ROBERT YOCHES FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER MR. YOCHES: Thank you, Commissioner LEHMAN, it is indeed a pleasure not to be in Washington, D.C. today because of the weather, and also a pleasure to be before this distinguished Panel. For the record my name is Bob Yoches and I am a partner of Finnegan, Henderson, Farabow, Garrett & Dunner, although I speak today not as a representative of that firm, not as a representa- tive of my partners, and not as a representative of any of thients of the firm. Instead I offer my own views based upon having practiced in the area of intellectual property for patents for fourteen years, and in that capacity I've been before the Pa- tent Office in prosecution, I've litigated patents in the software and computer area, I've licensed patents in those areas, licensed in and out technology, I've been involved in copyright registrations, copyright licensing and litigation, and I've been involved in trade secret litigation. I've represented both large companies that have been well_established, small companies and start_up companies. I've also represented domestic companies and foreign companies, and I've represented those that had intellec- tual copyrights and those that were concerned with other parties' intellectual property rights. And based upon that experience I'd like to offer some observations about the applicability of the patents and the patent law to the software_related inventions. I'm going to restrict my remarks to perhaps unique aspects oftware that make patents appropriate or inappropriate, as op- posed to addressing any of the general attacks on the patent sys- tem itself. I'm not under the impression that there's any large_scale movement to rid ourselves of the patent system, so let me address myself to the specific aspects of software and the specific aspects of how the patent system impacts software. I note that in the discussions today and the testimony given there are three characteristics of software that I think are im- portant, especially from the aspect of how best to implement the Constitutional directive. One is that software is pervasive in our technology. It pervades our lives, it pervades our jobs, it pervades all other types of technology that hithertofore we've considered different. We've heard somebody from the petroleum industry talk. We've heard about a case involving software and the medical industry. There is software in the banks, software in stock exchanges, there's software in your automobiles. Not only does sof e now pervade our lives, it will do so more in the future. A second observation is, you cannot extricate the software and treat it separately, in other words, I question whether we can talk intelligently about software_related inventions, software's such an integral part of our lives. And lastly, the last observa- tion generally on software is that although software has some unique aspects, so does every other type of technology; certainly biotechnology has unique aspects. Certainly chemistry and pharma- ceuticals have unique aspects, but I think there are some things about software that it has in common with other innovations and with other technologies that are particularly important to how patents will affect that. One of those characteristics is software is extremely useful; it is, as I indicated before, pervasive, but it has the potential, and has already actualized much of that potential for dramatic impacts on our life. Second, the more we know about software, and I think there is some testimon$ this point also, the more that is known about software, the greater will be the development in order to avoid ploughing ground that's been ploughed, and the faster will be the rate of that improvement. Given those observations then, what role do patents play and can they play? And I think patents have already played, and will continue to play, a role in three major aspects. The one general- ly starting from what I just talked about is in publication. We heard a speaker this morning testify that indeed one large com- pany allowed publication of ideas because they were protected by way of patents. In addition to that, however, and I think a much stronger point, is the fact that the patents themselves are pub- lications of the ideas, and publications in a very important way that really hasn't existed. They are publications of information in a structured format by way of the Patent Office's own classif- ication system. As the Commissioner spoke this morning, the fact of the matter is that because we have reli(o long on trade secrets there is perhaps a lack of this structured database. The way to solve that is not to avoid the patent system, but rather to embrace it, and to look at and perhaps adopt many of the recommendations that have been made here on how to improve the accessibility to prior art. The second issue, and this has been a key issue here, is that of investment, and rather than repeat what's been said, it has been my experience that not only do investors, and by investors I not only include venture capitalists, but also large concerns that are interested in some sort of partnering agreement, but these type of investors care more about patents than they do about trade secrets, if in all honesty copyrights are kind of a wash. They're there anyhow, it doesn't make much difference. But given that, there's often a choice between whether to keep processes secret or obtain a patent on it, I find investors like patents much better, for two reasons. One is, they don't like dealing with trade secrets b,se they have to sign a confidential- ity agreement and a lot of investors won't do that. The second reason is, and I think even more compelling, is that the inves- tors are afraid that the trade secrets will have a short life- time. They can easily be lost. They can be lost in an instant by an inadvertent publication. They much prefer patents. The third area that I think that patents play in software is that of innovation. There's been I guess some dispute here on whether software is fast_developing or slow_developing, but I think there is one observation we can make, and that is, it's generally easy to change software. It's more flexible to change software than hardware, indeed that's why so many of our developments have software in it. Well, of course one of the options that the pa- tent system offers, and one of the opportunities it offers, is that if there's a patent out there, and you don't feel like pay- ing the license fee for it, you are encouraged to design around the patent, and indeed the Federal 0uit has indicated that a key aspect of the patent laws is the designing_around. Software, by its nature, by the ease and quickness by which you can modify your procedures and modify your algorithms, is partic- ularly adapted to designing around other patents, and particular- ly adapted to then promoting new developments. It has been my ex- perience, in summary, that the patents have served the software type of developments very well, and I believe in general that the Patent Office, especially in Group 2300 with which I've had the most experience, has also done a good job of serving the system well, but I notice, I think, two problems currently, with the Pa- tent and Trademark Office in the area of patent protection of software_related inventions. The one is, I believe in the Sec- tion 101 area as I think other witnesses have indicated, that there is a reluctance, and almost stubborness by the Patent Of- fice to taking the most contrary position that they can on wheth- er subject matter is patentable, and indeed in 4form paragraphs which the patent and trademark office uses as a bases for its re- jections, it had been able to pick and choose among different cases, especially cases from the 1970s, to support their posi- tions. I think that's contrary to the trend of the law. I think it's contrary to two major Supreme Court cases, the most recent cases in this area. Because in the Jacobardi case, as the Notice indi- cates, the patent laws are supposed to extend to anything under the sun made by man, and in the Diehr case, there was a direction that we're supposed to look at the claim as a whole and not dissect it into its old elements, meaning its mathematical algo- rithms, and its new elements. And I do not believe currently that the Patent and Trademark Office is following that, and I think that the result has been, at least in my experience, two things. One is frustration by some applicants because they have abandoned their application rather than pursue this to the Board, and for those people that have pursued to the8rd, at least in our firm, they've been very successful, and all it's resulted in is an additional expense to those applicants. The other issue, and I think the Patent Office I understand the last week made I think a major change, is the Patent Office I understand now allows or will allow Group 2300 to hire computer scientists as examiners. I think that's a very good step. Howev- er, it's my understanding though that if you're a computer scien- tist out practicing in the world you may not currently sit for the Patent Bar. The belief is that you don't have sufficient technical training. I think that should change, and certainly if you're qualified enough to examine patents, you ought to be qual- ified enough to prosecute those patents in front of the Office. Thank you very much. COMMISSIONER LEHMAN: Thank you very much, Mr. Yoches, for coming all this way to share those thoughts with us. Next I'd like to call our final witness of the afternoon, Jim Shay of the firm of Morrison and Foerster.