PRESENTATION BY VERN BLANCHARD
AMERICAN MULTISYSTEMS
MR. BLANCHARD;:  Good afternoon.  According to Mr. Band I
probably fall within the software patents, or bad bunch and
even on a good day I think bad software patents are bad.  So
maybe we can take it from there.
I'm CEO and janitor of what's left of American Multisystems. 
I'm hopefully representative of the smaller companies which
generally don't have the opportunity to come speak before you.
COMMISSIONER LEHMAN;:  That's one reason we went to the
Silicon Valley and we had a lot more of the people who felt
that software patents were bad out there.  So we do know a
little bit.  They don't tend to have Washington lawyers as
much.
MR. BLANCHARD;:  Well, I think that's maybe why they sent me.
COMMISSIONER LEHMAN;:  Where are you from?
MR. BLANCHARD;:  I'm from San Diego.
COMMISSIONER LEHMAN;:  I see, so you came all the way.
MR. BLANCHARD;:  Yes, I did.
COMMISSIONER LEHMAN;:  Thanks.
MR. BLANCHARD;:  The patent system was enacted to promote the
useful sciences.  You've heard arguments stating that without
the patent process the software industry won't produce and it
will ultimately fail.  My belief is that until the door for
software patents was opened judicially we had a flourishing
software industry.
I believe that unless we close that door and get back to where
we used to be, the United States will be relegated to a third
world status as far as software is concerned.  Programmers are
not a stupid bunch.  When we're faced with endless and
expensive litigation and uncertainty, we're just going to
migrate to other fields.
And you, by keeping things as they are, will cause the best
and the brightest in the software industry to go to other
activities and professions.  Our innovations will be
stillborn.  The public loses when that happens.  I'll get up
on a little high horse here.  It probably sounds a little
melodramatic, but right now we have the power --
Specifically, you have the power in changing some of the rules
that will make or break an entire industry.  I believe that
software patents must be eliminated.  The patents granted over
the last decade or so are now being used to attack developers
for selling programs that they have independently developed.
We're reaching a point where new companies are going to be
barred from the software arena because most programs will
require licenses from dozens of patents.  I've seen quite a
few of them that in my opinion are absurd and were very
obvious even at the time they were granted.
By requiring the licenses it's going to make projects
unfeasible and I was one of those particular companies. 
You're going to be inundated with platitudes from both sides
of this issue -- hopefully I'll inundate you with a few things
that will change your mind -- you'll be told of lofty
principles and moral and ethical high grounds.
But the bottom line is, the actions of the PTO affect people. 
You've heard that software patents are necessary to protect
the small company.  American Multisystems is one person. 
That's me.  I'm probably typical of many start-up companies. 
And we'll get into what my story is.
I'm a pretty good programmer.  In fact, outside of this room
I'll probably tell you I'm a great programmer and lay out a
couple other descriptions of how well I can program.  In 1991
I was approached by a client who invited me to partake in the
American dream.  If I could program a bingo program I could
taste the good life, which I did.  I thought there would be no
problem at all.  Bingo is a real simple program.  It's a
child's game, in fact.
Most computer programming classes, this is first year stuff,
you design a bingo game or a checkers game or something along
those lines, very, very simple.  Besides, I had already, as it
turned out, just by coincidence, played an electronic bingo
game back in the early '80s on some OSI computers, for those
of you that remember OSI.
Certainly patent law had nothing to do with my analysis of
whether or not I could do the project.  I abandoned all my
other projects for two years.  And what you can read into that
is I did it without pay.  I saw the opportunity and I went for
it.
Ultimately I developed a superior product.  My customers liked
it.  The competition out there respected it.  Life was good. 
And then I was introduced to the patent system.  One of my
competitors sued me for patent infringement.  And irrespective
of the fact that I always believed that software was an
expression of an idea and covered under the First Amendment --
and we won't get into legal details because I'm sure there are
probably many of my colleagues out here who will take issue
with that -- besides that the fact that playing bingo on a
computer is not novel, it's not unique.  There's nothing
inherently brilliant about it.
The program that I created is nothing more than mathematical
algorithms.  And the fact is, I did nothing ethically or
morally wrong and effectively I was put out of business.
The realities of the patent system as it relates to computer
software is this --
COMMISSIONER LEHMAN;:  You need to tell us a little more how
that happened.  There are only two ways, it seems to me that
you would be put out of business.  One is that you decided to
shut your doors in the face of the patent claims from your
competitor or two, that the competitor actually enforced their
patent in some way that caused you to go out of business.
MR. BLANCHARD;:  In fact, that's what happened.  That's what
I'm getting to.  They filed suit for patent infringement.  The
patent in question covered a hand-held calculator type device
and it was broadly written enough to where since I was a
competitor they thought they could include my program, which
happened to be run on plain vanilla, IBM-clone, off-the-shelf
Comp-USA kind of hardware.
The filed for an injunction which, of course -- the problem
with the system as it is now is judges are not particularly
literate in technical issues.  When they see a patent they
presume that it's valid, as they should.  They're in a
position if the PTO says that this is a valid patent, well, of
course, it's a valid patent.  They're not necessarily schooled
in knowing the nuances of whether a particular claim reads on
an invention or not.
So initially the small company or the people that are
defendants in these actions are behind the eight ball.  We
must, even though the burden of proof is supposed to be on the
Plaintiff showing that their patent is valid, the realities
are that judges, when they see a patent, believe that the
patent is valid.
Now what the bottom line is, is when small companies are
involved in patent litigation you have just about by filing of
the suit put most companies out of business.  My particular
situation was unique.  As it turns out, I had some legal
schooling.  Everything that could possibly have gone right,
went right in my case and yet I'm out of business and I'm in
debt over $100,000.
The mere filing of a patent infringement suit will kill most
small companies.
COMMISSIONER LEHMAN;:  Does that mean you won the suit?
MR. BLANCHARD;:  Well, yes, I'm victorious.  There was
actually -- I'll take that back.  We're still in litigation. 
The state of our suit was that they filed for a preliminary
injunction which was granted.  We, of course, countered with
points that we made stating why she should overturn it, which
she ultimately did.
And, again, everything -- in my particular case things went
well.  I was able to do most of the legal work, saving
probably hundreds of thousands of dollars.  My adversary spent
more than $450,000.  Now this was just at the very first stage
and I was into it thankfully only for $100,000.
We had prior art searches done by the League for Programming
Freedom.  We found perfect prior art.  Everything went right. 
I had experts in the industry sign on and file -- and I'll
make this brief -- on my behalf.  We had a judge who after
giving a decision that said yes, this infringes and you're
restrained actually took the time to learn about patent law
and actually realized that she had made a mistake and reversed
her decision.
That rarely a happens.  I mean, how often have you heard a
judge say, I've made a mistake, here's the new ruling.  I
mean, we even expected her to say, if you don't like it,
appeal it.  Everything went right in my particular case and
yet American Multisystems is not a viable company today.
I copied nothing as far as the code.  Very simple.  Again,
it's a very simple code, playing bingo.
COMMISSIONER LEHMAN;:  Well, is that because the preliminary
injunction was lifted so that you could continue to do
business?  Why did you go out of business then?
MR. BLANCHARD;:  The cost.  We have $100,000 in legal fees,
not including all the time and effort that we were down,
patent companies -- or the aggressor in my particular case, of
course, went out into my particular industry and waved around
the preliminary injunction.  Effectively, we no longer can
partake in that market.
The realities are, is that happens all the time.  By filing
suit against the small company -- in fact, I'm sure that there
are many patent attorneys here will tell you what a retainer
will cost and what just even answering a complaint will cost
small companies.
COMMISSIONER LEHMAN;:  Was your case, your defense, based upon
the fact, the response that you did not infringe or was it
based on the validity of the plaintiff's patent?
MR. BLANCHARD;:  Yes, we took it from all those aspects.
COMMISSIONER LEHMAN;:  And apparently there hasn't been a
final judgment, so the judge has not ruled on the
patentability claim?
MR. BLANCHARD;:  No.
COMMISSIONER LEHMAN;:  On the viability of the patent.
MR. BLANCHARD;:  At this point we're still --
COMMISSIONER LEHMAN;:  And is it your view that the patent was
-- the basis of the infringement lawsuit was not valid?
MR. BLANCHARD;:  My opinion is yes, that it was not valid.  It
was written so broadly that it covered everything from a
wristwatch, calculator, computer, laptop.
COMMISSIONER LEHMAN;:  So it fell back into the second
category that Mr. Band described as bad software patents in
your view?
MR. BLANCHARD;:  Yes.
COMMISSIONER LEHMAN;:  Did you ever think of using the
reexamination procedure which would have presumably been a lot
less costly way for you to resolve this?
MR. BLANCHARD;:  Yes.  We did consider that.  The problem with
that is, by reexamining they may very well have had a good
patent as to a particular device.  But we still did not
believe that it would read on our invention.  By going and
reexamining it and coming back with you, the PTO, saying that
it's valid we then have no chance in court.
I'm supposed to stop speaking.  But if you have any other
questions.
COMMISSIONER LEHMAN;:  Well, I've kept you going.  So if you
want to -- if you have a couple more minutes, why don't you
continue because I interrupted you unlike some of the other
witnesses.  But I wanted to flesh out what the main objections
and the main points were in your experience.
MR. BLANCHARD;:  Sure.  The problem that's unique, I believe,
to software and I've heard some of the other speakers state
that software should not be differentiated from other fields. 
I was able to complete a very complex project because of the
programming tools I had available, not because of any
technique or patent or anything else that anybody had taught
by virtue of the patents.
The innovation in software is because of the tools that we
have available to us.  We can nearly instantaneously change
things, see how they will work.  The tools provide the
innovation, not the prior coding.
The overall effect if we continue to have software patents, in
my opinion hinder, the industry, is that the PTO will obstruct
that which you were charged to promote, which was the useful
sciences.  Computer programmers, we share a program all the
time.  I invite you to log onto many of the informational
services.  We help each other.  We submit code back and forth. 
And that's how computer programmers assemble pieces of code,
bits of ideas, bits of techniques into finished products.
Where computer software is different from many of the other
fields are because of the tools that we have.  Our compilers
today do things that were unheard of even five years ago, and
not because someone had patented any particular technique. 
It's just the evolution of the software process.
So I would implore you to change the rules as to software
patents to eliminate them or at least make it so that we fall
into the bad software patents or eliminate the bad software
patents.
COMMISSIONER LEHMAN;:  Thank you very much.  Now you could
help us a little bit if you would -- since we don't have the
time to get into all the details of your case.  But I assume
since you were in litigation you have memoranda or motions and
so on and so forth --
MR. BLANCHARD;:  Yes.
COMMISSIONER LEHMAN;:  -- filed in court, maybe even a
decision of the judge.  It would be really useful to have a
record to look at as an example, you know, to find out what
was really going on there, get to the bottom of your concerns. 
Obviously to the extent that, in fact, you had a truly valid
patent there and you may have, in fact, been infringing that
patent.  That creates one circumstance.
If in fact your allegations had some merit to them or your
defense did, that the initial patent was overly broad, that
suggests that it was a bad software patent, bad software
patents are bad and maybe that we should have been doing
something about that.
But we can't really get to the heart of that until we look at
some of the more details of your case.  We hear this,
certainly this statement, made.  We've heard it in the Silicon
Valley.  We've heard it from you, that there is a real
chilling effect going on here.  I would like to get to the
bottom of that.  Is that indeed the case?
And to get some very specific examples of it if people are, in
fact, having that problem, so that we can determine whether or
not there is a serious problem of widespread scope and then to
maybe address if there is how to deal with it or are these
just idiosyncratic rare circumstances that every -- and that
happens in life.
I mean every once in a while in business sometimes, you know,
you get some bad luck.  I'm trying to determine whether this
is bad luck occasionally or whether there's some systematic
pattern of problems here.  You can help us with that by
supplying what you have.
MR. BLANCHARD;:  I've got probably five feet of filings. 
Would you like them all?
COMMISSIONER LEHMAN;:  Yes, you can send them to Jeff Kushan
here and he can stay up until 3 o'clock in the morning for a
week, which he will do.
MR. BLANCHARD;:  Thank you.
COMMISSIONER LEHMAN;:  And you got his Internet number. 
Actually, it's in the witness list, I think, or one of the
handouts that's out on the table.
Next, is Mr. Heckel here yet?
(No audible response.)
COMMISSIONER LEHMAN;:  Apparently not.  Did Mr. Chakansky
come?
(No audible response.)
COMMISSIONER LEHMAN;:  Mr. DeAngeli?
(No audible response.)
COMMISSIONER LEHMAN;:  Apparently not.  Then I guess we're
down to D.C. Toedt of Arnold, White and Durkee from Texas.  I
think people are having a hard time getting into National
Airport now and he wasn't on our list until 4:30, but I don't
think we're going to be here until 4:30.
Joseph Hofstader is here, I think.
Well, I don't know quite what to do.  I think he was the last
witness.  So actually we're at the end of witnesses here. 
Yes, sir?
MR. CURRY;:  Given that you have some time, would you allow
some informal discussion?  Just for a couple of minutes.
COMMISSIONER LEHMAN;:  Well, I would permit you to come
forward if you wanted to make a statement for a few minutes
since we have time.  Let me say this, we have a lot of stuff
to do here.  We're really busy and really crunched time wise. 
So it's not like we have all afternoon to -- we have a lot of
good things to do with our time if we do adjourn the hearing
early.  But since we do have a few minutes and since these
people didn't come, I'd be happy to let you come forward and
make a statement if you'd like.  If you'll identify yourself,
please.
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