JIM SHAY MORRISON & FOERSTER MR. SHAY: I find myself in the very difficult position of play- ing clean_up and of trying to say something new, because many good things have already been said and many of my remarks I think only serve to reinforce those things, but perhaps that's useful as well. My name is Jim Shay, I am with the law firm of Morrison & Foerster in San Francisco. We represent the Multimedia Development Group, a trade association based on San Francisco, as well as other clients in the software and multimedia industry. My comments today are my own, however. They do not necessarily represent the views of the firm or its clients. I am a patent attorney. I spent three years as a patent examiner before entering private practice. I've also served as inhouse counsel for a medical technology company, and I've worked in a variety of technologies in a variety of ways, prosecution, liti- gation, licensing, representing individual inventors, large com- panies and investors. I believe in the value of pate@rotection as a tool for spurring innovation and for helping inventors, whether corporate or indi- vidual, obtain the benefit of their contributions. In my opinion this principle applies as much to software_related inventions as to any tangible mechanical, chemical or electrical invention. Specifically, the software industry as a whole and software com- panies and developers individually benefit from the patent sys- tem. The software industry I'm referring to is not just the com- panies whose primary products reside on floppy disks or CD_ROMs. In my view the term software industry includes any suppliers of products incorporating programmable microprocessors, products such as medical monitors, animated toys, automobile electronic ignitions, audio products, just to name a few. Advances in mi- croprocessor technology have made software ubiquitous and protec- tion of patentable inventions embodying that software is there- fore of concern not only to companies writing and selling software per se, but also to all manner of D, medium and low_tech companies serving a variety of markets. As the PTO has acknowledge in conducting these hearings, there appear to be a particularly high amount of concern over the vali- dity of software patents. A good example is the public reaction to the Compton's new media patent, a patent I came to know very well in my position as counsel to the Multimedia Development Group. I participated in question and answer sessions about the Compton's patents with members of the MDG's Executive Committee and with individual members of the MDG. Many expressed many strong, negative opinions about the conduct of the Compton's pa- tent applicants before the PTO and about the ability of the PTO to examine and issue valid patents in the subject area. My review of the file history of that patent, however, showed no evidence of any particular lapse or failure on either part. Nonetheless, the consensus of nearly all to whom I spoke was that the broadest claims of the Compton's patent could not possibly be valid, aHhat anyone associated with the multimedia industry would agree. The eventual disposition of the Compton's patent remains to be seen. The discussion surrounding that patent, however, has pointed to some possible deficiencies in the current patent sys- tem, especially as applied to software_related inventions. First, as other people have noted, patent examiners do not have easy access to the best prior art for software_related inven- tions. The best prior art consists of actual software, operators manuals, research papers and the like. These references are not generally accessible to patent examiners. Second, the PTO's relative lack of experience in software_related inventions because of the relative newness of the patentability of software makes it difficult for an examiner to determine how one of ordinary skill in the art would have approached the prob- lem that patent claims address. Often it is the feeling that an invention would have been obvious that leads an examiner to find the most pertinent priorL references, to make the most compelling argument regarding the unpatentability of the claims. This disconnect between the gut feelings of the patent examiners and the gut feelings of skilled artisans in the software industry un- dermines the industry's faith in the PTO. I would now like to make some recommendations based on these ob- servations. These are not new, these will merely reinforce other recommendations made earlier today. First, operating within the current statutory framework, I be- lieve that the PTO and the software industry could benefit great- ly from a more formal interaction. Specifically, the software in- dustry operating through industry groups such as the Multimedia Development Group, could provide the PTO with kinds of prior art references that the PTO currently lacks. I have spoken to many members of these groups who at least now are expressing a wil- lingness to work with the Patent and Trademark Office if the PTO will work with them in compiling these prior art references. Such a progrPould require the industry groups to dig up and send, and the Patent Office to accept and classify, prior art refer- ences related to the past and present software inventions. In addition, the PTO and industry groups should cooperate to train examiners working with software inventions. I'm aware, for example, of training programs offered by the Software Patent In- stitute. I also believe that the PTO should undertake the task of teaching the software industry about the patent process so that the industry can use the existing process more effectively. One of the most surprising things I learned in the Compton's process was how little people actually knew about the patent system. To the extent that the PTO is willing to support statutory changes and as I learned this morning, you are, I believe that a system of pre_grant publication and opposition proceedings would help improve the quality of software patents. This one aspect of change is the one thing mentioned more often by more people in discussing theTrent patent situation. A less radical statutory change would seem to be opening the reexamination process to pro- vide for full participation by interested parties in addition to the patent owner. I advocate the use of oral testimony. Experts in the field can be the best source of prior art, and this would be useful in the reexamination process. This change could en- courage the submission of all relevant prior art instead of the current practice of withholding the best prior art for use in license negotiations and in District Court infringement proceed- ings. In conclusion, while the emphasis of our remarks has been on the deficiencies I perceive in the patent system, I should state that I believe that there is much right with the current system. Our proposals will only be minor changes to a system that has served us well in promoting the useful arts. Thank you. COMMISSIONER LEHMAN: Thank you very much, Mr. Shay, I appreciate those very specific recommendations. I'd like to thank everybody in the auXce for having the interest in what others had to say, to stay all day and be with us, and we'll reconvene tomorrow morning at 9:00 o'clock, and our first witness at that time will be Jerry Fiddler, CEO and Chairman of Wind River Systems. Thank you very much.