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OCR for page 1
lnTeLLecTuaL
pRopeRTy Issues
In sorTwaRe
OCR for page 2
The question is whether, as to copyright protection for computer
software, ',the sky is falling." . . . I submit, "It just ain't so."
Morton David Goldberg, Partner, Schwab, Goldberg,
Price, ~ Dannay
[Mly answer to that is, the truth is the sky is falling all around
you. It just hasn't hit you yet.
Jerome H. Reichman, Professor of Law, Vanderbilt
University
I don't think the sky is falling. I think it is sagging in a few
places, and primarily because the law hasn't been properly
applied.
Ronald S. Laurie, Partner, Irell ~ Manella
Market-mediated innovation is definitely the way to go, and my
bottom line on the intellectual property front is let us not screw
it up. The agonizing thing is, I cannot tell whether that means
do nothing or do something radical.
Mitchell D. Kapor, Chairman, ON Technology, Inc.
I thought of concluding today with the adage, "If it ain't broke,
don't fix it." But that does not truly reflect my views, which are
stronger than that. So, I will conclude with a new adage, "If it
ain't broke, don't break it."
Howard G. Figueroa, Vice President, Commercial and
Industry Relations, IBM Corp.
OCR for page 3
1
Changing Contexts for
the Software Industry
An idea and a computer. Those two items, it has often been said,
are all that is needed to enter the software industry. Although this
characterization fails to convey the enormous range in the size of
software firms, as well as in the complexity of computer programs
and the underlying design and development efforts, it is accurate
insofar as it captures the industry's vitality and its propensity for
innovation.
Indeed, the software industry possesses all the attributes of a vig-
orous economic sector: stiff competition, a diverse mixture of firms,
rapid sales growth, high rates of commercial innovation, strong per-
formance in international markets, and, as the "idea and a computer"
adage suggests, low barriers to entry. Market statistics vary, but
they suggest that over the past twenty-five years the number of U.S.
software firms has quadrupled, and the size of the product market
has been doubling about every five years. In 1990, sales of packaged
software alone by U.S. software firms totaled nearly $20 billion and
accounted for more than 40 percent of the world market (Internation-
al Data Corporation estimate cited in U.S. Department of Commerce,
1991~; U.S. purchases of "software products" (excluding custom-devel-
oped software) amounted to $35 billion in 1990 according to another
estimate (personal communication, INPUT, March 6, 1991~.
Given this enviable track record and the outlook for continued
rapid sales growth, it would seem that the industry faces a bright
future. But some see the path to that future obstructed by uncer
3
OCR for page 4
4
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
tainty over intellectual property protection for software and by the
adversarial behavior that has arisen in this climate of uncertainty.
The result, said Robert Spinrad, director of corporate technology at
Xerox Corp., is confusion, which is having a "stultifying, dulling effect"
and "slowing down the activity" of firms big and small.
There are clear signs that legal concerns have become matters of
paramount importance in an industry that, for most of its history,
was unfettered by such concerns. One sign is the recent spate of
copyright- and patent-infringement cases, in which firms are charg-
ing that the commercial fruits of their innovative efforts have been
unfairly usurped by others. Another is the flurry of filings for patents
on software-related innovations. Until only a few years ago, it was
widely believed that patents were largely unavailable for software.
The result, according to critics of patent protection for software, is a
fundamental change in the rules that have governed the behavior of
software firms. A third sign is in evidence in Europe. There, software
firms have divided into two camps and squared off over a European
Commission proposal that would codify the application of convri~ht
law to software (Verity, 1990~.
-rip --em
Diagnoses of the current state of affairs vary widely, as do prognoses
of how intellectual property concerns will affect the pace of innovation
in software and the health of the industry. The quotations presented
at the beginning of this chapter are representative of the diversity of
opinion. Most notable about this spectrum of perspectives, perhaps,
is not the viewpoints themselves, but rather the fact that in every
quarter of software-related activity business, government, and
academia people have strongly held opinions on what and how rights
of ownership should be applied to software.
Until only recently, intellectual property concerns were limited almost
entirely to piracy, or the direct copying of software. Independent
software developers and firms had wide latitude of action, and many
software inventions were believed to be in the public domain, available
for all to use and to build upon. Some new software products-for
example, the first database management systems, the first Fortran
compiler, or the first timesharing operation system represented major
advances. Most, however, offered incremental improvements, such
as support for new hardware models, adaptation to a new market
niche, or greater ease of use.
This environment accommodated independent innovation, in which
different developers created separate products to accomplish the same
task. One need only peruse the variety of offerings for two of the most
common software applications word processing and spreadsheets to
find evidence of this phenomenon. The freewheeling atmosphere also
OCR for page 5
CHANGING CONTEXTS
5
fostered successive rounds of improvement in products with estab-
lished markets. For a firm to be satisfied with the performance and
functionality of an existing product was to risk losing market share
to a competitor that targeted the same market niche. The nature of
competition in the industry has been such that, if there is a perceived
market for a particular software product, "someone will build it, and
someone else will, as well," said Harry C. Reinstein, chairman and
chief executive officer of the Aion Corp.
While many software firms were aware of what intellectual prop-
erty protection applied to software primarily trade secret law and
copyright law- the actions of most firms suggested that legal concerns
rarely entered into product-development decisions. The collective
behavior of firms served to achieve the constitutional aim on which
intellectual property law is based: "to promote the progress of science
and the useful arts." More specifically, the software industry achieved
the intent of intellectual property law, that is, to advance the public
good, an objective widely interpreted to mean the generation and
wide dissemination of ideas and innovations.
Today's legal ferment indicates that software firms are much more
attuned to intellectual property issues. And why not? Copyright law
and patent law exist to encourage innovation. Both award limited
monopolies to those who invest their resources, effort, and ingenuity
in developing products that society may deem useful. Thus intellec-
tual property law offers the potential for private financial gain as an
incentive for undertaking the risks of innovation.
To Francis D. Fisher, adviser to the Educational Technology Group
at the Harvard Law School, concerns that innovation in software will
diminish without strong intellectual property protection seem at odds
with the industry's historically high rate of innovation. "It is not
enough to suggest that the incentives of monopoly are needed," Fish-
er maintained. '~We need evidence. We need to shift the burden of
proof, so that those who believe that the public interest gains from
extending property rights to software must prove their case." Among
those who believe this case is unproven is Richard Stallman, whose
Free Software Foundation and League for Programming Freedom pro-
vide a test of his conviction that innovation is best served absent
prices based on commercial monopoly.
While Fisher may be unconvinced of the need to accord strict intel-
lectual property rights to software, the perception that software is
vulnerable to abuses by competitors and users is widespread. Firms
trying to position themselves in the market to earn returns on their
investment often devote considerable thought to protection strate-
gies. But in the end, said Peter R. Schneider, IBM Corp. vice presi
OCR for page 6
6
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
dent for systems and programming, "this is a crap shoot.... I cannot
depend on my lawyers or the legal system" to identify a single mea-
sure that, on its own, will provide adequate protection. As a result, a
firm may take advantage of all the available protections.2 "[Ilt is like
there is a disease out there," Schneider explained, "and massive doses
of mixed antibiotics are best, because I am not sure which one of
them is going to be the silver bullet."
The uncertainty that Schneider expresses stems from doubts about
the scope of intellectual property law and, in particular, how patent
and copyright laws apply to the innovative elements embodied in a
software product. "The current environment is such that you don't
know the right thing to do," said Anita K. [ones, head of the Univer-
sity of Virginia Computer Science Department and co-founder of a
small software firm. "So, you act in a very protective fashion."
Assertions like those made by Jones and Schneider raise two fun-
damental questions. Why do firms-even large ones with access to
the best legal advice perceive the need to act so protectively, and
why are they unsure of the applicability of the 200-year-old body of
intellectual property law to software? Some insight into these ques-
tions can be gained by examining the changing and often unpredict-
able economic, technical, legal, and social influences that are shaping
the industry.
A MATURING INDUSTRY
Software is big business, and if forecasts of continued rates of sales
growth exceeding 10 percent are accurate, it will become a much
bigger business during the next decade. Japan, the nations of Western
Europe, and other countries have taken steps to foster the develop-
ment of internationally competitive software industries. Not coinci-
dentally, many of these nations are also wrestling with questions
concerning intellectual property protection for software.
The economic importance of software has risen dramatically over
the last three decades. During the 1960s, computer manufacturers
provided little software beyond the operating system, which was neces-
sary to the functioning of the machine. In the mid- to late-1960s, IBM
began "unbundling" software from its hardware products, and other
computer makers followed the example of the industry leader. In
addition, the service bureaus of computer manufacturers and independ-
ent automated data processing firms were major sources of leased
software, as were computer users who developed their own programs.
The best of the user-developed software was marketed and supported
by computer manufacturers.
OCR for page 7
CHANGING CONTEXTS
7
These changes sowed the seeds of the software industry. In 1970
U.S. expenditures for software products totaled an estimated $500
million. That number grew to an estimated $1 billion in 1975 and
approached $3 billion in 1980 (CBEMA, 19901. In succeeding years,
as noted above, sales, the number of firms, and the number of soft-
ware applications mushroomed.
At some point in the evolution of most industries, annual increases
in sales begin to taper off, and product niches become crowded with
competitors. In the software industry, the growing tide of litigation may
mark the early stages of this maturation process, when firms devote
less time to prospecting, begin to stake out their territories, and start
prosecuting trespassers. The competitive landscape fills up.
Such a scenario is, of course, highly speculative. The general expec-
tation is that innovation and new product development will proceed
at a rapid clip. As Bruce Tognazzini, designer of dozens of programs
for Apple Computer, Inc., said in regard to human interfaces, "You
ain't seen nuthin' yet," and he reminded that "little companies are
the major innovators out there, still." Tognazzini's outlook, with
which many software industry analysts would concur, suggests that
there is still much new territory for software firms to explore.
Nonetheless, the steadily growing number of software firms, both
in the United States and abroad, means that the population of prospec-
tors combing the terrain for new commercial opportunities is also
increasing. Moreover, established firms have already made substan-
tial investments in developing products and building a customer
base for those products. For these firms, innovation can have some
negative consequences. If an innovation by a competitor has the
potential to supplant existing products, it jeopardizes the established
firm's revenue stream and, thus, its return on past investments. Ancl
for the established firm to stay competitive, it will have to make new
investments in research, development, and marketing. Even if the
innovation is the established firm's own creation, it may not translate
into substantial new revenue growth. Rather, it may help the firm
maintain its customer base and avert a loss in sales.
Start-up firms, in contrast, are not constrained by past investments,
nor must they worry about carving up an existing customer base. In
relative terms, start-up firms may realize greater returns on innova-
tion than do firms with established product lines.
Compared with the early days of the software industry, explained
Lewis M. Branscomb, director of the Science, Technology, and Public
Policy Program at Harvard University's John F. Kennedy School of
Government, "there are more stakeholders, and the stakeholders are
generally more heavily invested than before. Large investments pro
OCR for page 8
8
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
duce new inelasticities in the system. Technological changes create
conflict because they are harder to accommodate."
To protect their investments and maintain their position in the
market, firms will take advantage of whatever tools are available,
including intellectual property law. Although the law is not intended
to guarantee profits, ownership rights accorded through the law do
provide innovators the opportunity to earn a return on their creative
efforts in the market, the ultimate judge of the commercial value of a
particular innovation.
Eliminate the financial incentive for making software, suggested
John F. Shoch, general partner at the Asset Management Co., and to-
day's intellectual property disputes would disappear, but so would
the pipeline of products that add new capability after new capability
to the computer. "If software had no value and nobody wanted to
buy it, this would be a very academic discussion," Shoch maintained.
"It would be a wonderful hobby. It wouldn't be a business, and
nobody would care where intellectual property boundaries are drawn
because no one would be making any money, and no one would
bother filing a lawsuit."
Economic analyses provide support for Shoch's contention.
Schumpeter, Scherer (1984), and other economists, Branscomb explained,
have clearly shown that without some form of temporary protection
for inventions, the market, by itself, "will not support the risks and
costs of technical progress." This may be especially true for software,
which can require large expenditures for development but costs virtu-
ally nothing to manufacture-or to copy.
Software's inherent vulnerability to copying seems to underscore
the need for protection that encourages individuals and businesses to
pursue new ideas and new computer applications, producing benefits
for the larger society. But the prospect of private gain, intellectual
property law's incentive for innovation, spawns vested interests and
the inclination for firms to act according to their own needs, which
may not coincide with the public's or even the industry's best inter-
ests. Thus there is also the inclination for firms to wield intellectual
property protection as a tactical weapon against competitors.
There are some indications-and even more allegations-of such be-
havior in the software industry. In a recent law suit, one firm claimed
that a competitor was "using its copyrights to hold the computer in-
dustry hostage by its licensing and litigation practices" (Pollack,
1990~. At issue in several pending law suits is retroactive declaration
of ownership rights. According to some industry observers, firms that
initially promoted widespread use of particular innovations to culti-
vate the market for their own commercial implementations, later
OCR for page 9
CHANGING CONTEXTS
9
have declared the innovations proprietary and demanded royalties
for their use.
Thus questions about the applicability of intellectual property pro-
tection to software must be considered in the context of how firms
are likely to use the available protection to advance their position in
the market.
CHANGING TECHNOLOGY
As the power and speed of computers have increased, so have the
utility, complexity, and, ultimately, the importance of software. Ad-
vances in hardware stimulate new rounds of software innovation,
resulting in new applications that expand the role of software and
move the computer toward its projected incarnation as the universal
machine.
"In every new generation of hardware," Branscomb said, "function
that was previously provided in software is often incorporated in the
hardware, where it can be more efficiently executed. Nevertheless,
as the technology evolves, new layers of software are developed,
which bring new functions to the hardware, and this ever-growing
bubble of capability seems not only to be adding new function, but
an even larger fraction of the function is delivered through layers of
software."
One consequence of this evolution is software's growing share of
the expense associated with computer systems. Another is difficult
questions about where value, or the intellectual property, lies in soft-
ware and how best to protect those elements that surpass a certain
threshold of creativity. While once proscriptions against outright copy-
ing of program code might have been accepted as sufficient means
to address abuses that undermine intellectual property rights, today
the concepts of value and sufficient creativity require clarification to
guide the application of the law to issues that no well beyond the
copying of code.
. ~ . . .
Although these concepts are subject to interpretation, a recognized
criterion of value is the nature of the interaction between a software
application and the user. "As time has moved on," explained Schneider
of IBM, "more and more of the creative output has been focused on
interfaces, and that is simply a reflection of the fact that in order to
grow in our industry we are spending less energy figuring out how
to do task dispatching and memory management and more energy
focusing on how to interface with the end user and how to expand
the marketplace."
The emphasis on developing software that mimics and comple
OCR for page 10
10
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
meets the behavior of the human user makes ergonomic factors im-
portant determinants of value in software. Many in the industry be-
lieve that limiting intellectual property protection solely to the copy-
ing of code is an inadequate safeguard for the creativity, as well as
the underlying financial investment, embodied in software that, in
effect, meshes with the intuitions, needs, and predilections of the us-
er. While charges of verbatim copying have not disappeared, software
firms are now asking the courts to determine whether competitors
copied the "look and feel" or "structure, sequence, and organization"
of a software product, despite substantial differences in the code of
the original and competing products. While all courts agree that a
program's functionality is not copyrightable, courts disagree on the
extent to which particular elements of a computer program constitute
functional subject matter.
Interfaces, generally defined as the boundary between two envi-
ronments, are critical to satisfying user demand for achieving the com-
patibility and interoperability of independent software applications.
As the web of computers and related information technologies grows,
the value and utility of software are largely defined by its role in
some larger system by its ability to interface and work with other
applications. As a result, users are objecting to obstacles to interopera-
bility imposed by the idiosyncrasies of proprietary system interfaces.
Computer manufacturers and software developers are responding
to this demand, as the rapid growth of networking attests and the
momentum for so-called open systems also grows. But, again, these
technological changes are altering the identity of software and generat-
ing new questions, including how to price software.
Software applications, according to Esther Dyson, publisher of the
software industry newsletter "Release 1.0," are evolving from discrete
packages of functionality into collections of functions that users can
invoke individually. "Software is going to be much more fluid," she
said. "You won't know what computer it runs on. You are going to
sit at a terminal and ask for a service. Where that service gets executed
you probably won't know." And during the execution of that service,
Dyson continued, functions performed by many different pieces of
software- residing perhaps on many different machines may participate
in accomplishing a specific task. In essence carrying out a user request
will create the software equivalent of "going to a prime contractor
who uses a variety of subcontractors." Such fluidity and interoperabil-
ity among software applications will undermine existing pricing sys-
tems. "If I use three pieces of software but only a small part of the func-
tionality of each," Dyson asked, "whom do I pay? How do I get charged?"
The answers are not clear. "We are not at all sure we know how to
OCR for page 11
CHANGING CONTEXTS
11
control the assets" software-once they are available in a distrib-
uted computing network, said Schneider of IBM. ,'The free flow
through LANs [local area networks] says we have gotten to the point
where we are not sure how to bill for software anymore." One po-
tential pricing mechanism is an enterpris~wide contract, in which software
suppliers receive a fraction of client revenues. If software pricing is
troublesome, so too will be the allocation of royalties for its use.
Even more problematic are questions about the rights of owner-
ship accorded to each of the application components that are combined
and recombined to create a customized work of software at the user's
behest. Today, questions about what constitutes fair use of software
elements and what distinguishes a derivative work from an original
one focus primarily on the behavior of designers and program
implementors. Tomorrow, Dyson noted, users who create software as
a byproduct of running a business (and potentially a product or source
of competitive advantage) will become part of the conundrum.
In this fluid environment, the corollary to the question of what
elements of software warrant protection becomes a critical issue. That
is, if the goal of interoperability is to be fully realized, then the soft-
ware industry will have to determine what elements should not be
protected, and therefore freely licensed. For example, several forum
participants advocated "open" program-to-program interfaces. Objec-
tors to this proposal argued that the decision of whether to declare
an interface proprietary or open should rest with the innovator. The
popularity of a widely used interface should be incentive enough to
make it generally available. However, software vendors want to be
reassured that they do not lose the rights to the underlying code
when they publish the interfaces, and users want reassurances that a
royalty for the interface will not be imposed once its popularity is
established and its use becomes a necessity.
Yet another technological development automated reverse engi-
neering technology has the potential to complicate the application
of intellectual property law to software. Already available technology
can in certain circumstances decompile, or translate, computer code
into a higher-level language, mechanically restructure the program,
and generate new computer code that, by appearance, is substantially
different from the original. Some forum participants minimized the
potential for abuses posed by this technology, at least in its current
form. Branscomb, for example, noted that the technology "works
only on clean, well-structured object [machine-readable] code." The
recompiled code, he added, "is still undocumented and will be very
hard to maintain." But if abuses do arise, several legal experts pointed
out, intellectual property law may not be an effective means of re
OCR for page 12
12
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
dress. If the copied version and the original are substantially dis-
similar and there is no evidence of reverse compilation, they said,
judges and juries will be hard pressed to find infringement.
CHANGING LEGAL CONTEXT
The constitutional foundation of intellectual property law precedes
by nearly two centuries the introduction of computers and software.
Obviously, the framers of this body of law never anticipated computer
software. Nor, however, did they foresee such developments as mo-
tion pictures, record albums, compact disks, and numerous other tech-
nologies and expressions now protected by copyright law. To some,
the demonstrated flexibility of intellectual property law strongly indi-
cates that the legal system can continue to adapt to new technologies
and to handle questions related to software. Unlike most other tech-
nologies, however, software may be eligible for both patent and copyright
protection, which introduces a significant source of uncertainty.
"EPlatent and copyright law have survived as long as they have sur-
vived," maintained Frank Ingari, head of marketing and development
in the Spreadsheet Division of Lotus Development Corp., "because they
have shown a remarkable capability to deal with wave upon wave of
technology and wave upon wave of innovation and industrial develop-
ment."
Those who are confident in the providence of the legal system see
today 's intellectual property disputes as the consequence of an inevitable
gap between the rate of technological progress and the pace of the
law. Confusion and uncertainty will diminish, according to this view,
as courts resolve today's issues. Ideally, the decisions will yield predict-
able rules for firms to follow and guideposts for addressing unforeseen
issues that are certain to arise with new developments in the rapidly
changing field.
Computer scientists respond, however, with "What about tomorrow's
issues?" Many technical and legal experts are not convinced that
today's disputes are the manifestations of transient legal problems.
They are less confident in the ability of existing intellectual property
law to be stretched to accommodate features of software that, they
contend, are ill-served by the traditional models of legal protection.
Vanderbilt University law professor Jerome H. Reichman went so far
as to predict that continuing to stretch copyright and patent laws
beyond their traditional scope will lead to "unsupportable restraints
of trade and a breakdown of the world's intellectual property system."
Others troubled by the current state of affairs in the software indus-
try called for a reassessment. '~We need to think again and we need to
OCR for page 13
CHANGING CONTEXTS
13
be willing to question some of the most fundamental assumptions"
of intellectual property law, said Randall Davis, associate director of
the Artificial Intelligence Laboratory at the Massachusetts Institute of
Technology.
Branscomb of Harvard suggested that the technical community's
discomfort with the law may stem from a seeming incongruity between
law and science. Therefore one might question the validity of applying
legal precedents to what many technical experts believe is an un-
precedented technology. "It is entirely possible," Branscomb said,
"speaking from the scientist's point of view, that judges make correct
and just findings in each case, while the opinions that give the ration-
ale may look to the scientist as though they are stretching paradigms
of early technologies to fit the frame of new ones, perhaps in an
awkward way. Thus it is not unreasonable to ask, if the courts give
us the right- that is, fair and just answers, based on ill-fitting models:
Does that matter?"
It does matter, according to Stanford University law professor Paul
Goldstein, if the decisions do not clarify the law. "One of the law's
roles in society is to reduce uncertainty," he said, distinguishing legal
risks from the uncertainties of the marketplace, which are inherent to
all forms of business. To software industry commentator Dyson,
clarity and consistency may be as important as legal content. "I
don't think anyone really cares what the rules are as long as it is
clear what they are," she said. "The market can adjust."
So far, however, judicial decisions in software-related copyright
infringement cases have not been consistent, maintained Ronald S.
Laurie, head of the computer law group in Irell & Manella's North-
ern California office. This same problem, Laurie predicted, is likely to
emerge in the application of patent law to software.
"I submit," he said, "that all of the issues that we are familiar with
and that have caused such controversy and emotion in the copyright
area concerning 'structure, sequence, and organization' and levels of
abstraction are going to be reenacted in the patent context of the doc-
trine of equivalents." (See chapter 2 for a discussion of this doctrine.)
Patent protection, itself, exemplifies how the application of intel-
lectual property law to software has changed. Following a 1972 Supreme
Court decision, Gottschalk, Acting Commissioner of Patents v. Benson et
al. (409 U.S. 63, 93 S. Ct. 253 [19721), widely interpreted as rendering
software as unpatentable subject matter separate from novel hard-
ware, producers were discouraged from filing patent claims for their
inventions. A 1981 Supreme Court decision, Diamond v. Diehr (450 U.S.
175), however, has been interpreted as restoring the protection for
software that meets the stringent standards of patent law. Since then,
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14
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
the U.S. Patent and Trademark Office has been awarding patents for
software-related inventions, and the number of claims filed for pat-
ents has been increasing steadily.
Many in the software industry welcome the protection, believing
that patent law is the proper legal context in which to address some
issues that, because of the presumed unavailability of patent protec-
tion, were forced into the domain of copyright law. Critics argue,
however, that making patent protection available now amounts to
changing the rules in the middle of the game. Some of these critics
predict that patent protection will lead to a restructuring of the soft-
ware industry.
"We don't have right now a clear notion about the boundaries of
either patent or copyright [lawl," said Pamela Samuelson, law professor
at the University of Pittsburgh. "And we don't have a sense of the
relationship between those two laws.... The lawyers out there have
radically different views about that, and since they will give advice
based on those very different views, we are in for some litigation in
the future."
UNPREDICTABLE FUTURE
Questions concerning intellectual property protection are a wedge
that opens the door to an even larger and perhaps more complex set
of issues that arise as society proceeds in the Information Revolution.
"We still are in a stage of implementing the obvious in new ways,"
said Ernest E. Keet, partner at Vanguard Atlantic Ltd., the Connecti-
cut-based merchant banking firm. "We really still have a long way to
go to apply this new technology the computer and software...."
Today's debate focuses primarily on software as a tool for storing,
processing, and presenting textual information in alphanumerical or
graphical form. But tomorrow, the debate will almost certainly be ex-
panded to include questions about rights of ownership to information
itself and to the ideas embodied in that information. And that infor-
mation will not only be blocks of text and tables of numbers, but also
sounds and images combined and packaged in digital form. The
possibilities for new products and service created by freeing infor-
mation from the constraints of analog media for example, sound
from vinyl and tape, and images from photographs, tape, and film-
are seemingly endless, barely hinted at by such terms as multimedia,
hypermedia, infotainment, and edutainment.
"In the 30 years I have been in this business," said Harry Reinstein
of Aion, "I know of no time that I could have accurately predicted
where we would be in 5 years."
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CHANGING CONTEXTS
15
Reinstein is hardly alone. Consider a prediction made in the Wall
Street fournaZ in a series of future-looking articles appearing during
the mid-1960s: By the year 2000, the United States would have about
220,000 computers. Compare the reality: In 1990, an estimated 50
million computers were in U.S. homes and businesses. Wholly unan-
ticipated by virtually everyone was the emergence of the personal
computer, as well as a host of other information-related technologies.
The more than 200-fold difference between projection and reality at
the start of the decade leading into the next century is testimony, the
WaZZ Street Journal said 25 years later, that the "electronic revolution
has exploded beyond the dreams of even the most breathless early
enthusiasts' visions of the future" (Miller, 1989~.
To a great degree, prospects for realizing the possibilities now
germinating in the minds of scientists, engineers, designers, and invest-
ors hinge on advances in software. If computers are truly to become
the universal machine in the global information-based economy that
is now evolving, it is software that will match the ever-increasing
computational power of hardware with ever-more-sophisticated hu-
man needs and expectations.
For example, many experts believe that the next great leap in the
problem-solving capabilities of computers will spring from parallel
computing, in which interconnected machines, from two to tens of
thousands, work on separate pieces of the same problem. Although
embryonic versions of parallel computers already exist, the utility of
such machines is constrained. "We do not have the algorithms that al-
low us to take some data-processing problem or transaction-process-
ing problem and effectively break it up into small pieces and bring
1,000 or even 5,000 processors to bear on the problem," explained
Michael O. Rabin, professor of computer science at Harvard Univer-
sity and Hebrew University. What is needed, he added, are "com-
pletely new algorithms." In Rabin's view, one potent incentive would
be to provide stronger intellectual property protection. He expressed
concern that without the incentive of exclusive rights of ownership,
innovators might ignore the need for algorithms, and progress toward
effective parallel computing and its numerous anticipated benefits
might be impeded. Others do not share this view, citing the healthy
growth of the research community in this area.
But a corollary to Rabin's assertion, one often raised as an objec-
tion to the patenting of algorithms and so-called software-related
inventions, is that exclusive ownership of innovations grants monopoly
power to inventors. Monopoly control, goes the argument, may cor-
don off the rest of the industry from building on fundamental break-
throughs. The public, in turn, might not reap the full conunercial
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16
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
benefits of major advances until after the 17-year period of patent
protection expires.
Other issues lurking on the horizon stem from the differing legal
treatment given to different manifestations of information. Unlike
numbers and words, noted Francis Fisher, images, under existing
law, can be subject to rights. Yet, property rights in images may be
inconsistent with the degree of freedom we want in communicating
ideas that are incorporated in images.
Images are just the beginning. Observed Fisher, "We can even
foresee the not distant day when the stuff of communications will
include expressions and ideas that themselves are intelligent. That
is, they will incorporate some sort of computer program. There may
then be little distinction between what is a piece of software program
and what is a piece of information on which that program operates."
In business and other realms of human activity where information
is the fundamental item of value, notions of what software is will
become all encompassing, predicted Esther Dyson. "The software
business is virtually everybody," she said; "it is not a type of intellectual
property. It is the representation of most intellectual property." In-
creasingly, software defines and embodies business practices, she said.
For example, tax accounting and other procedures are represented
and embodied not just in manuals but also in the applications that per-
form them.
CONCLUSION
The path into the Information Age is not well marked, but innova-
tion in software is necessary to pave the ``ray and to ensure a steady
rate of progress. Indeed, software not only sets the pace but also
limits it. While the speed and power of computers double about
every two years, software applications that harness this power for
human uses evolve at a much slower rate, creating an ever-widening
gap between expectation and reality.
"EClompared to computer hardware," said Harvard's Branscomb,
"software is still the Achilles heel of the computer and communica-
tions industries, responsible for more shipment delays, cost overruns,
and user frustrations by a mile."
Branscomb later warned against the complacency that can arise
when the software industry's past is used as the basis for projecting
its future performance. "There is plenty of need," he said, "for new
creative ideas, for the skills, tools, and effort to realize software ideas
in code that is elegantly and reliably expressed. It is, in other words,
not sufficient, in my opinion, to simply say that because software
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CHANGING CONTEXTS
17
revenue doubles every five years and the United States has a prepon-
derantly favorable position in world markets, then everything is there-
fore as good as it either could be or should be."
Intellectual property law figures prominently in the industry's fu-
ture, setting the rules that guide the behavior of firms and individual
inventors. Although optima are rarely achieved in real life, the law
helps set the course toward achieving the goals that are deemed to be
in the public interest. Among these goals, according to Branscomb,
are encouraging the creation and diffusion of new concepts and ideas,
as well as the dissemination of useful innovations based on these
new ideas; encouraging the development of interoperability and con-
nectivity in the interest of equitable public access to the fruits of in-
formation technology; generating the investments needed to advance
the industry and the knowledge infrastructure on which the industry
technological progress is based; and assuring equitable allocation of
the benefits of investment, creative genius, and hard work in an effi-
ciently functioning marketplace.
"All of that needs to be accomplished on a worldwide level," Brans-
comb said, ',because software is, of course, a mapr element in international
trade, having not only the feature that it is cheap to replicate but also
that it is cheap to communicate."
At this juncture, well-intentioned people disagree strongly on what
legal environment is best for the technology, the industry, and, most
important, for the public" today and tomorrow. What is clearly needed
is balance: balance between private and public interest, balance between
the need to protect the essence of innovation and the need to share
for the sake of compatibility and interoperability, and balance between
the need to foster leaps in the technology and the need to allow
incremental improvements in the existing base of technology.
The legal uncertainties that cloud the software industry today indi-
cate that the proper balance has yet to be achieved. Determining
where to position the fulcrum of intellectual property law will not be
easy. "I can see how too-protectionist a view could hurt our company,"
said Ingari of Lotus, "and, obviously, I can see how not enough pro-
tection could hurt our company."
Added ON Technology, Inc.'s Chairman Mitchell Kapor: "The digital
revolution has just started. I cannot tell you how it is going to come
out. I can see some of the dynamics. Market-mediated innovation is
definitely the way to go, and my bottom line on the intellectual proper-
ty front is let us not screw it up. The agonizing thing is, I cannot tell
whether that means do nothing or do something radical. So, I am
here to sort that out, but I know that the stakes are large."
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INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
NOTES
1. Indeed, the Free Software Foundation (FSF) uses copyright in the form of a
licensing agreement Stallman calls "Copyleft," but for an opposite purpose: to prevent
its software from being incorporated into a priced product. FSF work revolves
around products labeled GNU, for GNU's Not Unix. GNU software can run on Unix
without being Unix and therefore without being subject to Unix licensing constraints
(Garfinkel, 1991).
2. Use of multiple forms of protection may also stem from other causes. After all,
a homeowner who installs strong locks and a burglar alarm does not do so because of
uncertainty about the laws regarding burglary. However, the uncertainty that pre-
vails in the software industry adds to the motivation for seeking multiple le-
gal protections.
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How do you get innovation to happen faster? Do you allow
people really strong protection of their ideas so that it is worth
the effort to take giant leaps? Or do you make protection weak
so that innovation can be done all incrementally7
Bruce Tognazzini, Evangelist, Apple Computer, Inc.
We have few phenomena more harmful to technological progress
than [legal] uncertainty.
Paul Goldstein, Stella W. and Ira S. Lillick Professor of Law,
Stanford University
Copyright does not protect function. It does protect form, and if
the two are bound together, we have a heck of a problem.
Dennis S. Kar~ala, Director, Center for the Study of Law,
Science, and Technology, Arizona State University
Until we have a clearer picture about the patent-copyright inter-
face, I think we are going to be in some trouble.... Copyright is
not supposed to pick up for what is to some extent the bad busi-
ness of the patent system.
Pamela Samuelson, Professor of Law, University of Pittsburgh
If we continue to stretch these paradigms [patent and copyright
law] too far in order to accommodate the subject matters, . . . I'm
afraid we are going to have a breakdown and a lot more problems
than we think we are solving.
Jerome H. Reichman, Professor of Law, Vanderbilt University
If you think you are getting inconsistent and irrational decisions
in the courts now, create a new statute with no precedents and
watch what happens.
Ronald S. Laurie, Partner, Irell ~ Manella
Representative terms from entire chapter:
property law
