report, op. cit., foomote 20, The conferees were Donald S, Chisum (University of Washington), Rochelle Cooper

Dreyfuss (NYU), Paul Goldstein (Stanford), Robert A. Gotman (University of Rnnsylvania), Dennis S. Karjala (Arizona State University), Edmund

W. Kitch (Univesity of Virginia), Peter S. Menell (Georgetown University), Leo J. Raakind (University of Minnesota), Jerome H. Reichman (Vanderbilt

University), and Pamela SamuelSon (Emory University/University of Pittsburgh). Others from the academic and business communities attended parts

of the conference as presenters or observers.

%id., p. 2.
16 • Computer Software and Intellectual property

expressions from processes or procedures.

Moreover, computer programs are functional

works, thus technological constraints on using

them limits the scope of available protection.33

Courts have extended copyright protection

beyond the exact text of a work.34

Achieving compatibility between programs

that serve as software-to-software or hardwareto-software interfaces is a legitimate goal for

software competitors.35

Some programdevelopment practices that extract logic and use it in developing another

program do not infringe copyright.36

Copyright law provides a mechanism for protecting user interfaces, but the protection

should be limited so that, for example, aspects

that optimize in a way that has no “viable

substitute” (i.e., are functionally optimal) are

not protected.37

In other important areas, consensus was not

reached: 3g

The extent to which copyright law protects

interface aspects that are not “functionally

optimal” (see last item above).

The extent to which human factors analysis can

be relied on to determine the scope of copyright

protection.

What the optimal level of software protection

is.

If a sui generis protection regime is desirable.

ssIbid, p. 6.

341bid

351bid, p, 7,

%id., pp. 8-11. Conferees believed that iimited Copyhlg f~ pWpOSeS of exti“on and study of a program’s unprotected elements (including

dittawxmbly or ckxxnpiling to get pseudo-source wde from object code) would fall within the terms of fair use.

3TIbid, pp. 12-17.

%id, pp. 2-17.
Chapter 5

International Issues

Software is an important positive part of America’s position in international trade. A study by the

United States International Trade Commission

(ITC) estimates that in 1987 almost 40 percent of

U.S. software developers’ revenues came from

foreign sales.l Indirectly, computer software contributes to the efficiency of other businesses and

manufacturers competing in international commerce.

2

The global nature of the software industry must be

recognized when considering domestic intellectual

property protection. For example, U.S. treaty obligations under the Berne Convention, Universal Copyright Convention, and Paris Convention mean that

domestic laws will protect foreign fins, along with

domestic firms, in the U.S. markets If U.S. law

differs substantially from international norms of

copyright and patent protection, U.S. software

producers may find it difficult to have their claims

for intellectual property protection recognized in

foreign countries.

Intellectual property law is important to encourage and to protect U.S. works and inventions

internationally. The United States is attempting to

include intellectual property in the General Agreement on Tariffs and Trade (GATT) treaty and is

engaged in bilateral negotiations as well. (App. B

reviews mechanisms for international intellectualproperty protection and looks at some issues concerning international competition and trade.)

As the software industry evolves on an international scale, intellectual-property issues will continue to grow in importance. Currently, the United

States is in the forefront of software development.

However, we must be sensitive to shifts in the world

economy, such as the changes in the European

Economic Community proposed for 1992. As global

networks develop, hardware and software standards

will also become more important.

Piracy abroad can reduce the economic incentives

to invest in software development and can give rise

to diplomatic and trade problems.4 Lack of adequate

intellectual-property protection abroad makes it

more difficult to protect U.S. works and inventions

in foreign markets, while strong software protection

in the United States benefits both foreign and

domestic producers. Lack of protection might also

complicate North-South technology transfer to lessdeveloped countries (LDCS) and East-West transfer

to Eastern Europe and the People’s Republic of

China. In some of these countries, commercial

software piracy has become ingrained, making

software companies less willing to make state-ofthe-art software available.5 Many of the nations

where commercial piracy is widespread are Third

World countries, who may be trying to develop a

computer industry of their own or who cannot afford

to pay full price for software. U.S. producers,

however, lose revenues through this piracy, and may

be unable to develop legitimate markets in these

countries.

IU.S. ~t~ti~~ Trade commission, ‘The Effects of Greater Economic Integration Within the European Community on the United States,” JUIY

1989, ch. 4, p. 39.

ZAS me co~en~tornotm, “wormtiion technologies are fast becoming the raw material of the global economy. . .[n]ew information technologies

are changing the way the manufacturing sector conducts business just as radically as they are changing the character of the service industries. The

manufacturing sector is relying more and more on services as inputs, including R&D, engineering, sales, accounting, finance, and even management.”

(Clarence J. Brown, ‘The Globalization of Information Technologies,” The Washington Quarterly, winter 1988, pp. 90, 95.)

S’IIIUS, stiong U.S. laws benefit forei~ commtitors; as foreig software suppliers grow stronger, this may become more impommt. For tir

discussions of international conventions and a lengthier treatment of other international issues, see app. B.

41Vorldwi@ piracy fmcomputer software and hardware is estimated to have cost producers $4 billion in 1986 (this figure is based primtily on firms’

ownestirnates of losses). (Estimate based on a study performed by the U.S. International Trade Commission, Foreign Protection oflntellectuaf Property

Rights and the Effect on U.S. Industry and Trade, February 1988, table 4-1, p. 4-3.)

‘Ile Intemationtd Intellectual Property Alliance estimated that software piracy in 11 “problem” countries amounted to $547 million in 1988.

(International Intellectual Property Alliance, “Trade Losses Due to Piracy and Other Market Access Barriers Affecting the U.S. Copyright Industries:

A Report to the United States Trade Representative on 12 ‘Roblem Countries’,” April 1989, p. viii.)

5FW ex~ple, & ~ple’s Republic of china h= no copyright law of its own (although it is currently drafting one Witi provisions for softw~e)

and is not a member of international conventions. One study sponsored by several industry groups has estimated that software piracy in the Rople’s

Republic of China cost U.S. developers some $300 million in 1988. (international Intellectual Roperty Alliance, op. cit., footnote 4.)

–17-
Appendix A

Legal Protection for Computer Software

Computer software can be protected under copyright

patent or trade secret law, or under some combination of

these. This appendix briefly reviews these forms of

protection, with emphasis on applications to computer

software.

A related, sui generis, form of protection for semiconductorchip mask designs is provided via the Semiconductor Chip Protection Act of 1984.1 The Act protects the

designs of the mask works used to lay out integrated

circuit designs in semiconductor chips.2

Copyright

The current copyright law is enacted in the Copyright

Act of 1976, as amended (Title 17 U. S.C., ch. 1-8,90 Stat.

2541). A 1980 amendment made explicit provisions for

computer programs as (literary) works of authorship

(Public Law %-517, 94 Stat. 3-15, 3028). Copyright

protects “original works of authorship” from unauthorized uses including reproduction (copying), making

derivative works (adaptation), public distribution, public

performance, and display.3 Generally, the term of copyright for new works is the life of the author plus 50 years,

or 75 years for works made for hire (e.g., by art employee

of a firrn).4

Copyright has been the form of software protection

favored by most nations (see app. B). Obtaining a

copyright is easy, inexpensive, and quick compared to the

requirements for obtaining a patent (see next section on

patents). Since copyright is administered under Federal

law, unlike trade secret protection, it is uniform in all the

States. The duration of copyright protection is very long,

compared to the expected economic or technical lifetimes

of computer programs.

The doctrine of fair use is one of several statutory

limitations on copyright holders’ exclusive rights. Under

this doctrine, certain unauthorized uses, such as copying

for the purposes of teaching, scholarship, or research, may

be considered “fair use:’ not copyright infringements.

Whether an instance of copying is a fair use instead of an

infringement is determined by the courts, taking four

statutory criteria into account: 1) the purpose and

character of the use, 2) the nature of the copyrighted work,

3) the amount and substantiality of the portion used in

relation to the work as a whole, and 4) the effect of the use

on the potential value of or market for the work.5

Another statutory limitation on the rights of software

copyright holders is given by section 117 of the copyright

law, added in the 1980 amendment:

. . . it is not an infringement for the owner of a copy

of a computer program to make or authorize the

making of another copy or adaptation of that

computer program provided:

1.

2.

This

that such new copy or adaptation is created as an

essential step in the utilization of the computer

program in conjunction with a machine and that

it is used in no other reamer, or

that such new copy or adaptation is for archival

Purposes Only and that all archival copies are

destroyed in the event that continued possession

of the computer program should cease to be

rightful.

limitation clarifies the right of a user who legitimately owns a software product to make “backup” copies

of the software to protect against damage or loss, to load

the software onto the hard disk of a computer for easier or

more efficient use, and to make adaptations if necessary

to make the program usable on a computer (e.g.,

compiling it, inserting default formats or directory paths,

l~blic Law 98-62(1,98 Stat. 3347,3356.

2* Cq H. s~m, ~ish R. Sadimn, ~ Marc D. G~n, co~~r So@are Protectin ~(washingt~, DC: The Bureau of National

Affairs, Inc., 1989), part 300. Rotection for an original mask work extends for 10 years from the time it is registered; the duration takes into account

the relatively short useful econcxnic life of a particular chip. The Act was developed in a period when chip design and mask-work production was a very

labor-intensive and time-consuming step in chip manufacture, so that protection from copying of the mask work confemcd a significant competitive

advantage. The Act does not provide protection for the underlying iti or against indepmdent creation, reverse engineering, or instances where the

design was not copied. Patent protection also applies to chips, but patents require public disclosure of the invention. Also, the layout of a chip will rarely

satisfy the levels of novelty and nonobviousness required by patent law, which protects invention, not effoxt.

3An “original work” is one that does not have the same expression as a preexisting work; an identical, but independently created, wodt is not a

copyright infringement. (The “originality neceasiuy to support a copyright merely calls for independent creation, not novelty.” Melvin B. Nimmer,

N“unmer on Copyright (New York, NY: Matthew Bender, 1982), vol. 1, sec. 201(A), cited in U.S. Congress, Of& of Technology Assessment,

Intellectual Property Rights in an Age qfElectronics and Iqfo rmation (Melbourne, FL: Kreiger Publishing Co., April 1986), OTA-CIT-302, ch. 3,

foomote 10.) chapter 3 of the 1986 report discusses intellectual property concepts.

A “derivative work” is a work based on one or more preexisting works, such as a translation, abridgement, condensation, etc. (Copyright Act, sec.

101).

4S= cw~~t ~L ~. 302. ~f~rdiscuionofu<so copyright law, see U.S. Congress, Office of Technology Assessment, CoPYri8~a~Ho~

Copying: Technology Ckzilenges the fuw, OTA-CIT-422 (Washington, DC: U.S. Government Printing Office, October 1989), ch. 3.

S@@@t Act of 1976, cho 1, sec. 107. Compu@ softwm can PRSfXIt Some pafdCdSr prObkIW h aSsCSsing what is “fair u=.” For e~ple* a

ccxnpetitor who de-compiles a copyrighted object+ode program in order to study the unprotected ideas it embodies will necessarily make a “copy” of

the entire program (see app. A, foomote 7).

-19-
20 . Computer Software and Intellectual Property

etc.). It does not permit making and distributing multiple

copies for school or office use.

Copyright does not confer rights over ideas-only the

expression of an idea is protected, not the underlying idea

itself. 6 A copyright holder (e.g., a software developer)

might consider this to be a disadvantage, because his

copyright will not preclude a competitor from creating a

new work embodying the same idea, so long as the

competitor does not incorporate copyrighted expression

from the first program into the second program. For

software, copyright may also allow “clean room” reverseengineering practices.7 In this type of reverse engineering,

one team of software developers studies the code of a

copyrighted program to extract the underlying functionality (ideas). A second team (who has never had access to

the copyrighted code) then creates a new program, based

on the first team’s functional specifications. For some

computer software, writing the code may be relatively

trivial, so that the true innovation and market advantage

lie in the program’s logical structure or in its interfaces.

The extent to which these are protectable expression, as

opposed to uncopyrightable ideas, is the focus of the latest

round of court cases.

Disputes Over Copyrightability

There has been considerable disagreement over what

features of a computer program are (or should be)

copyrightable. The distinction between idea and expression can be very tricky to make, even for some traditional

literary works like books and plays. For software, which

is intrinsically functional, idea and expression are closely

interwoven, even in theory. In practice, it is extremely

difficult to separate which elements of a program are the

expression and which are the underlying idea.8 There is

substantial disagreement among legal scholars and among

software developers and computer scientists as to whether

copyright should protect only against literal or near-literal

copying (e.g., mechanical translations, paraphrasing, and

disguised copying), or should also protect a program’s

structure, sequence, and organization and user interfaces

(including “look and feel”) as well.9 For example, some

in the computer and legal professions believe that a

program’s “look and feel” should not be protected by

copyright instead, these individuals think that protection

for "look and feel” is better suited to a patent framework.10

Others, however, are critical of patent protection for

computer processes in programs.ll

Many in the computer and legal professions believe

that “traditional rules of copyright law adapt very

comfortably” to new forms of expression like computer

latest programs.12These individuals believe that there is

considerable room for expression in even detailed aspects

of a program like its design, logic, structure, and flow,13

and that the courts can be and generally have been

successful in adapting traditional copyright principles to

software-infringement cases, even those involving ideav.-expression or structure, sequence, and organization

questions. 14 Therefore, they think that copyright is

viable—and vital-as a vehicle for protecting computer

~’kno case doescopyrightprotection foranoriginal work of authorship extend to any idea proce!dure, process, system, method of o-on, ~n@Pt*

principle, or discovery, regardless of the form in which it is descriw explained, illustrated, or embodied in snxh work.” (Copyright Act of 1976, ch.

1, sec. la(b).)

T-~&ci~ has found copying for the puxpose of reverse engineering to be sanctioned by section 117 of * copyright AcL (V~V. Q~~

655 F.Supp. 750, E.D. LA. (1987), affkned, 847 F.2d 255 (1988), cited by Brian Kahin, personal COmlnUniCiltiOll, Dec. 1, 1989).

S~rexmple, ~~i.sion ~ w~~n~~o~. /w. v. J~~ ~e~~rato~~s, ~w. (797 F.~ 1222 (3rd Cir. 1%6), ~.dati, 107 S. ct. 877,

1987) held that the underlying puxpose of a program is its “id-” and everything else is expmasion, given that more than one way to achieve the purpose

is possible. Under this interpretation, virtuaUy any elements of the program’s structure, sequence, or organization would be considered copyrightable.

By con- the decision in Pb”w Cotton coop. Assoc. v. Goodpustnre Co~urer Service, Inc. (807 F.2nd 1256 (5th Cir.), cert. denied, 108 S, Ct. 80,

1987) held that only line-by-line program design or literal code were protectable. (David C. Godbey, “Comment: hgal Documents As A Metaphor for

Computer Programs in Copyright Anaiysis-A Critique of Whek,m and Pkins CortonJ’ The Compucer Lavyer, vol. 6, No. 8, August 1989, pp. 1-10.)

9Recent court decisions have varied in determining the extent to which program structure, sequence, and organization should be protected by

copyright.

The term “look and feel” originated in an article that focused attention on software user interfaces (Jack Russo and Douglas K. Derwin, “Copyright

in the ‘Imok and Feel’ of Computer Software,” The Computer Luwyer, vol. 2, No. 2, February 1985). There is no statutory orcase-lawdefmition, although

a kindred phrase, “total concept and feel, ’’has been adopted by appellate courts, (Pamela Samuelson, “Why the Look and Feel of Software User Interfaces

Should Not Be Protected By Copyright Law;’ Communicurions of the ACIU, VO1. 32, No. 5, May 1989, pp. 563-572.)

l~e~~ent is ~~ ‘~l~ ~f=l” is mom id-~ Wxept th~ expession.~ ~~ c=, howev~, ~ ~v~on hat did not m-t a novel

and nonobvious advance over prior work would not be patentable (see seaion on patents). Thus, most user-interface improvements would not be

protected under either patent or copyright if “look and feel” is not accepted by the wmrta. See: “Computer Scientists Protest Software Litigation:’

Internatwnai Computer Luw Adviser, June 1989, p. 22; and Pamela SamuelSon, ibid.

llFor exmple, see Brian Kahin, “’Ilie Impact of Software Patents,” Educom Review, winter 1989. PP. 28-31.

12For adiscusim of ~~ition ~d a ~~t~ of ~Ping views, ~~thony L. c-,p~ck Lynch ~W R, s~in~g, “silicon Epics ~

Binary Bards,” UCfA L.uw Review, vol. 34, June-August 1987, pp. 1493-1594 (seep. 1501).

Is% ~Ws et al., ibid., PP. 1549-1558.

ld~ cla~set~., ibid., especially pp. 1546-1554 ~d 1575-1584. % ~SO ~David Goldberg and John F. Burleigh, “Copyright Rotection for

Computer Programs: Is the Sky Falling?” AIPfA Quur@rfy Journal, vol. 17, No. 3, 1989. pp. 2%-297. Goidberg and Budeigh argue that even if not

all court cases have been cmrect or clearly articulated, the same is true ofpatent cases forsoftware-related inventions and would be true for any sui generis

forms of protection (ibid., p. 2%).
Appendix legal Protection for Computer Software •21

software, and that arguments for hybrid or sui generis

protections are based on faulty premises.15

Before the current copyright law (and 1980 amendment), there was considerable disagreement as to whether

programs could be copyrighted as writings and, if so, what

forms of computer software were copyrightable-e.g.,

whether only the higher-level-language (or “source”)

code could be copyrighted, as opposed to code in

assembly language or machine language (the “object”

code). Some arguments-which may have distracted

attention from more fundamental issues—were based on

the presumed inability of humans to read lower level

languages or binary object code; according to this

rationale, only higher level languages expressed “writings” (for human readers) eligible for copyright protection. 16 These arguments were misguided because human

programmers can and do read programs, albeit with more

difficulty, in assembly language and machine language.17

The 1980 amendment with reference to programs as

statements used “directly or indirectly” in a computer

(sec. 101) and “adaptations” for purpose of use in a

computer (sec. 117), as well as the explicit 1976

provisions for works that can be perceived/reproduced/

communicated “either directly or with the aid of a

machine or device” (sec. 101), resolved much of this

confusion. Court cases have held that computer programs source code, object code, microcode,18 flow

charts, and audiovisual screen displays-are protected.19

Patent

A patent protects an invention, including application of

the underlying idea, from copying and from independent

creation for a period of 17 years. It protects against literal

infringement (making, using, or selling the claimed

invention) and also against infringement by equivalent

inventions, whether or not the infringing inventor had

prior knowledge of the patented invention. The statutory

subject matter of a patent is limited to a process, machine,

article of manufacture, or composition of matter that is

novel, nonobvious, and useful, or to new and useful

improvements to these classes of patentable subject

matter.

The requirements for a patentable invention are

relatively stringent; patents don’t reward hard work per

se. The patent requirements for novelty and nonobviousness are a finer screen than the “originality” criterion of

copyright. (All “original” software is eligible for copyright, as with any other statutory work of authorship, and

copyright inheres in a work as soon as it is created.)

Although patents are being granted for software-related

inventions, 20 only a small fraction of software is likely to

contain a computer process meeting the tests of novelty

and nonobviousness.21

15w clw et ~o, op. cit., fmok 12, eswi~ly pp. 1501-1505, 1548-1561, and 1583-84. See also Goldberg and Burleigh. ibid.> PP. 317-322.

l~e de that a work must be re~le by a human tiience had its origins in White-Sm”th Music Publishing CO. V. J@OLfO MUSLC CO., 2W Us. 1

(1908) which ruled that player piano rolls could not be copyrighted. For a discussion of the readability requirement see “Copyright Protection of

Computer Rogram Object Code, ’’Harvard Law Review, vol. 96, May 1983, pp. 1723-1744., Christopher M. Mislow, “Computer Microcode: Testing

the Limits of Software Copyrightability,” Boston University h Review, vol. 65, July 1985, pp. 733-805., and the dissent of Commissioner Hersey in

the National Commission on New Technological Uses of Copyrighted Works (CONTU), Final Report, July 31, 1978.

17A ~~e pmgr~ is tie progr~ as titten by the programmer. Writing in lower-level languages like assembly language Cm be tediOUS, so

programmers usually use a higher-level language like Fortran. For example, a Fortran instruction to add an input “V” to a variable “SPEED” would be

SPEED = SPEED+ V. A Fortran program must be compiled before it is executed by the computer; the compiler translates each Fortran instruction into

many bin~ machine-language instructions.

Similarly, a program written in assembly language must be assembled before it is executed. An assembly-language program generally consists of

symbolic statements, each one of which cormponds to one basic operation of the computer. For example, to add “V” to “SPEED” would require

statements like LD RO$PEED (load SPEED into Register O), LD RI,V (load V into Register 1), AD ROJU (add contents of Register 1 to Register O).

Assembly-language programs can’t be directly understood by the computer, so an assembler has to translate them into machine language.

In the 1950s-1960s, computer programs were usually entered in the computer in the form of punched cards. As this “source” deck was keypunched,

the 80 characters of code on each card were printed at the top for verification and debugging purposes. When the program was compiled, the resulting

“object” deck contained only punched holes. This may have contributed to the assumption that object-code programs could not be read by humans.

18Mcmfi govms & ~r~on of the computer within one cycle of the computer’s internal clock; it is part of the computers oper~~g sYstem.

@W@~ility of mic~e WM upheld in NEC COT. V. htei Cop. (645 F. Supp. 590 (N.D. Cal. 1986) vacated, 835 F.2d 1546 (9th Cir. 1988).

lgshennan et al., op. cit., footnote 2, sees. 203.5(c)-203.7(c).

W the United States, certain types of computer-implemented processes and algorithms can be patented. The Supreme Court has not ruled on whether

computer programs per se are patentable subject matter, but has Nled that computer-implemented algorithms that are deemed “mathematical algorithms”

per se are not statutory subject matter. Federal courts have thus held that a computer processor algorithm is statutory subject matter unless it falls within

a judicially detcmnined exception like the one for’’mathematicat algorithms” per se. (See U.S. Patent and Trademark Office, “Patentable Subject Matter:

Mathematical Algorithms and Computer Rograms,” 1106 O.G. 4, Sept. 5, 1989).

In this paper, OTA sometimes uses phrases like “patents for softwaremlated inventions,”” software-related patertts,” or “patenting algorithms” to refer

~erally to patent protection for computer-implemented processes and algorithms. The U.S. Patent and Trademark Office (pTO) considers terms like

“software patents” to be a misnomer because they may be interpreted to mean that a computer program per se (i.e., the sequence of coded instructions

itself) is patentable, as opposed to the underlying computer process it carries out. (M. Keplinger, G. Goldberg, and L. Skillington, PT’0, comments on

-paper, Dec. 18, 1989, pp. 1-2.)

zl~wtim~~~ World b~Il=m~ ~rty Organization pla=~ fractional 1 percent. (Cited in I.ngrid M. Arckens, “Obtaining Intmnadonrd

~M@p@~~~ for ~fiw~: N~~ Laws ~d kternational Copyright Conventions,” Federal Communi catio?u Law Journai, vol. 38, August

9. .
22 . Computer Software and Intellectual Property

An advantage of patent protection for the discoverer of

a software-related invention is that the patent will protect

all the claims for the invention, taken as a whole. (Many

of these processes would likely not be protectable under

copyright because they would be considered part of the

unprotected “idea.”) A single computer program may

consist of a number of patentable processes and algorithms. At the same time, the claimed invention might be

executed by a number of copyrighted programs. Depending on how carefully claims are constructed, the computational logic and processes-even the algorithm itself—

Carl be protected.

The United States Patent and Trademark office (PTO)

issues patents on inventions that are determined to meet

statutory requirements (see above), the first of which is

statutory subject matter. Because of the judicially created

exception for “mathematical” algorithms (see footnote

20), computer processes that are solely “mathematical”

algorithms- "mathematical” algorithms per se—are not

considered to be statutory subject matter. However,

software-related inventions claiming a new or improved

process (which can include an algorithm, perhaps even a

“mathematical” one) can be statutory subject matter if the

patent claims excluding the “mathematical” algorithm are

otherwise statutory. Therefore, they can be patented if the

other requirements of novelty and nonobviousness are

m e t

z

From the viewpoint of the software industry and

society as a whole, some unattractive elements of patents

for software-related inventions are procedural, and have

to do with the “prior art” and patent searches. The prior art

is the body of publicly known technical information

against which the patentability of an invention is evaluated. Even if a discovery is “novel” compared to the prior

art it must also be “nonobvious.” This means that if the

“differences between the subject matter sought to be

patented and the prior art are such that the subject matter

as a whole would have been obvious at the time the

invention was made to a person having ordinary skill in

the art,’ then the invention is not patentable.23

In principle, prior art consists of inventions previously

known, sold, or used, including those described in othe

patents and published articles (see 35 U.S.C. 102). I

practice, prior art is most often previously issued patents

Because the bulk of software continues to be protected b

copyright and/or trade secret because much of the histor

of software development is not in the published literature

and because relatively few patents for software-related

inventions were granted prior to the 1980~ the availabl

and locatable prior art is less complete and relatively mor

difficult to compile or search than the prior art for other

technical fields. PTO classifies patents for softwarerelated inventions according to the field of the proces

chimed, making it difficult to find or track patents for

computer-program processes.~ Also, nonpatent prior a

for software-related inventions is often in nonwritten

form, existing only as software products. Thus, there i

more risk that invalid patents may issue for widely know

or “obvious” computer-program processes.

Patents under examination are not disclosed, so a

competitor may put considerable effort into developing a

program that unknowingly duplicates computer processes

for which one or more patents are pending. The problem

of timing and product life cycles is not unique to the

computer and software industries, but it is especially

troublesome in industries as fast-paced as these. Finally,

the process of getting a patent is expensive and lengthy,

compared to copyright or trade secret protection. Although turnaround time in PTO is decreasing, a patent still

may take years to issue in an industry where products have

short economic lifetimes. Enforcement can be difficult

and time-consuming, and litigation for infringement runs

the risk of finding one’s patent invalid.

Problems With Terms and Models

Use of the term “algorithm”25 has been subject to

controversy, largely because computer scientists, lawyers, and the courts have used different definitions of

computer-related terms and different models of how

“programming” is done. Often, the legal definitions or

22The Supreme Court has not ruled as to whether computer programs per se constitute patentable subject matter. Currently, PTO patent examiners

carry out a two-part test for mathematical-algorithm statutory subject matter; the test is intended to be consistent witb legislative history and case-law.

For examination purposes, “mathematical algorithms” are considered to refer to “methods of calculation, mathematical formulas, and mathematical

procedures generally,” and no distinction is made between man-made mathematical algorithms and mathematical algorithms representing discoveries

of scientific principles and laws of nature (which have never been statutory subject matter). For a process claim involving a mathematical algorithm to

be patentable, the claim excluding the algorithm is required to be statutory subject matter-i.e., the claim must be for a process, machine, etc. Trivial

post-solution activity like displaying a number is not sufficient. (Patentable Subject Matter: Mathematical Algorithms and Computer ProgramsJ’ 1106

0.G.4, Sept. 5, 1989; also cmtindtiPmmProtection$or ComputerSo@are: The New Sufeguurd, Michael S. Keplinger and Ronald S. Laurie, (eds.)

(Englewood Cliffs, NJ: Prentice Hall Law and Business, 1989), pp. 942.)

~35 U.S.C. S=tion 103. S= IW@ KS~OII, Kuyton on pure~ (Washington, DC: Patent Resources Institute, Inc., 1983), ch. 5.

~PTO categorizes ptits by some 350 classes, each with some 350 subclasses; classification is done accordhtg to Stitmal el~. Many

software-related patents are chssifkl in classes 364,235, and 340, but not ail patents in these classes are sotlware-related. PTO places patents drawn

solely to computer processes that are not classifiable in other areas of technology in Class 340, Subclass 300. (M. Keplinger, G. Goldberg, and L.

Skillington, FTO, comments on draft paper, Dec. 18,1989, p. 4)

fiA common definition of the term ufgorithm is: “a set of ruks which specify a sequence of actions to be taken to solve a problem [or carry out a

FOCCSSI. fich we is w=iscIY ~d biwuly Afmti so that in @cipk it can be carried out by machine.” (Chambers Science and Technology

Dictionary, Peter M. B. Walker (cd) (New York, NY: W & R Chambcm, Ltd., 1988), p. 23.)
Appendix A-Legal Protection for Computer Software ● 23

interpretations have been inexact or at odds with common

use of the terms by mathematicians, computer scientists

and programmers. Thus, legal battles have included

arguments over distinctions between “mathematical” and

“nonmathematical” algorithms, mathematical algorithms

and “numerical” equations, equations and “laws of

nature” or “basic truths,” algorithms and “mental steps,”

etc.26

While algorithms may be numerical or non-numerical,

algorithms are all “mathematical” constructs. Therefore,

making distinctions between mathematical and nonmathematical algorithms, or even between algorithms and

computer programs, is problematic for the long term.27

Moreover, while a particular algorithm may describe a

new or improved method of carrying out an operation

(like a Fourier transform), or even the most computationally efficient, it may not describe the only method.

Trade Secret

Trade secret law protects the owners of certain information against its misappropriation. Others, who have not

obtained the information by improper means, are free to

use the information and associated ideas. Unlike copyright or patent, there is no limitation on its duration. Trade

secret has been the traditional favorite form of protection

for mainamframe and minicomputer software. From the

viewpoint of a software developer, the advantages to trade

secret are that it protects a program’s underlying ideas,

logic, and structure, not just expression (as in copyright).

It avoids formalities of registration or application and

lengthy waits for protection. Enforcement is relatively

clear-cut and injunctions or compensatory relief is

available for those who can prove misappropriation of

trade secrets.

On the other hand, trade secret protection doesn’t

protect against independent creation, reverse engineering,

or accidental disclosure of the secret. Also, it can be costly

or impossible to maintain secrecy, and the lack of

uniformity in State and national laws can be frustrating.

In the United States, trade secrets are protected by

individual State laws, although there is a Uniform Trade

Secrets Act enacted in many States with minor variations.

(Although most developed nations have some form of

protection for confidential business information, most

foreign nations outside of Western Europe do not have

trade secret laws per se.) However, much of what trade

secret law does can be accomplished by contract and by

enforcing licensing terms against disclosure.

When software is protected by trade secret it maintains

that status so long as it is not publicly disclosed. For

society, this can lead to a lack of knowledge about the

state-of-the-art. x In turn, this can adversely affect prior

art for patent examinations and lead to “reinventing the

wheel” rather than building on (or around) prior advances.

Maintaining Software as a Trade Secret

For software (or anything) to be protected as a trade

secret, it must not be generally known to a competitor,

there must bean effort to maintain its “secrecy,” and those

to whom the secret is disclosed must have a duty not to

mistreat the information. However, if they do and a third

party gets hold of it, then in many jurisdictions, the third

party has no duty to respect the trade secret.

Trade secret protection became popular long before the

wide proliferation of personal computers (PCs). Markets

(for mainframe and minicomputer software) were smaller

then, and much software was custom-developed for

particular clients or small market niches.

Some parts of the software market still work like this.

In these types of markets, trade secret software has

relatively limited exposure, usually to users with contractual obligations to the developer. Often, software is

delivered to the client in a lower-level language like

machine code (sometimes called object code), with

contractual agreements prohibiting the client from reverse-compiling it to yield equivalent code in a more

easily analyzed, higher-level language like Fortran.29

26F~~ ~me, ~= ~w ~-e~e~ ~a~ he tem “m~ematic~ ~gori~” M synonymous with a “m~hematicd formula” such ss sin(2a) =

2(sin(a)cos(a)) or a “law of nature” such as E = (mass) (speed of light squared). (For discussions see: Donald S. Chisum, “The Patentability of

Algorithms,” University of Pittsburgh Luw Review, vol. 47, No. 4, summer 1986, pp. 959-992; and Supreme Court cases Gottschalk v. Benson, 409 U.S.

63 (1972), Purker v. FZook, 437 U.S. 584 (1978), and Diumond v. Diehr, 450 U.S. 381 (1981 ).)

~ForaWmp~scimtist’ swFtive on leg~ Cmfusionsmsulting from ~s~~lemodelsfor ~gori~s ~dcompu~rprogr~s,s Allen Newell,

“TM Models Are Broken, The Models Are Broken!” University of Pittsburgh Luw Review, vol. 47, No. 4, summer 1986, pp. 1023-1035.

Some think that new and useful algorithms, including “mathematical” algorithms should constitute subject matter eligible for patent protection (see

Donald S. Chisum, ibid., pp. 959-1022.)

A recent decision by the Court of Appeals for the Federal Circuit (In re hvuhashi, et al., CAFC 89-1019, decided Nov. 7, 1989) reversed PTO’S

rejection of a patent application in which the algorithm constituted the bulk of the invention. Some observers consider that this decision, which limited

patent protection for the algorithm only to ita use in the particular apparatus described in the claims, will further ease the way for patent protection for

algorithms. (See Edmund L. Andrews, “Patents: Algorithm Ruling May Aid Software,” The New York Times, Nov. 11,1989, business section, p. 36.)

2SBY ~nw, Ptit ~~fi ~~u~ in exc~ge for fil diScIm~ of the p~entee’s “beat method” of practicing the invention. But ~me comider

that in practice claims are sometimes so broad that they don’t really show the state-of-the-art (B. Kahin, personal communication, Dec. 1, 1989),

2gAb~t con~m~ agreements, trade seaet does not protect against reverse engineering.

%e Copyright Offkx has special release provisions for deposit of software with trade secrets. Depositors may use object code, remove trade-secret

pare% etc.
24 . Computer Software and Intellectual Property

PC software, by contrast is mass-marketed to hundreds The shrink-wrap license may contain language and terms

of thousands of customers.30 To help maintain trade- that purport to create a duty by the user to maintain the

secret status, PC software is often published in object code trade-secret information, but some question whether this

and distributed with a “shrink-wrap” license, which every would stand up in court.31

purchaser is supposed to agree to on opening the package.

Whe Copyright Offke has special release provisions for&posit of soflwam with trwk secrets. Depositors may use object code, remove trade-secret

parts, etc.

31- mew. B--b, “who ~c~~ty?” Tec~@y ~evi~, ~y/Ju lgg& p. As., ~~ ~SO shma et d., Of). Cit., f~ 2, a.

309.4(g). Anne Branscomb believes that statutory clarification is needed for the status of trade secrets within copyrighted works (Anne W. Branscmb,

-co-tmka@h Dec. 8, 1989).
Appendix B

International Protection for Computer Software

Intellectual-property issues are of growing international concern. Problems like commercial piracyl that

occur in domestic markets have international counterparts. The United States currently enjoys a strong

competitive position in international software markets,

and appropriate intellectual-property protections and

enforcement can help maintain our position and reduce

piracy.

With an emphasis on software protections, this appendix briefly reviews existing multilateral and bilateral

treaties that help protect the intellectual property of a U.S.

national via copyright and patent.2

international Conventions and Treaties

Copyright is the predominant form of software protection in the United States and abroad. In most countries,

computer programs per se are not in principle eligible for

patent protection (although interpretations of these policies vary in practice among the various patent offices and

courts). However, in some countries (including the United

States) certain types of computer-implemented processes

and algorithms can be patented.3

Copyright and patent protections abroad are substantially similar in form to those in the United States, and

have most of the same advantages and liabilities. Sui

generis protection for software has been proposed but has

not had much of an international impact thus far.4

Copyright

Copyright protection abroad is provided for U.S.

nationals principally through the Berne Convention and

the Universal Copyright Convention.5 The United States

formally joined the Berne Convention in March 1989.

The treaty was first established in 1886 and is the primary

multilateral agreement in the world dealing with copyright. It is administered by the World Intellectual Property

Organization (WIPO), an agency of the United Nations.

Berne’s fundamental principle of “national treatment”

requires each member nation to provide the same

protection to works of nationals of other member nations

as it does to works of its own nationals. Berne requires

that a nation provide certain minimum rights in order to

join the convention, including moral rights for the author6

and automatic protection, thus eliminating the former

l$4pir~y”h~ ~~fj~ ~ ctie ~~wtjon and ~e of copfight material without the consent of author or publisher;’ by Publishers Association

andthe httemationall%kmtionof l%onogram and Videograrn Producers on Behalfofthe U.K. Anti-Piracy Group, 1986, cited in Mark L. Damschmeder,

“IntelleetualPmperty Rights andtheGAT1’: United States Goals inthe Uruguay Round,” VmderbihJottrna/ of Transnurwnal L.aw, vol. 22, No. 2,1988,

p. 368, footnote 1.

In this paper, OTAuaesthe term “piracy”to mean unauthorized commercial reproduction and sale, not unauthorized private (noncommercial) copying.

(For adiscussionofthe legal status of private copying, see U.S. Congress, Office of Technology Assessment, Copyright andHome Copying: Technology

Challenges the Law, OTA-CIT422 (Washington, DC: U.S. Government Printing Office, October 1989), ch. 3.)

-y a few countries have extensive trade secret laws.

3W Su-e CO~ h= not ruled on Whetir computer programs per se are patentable subject matter, but has ruled that computer-implemented

algorithms that are deemed “mathematical algorithms” per se are not statutory subject matter. Courts have thus held that a computer process or algorithm

is statutory subject matter unless it falls within a judicially determined exception like the one for “mathematical algorithms” per se. U.S. Patent and

Trademark Office (PTO)examiners use atwo-parttestto decide whether patent claims containing ’’mathematical algorithms” are statutory subject matter.

(U.S. Patent and Trademark Office, “Patentable Subject Matter: Mathematical Algorithms and Computer Programs,” 1106 O.G. 4, Sept. 5, 1989).

Inthispaper, OTAsometimes uses phrases like “patents for software-related inventions,““software-related patents,” or “patenting algorithms” to refer

generally to patent protection for computer-implemented processes and algorithms. The PTO considers terms like “software patents” to be a misnomer

because they may be interpreted to mean that a computer program per se (i.e., the sequence of coded instructions itself) is patentable, as opposed to the

underlying cumputer process it carries out. (M. Kephnger, G. Goldberg, and L. Skillington, PTO, comments on draft paper, Dec. 18, 1989, pp. 1-2.)

gm World ~til~t~ PrOptmy org~~on (WIPG) proposed sui generis Mcxkl Provisions on the ROtection of Computer Software providing

a mixture of patent and copyright protection. The model provisions were not based on the principle of national protection, instead giving computer

software explicit and absolute rights and protection in all signatmy nations. Intended as a guideline for national legislatures, the model provisions have

W been adopted.

5whi}e cW@@t-~ extend simil~ ~twtion in most co~~es, ~e~ ~n~o~ differ~es. ~ West Germ~y, for example, compllt~ ~

eoasidered a functional work and must meet a relatively high standard of “originality.” One e “stunate suggests that 90 percent of programs will fail to

meet that standard. (From the lnkusso case, cited by Ian A. Staines, “An Assessment of the European Commission’s Proposal for a Council Directive

on the bgal Rotection of Computer programs,” The Computer Luwyer, vol. 6, No. 9, September 1989, p. 21.)

6MOMI @ts‘C= ~~e fmrn the eccmomic rights of the author and concern what are usually called rights of paternity and integrity. The right of

-V is* right to k n- as author of a work the right of integrity is the right to object to distortion, other alteration of a work, or derogatory

actton prejudicial to the author’s honor or reputation in relation to a work. Micle 6bis of the [Beme] convention provides that authors shall have the

rights of paternity and integrity. Congress concluded that present law, including unfair competition law and State and common law protection [such as

libel, defamation, or misrepresentation], provides sufficient moral rights to fulfill the obligations of the Beme Convention. Therefore, it is not necessary

for the implementatlo. n act to include additional moral rights.” (U.S. Copyright Office, Circular 93a: The United States Joins the Berne Union, February

1989, p. 3.)

Under the Constitution, the United States does not accept a “natural right” theory of copyright giving inherent moral rights to the fruits of one’s own

labm. ‘Ihe United States has Wcally considered economic incentives for creativity as the basis for copyright protection.

-2s-
26 ● Computer Software and Intellectual Property

U.S. requirements for formal notice and registration.7 The

latter two provisions were perceived as substantial

barriers to entry by the United States.

The United States is also a member of the UniversaI

Copyright Convention (UCC), which was established and

adopted by the United States in 1955. It is administered

by the United Nations Educational, Scientific, and

Cultural organization (UNESCO), an agency of the

United Nations. The United States withdrew from

UNESCO in 1984 but adheres to the Convention.8 UCC

is also based on the principle of national treatment but it

provides less protection than the Berne Convention and

has lower minimum standards. In nations that agree to

both Berne and UCC, Berne takes precedence.

The Berne Convention is recognized in 79 nations,

which gives U.S. nationals protection in 24 countries

where there was no previous copyright agreement.9 The

United States has bilateral copyright agreements with 33

nations as well, often in addition to common Berne or

UCC membership.10 Japan, the members of the European

Community (EC), Australia and Canada are members of

both conventions, while the Soviet Union is a member of

the UCC only.ll While this leaves a large number of

nations in which U.S. works are not protected, the

geographic scope of copyright protection is broad. The

procedures are simple: once copyright exists for a work in

a member nation, it applies in all other signatory nations,

according to their own laws. Computer programs are not

specifically mentioned in either convention, but are

commonly agreed to be included.12

Patent

Securing patent protection in foreign countries is a

much more difficult process than obtaining a copyright.

Patents for any invention are difficult to obtain, due to the

rigorous standards of novelty and nonobviousness. A

patent must be applied for in each country where it is to

be valid-there is no universal patent process.13 This

results in expenditures of time, money, and expert help

needed for dealing with differences in languages and

requirements.

In most countries software per se is not considered

patentable. In many countries (including the United

States) patents can be obtained for computerimplemented processes and algorithms (see footnote 3).

In some nations (including Canada the USSR, and

members of the European Economic community) a

patent will not be granted if the novel step is the computer

program itself, although in these countries merely having

a computer program as part of the invention need not

automatically disqualify it from patent consideration.14

The United States is a member of the oldest and most

extensive patent treaty, the Paris Convention established

in 1883. This Convention is based on “national treatment,” where both domestics and foreigners are accorded

the same treatment. However, there is no requirement that

software-related inventions be considered patentable.

Other conventions exist that make international patent

protection more convenient, although still not easy.

Through the European Patent Convention (EPC), a single

application for a patent is valid in up to 11 Western

European member nations. The patentee must pay an

extra fee for each country included, but only goes through

a single application and examination. The EPC does not,

however, provide uniform protection; a patent is subject

to the existing laws in each of the member countries. A

second convention is the Patent Cooperation Treaty,

which provides for: 1) an international search report for

prior art, 2) a preliminary examination report for some

countries, and 3) the option to delay applying for a foreign

7The Berne Convention Implementation Act has repealed the mandatory copyright notice requirement (thencircled “c,” w, Md me of ~

@pfi@t OW@ ad e~~~ed ~~u~m~t to mgist~ a WOk at the Cop@@t Offkx. AMMMgh foreign authors need not register, them are

si~lcant incentives for a U.S. citizen to register because for them registration is a precondition for a copyright lawsuit award for attorney’s feea, and

statutory damages. (U.S. Copyright (Mice, Circular 93a, op. cit., footnote 6, p. 3.)

~ United States is active on an intergovernmental committee for the UCC and also contributes to and supports the copyright-related activities of

UNESCO.

9 Fi~ fi& U.S. copyright Office, Circular 93: Highlights of U.S. AdMWMX to the Beme Convention, April 1989, and Circular93a, op cit.,

footnote 6. Additional members may have joined since these circulars were publiskl.

1~.s. cw~~t ~lu, C~~m 38a: ~ternation~ Copyright Relations of the Uni~d SES, JulY 1989.

111’bid.

12~, for exmple, In@ M. Arckens, “Ob~ning bternationd Copyright ~tection for software: National hlWS and hmxnational Copyright

Conventions,” Fe&ral Communi cutions Law Journal, vol. 38, August 1986, pp. 283-300. Max W. Laun, “Improving the International Framework for

the Protection of Computer Softwiue,” University of Pittsburgh Luw Review, vol. 48, summer 1987, pp. 1151-1184.

There are questions, however, about exactly what protection extends to (i.e. is “look and feel” protected by copyrigh~ what is inclwkd in fair use,

etc.), similar to the debates curren tly occurring in the United States over cupyright protection for software.

13~e E~~ ~mt ~vmtim, ~s~~ in mm ~~1 1~~, ~~vide mu.hinationd rCCO@tiOXI of a p-t. The~ Patent office

(EPO) makes it somewhat easier to obtain patent rights in Europe.

14~ c-awgm isnot pata~ble but ~ ~vmtion involving a~pu~p~ w~d n~ ~ mj~~ ol,l@tt. IIIG=, COMpUm~&~S

per se are unpatentable. In Brazil, computer programs are not patentable, but semiconductor-chip fmware is patemabie; in New Zealand canputer

p-s cm k ptieti ~ly indi~tly, by patenting hardware programmed in accdance with the program. South Africa has a statutory exclusion

for computer programs. In the USSR, patent applications are not accepted for exammation “ if the claimed subject matter is an algdhrn or computer

pm-. (Baxter-Sinnott, Workf Luw and Pr@ice, vol. 2A (New York, NY: Matthew Bender, 1985), pp. 2A-10 to 2A-12.)
Appendix B--International Protection for Computer Software .27

patent for up to 30 months after the initial filing. An

applicant must still file in each country (or region such as

theEC)separately,but has greater assurance of being

.

Trade Secret

Trade secret has been the traditionally favored method

of protection for “ r mainframe and minicomputer software

developers in the United States. However, most countries

outside the United States and Western Europe do not

recognize either domestic or international trade secret

protection, although they may have laws concerning

confidential business information that may be similar if

less extensive. Japan is developing a trade secret law;

however, it is not formulated to protect software.15 No

international conventions for trade secret exist. The

validity of trade secret protection for mass-marketed

software (commonly used for PC software) is questionable in the United States and there are signs that

“shrink-wrap” licensing may not be considered valid in

the European Community in the future.lb

Bilateral Negotiations

Bilateral agreements are another way to protect intellectual property abroad. In 1984, Congress amended the

Trade and Tariff Act of 1974 to require that intellectualProperty protection be considered in awarding benefits

under the Generalized System of Preference (GSP) for

trading partners.17 Another clause of the 1974 Act section

301, gave the president the power to restrict imports in

retaliation for foreign trade practices that unfairly restrain

U.S. trade. This was strengthened in the Omnibus Trade

and Competitiveness Act in 1988. The amendment,

known as “Special 301,” directs the U.S. Trade Representative (USTR) to identify “priority countries” that provide

inadequate or ineffective intellectual-property protection.

If it is determined that sufficient progress is not being

made by these nations, the USTR may bring an unfair

trade practice case against the offending country .18 These

pieces of legislation attempt to move countries with

historically weak protection towards international standdards.

For example, the Republic of Korea Singapore, and

Taiwan have recently negotiated intellectual-property

agreements with the United States. The United States

began bilateral negotiations with each nation in the early

1980s. Then the United States began to apply trade

leverage around 1985, often through the GSP system or

section 301 of the Trade Act. Maintaining relations with

the United States is important to each of these countries

for economic and security reasons. Singapore and Taiwan, as emerging centers of high technology in the Region,

will benefit from stronger protection laws. The laws of all

three nations protect software expressly under copyright,

and to the extent established by international standards,

although only Korea has joined the Paris Convention and

the UCC.19

Trade and Competitiveness Issues in the

Global Economy

If the reasons for domestic intellectual property protection are principally economic, the same is true for

international protection. Software protection has both

direct and indirect effects on trade and competitiveness.

Commercial piracy and loss of royalties result in direct

revenue losses to U.S. firms and the U.S. economy.

Appropriate intellectual-property protection can encourage investment and innovation and indirectly strengthen

the U.S. economic position in high technology and in the

business and manufacturing industries supported by

computers and software.20

The United States is the world’s leading innovator and

producer of computer software. Estimates of market

shares, volume, and revenues vary, but one European

study estimates that the United States supplies 70 percent

of the world’s software and accounts for half the world

demand. 21 Another article claims that IBM, the largest

software developer in the world, accounts for 60 percent

of volume in world software sales and perhaps 70 percent

of world operating profits.22 Western Europe is estimated

to have 10 percent of world sales and the Japanese 15

percent. The Soviet Union contributes practically no sales

15~ela L. ~1~, ‘ Tmtedons for Software Under U.S. and Japanese Law: A Comparative Analysis,” Boston College Internutiond and

Cowywrative L.uw Review, vol. 7, summer 1984, p. 390.

16~~1 J). ~tt, ‘~- 1~: me ~pact of unific~m on Non-E~~ ~pter comp~es,” lmer~~~Com@rer @ Advisor, ~iiy

1989, p. 5. See also the section on mahmhing software as a trade secret in app. A.

1~ ~ch=l c~~w ~ Time@ 1. ~c~s (~.), /~euec~ pr~e~ Rig~s: Glo~/ co~ens~, GIo~/ co@fict? (B@der ~d ~(hl:

Westview Press, 1988) especially p. 6; and Robert P. Be&o, Protecting Intellectual Property Rights (Washington, DC: American Enterprise Institute,

1987), p. 11.

18* ~, ● *Pursuing U.S. Goals Bilaterally: Intellectual Roperty and ‘Special 301 ‘,” Business America, vol. 110, No. 19, Sept. 25, 1989, p. 6.

1* “ partmks were all taken fkom Gadbaw and Richards, op. cit., footnote 17, chs. 8,9, 10.

20~~@~~ prqerty rights promote innovation and intellectual creativity. Their protection and enforcement are essential to the expansion of

.

temlatioaal trade, investment, emnomie developmen~ and.. the beneficial distribution of technology.” (“United States Proposal for Negotiatba on

%-Related Aspects of intellectual Roperty Rights:’ Internazionul Computerhw Advisor, June 1989, p. 13.)

21@nmissionof the Eurqean -unities, “GreenPaperon Copyright and the Challenge of Technology--Copyright Issues Requiring Immediate

AcdoaL” June 1988, pp. 171-172.

-t- cited in ~Byiinsky, ‘~ ~@ Tech Race: who’s -?Fortune, vol. 114, &t. 13, 1986, p. 28.
28 ● Computer Software and Intellectual Property

to the West, trying instead to catch up with Western

state-of-the-art. 23 The United States is also the international leader in electronic databases: two-thirds of all

databases available on world markets are U. S.-based.24

According to one estimate, the total revenues generated

for the U.S. computer and data processing industries from

foreign markets came to $22 billion in 1987; approximately $8 billion of that was from SOftWare.

25

International Piracy and the Third World

Commercial piracy results in direct revenue losses to

U.S. firms, through loss of sales, loss of royalties, and/or

loss of investment opportunities.26 However, redress of

piracy abroad is often difficult and can involve issues of

technology transfer and assistance to developing nations.

Most of the industrialized, developed countries have

strong intellectual-property protections, whereas many of

the lesser-developed countries either do not have strong

intellectual-property laws or do not enforce them.

Nimmer and Krauthaus27 give two possible reasons for

this lack of enforceable protection. The first is uncertainty

about the ambiguous position of software in relation to

copyright or patent protection. The United States spent

several years deciding whether and how much to protect

software in the realms of copyright and patent. More

recently, Western Europe and Japan have developed

protection schemes for software. In the Third World,

where software development itself is much younger, legal

solutions to protection may be slower than in the more

advanced nations.

The second is a North-South trade and technology

transfer issue, with the views of advanced nations in

conflict with those of the lesser-developed nations.

Advanced nations want to protect the computer and

software industries that are strong sectors in their

economies and want to promote free trade to benefit from

these investments. lesser-developed countries want lowcost access to technology in order to promote and

modernize business. Many also want to encourage a

fledgling domestic programming industry. The advanced

nations argue that strong software protection will encourage both domestic innovation and foreign investment; for

some nations this argument may be well received, but for

others whose development as a high-technology center is

much further in the future, if at all, there is less urgency.

GATT Negotiations

Intellectual property has been included in the current

Uruguay Round of GATT negotiations, scheduled to

conclude in 1990. The GATT (General Agreement on

Tariffs and Trade) is the major document regulating trade

in the world, and has not traditionally included intellectual property within its sphere.28 ‘The objective of a

GATT intellectual property agreement would be to reduce

distortions of and impediments to legitimate trade in

goods and services caused by deficient levels of protection and enforcement of intellectual property rights:’ the

U.S. position states.29 The European Economic Community, Japan, and several other nations have also submitted

proposals in support of including intellectual property

issues in the GATT negotiations, and the United States is

trying to get support from nations such as South Korea

and Singapore that already have developed intellectualproperty laws.30

If a GATT agreement is reached, the parties would

adopt laws with a sufficient amount of intellectualproperty Protection-’ ’sufficient” to be determined relative to domestic law and international standards. It would

cover patents, copyrights, trademarks, trade secrets, and

semiconductor mask works.31 Conciliation and dispute

settlement procedures would be invoked when informal

meetings fail to settle differences between two nations.

Finally, strong enforcement measures would allow border

control and the withdrawal of GATT concessions if the

terms fail to be honored. Enforcement is a particularly

important issue to many U.S. software manufacturers,

since currently there is often little they can do and few

remedies against foreign infringers.32

231bidm

24~arence J. Brown, ‘The Globalization of Information Technologies,” The Washington Quarrerly, vol. 11, winter 1988, p. 94.

23U.S. ~-(mid Trade Commission, “’he Effects of Greater Economic Integration Within the European Community on the United States,” July

1989, ch. 4, p. 39.

MA tiler MOWmd discussion of the many ways through which companies experience revenue 10SS can be found in a stUdY by tie U.S.

International Trwie Commission, “Foreign Protection of Xntekctual Roperty Rights and the Effect on U.S. Industry and Trade:’ Febmary 1988, ch. 4.

2T~ymond T. Nimmer mdp~cia Krauthaus, “Classification of Gmputer ~ftware for hgtd ~tectiOIX hlttiiOXld ~“ves,’’lnternationd

Luwyer, vol. 21, summer 1987, pp. 733-754.

2sHowev~, in tie -g round of negotiations (the ‘fbkyo Round) an antkounterfeiting cde w= diw-.

~’United States proposal for Negotiations. . .,” op. cit., footn~ 20, p. 13.

Wadbaw and Richards, op. cit., footnote 17, chs. 8 and 9.

slText of ~~P~ su~tt~ by the United sties to ~ GA~, printed in “Uni~ Swes pro- for Negotiations. . .,’’ Op. Cit., fOOtlltXe 20, pp.

15-16.

32~~s~,op. cit., foomote 1; Gadbaw and Richards, op. cit., footnote 17, ch. 2; and Dana Williamson, “Addressing Inadequate Intellectual

-IW protection in the Uruguay Round:’ Busines.s America, vol. 110, No. 9, Sept. 25,1989, pp. 4-5.
Appendix B--International Protection for Computer Software ● 29

Innovation and Competition

Continued innovation is of great importance to a

high-technology industry such as software. Intellectualproperty protection encourages innovation by providing

incentives for creation and providing some security for

investors. This promotes international competition; if

innovation increases domestically, the United States can

continue to outshine foreign competitors. The United

States is thus far the leading and most innovative software

producer in the world. Not only has the industry

developed earlier here than in other countries, but there is

also a large installed hardware base and domestic market

which makes investment less risky. So far, U.S. industry’s

position in the world market and the individualistic

approach and enterprise of start-up companies have kept

the United States ahead of all competition.

However, there is fear of foreign competition, especially from the Japanese.33 The Japanese are funding

efforts in programming R&D; they planned to spend $125

billion over 10 years, according to one estimate.34

Artificial intelligence is a major project in Japan; known

as the “fifth generation” project, the general goal is to

make computers think more like humans. Some U.S.

researchers fear that Japanese experience in this area

could give them a head start in parallel processing and

other cutting edge programming techniques.

ss~-k,H=- at ~ points OUt hOW tk hp$UMSC took control of the initially American semiconductor industry, and arc XWW ti

world leaks. (Thomas Kiky, W@ Tech Heresy,” New EngfandBusiness, vol. 10, Novanbcr 1988, pp. 62-66.) Also see hwcy, Balkntine, Bushby,

Palmer, and woO& “Japancac Software: The Next Competitive C%a&nge/’ pmpamd for ADAPSO, January 1989.

~Brown, op. cit., foomotc 24, p, 90.