36[bid., pp. 8-11. Conferees believed that limited copying for purposes of examination and study of a program's unprotected elements (including disassembly or decompiling to get pseudo-source code from object code) would fall within the terms of fair use.

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. 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 firms, along with domestic firms, in the U.S. market. 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. 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. 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.

IUS. International Trade Commission, "The Effects of Greater Economic Integration Within the European Community on the United States," July 1989, ch. 4, p. 39.

2 As one commentator notes, "Information 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.)

"Thus, strong U.S. laws benefit foreign competitors; as foreign software suppliers grow stronger, this may become more important. For further discussions of international conventions and a lengthier treatment of other international issues, see app. B.

"Worldwide, piracy for computer software and hardware is estimated to have cost producers $4 billion in 1986 (this figure is based primarily on firms' own estimates of losses). (Estimate based on a study performed by the US. International Trade Commission, Foreign Protection of Intellectual Property Rights and the Effect on US Industry and Trade, February 1988. table 4-1. p. 4-3.)

The International 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 'Problem Countries," April 1989, p. viii.)

"For example, the People's Republic of China has no copyright law of its own (although it is currently drafting one with provisions for software) and is not a member of international conventions. One study sponsored by several industry groups has estimated that software piracy in the People's Republic of China cost U.S. developers some $300 million in 1988. (International Intellectual Property 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 semiconductor chip 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 96-517, 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. 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 an employee of a firm).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

'Public Law 98-620, 98 Stat. 3347,3356.

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.

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. 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 manner, or

2. that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful.

This limitation clarifies the right of a user who legitimately owns a software product to make "backup" copies of the software to protect against damage or loss, to load the software onto the hard disk of a computer for easier or more efficient use, and to make adaptations if necessary to make the program usable on a computer (e.g., compiling it, inserting default formats or directory paths,

2See Cary H. Sherman, Hamish R. Sandison, and Marc D. Guren, Computer Software Protection Law (Washington, DC: The Bureau of National Affairs, Inc., 1989), part 300. Protection for an original mask work extends for 10 years from the time it is registered; the duration takes into account the relatively short useful economic 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 conferred a significant competitive advantage. The Act does not provide protection for the underlying idea, or against independent 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 effort.

3An "original work" is one that does not have the same expression as a preexisting work; an identical, but independently created, work is not a copyright infringement. (The "originality necessary to support a copyright merely calls for independent creation, not novelty." Melvin B. Nimmer, Nimmer on Copyright (New York, NY: Matthew Bender, 1982), vol. 1, sec. 201(A), cited in U.S. Congress, Office of Technology Assessment, Intellectual Property Rights in an Age of Electronics and Information (Melbourne, FL: Kreiger Publishing Co., April 1986), OTA-CIT-302, ch. 3. footnote 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).

'See Copyright Act, sec. 302. For further discussion of U.S. copyright law, see U.S. Congress, Office of Technology Assessment, Copyright and Home Copying: Technology Challenges the Law, OTA-CIT-422 (Washington, DC: U.S. Government Printing Office, October 1989), ch. 3.

"Copyright Act of 1976, ch. 1, sec. 107. Computer software can present some particular problems in assessing what is "fair use." For example, a competitor who de-compiles a copyrighted object-code program in order to study the unprotected ideas it embodies will necessarily make a "copy" of the entire program (see app. A, footnote 7).

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. 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. 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. 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. 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.11

Many in the computer and legal professions believe that "traditional rules of copyright law adapt very comfortably" to new forms of expression like computer programs.12 These 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

In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” (Copyright Act of 1976, ch. 1. sec. 102(b).)

"One court decision has found copying for the purpose of reverse engineering to be sanctioned by section 117 of the Copyright Act. (Vault v. Quade, 655 F.Supp. 750, E.D. LA. (1987), affirmed. 847 F.2d 255 (1988), cited by Brian Kahin, personal communication, Dec. 1, 1989).

*For example, the decision in Whelan Assoc. Inc. v. Jaslow Dental Laboratories, Inc. (797 F.2nd 1222 (3rd Cir. 1986), cert. denied, 107 S. Ɑ. 877, 1987) held that the underlying purpose of a program is its "idea," and everything else is expression, given that more than one way to achieve the purpose is possible. Under this interpretation, virtually any elements of the program's structure, sequence, or organization would be considered copyrightable. By contrast, the decision in Plains Cotton Coop Assoc. v. Goodpasture Computer Service, Inc. (807 F.2nd 1256 (5th Cir.), cert. denied, 108 S. C. 80, 1987) held that only line-by-line program design or literal code were protectable. (David C. Godbey, "Comment: Legal Documents As A Metaphor for Computer Programs in Copyright Analysis-A Critique of Whelan and Plains Cotton," The Computer Lawyer, vol. 6, No. 8, August 1989, pp. 1-10.) "Recent 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 'Look and Feel' of Computer Software." The Computer Lawyer, vol. 2, No. 2, February 1985). There is no statutory or case-law definition, 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." Communications of the ACM, vol. 32, No. 5. May 1989, pp. 563-572.)

10The argument is that "look and feel" is more idea and concept than expression. In that case, however, an innovation that did not represent a novel and nonobvious advance over prior work would not be patentable (see section 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 courts. See: "Computer Scientists Protest Software Litigation,” International Computer Law Adviser, June 1989, p. 22; and Pamela Samuelson, ibid.

11For example, see Brian Kahin, "The Impact of Software Patents," Educom Review, winter 1989, pp. 28-31.

12For a discussion of this position and a rebuttal of opposing views, see Anthony L. Clapes, Patrick Lynch and Mark R. Steinberg, “Silicon Epics and Binary Bards," UCLA Law Review, vol. 34, June-August 1987, pp. 1493-1594 (see p. 1501).

13See Clapes et al., ibid., pp. 1549-1558.

14See Clapes et al., ibid., especially pp. 1546-1554 and 1575-1584. See also Morton David Goldberg and John F. Burleigh, "Copyright Protection for Computer Programs: Is the Sky Falling?" AIPLA Quarterly Journal, vol. 17, No. 3, 1989. pp. 296-297. Goldberg and Burleigh argue that even if not all court cases have been correct or clearly articulated, the same is true of patent cases for software-related inventions and would be true for any sui generis forms of protection (ibid., p. 296).

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 pro

Appendix A Legal Protection for Computer Software 21

grams as 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

15See Clapes et al., op. cit., footnote 12, especially pp. 1501-1505, 1548-1561, and 1583-84. See also Goldberg and Burleigh, ibid., pp. 317-322. 16The rule that a work must be readable by a human audience had its origins in White-Smith Music Publishing Co v. Apollo Music Co. 209 U.S. 1 (1908) which ruled that player piano rolls could not be copyrighted. For a discussion of the readability requirement see "Copyright Protection of Computer Program 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 Law 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 source program is the program as written by the programmer. Writing in lower-level languages like assembly language can be tedious, so programmers usually use a higher-level language like Fortran. For example, a Fortran instruction to add an input "V" to a vanable "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 binary 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 corresponds to one basic operation of the computer. For example, to add "V" to "SPEED" would require statements like LD RO SPEED (load SPEED into Register 0), LD RI,V (load V into Register 1), AD RORI (add contents of Register 1 to Register 0). 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. 18Microcode governs the operation of the computer within one cycle of the computer's internal clock, it is part of the computer's operating system. Copyrightability of microcode was upheld in NEC Corp v. Intel Corp. (645 F. Supp. 590 (N.D. Cal. 1986) vacated, 835 F.2d 1546 (9th Cir. 1988). 19Sherman et al., op. cit., footnote 2, secs. 203.5(c)-203.7(c).

20In 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 ruled that computer-implemented algorithms that are deemed "mathematical algorithms” per se are not statutory subject matter. Federal 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. (See U.S. Patent and Trademark Office, "Patentable Subject Matter: Mathematical Algorithms and Computer Programs." 1106 O.G. 4, Sept. 5, 1989).

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-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 (ie., 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, PTO, comments on draft paper, Dec. 18, 1989, pp. 1-2.)

21 One estimate from the World Intellectual Property Organization places the fraction at 1 percent. (Cited in Ingrid M. Arckens, "Obtaining International Copyright Protection for Software: National Laws and International Copyright Conventions," Federal Communications Law Journal, vol. 38. August 1986, p. 285.)