CHRISTOPHER BYRNE STORAGETEK __ ACIS MR. BYRNE: Good morning. I'm Chris Byrne, Senior Intellectual Property Counsel for Storage Technology Corporation, or StorageTek. I am testifying today on behalf of the American Committee for Interoperable Systems, or ACIS, to which StorageTek belongs. ACIS sincerely appreciates this opportunity to provide testimony. By way of introduction, I am an electrical engineer and a lawyer, and a registered patent attorney before joining StorageTek as patent counsel in 1991. I spent six years on the Intellectual Property Staff of the Hewlett_Packard Company. I will address Topic A, Questions 4(a) and 5: Does the present framework of patent, copyright and trade secret law effectively promote innovation in the field of software? Do you believe a new form of protection for computer programs is needed? Because these questions are two sides of the same coin, I will respond to them together. ACIS members include numerous innovative high technology companies such as Sun Microsystems, NCR and Broderbund Software. My own company, StorageTek, is headquartered in Louisville, Colorado, which is about five miles east of Boulder. We employ thousands of people worldwide, and we had 1993 revenues of approximately $1.4 billion. StorageTek designs and manufactures high performance data storage and retrieval systems for mainframe, mid_range and networked desktop computer systems. Our customers include many Fortune 200 communication, transportation and financial companies. In fact, if you recently made a phone call, bought an airline ticket or bought or sold securities, chances are that records of your activity is stored on one of our products, awaiting ready access and retrieval when necessary. Our competitors include IBM, Hitachi and Fujitsu. Like other ACIS members, we rely heavily on our nation's intellectual property system to protect our most valuable assets: the innovations of our engineers, particularly our software engineers. Without adequate intellectual property protection, we could not protect and recover our substantial investment in research and development. For instance, at StorageTek last year, we invested approximately 10% of our revenues in R&D __ that's over 140 million dollars. Without that R&D investment, we simply cannot stay competitive and in business. Indeed, last November Vice President Gore himself toured our substantial R&D facilities and personally previewed key technology which we believe will facilitate his grand vision of the information superhighway. While all ACIS companies believe in strong intellectual property protection, we also believe in balance. We believe that overprotection is as threatening to innovation as underprotection. The need for this sophisticated balance is particularly important with respect to software, which is so pervasive in our economy and critical to its growth in our national leadership and high technology. ACIS believes that it would be a dangerous act of underprotection to deny patent protection to software subject matter per se. But it is an equally dangerous example of overprotection to fail to expeditiously implement needed corrections in the way we currently do software patents, if not all our patents. Those needed corrections are well known, and ACIS has gone on record in support of them. They include: Improving the software prior art database so that it is accurate, timely and includes both patent and nonpatent prior art. The quality of the software patent database will be directly related to the quality of the software patentability examination by the PTO. Working to raise the skill level of PTO examiners who are charged with the vital and difficult task of examining software patent applications. One way to accomplish this is with site visits by examiners. For instance, last year two groups of examiners, one from Art Unit 2308 led by Michael Fleming and another group from Art Unit 2507 led by Bruce Arnold, visited StorageTek. They spent valuable time with our engineers and our patent committee learning how we do R&D and how we make our decisions about which inventions to seek to patent. We were very favorably impressed with the legal and technical expertise of the examiners, who too often are merely names at the end of an office action. To our mutual benefit, the examiners learned about the challenges we face in innovative R&D and we received a much better understanding of the difficult nature of the examiners' work. Educational visits by examiners is one way to raise those skills. Implementing key procedural reforms to prevent applicants from secretly and indefinitely submerging their applications in the PTO until they are ready to ambush the public __ and I think your 20_year limit is going to go a long way toward solving that problem. Otherwise we need to speed the examination process and include accompanying public notice of possible patents. Many such procedural reforms are considered as a function of possible harmonization of patent law, but such reform in this country should proceed with or without harmonization. And just a footnote here: I think one of the very positive fallouts of this meeting has been the offline interaction among participants. And just as an example, yesterday I spent some time brainstorming with my counterpart at Silicon Graphics, Tim Casey, and Rob Stern, an attorney in private practice from DC, and just over lunch we were talking about the problems that we have with the Patent Office and we were brainstorming possible solutions, and a number of those were things like regionalizing the Patent Office, industry_sponsored technical colleges for examiners, expedited application procedures, possibly limiting patents to one independent claim, and the automation requirements of the modern patent system. And one of the conclusions that we came to was that we definitely believe that the water glass at the PTO is half full as opposed to half empty, and we think that hearings like this are going to be an important first step towards filling the glass. But all the good work that we undertake to improve software patents will be simply undermined if we do not address another balancing issue, and that is the proper balance between patent versus copyright protection of software. This is because copyright, if misapplied, can achieve patent_like protection for software functionality. This misapplication is particularly dangerous when we consider that there is no examination for copyright as there is for patents; a copyright registration does not specify the boundary line of protected expression in a work, whereas a patent is explicitly bounded by the terms of its claims; and copyright protection outlasts patent protection by at least a factor of four. This de facto patent protection under copyright is particularly pernicious with respect to interface specifications. Unlike novels and plays, which stand alone and do not need to interact with other works, computer programs never stand by themselves; they function only by interacting with a computer environment. If the developer of an environment can use copyright to prevent other developers from conforming to the system of rules governing interaction within the environment __ to its interface specifications __ the first developer can gain a patentlike monopoly without ever subjecting his system of rules to a patent examination. In the absence of competition, the first developer would have little incentive to develop more innovative and less costly products. Moreover, this result is particularly dangerous to a company such as mine. StorageTek designs and manufactures data storage peripherals which interface with the computers made by the dominant American, European and Japanese computer vendors. With de facto patentlike copyright control of their operating systems, these vendors have the potential to therefore control functional access to that interface and therefore exert market control over subject matter, i.e., the peripheral device, which is completely beyond the scope of the copyright itself. This is dangerous overprotection of software via copyright. StorageTek joined ACIS because of our concern that the courts and the U.S. government were losing sight of the importance of maintaining a balance between incentives and competition in the area of intellectual property protection of software, particularly copyright protection. From the outset, it was our believe that the proper application of traditional copyright principles such as the idea/expression dichotomy, merger, scenes a faire, and the fair use doctrine would yield the appropriate scope of protection for software. Recent court decisions have validated this. The Second, Ninth and Federal Circuits have all found that copyright does not protect functional interface specifications. Further, the Ninth and Federal Circuits have found the reverse engineering technique known as disassembly to be a fair use and proper means to achieve functional interoperability. In our view, the Altai, Sega, and Atari decisions are not radical departures from traditional principles; rather, they return copyright to its proper course. We expect that the First Circuit will soon be consistent and overturn Judge Keeton's decision in Lotus. Despite this positive trend in the case law, however, we fear that the U.S. government has allowed its laudable goal to improve the balance of trade to inadvertently divert its attention from the ultimate goal of our patent and copyright system: promoting the progress of science and the useful arts, as explicitly provided for in Article I, Section 8, Clause 8, of the U.S. Constitution. We applaud the manner and spirit of these hearings, therefore, as solid indication that the U.S. government clearly appreciates that more protection is not necessarily better. We are also encouraged that Assistant Attorney General Bingaman has established a task force to review and reformulate the Antitrust Division's policies on intellectual property and antitrust. We applaud her observation that the scope of copyright protection for computer software has important competitive implications. In summary, we see no need for a sui generis software protection law. Until recently, courts applied copyright in a manner that overprotected software, but the Altai, Atari, and Sega decisions corrected that aberration. Bad software patents also dangerously risk overprotecting software, but let's not throw out the baby with the bath water; let's move quickly to implement needed improvements in the way we do our software patents. Thank you for this opportunity to present this testimony for your kind attention. I would be glad to answer any questions. COMMISSIONER LEHMAN: Thank you very much. Appreciate your sharing that with us today. Next I'd like to ask Gideon Gimlan from Fliesler, Dubb, Meyer & Lovejoy.