KAYE CALDWELL SOFTWARE ENTREPRENEURS FORUM MS. CALDWELL: Yes. I work with a lot of different software or- ganizations and I'm speaking for the Software Entrepreneurs Forum today. I'm the President of that organization. I'm also the Legislative Awareness Director. SEF, as we this Software En- trepreneurs Forum, is a ten_year_old nonprofit organization of over one thousand present and future software developers. Nearly all of them are located in the Silicon Valley. We have monthly dinner meetings which attract over two hundred people and we've had as many as six hundred people. We also have eleven special_interest groups that each hold monthly meetion a variety of technical and business topics. Our members are mostly small companies, and I think our idea of small is probably not the same as your idea of small. By small I mean one to five people in the company, very small. The U.S. software industry is unique in that it includes a large number of very small companies. We have a thousand members just in the San Francisco Bay Area. Many of these small companies are responsible for the most creative new software developments. In the early days of microcomputer software development, nearly all software was created by individuals working on their own with one or two associates; yet these types of development environments were responsible for early word processors, spreadsheets and ac- counting software. In earlier generations of hardware, I'm told that it was also the case that one_ or two_person companies were a major factor in leading innovations. Even today much software marketed by large software companies is initially developed by small, indepen software developers. SEF's mission is to help these small companies succeed. While SEF is local to Silicon Valley, we feel that SEF members are representative of the thousands of software entrepreneurs throughout the United States. Our members have different opinions on software patentability, indeed you're hearing from at least two of our members at other points during this hearing. Some of our members are patent holders and are strongly in favor of broad patent software protection. Other members are against software patents entirely. However, there are issues on which SEF members are in general agreement. Our members feel that the patent sys- tem favors large companies over small companies, and we feel that it's important that the patent system both in theory and in prac- tice should not give big companies an advantage over small ones. Most of our concerns have to do with Patent Office practices, and we understand that this subject is scheduled for hearing in February. We do appreciate the opportu to speak on these issues today. To the degree that software is patentable, SEF members want the patent system to produce good, clear patents, especially where the patents are important. We want patents to be issued and in- fringement issues resolved expeditiously. Uncertainty as to the validity or scope of a patent hurts paten- tee and possible infringer alike. It makes it difficult to make decisions, to raise capital, to develop business plans and to make business decisions. Patents of uncertain scope or validity are much more damaging to small companies than large ones. Small companies can rarely afford a good legal analysis on a patent's scope and validity, and an uncertain situation can often put a major part of the small company's net worth at risk. The current patent system seems to encourage litigation. We feel that it's important to improve the patent system so that it becomes more self_enforcing. While we realize that much progress has been made recently in the ability of the Patent Office eal with software patents, initial progress needs to be made. In proposing the following recommenda- tions for consideration we're less concerned with the specific suggestions than we are in highlighting what we see as problems and in stimulating the Patent Office to solve them. Our first recommendation would be that the Patent Office should continue to improve its prior art database by adding to it text- books, scholarly articles, user manuals of commercial products and nonpatent prior art cited in existing and pending software_related patents. This would be particularly effective if such art could be added to the PTO's computerized database, but also be useful to review the trade publications for the last ten years to identify significant software products or product enhancements so that their manuals could be included in the data- base. Our second recommendation is that we realize that patent exa- miners must have both technical ability and a knowledge of how to apply legal principles to determine patentab$y. We encourage the Patent Office's recruiting of examiners with computer science knowledge. We encourage the Patent Office to continue to improve the quality and expertise of its patent examiners and software. We particularly suggest increasing the pay and professional sta- ture of examiners so that more examiners see it as a professional career rather than just a stepping stone to private practice; I think you've heard those suggestions earlier also. We also suggest putting a high priority on identifying and exped- itiously examining patents which are likely to be asserted. We feel that it's important to identify crucial patents and to focus patent office resources on them as the place that will have the most real_world effect. The accelerated patent examination ap- pears to be a mechanism for achieving this, but in practice the accelerated examination does not seem to be having the desired effect. We believe the criteria for making the accelerated exam- ination also serve to select those patents which are(ely to be asserted, those patents being reexamined, reissued, or where the patent holder says there's a suspected infringer. The performance criteria for the Patent Office should give more weight to the examining of high_priority cases rather than simply counting numbers of patents examined. We suggest that expediters be responsible for getting accelerated patents through the system so they don't get stuck on individual desks. This and other prob- lems could be reduced by tracking patents based on the length of time they've been in the Patent Office rather than their length of time on a particular desk. In brief we believe it's good pub- lic policy to identify those patents that are likely to be as- serted and examine them promptly and thoroughly so as to reduce the uncertainty of the scope of those patents. This way the pa- tent can take a place in the free_enterprise system as a negoti- able commodity of reasonably_certain scope. We understand that the Patent Office is trying out a preexamina- tion interview. A, understand the way it works, prior to the ex- amination the examiner, the patentee's lawyer and possibly the patentee have an interview where they attempt to convey what the invention is and to identify where relevant nonpatent prior art might be found. We commend this idea, which we think has poten- tial to both speed the examination process and create a better_quality patent. We also commend the Patent Office for trying out new ideas on an experimental basis to try to improve the patent process. We understand that the level of skill and the art needed to determine obviousness should be supported by printed publica- tions. We also understand that the determination of obviousness is a legal question. However, we encourage the patent office to try to use software professionals and academics to help locate relevant printed publications which would document the level of skill in the art. We also encourage the Patent Office to provide further education for patent applicants, which includes actual case exa0s illus- trating how applicants can pursue the question of nonobviousness. Particularly important would be actual examples outlining the examiner's reasoning in determining nonobviousness. We feel that there's a need for better education of the public on patents in general and software patents in particular. The reex- amination process should be highlighted as a normal part of the process. The role of prior art in the reexamination process should be made known to the public and to the press in order to reduce the concerns of possible infringers. The Commissioner has ordered a reexamination of the Compton's Multimedia patent. We applaud this action as it shows a respect for the legitimate concerns of possible infringers, especially small ones. We propose that the Commissioner, as a standard pol- icy, order reexaminations of patents at no cost on request by small entities which both present evidence that they've been given notice on the patent and produce prior art or other evi- dence of invalidity. In the in4sts of reducing the time and expense it takes to deter- mine the validity and scope of patents, we propose that the law be changed in the following ways. A, have Federal judges remand all validity issues to the Patent Office for reconsideration. The courts should still be able to review such actions. B, re- quire that anyone representing a possible infringer who has prior art on a patent send that prior art to the patent office for sub- mission into the patent's file wrapper. The penalty for not doing so would be that the possible infringer could not use such prior art to challenge the validity of the patent. C, limit the number of reexaminations on any one patent to two except under extremely unusual cases, in order to bring forth prior art at an early point; require rather than allow that the Patent Office consider all previously_unconsidered art in a file wrapper at any reexami- nation, provided such prior art is filed at some time prior to three months after the reexamination notice is published. Finall8e would encourage the Patent Office to take full advantage of public participation in the patent process by making their internal prior art database available on electronic form via the Internet as well as placing notices of reexamination on the In- ternet. You spoke about this earlier today, and mentioned that this was a goal to be achieved several years down the road. Here in California there was a law passed last year that went into ef- fect January 1st to put all pending legislation on the Internet. Last Friday that system went on_line. It took them three weeks. You might want to speak a little bit to Jim Warren who's testify- ing tomorrow morning. He was very much involved in getting this legislation passed and in getting this system implemented. So I think he could probably tell you something about that process. We expect that the effects of these suggestions would be to force out prior art early on so as to more quickly determine the scope and validity of the patents. Commissioner LEHMAN, I'd like to thank you for holding these hear- ings here in Silicon Valley and for giving us the opportunity to speak. Thank you. COMMISSIONER LEHMAN: Thank you very much. I want to commend you for a very interesting catalogue of suggestions, and I think it's very gratifying how a group of individual inventors like yours, not a big corporation, can really give so much thought to some- thing like this and come up with so many very intriguing recom- mendations that we're going to be looking at, and on that ques- tion of the __ putting our system on the Internet, I would just make an observation that the quantity of data in our files is a little bit larger than the legislation currently pending before the California Legislature, and there are a few more technical problems, but one of the things maybe if I can put in an adver- tisement, we have openings for two positions now in the Patent and Trademark Office, basically the two top people who ran our information systems program for the last seven years have re- tired. So we're @uiting for new people to take this over. Obviously I think one of the problems we have now, there was a suggestion earlier that maybe we ought to move the Patent Office out here, and maybe we should move at least Group 2300 out here. I don't know. I see Gerry Goldberg is saying that wouldn't be such a bad idea, after all we went through in Washington last week. But this certainly is where the talent is, so I think we'll be publishing these openings pretty soon, and I think we'll do some aggressive recruiting out in this part of the world; and maybe you can help us to get ourselves up to snuff technological- ly. Maybe it won't be three weeks, but maybe it won't have to be the years that it's taken us thus far to make these improvements. Anyway, I wanted to thank you very much for your excellent suggestions that are really appreciated. Thanks. Next I'd like to ask Mr. James Chiddix to come forward, who is Senior Vice_President for Engineering and Technology of Time_Warner Cable.