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— can 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 met. 22

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 other patents and published articles (see 35 U.S.C. 102). In practice, prior art is most often previously issued patents. Because the bulk of software continues to be protected by copyright and/or trade secret, because much of the history of software development is not in the published literature, and because relatively few patents for software-related inventions were granted prior to the 1980s, the available and locatable prior art is less complete and relatively more 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 process claimed, making it difficult to find or track patents for computer-program processes. 24 Also, nonpatent prior art for software-related inventions is often in nonwritten form, existing only as software products. Thus, there is more risk that invalid patents may issue for widely known 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

22 The Supreme Court has not ruled as to whether computer programs per se constitute patentable subject matter. Currently, PTO patent examiners carry out a two-part test for mathematical-algorithm statutory subject matter, the test is intended to be consistent 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.c., 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 Programs,” 1106 O.G. 4, Sept. 5, 1989; also contained in Patent Protection for Computer Software: The New Safeguard, Michael S. Keplinger and Ronald S. Laurie, (eds.) (Englewood Cliffs, NJ: Prentice Hall Law and Business, 1989), pp. 9-42.)

2335 U.S.C. Section 103. See Irving Kayton, Kayton on Patents (Washington, DC: Patent Resources Institute, Inc., 1983), ch. 5.

24PTO categorizes patents by some 350 classes, each with some 350 subclasses; classification is done according to structural elements. Many software-related patents are classified in classes 364, 235, and 340, but not all patents in these classes are software-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, PTO, comments on draft paper. Dec 18, 1989, p. 4)

25 A common definition of the term algorithm is: “a set of rules which specify a sequence of actions to be taken to solve a problem (or carry out a process). Each rule is precisely and unambiguously defined so that in principle it can be carried out by machine.” (Chambers Science and Technology Dictionary, Peter M. B. Walker (ed) (New York, NY: W & R Chambers, Lid., 1988), p. 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 mainframe 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.

Appendix A Legal Protection for Computer Software • 23

In the United States, trade secrets are protected by individua! 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 28 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 be an 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

26For instance, case law has sometimes treated the term "mathematical algorithm" as synonymous with a "mathematical formula" such as 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 Piasburgh Law Review, vol. 47, No. 4, summer 1986, pp. 959-992; and Supreme Court cases Gottschalk v. Benson, 409 U.S. 63 (1972), Parker v. Flook, 437 U.S. 584 (1978), and Diamond v. Diehr, 450 U.S. 381 (1981).)

"For a computer scientist's perspective on legal confusions resulting from unsuitable models for algorithms and computer programs, see Allen Newell, "The Models Are Broken, The Models Are Broken!" University of Pittsburgh Law 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 Iwahashi, 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 its 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.) 28By contrast, patent rights are granted in exchange for full disclosure of the patentee's "best method" of practicing the invention. But some consider 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). 29 Absent contractual agreements, trade secret does not protect against reverse engineering.

30 The Copyright Office has special release provisions for deposit of software with trade secrets. Depositors may use object code, remove trade-secret parts, etc.

24⚫ Computer Software and Intellectual Property

PC software, by contrast, is mass-marketed to hundreds of thousands of customers.30 To help maintain tradesecret status, PC software is often published in object code and distributed with a “shrink-wrap" license, which every purchaser is supposed to agree to on opening the package.

The shrink-wrap license may contain language and terms that purport to create a duty by the user to maintain the trade-secret information, but some question whether this would stand up in court.31

30The Copyright Office has special release provisions for deposit of software with trade secrets. Depositors may use object code, remove trade-secret parts, etc.

31See Anne W. Branscomb, "Who Owns Creativity?" Technology Review, May/June 1988, p. 43., and also Sherman et al., op. cit., footnote 2, sec. 309.4(g). Anne Branscomb believes that statutory clarification is needed for the status of trade secrets within copyrighted works (Anne W. Branscomb, personal communication, Dec. 8, 1989).

Appendix B

International Protection for Computer Software

Intellectual-property issues are of growing international concern. Problems like commercial piracy' 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. 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 author and automatic protection, thus eliminating the former

"Piracy" has been defined as "the reproduction and sale of copyright material without the consent of author or publisher," by Publishers Association and the International Federation of Phonogram and Videogram Producers on Behalf of the U.K. Anti-Piracy Group, 1986, cited in Mark L. Dam schroeder, "Intellectual Property Rights and the GATT: United States Goals in the Uruguay Round," Vanderbilt Journal of Transnational Law, vol. 22, No. 2, 1988. p. 368, footnote 1.

In this paper, OTA uses the term "piracy" to mean unauthorized commercial reproduction and sale, not unauthorized private (noncommercial) copying. (For a discussion of the legal status of private copying, 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.)

2Only a few countries have extensive trade secret laws.

"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. 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 a two-part test to 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). 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 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.)

"The World Intellectual Property Organization (WIPO) proposed sui generis Model Provisions on the Protection 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 signatory nations. Intended as a guideline for national legislatures, the model provisions have not been adopted.

5While copyright tends to extend similar protection in most countries, there are national differences. In West Germany, for example, computers are considered a functional work and must meet a relatively high standard of "originality." One estimate suggests that 90 percent of programs will fail to meet that standard. (From the Inkasso case, cited by lan A. Staines, "An Assessment of the European Commission's Proposal for a Council Directive on the Legal Protection of Computer Programs," The Computer Lawyer, vol. 6, No. 9. September 1989, p. 21.)

"Moral rights "are separate from the economic rights of the author and concern what are usually called rights of paternity and integrity. The right of paternity is the right to be named as author of a work; the right of integrity is the right to object to distortion, other alteration of a work, or derogatory action prejudicial to the author's honor or reputation in relation to a work. Article 6bis of the Berne) 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 Berne Convention. Therefore, it is not necessary for the implementation 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 Labor. The United States has historically considered economic incentives for creativity as the basis for copyright protection.

26⚫ Computer Software and Intellectual Property

U.S. requirements for formal notice and registration.? The latter two provisions were perceived as substantial barriers to entry by the United States.

The United States is also a member of the Universal 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. 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. 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. 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

11

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) 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 "The Berne Convention Implementation Act has repealed the mandatory copyright notice requirement (the encircled "c," date, and name of the copyright owner) and eliminated the requirement to register a work at the Copyright Office. Although foreign authors need not register, there are significant incentives for a U.S. citizen to register because for them registration is a precondition for a copyright lawsuit, award for attorney's fees, and statutory damages. (U.S. Copyright Office, Circular 93a, op. cit., footnote 6, p. 3.)

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

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

9 Figures from the U.S. Copyright Office, Circular 93: Highlights of U.S. Adherence to the Berne Convention, April 1989, and Circular 93a, op cit.. footnote 6. Additional members may have joined since these circulars were published.

19U.S. Copyright Office, Circular 38a: International Copyright Relations of the United States, July 1989. 11Ibid.

12See, for example, Ingrid M. Arckens, “Obtaining International Copyright Protection for Software: National Laws and International Copyright Conventions," Federal Communications Law Journal, vol. 38. August 1986, pp. 283-300, Max W. Laun, "Improving the International Framework for the Protection of Computer Software." University of Pittsburgh Law 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 copyright, what is included in fair use, etc.), similar to the debates currently occurring in the United States over copyright protection for software.

13 The European Patent Convention, described in more detail later, does provide multinational recognition of a patent. The European Patent Office (EPO) makes it somewhat easier to obtain patent rights in Europe.

14In Canada, a program is not patentable but an invention involving a computer program would not be rejected outright. In Greece, computer programs per se are unpatentable. In Brazil, computer programs are not patentable, but semiconductor-chip firmware is patentable; in New Zealand, computer programs can be patented only indirectly, by patenting hardware programmed in accordance with the program. South Africa has a statutory exclusion for computer programs. In the USSR, patent applications are not accepted for examination if the claimed subject matter is an algorithm or computer program. (Baxter-Sinnott, World Law and Practice, vol. 2A (New York, NY: Matthew Bender, 1985), pp. 2A-10 to 2A-12.)