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lnTeLLeGTuaL
PROPERTY Issues
In soFTwaRe
Steering Committee for Intellectual Property Issues in Software
Computer Science and Telecommunications Board
Commission on Physical Sciences, Mathematics, and Applications
National Research Council
National Academy Press
Washington, D.C. 1991
OCR for page R2
NOTICE: The project that is the subject of this report was approved by the Governing
Board of the National Research Council, whose members are drawn from the councils
of the National Academy of Sciences, the National Academy of Engineering, and the
Institute of Medicine. The members of the committee responsible for the report were
chosen for their special competences and with regard for appropriate balance.
This report has been reviewed by a group other than the authors according to procedures
approved by a Report Review Committee consisting of members of the National Academy
of Sciences, the National Academy of Engineering, and the Institute of Medicine.
The National Academy of Sciences is a private, nonprofit, self-perpetuating society
of distinguished scholars engaged in scientific and engineering research, dedicated to
the furtherance of science and technology and to their use for the general welfare.
Upon the authority of the charter granted to it by the Congress in 1863, the Academy
has a mandate that requires it to advise the federal government on scientific and
technical matters. Dr. Frank Press is president of the National Academy of Sciences.
lithe National Academy of Engineering was established in 1964, under the charter of
the National Academy of Sciences, as a parallel organization of outstanding engineers.
It is autonomous in its administration and in the selection of its members, sharing
with the National Academy of Sciences the responsibility for advising the federal
government. The National Academy of Engineering also sponsors engineering pro-
grams aimed at meeting national needs, encourages education and research, and recognizes
the superior achievements of engineers. Dr. Robert M. White is president of the Na-
tional Academy of Engineering.
The Institute of Medicine was established in 1970 by the National Academy of Sci-
ences to secure the services of eminent members of appropriate professions in the
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by both Academies and the Institute of Medicine. Dr. Frank Press and Dr. Robert M.
White are chairman and vice chairman, respectively, of the National Research Council.
Support for this project was provided by the following organizations and agencies:
Air Force Office of Scientific Research (Grant No. N00014-87-J-1110), Apple Computer,
Inc., Control Data Corporation, Cray Research, Inc., the Defense Advanced Research
Projects Agency (Grant No. N00014-87-J-1110), Digital Equipment Corporation, IBM
Corporation, the National Aeronautics and Space Administration (Grant No. CDA-
860535), the National Science Foundation (Grant No. CDA-860535), and the Office of
Naval Research (Grant No. N00014-87-J-1110).
Library of Congress Catalog Card Number 90-62783
International Standard Book Number 0-309-04344-1
Available for sale from:
National Academy Press
2101 Constitution Avenue, NW
Washington, DC 20418
S227
Printed in the United States of America
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STEERING COMMITTEE FOR INTELLECTUAL PROPERTY
ISSUES IN SOFTWARE
LEWIS M. BRANSCOMB, Harvard University, Chairman
PAUL GOLDSTEIN, Stanford Law School
ANITA K. JONES, University of Virginia
MITCHELL D. KAPOR, ON Technology, Inc.
MICHAEL O. RABIN, Harvard University
PETER R. SCHNEIDER, IBM Corporation
MARJORY S. BLUMENTHAL, Staff Director
C.K. GUNSALUS, CSTB Consultant
MARK BELLO, CSTB Consultant
DONNA F. ALLEN, Administrative Secretary
r
· . ~
lll
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COMPUTER SCIENCE AND TELECOMMUNICATIONS BOARD
JOSEPH F. TRAUB, Columbia University, Chairman
ALFRED V. AHO, AT&T Bell Laboratories
JOHN SEELY BROWN, Xerox Corporation PARC
FRANK P. CARRUBBA, Hewlett-Packard Company
DAVID I. FARBER, University of Pennsylvania
SAMUEL H. FULLER, Digital Equipment Corporation
JAMES FREEMAN GILBERT, University of California at San Diego
WILLIAM A. GODDARD III, California Institute of Technology
JOHN E. HOPCROFT, Cornell University
MITCHELL D. KAP OR, ON Technology, Inc.
SIDNEY KARIN, San Diego Supercomputer Center
LEONARD KLEINROCK, University of California at Los Angeles
ROBERT LANGRIDGE, University of California at San Francisco
ROBERT L. MARTIN, Bell Communications Research
WILLIAM F. MILLER, SRI International
ABRAHAM PELED, IBM T.~. Watson Research Center
RAT REDDY, Carnegie Mellon University
JEROME H. SALTZER, Massachusetts Institute of Technology
MARY SHAW, Carnegie Mellon University
ERIC E. SUMNER, Institute of Electrical and Electronics Engineers
IVAN E. SUTHERLAND, Sutherland, Sproull & Associates
GEORGE L. TURIN, Teknekron Corporation
VICTOR VYSSOTSKY, Digital Equipment Corporation
WILLIS H. WARE, The RAND Corporation
WILLIAM WULF, University of Virginia
MARJORY S. BLUMENTHAL) Staff Director
ANTHONY M. FORTE, Senior Staff Officer
RENEE A. HAWKINS, Staff Associate
HERBERT LIN, Staff Officer
DAMIAN M. SACCOCIO, Staff Officer
DONNA F. ALLEN, Administrative Secretary
OPHELIA BITANGA-BRICENO, Project Assistant
CATHERINE A. SPARKS, Senior Secretary
TV
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COMMISSION ON PHYSICAL SCIENCES, MATHEMATICS,
AND APPLICATIONS
NORMAN HACKERMAN, Robert A. Welch Foundation, Chairman
PETER J. BICKEL, University of California at Berkeley
GEORGE F. CARRIER, Harvard University
HERBERT D. DOAN, The Dow Chemical Company (retired)
DEAN E. EASTMAN, IBM T. I. Watson Research Center
MARYE ANNE FOX, University of Texas
PHILLIP A. GRIFFITHS, Duke University
NEAL F. LANE, Rice University
ROBERT W. LUCKY, AT&T Bell Laboratories
CHRISTOPHER F. McKEE, University of California at Berkeley
RICHARD S. NICHOLSON, American Association for the Advancement
of Science
JEREMIAH P. OSTRIKER, Princeton University Observatory
ALAN SCHRIESHEIM, Argonne National Laboratory
ROY F. SCHWITTERS, Superconducting Super Collider Laboratory
KENNETH G. WILSON, Ohio State University
NORMAN METZGER, Executive Director
v
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Preface
Computer software is a remarkable human achievement whether
measured by its extraordinary power to orchestrate computer hardware
to carry out useful tasks; the creativity, talent, and teamwork required
for its creation; the rapidity with which it is advancing technically; or
the phenomenal growth of software as an economic activity. Nothing
in human experience with technology is quite like it.
Twenty-five years ago sales of computer programs in the United
States totaled an estimated $250 million. Today several thousand U.S.
software producers ranging from individuals to highly organized
teams of hundreds or even thousands of computer scientists, software
engineers, and programmers-generate revenues in the tens of billions
of dollars. The systems and the application software they produce en-
able computers to support an ever-growing number of human activities.
In the early years of the Information Age, advances in computer
and communications hardware drove progress in the computer-com-
munications industry. Today it is software that adapts the hardware
to the infinite range of human uses that gives the computer its personal-
ity and exploits its power. The manufacturers of computer hardware
and software still gain a majority of their revenue from the hardware,
but when the software created by users is included, people spend
more on software than on hardware. For vertically integrated firms
like IBM, software is, on the average, more profitable, and revenue
from software is growing faster than revenue from hardware, in spite
of the fact that proven software functions are continuously integrated
into new hardware designs, and software designers move on to tackle
yet newer tasks.
· ~
V11
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Vlll
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
Thus the software industry is the enabling "complementary asset"
for the hardware industry; those who master the challenge of creating
good software can expect to be the leaders in the world of informa-
tion machines and services. No one is prepared to predict that the
extraordinary rate of growth and change is about to stop, or even
slow down substantially. Both new applications and new computer
architecture will continue to change the way we work, create, learn,
communicate, and play.
Why then are computer scientists and software entrepreneurs ner-
vous about the court decisions that guide the arcane legal world of
intellectual property protection? And why do some intellectual property
lawyers become even more nervous when scientists question the ration-
ale underlying the current structure of legal protection and even sug-
gest that it may be inadequate or cause serious problems in the future?
The world of software has changed dramatically since the emergence
of commercial software in the 1950s. Initially the work of mathemati-
cians and scientists who were intimately involved in building computer
hardware, software was the creative expression of gifted individuals.
With IBM's decision to "unbundle" software pricing it separately
from the hardware and later the development of high-level design
languages to lower the technical barriers to programming, the team
approach to software production began to look much more like the
modus operandi in the more traditional areas of commercial product
design and testing.
Today in the largest firms, products comprising millions of lines of
"code" are produced in industrial environments against committed
plans for function, cost, and date of delivery. But even in these
mature commercial environments, the role of the designer who is
able to keep the conception of system-level design in mind, and who
oversees the integration of hundreds of modules into a functioning
whole, is still the key to product success. An evolving combination
of intuition, prior experience, and expertise in computer and cognitive
science go into the production of "user-friendly," efficient, error-free code.
But the institutional structure of the industry is maturing. There
are large numbers of firms with market positions to protect, with
customers dependent on the continuous, incremental improvement
of their applications. The magnitude of the up-front investments
required to create competitive software products, and of the down-
stream investments needed to sell and support them, inevitably gives
rise to conflicting desires to encourage innovation while preserving
stability in a huge, competitive industry.
The maturing of the industry is not the result of saturating growth
but reflects instead the industry's success in becoming integrated into
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PREFACE
IX
the fabric of modern society. End users want to assemble for their
needs the best of the industry's output. They want familiar, reliable,
and predictable ways to do things. They cannot sort through thou-
sands of packages to find the best ones; they are demanding that the
industry through strategic alliances, standards development, or simply
response to market forces-provide more interoperability, consistent
interfaces, and very high levels of reliability.
Market entry for new innovators is still wide open, however, as far
as industry structure, the legal environment, and emerging markets
are concerned.
But the cost of entry is soaring; negotiating compatibility with other
products, testing, advertising, and providing customer support and
continuous product evolution as the hardware and software around
the product change-all entail high risks and heavy up-front investment.
No wonder those who spend millions of dollars to develop and bring
to market products that cost virtually nothing to replicate or manu-
facture want assurances that they will have a chance to enjoy the
fruits of their labors.
Three fears seem to be dominant in the minds of industry leaders:
· fear of loss of freedom of action,
· fear of litigation over possible infringement of patents and copy-
rights, and
· fear of unfair business practices that deny risk-takers the fruits
of their creativity.
A fourth fear is voiced by the scientists and entrepreneurs entering
the market:
.
fear that business practices and legal constraints will slow down
the process of shared learning on which future progress rests.
This is the very process that led the framers of the Constitution to
enshrine copyright and patent law with constitutional authority. A
fifth fear is less frequently voiced, perhaps because the public has
been so well served by software innovators of the last 40 years, but
nevertheless deserves consideration:
.
fear that the public interest in software will be subordinated to
the interests of the industry.
From a bystander's perspective, legal protection of software today
may not seem very complicated, nor in serious difficulty. Relatively
few software patents have been issued, and even fewer have been
tested in court. Copyright protection is almost universally available,
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x
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
is inexpensive, and little constrains the entry of new firms or the
growth of the industry. Contractual commitments by buyers to sellers
are generally respected, especially in business environments.
Freedom of action has been the hallmark of the first 40 years; its
attraction for innovators is the very factor that breeds fear of its loss.
Larger computer hardware firms extensively cross-license their patents,
preserving freedom to innovate in the hardware. To the extent that
software copyright does not grant exclusivity to ideas or to function,
but only to their expression, that freedom of action is preserved, for
the software industry as well.
But for those inclined to worry about the future there are worries
enough. At the practical level, software vendors are using multiple
levels of protection: trade secret rights, copyright law, publishing
only in hard-to-understand "object code," binding users by contract,
and increasingly- seeking patent protection as well. On the face of
it, this defense-in-depth strategy seems to suggest that the firms
are less than fully confident that the property protection system is
robust.
A second concern arises from the tensions of stretching a system
designed for works of art and literature to works of great value for
their utility (as well as occasional intellectual elegance). Is a copyright
violated by a product whose form and function emulate another's
but whose code is never identical? Is it legitimate to use a reverse
compiler to create source code from a copyrighted product shipped
only in object code, and then recompile to a different machine a re-
structured version of the original? How will the notion of "copying"
be applied when a user's inquiry for information from distributed
databases in communications networks momentarily touches small
parts of dozens of separately copyrighted programs? Lawyers are
perhaps more comfortable with the need to stretch and adapt legal
precedents to changes in technology than are scientists. This happens
in every branch of the law. But many scientists and some legal scholars
see the stretching of patent and copyright law to cover the rapidly
changing field of software property as a source of discomfort, if not
of serious concern.
The third concern is seen by some as a little black cloud on the
horizon: the resurgence of patent filings on inventions primarily
embodied in software. Some may see this trend as offering an alter-
native to the pressure to distort copyright law to protect the most
creative elements of a program rather than just a boring sequence of
hexadecimal numbers. But others ask, with the standards as yet un-
settled for software "inventions," what costs will be added to the
development process when software developers must ensure that the
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PREFACE
Xl
protected ideas of others have not been independently created by
their staffs. They fear that software patents, if not strictly managed
by the Patent and Trademark Office, will be a boon to litigators and a
nightmare for software developers. Still others believe that with so
many software inventions already in the public domain, few patents
will withstand challenge, but the costs of challenging will be high.
Perhaps these are just "growing pains" of a maturing industry, and
the gains afforded by widespread use of software patents will more
than make up for the costs. But perhaps not.
The fourth, and most important, concern is over the ability of the
courts and the Congress to keep up with the pace of technical change.
Although copyright has proved elastic enough to extend from maps
and charts in the 18th century to books, works of art, movies, and audio
and video tapes, none of these technologies has exhibited the pace of
change of software. When computer scientists and entrepreneurs try to
understand the rationales used by judges to adapt the law to technical
change, they get more nervous still. Many cases whose resolution strikes
the layman as fair and judicious are explained in opinions that des-
cribe the technology (often by analogy) in ways the scientists cannot
easily accept. That judges may not think like computer scientists does
not mean they make bad law. But it may amplify the concerns of tech-
nical people trying to guess where the law is going next. And it
motivates legal scholars to try to understand the industry's technical
destiny as the reference frame for evaluating the legal structure on
which future decisions will rest.
That lawyers and scientists approach this subject differently will
surprise no one. Technical people set their sights on the future, prob-
ing the limits of today's technology and laying the groundwork for
tomorrow's innovations. Change, surprise, even disruption are not
the enemies of science, but rather its purpose. The law values coher-
ence with the past, predictability, and a broad consensus. Judges
and attorneys build on precedent to deal with questions arising from
new technology. In so doing they build an architecture of reason-
ing on which the framework for resolving future issues must rest.
Scientists, engineers, and software designers sometimes question the
appropriateness of that architecture for what they see coming in the
technology.
It is not just legal and technical experts who sometimes have dif-
fering views. The perspectives of academic computer scientists sometimes
differ from those of software entrepreneurs; legal scholars tend to be
more critical of the existing protection regime than do the litigators
and corporate counsel.
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· ~
All
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
NATURE OF THIS PROJECT
Would a wide-ranging discussion between computer and legal ex-
perts help to clarify the basic issues that set directions for the future
in the field of intellectual property protection for software?
That is the basic question that motivated a workshop held on
September 12-13, 1989 (Appendix A), and a forum discussion in De-
cember 1989 (Appendix B) sponsored by the Computer Science and
Technology Board (since renamed the Computer Science and Telecom-
munications Board) of the National Research Council. About 100
legal scholars, attorneys, computer scientists, software designers and
entrepreneurs, and business and government executives aired the
views that are summarized (with updates as appropriate) in this re-
port.
The forum discussion did not seek to find a consensus, nor did it
entertain collective recommendations. Rather, the goal was to foster a
common understanding among individuals and groups who have a stake
in the issues but who have had few opportunities to share their points
of view. The discussion did not seek to deal with current controversies,
and certainly not with current litigation. Instead the forum sought to
take a step back from the debate and explore basic concepts both technical
and legal that are too often obscured by polemics.
The success of the forum, and of the two-day workshop that pre-
ceded it, lies in the often expressed view at the end of the meetings
that a number of important issues explored there deserved to be en-
gaged by a mixed group of legal and technical experts in much greater
depth. This reflection of confidence that differing perceptions could
be bridged provides a basis for considerable optimism about the value
of this kind of exchange.
ORGANIZATION OF THE REPORT
This publication is based primarily on discussions at the two-day
forum and at the preceding two-day planning workshop attended by
many of the speakers at the fortune. It also draws on articles and re-
ports distributed to forum and workshop participants, as well as on
other informational materials. These additional sources are identified
within the text.
The following chapters describe the spectrum of legal and techni-
cal perspectives on intellectual property protection for software. Chap-
ter 1 discusses some of the changing technical, economic, and legal
circumstances that underlie the debate over the adequacy of intellec-
tual property protection for software. In chapter 2, the underlying
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PREFACE
· · ~
alit
tenets of U.S. copyright, patent, and trade secret laws are described,
as are issues that have arisen in the application of these laws to
software. Chapter 2 also discusses international treatment of soft-
ware as intellectual property. The attributes of software, the nature
of the process for designing and developing software, and the rel-
evance of both to determining which elements of software merit pro-
tection are examined in chapter 3. Chapter 4 takes a closer look at
legal uncertainties, how software firms are responding to these un-
certainties, and how intellectual property protection can influence
standardization, including ongoing efforts to increase the interoperability
of software applications. The final chapter, Chapter 5, presents some
forum participants' views on how to improve the fit between software
and intellectual property law.
The primary authors of this report are C.K. Gunsalus, associate
vice chancellor for research at the University of Illinois at Urbana-
Champaign and consultant to the Computer Science and Telecommu-
nications Board (CSTB), and Mark Bello, also a consultant to the CSTB.
The project was organized by C.K. Gunsalus in conjunction with Mar-
jory Blumenthal, CSTB staff director. Their authorship was performed
under the supervision of the steering committee, which was responsible
for the conduct of the workshop and the forum and which expresses
its deep appreciation for the work of the staff and consultants. While
the authors and the steering committee members have done their
best to make this account faithful to the views expressed at the meeting
and in other sources, we request that readers not use this document
to attribute the views of forum participants who are quoted. Please
contact them directly for full and in-context accounts of their views.
Lewis M. Branscomb, Chairman
Steering Committee for Intellectual Property
Issues in Software
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Contents
1 Changing Contexts for the Software Industry
A Maturing Industry, 6
Changing Technology, 9
Changing Legal Context, 12
Unpredictable Future, 14
Conclusion, 16
Notes, 18
2 Background to Basic Legal Issues
Copyright, 22
Expressions, Ideas, and Functions, 24
What Constitutes Copyright Infringement?, 27
Trade Secret, 29
Patent, 31
Characteristics of Patents, 32
What Is Patentable?, 34
Test for Patentability, 35
Coherent or Incoherent?, 37
The International Situation, 38
Notes, 41
Is Software a Special Caset
The Process, 43
Software as a Creative Medium, 48
The Influence of the Market, 49
xv
3
21
43
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xzn
INTELLECTUAL PROPERTY ISSUES IN SOFTWARE
Symbiosis in the Market, 50
The Case of Interfaces, 51
Evolution of User Interfaces, 54
Where Does Innovation Lie?, 55
Summary, 57
Note, 57
4 A Closer Look at Current Issues
Protected or Unprotected?, 60
The Patent-Copyright Interface, 62
Patent Problems: Structural or Legal?, 63
Compatibility and Interoperability, 66
Open Interfaces, a Controversial Suggestion, 68
Immediate Declaration of Rights, 69
Standardization, 70
The Influence of Intellectual Property Law, 73
Withholding of Source Code, 75
Reverse Engineering, 77
Conclusion, 78
Notes, 79
5 The Open Agenda
Defining a Concept of Value, 83
Legislative "Solutions"?, 84
Hybrid System for Hybrid Technologies?, 87
Incremental Improvements to Patent System?, 89
Next Steps, 90
Notes, 93
6 Bibliography
Appendix A Intellectual Property Challenges in Software-
Workshop Program and Participants, 101
Appendix B Intellectual Property Issues in Software-
Forum Program and Participants, 107
59
81
95
