any other company. So, the first ox that is getting gored is ours. Fairchild and National will follow us up on that curve. In due course, they will realize that we cannot continue to operate as we have. At that point, I think they will begin to appreciate what we are talking about here today. Today, since so much of the product line is the kind of product that is done on the curve, the design is very inexpensive and very simple, they have not suffered the consequences of that problem yet. Last, I believe counsel of the committee asked representatives of National if National has ever copied. I believe Mr. Finch's answer was erroneous and I am prepared to put into evidence two sets of photographs showing Intel and National product each. I will label them in the back. This is an Intel 8000 bit programable reload memory. This is a photographic reproduction of the same thing put into manufacturing by National Semiconductor. This is the microcomputer Professor Angell claimed to be the grandfather of, the industry standard microcomputer called the 8080. This is the Intel version of it. Perhaps, Mr. Kastenmeier, you might find an answer to your question about the different attitudes. Mr. KASTENMEIER. It is useful for that purpose, although National Semiconductor is not on trial here. I should point out Mr. Finch qualified his answer by saying to his knowledge, not at this time. He didn't say never; but in any event, I will say that this does go to the point of differing economic interests part of it. Mr. GROVE. Thank you very much. Mr. KASTENMEIER. I would like to ask you just one question before I yield to Norm. Counsel suggested this, the differences in position of at least the panels of witnesses appearing today suggested that perhaps the whole of a circuitry of a chip might be protected and that the type of interest that other corporations have in a work by piecemeal or by reverse engineering or by segments or for other purposes, be excluded from protection. I don't think I agree. There is probably no such thing as fair use, probably any use. I agree with Dr. Early, any use probably would have economic detriment, an effect which in and of itself would suggest it was not, in fact, fair use. Examples, certainly, that you and Mr. Sevin suggested were a whole circuitry system and you also suggested that it wasn't very feasible to reproduce that except in its entirety. Therefore, the exceptions and uses referred to by Mr. Finch suggested that their interest and others could be in part of what competitors were doing and not necessarily reproducing the whole of a chip. How do you react to that analysis? Mr. GROVE. Let me make sure I get the precise point of the question. Do I understand the question correctly that you are asking how do I react to somebody taking certain small parts of a total design rather than the total design itself? Mr. KASTENMEIER. What I am asking, in a sense, is if the bill were to protect only the totality, all of it, that is to say only if reproduced in its totality. Those were the examples that you and Mr. Sevin chose, in its totality and not protect in any way whatsoever partial or reverse engineering reproduction of the content of the chip. Mr. GROVE. I am sure we would have to find a legal answer to this. Let me try to explain to you the practical answer; how do we reduce that to legal language. That is a job that needs to be done. Merely restricting the legislation to precise and exact photographic copies could be circumvented by something no more difficult than taking Mr. Sevin's example with the metal that serves no useful purpose and erasing that from the photograph, retouching the photograph, as it were, and all the rest of it could be copied; or by taking one of those little areas and in the process of photographing, locating it a little distance away from where they are in the original. Mr. KASTENMEIER. I understood from the earlier testimony that it was not feasible. Mr. GROVE. It is feasible. It was not done because the perpetrators of that particular copy did not find it necessary to take the trouble. If there was legislation, however, that said that photographic copy has to be precise in its totality, it would be somewhat equivalent to maybe, maybe I am naive in this one, to have book copyrights saying it is all right so long as you move the page number to the right side from center. We would not buy a great deal. On the other side, I have no real objection to reverse engineering which requires something totally different than photographic copy. It requires engineers to go back and understand what they have there and reconfigurate on their own. The objection to these two extremes will be it is going to be difficult to find what portion, is a 10-percent rearrangement OK, does it require a 20-percent rearrangement. These are matters of law and these are probably matters that would even have to be resolved in the court. I would be happy to have a word like substantial change and have the opportunity to go to court and prove that something is or is not a substantial change. Mr. KASTENMEIER. Certainly all the items cited today involved really a total of "pirating" of the work. Mr. GROVE. That is correct. I might add, we put the copyright sign on all of our chips and the copying was not totally complete. The copyright sign was removed. Mr. MINETA. I would like to ask Dr. Grove, in your statement today, were you representing Intel as a corporation but also AMA? Mr. GROVE. Yes, I was. Mr. MINETA. Has the SIA, the Semiconductor Industry Association, taken a stand on this? Mr. GROVE. No, they have not. Mr. MINETA. AEA has taken this as their formal position, relative to H.R. 1007? Mr. GROVE. That is my understanding. Mr. KASTENMEIER. Would you identify AEA for us? Mr. MINETA. AEA is the American Electronics Association. It is the leading trade organization in the country. Mr. KASTENMEIER. Thank you very much. I would like to take this opportunity, in conclusion, to thank all of you for your interest in this public question. I particularly, however, want to express my personal thanks and that of the committee and Congressman Don Edwards and Congressman Norman Mineta, my colleagues for their hospitality and their help and their interest in this question. It is obviously not the last chapter but merely the opening chapter of the public question we have addressed today. I would like, in conclusion, to express my thanks and that of the committee. It is a treat to come here to San Jose and join my colleagues. Mr. EDWARDS. Mr. Chairman, on behalf of Norm and I and Pete and all of the people in this valley, we would like to thank you for coming. This is the first congressional hearing in our history in San Jose and we hope you come back. Mr. KASTENMEIER. The committee stands adjourned. Hon. ROBERT Kastenmeier, GENERAL INSTRUMENT CORP., Chairman, Subcommittee on Courts, Civil Liberties, and the Administration of Justice, Committee on the Judiciary, U.S. House of Representatives, Rayburn House Office Building, Washington, DC. Re: H.R. 1007 DEAR REPRESEntative KasteNMEIER: Enclosed please find a statement on behalf of General Instrument Corporation on H.R. 1007, a bill to extend copyright protection to the manufacture of integrated circuits. We regret our inability to appear at the hearings on this bill which were held in San Jose, California on April 16, 1979. We submit this statement in lieu of testimony and request that it be made a part of the formal hearing record on the bill. Thank you for your interest and concern about the semiconductor industry, an industry which we believe is of major service to the American people and the American economy. Sincerely, Enclosure: QUINCY RODGERS, STATEMENT OF GENERAL INSTRUMENT CORP. General Instrument Corporation (GI) appreciates this opportunity to comment on H.R. 1007, a bill intended to protect the interests of integrated circuit manufacturers by extending copyright protection to the masks used in circuit fabrication. As the industry pioneer in the development of metal-oxide-silicon (MOS) integrated circuit technology, and as a leading innovator in the development of MOS circuits, GI appreciates the need to protect companies which have invested money and time in the development of innovative designs. However, because we are convinced, after careful reflection, that the copyright laws are the wrong means for providing this protection, we oppose the enactment of H.R. 1007 in its present form. During the 1960's and early 1970's GI led the way in commercializing the MOS technology now widely practiced by the semiconductor industry. That technology is responsible for one of the major technical and social revolutions of our age: the availability of enormous computational power and data memory at very low cost. Consumer products such as calculators and video games represent only the earliest and most visible products of that revolution; MOS integrated circuitry used in such fields as computer, household appliances, automobiles, office equipment, telecommunications, and the like will, over the next few years, dramatically affect the lives of people the world over. It is, therefore, clearly in the public interest to encourage the development of innovative technology in this field and the rapid diffusion of that technology, so as to make the benefits of innovation widely available at low cost. The issue thus has two aspects: How to appropriately protect and reward innovators; and How to assure that competition will distribute the benefits of innovation to the widest possible market at the lowest possible cost. The basic deficiency of H.R. 1007 is that it gives the innovator far more protection than is needed and unnecessarily stultifies the diffusion process. H.R. 1007 would radically alter the fundamental groundrules under which American industry has flourished. At the risk of oversimplifying a vast and complex body of law, the basic principles can be summarized as follows: 1. As the Supreme Court has repeatedly reaffirmed, our deep commitment to a strong competitive system means that competitors should be permitted to imitate successful innovations-and, except as specifically limited by the laws pertaining to intellectual property (see below), even to copy those innovative products down to the last detail. The entire economy benefits from this process, and efforts to stifle it must be carefully and cautiously analyzed. No rhetoric of "piracy" should be permitted to obscure the fundamental public interest in permitting the diffusion of innovation through imitation and copying. 2. There are essentially only three exceptions to that principle: Those whose innovations rise to the standard of true inventions are entitled to patent protection confering a limited monopoly in the inventions. By definition, this bill would grant monopoly protection to products which are not inventions. H.R. 1007 is an attempt to fit into copyright law material which is more properly the subject matter of patents. The distinction between copyright and patent was expressed initially by the Supreme Court in Baker v. Selden 101 U.S. 99 (1879). "The description of the art in a book, though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of the other is use. The former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters patent.' Literary, musical and artistic creators are similarly entitled to copyright monopolies in their works. Clearly, integrated circuit masks do not fall within this category. Congress, in the First National Copyright Act in 1790, extended copyright protection to "books, maps and charts". Over the course of nearly two centuries, the law has been amended and revised to include musical compositions, dramatic works, photographs, motion pictures and less traditional forms of expression, such as, sound recordings and computer programs. In every case in which copyright protection has been afforded to a category of works, the works have been those which communicate with humans. Even computer programs, which it can be argued "operate" machines, are capable of being read and understood. The integrated circuit chip conveys no information. It is a machine which communicates only with other machines. It bears no resemblance to other forms of pictorial, graphic or sculptural works which are protected by the copyright law. If it did, it would be protected under the 1976 Copyright Act without the need for this amendment. To fit integrated circuit chips into the copyright law would require what John Hersey, in his dissenting position in the Report of the National Commission on New Technological Uses of Copyright Works (CONTU) has called "distortion by shoehorn". All innovators are entitled to protection against imitation and copying by illicit means, such as industrial espionage, or inducing employees to breach their obligations of trust with respect proprietary information. H.R. 1007 does not deal with this issue-an issue which, in our view, is far more significant and critical to the semiconductor industry than the issue the bill does deal with. These fundamental principles have served the nation and the semiconductor industry well. The proposed bill would radically alter those principles by granting monopoly protection to those integrated circuit designs which neither rise to the standard of invention required under the patent laws, nor contain artistic value, and which are limitated without resort to illicit means. To do so would be to create an entirely new species of property right unprecedented in the American competitive system. If the principles which underlie H.R. 1007 are valid when applied to the semiconductor industry, then they are equally valid in the case of every other manufacturing industry. There is no distinction in principle between integrated circuit masks and the tools which are used to fabricate any other manufactured product. If integrated circuit designs are to be given monopoly protection even though they do not constitute inventions, then there is no reason not to similarly protect all industrial designs. Clearly, this would constitute a revolutionary step in the law of intellectual property and in our competitive system. It cannot be argued that copyright protection is uniquely needed by our industry to provide the incentive for companies to invest in developing innovative designs. The indisputable fact is that the existing economic incentives encouraging and rewarding innovation in the field of integrated circuitry are already enormously powerful: the creative energy of the semi-conductor industry, the dynamic pace of innovation in that industry, and the rapid growth and financial success of innovative companies are convincing evidence of that fact. The payoff for successful innovators is huge; indeed, an entire multi-billion dollar industry based upon continuous innovation has evolved in the past decade without the dubious benefit of copyright protection. This is so because the economics of the semiconductor industry are such that the lead time gained by an innovator in itself strongly tends to protect its investment in innovation. It should be pointed out that our views on this legislation do not reflect any interest of GI in copying the designs of others: not only have we never done so, but, on the contrary, other firms have copied a number of our successful designs. Rather, we oppose this legislation because we think it is harmful to the semiconductor industry in four critical respects: First, it is harmful because its practical effect would be to slow the pace at which innovative technology is diffused through the industry. Claims of copyright protection and threats of litigation would be used to intimidate competitors from analyzing and imitating competitive products, a process which ultimately leads to further improvement and fresh innovation. The stultification of that process would be detrimental not only to consumers, but, ultimately, to the industry itself. Second, it is harmful because it reflects an astonishingly defeatist attitude: it implies that our industry needs special protection not applicable to other industries. Unlike the advocates of H.R. 1007, we are confident of our ability to gain and maintain our position in the marketplace under the same competitive rules that are applicable to industry generally. The invocation of foreign competition to justify this legislation is, we think, entirely inapposite. Ours is a strong industry, capable of meeting—and, indeed, benefitting from-tough competition from abroad. To the extent that foreign companies obtain special advantages from their home governments, or prevent American firms from competing on an equal footing in their home markets, legislative or other governmental responses may be appropriate; but the creation of a copyright monopoly is at best a clumsy and, indeed, irrelevant response, likely to do more harm than good in the international arena. Third, it is harmful because H.R. 1007 does not grow out of considered dialogue with all interested parties. If there is a problem with copying, any legislative response ought to reflect the views of the industry and its customers, and not simply those of a segment of the industry. Finally, and most significantly, it is harmful because it distorts the industry's legislative priorities. There are genuine challenges facing this industry, some of which may deserve Congressional attention. Among these problems are: Regulatory policies and practices which impose unjustified costs upon domestic manufacturers; Inequities in tax structure and imperfections in capital markets which limit the availability of venture capital for innovative young corporations; Inadequate governmental support for major research and development, particularly as compared with other countries; Unnecessary export controls. Indeed, within the field of protecting intellectual property, (such as designs, processes and other valuable technology) the problem of obtaining prompt, effective and low-cost remedies against the misappropriation of proprietary information by illicit means deserves, in our view, a far higher priority than the problem of copying designs which have been disclosed to the marketplace. We would be glad to work with the Committee and with all interested parties to develop sound and broadly based legislation to respond to the real challenges confronting our industry. ROBERT B. SHAPIRO, General Counsel, General Instrument Corp. |