PRESENTATION BY SAMUAL ODDI
NORTHERN ILLINOIS UNIVERSITY COLLEGE OF LAW
MR. ODDI;:  My name is Samual Oddi.  I'm Professor of Law at
the Northern Illinois University College of Law in DeKalb,
Illinois.
My comments are premised on research I have done into the area
of the economic impact that intellectual property has in
various spheres.  I started this research because of my
interest in the international patent system and its impact on
the economic development of Third World countries.  That study
is published in the Duke Law Journal.
Then, due to my economic research into that, I came upon a
number of economic theories which I thought had more specific
applicability, if you would, to the United States and
developed countries.
I then published an article in the American University Law
Review entitled "Invention Protection in the 21st Century
Beyond Obviousness" where I proposed a revolutionary patent
which provided an enhanced degree of protection for those very
rare revolutionary inventions which I will define in a moment.
Most pertinent to these hearings is an article that was
published very recently, late last year, in the Nebraska Law
Review entitled "On Uneasier Case for Copyright Than for
Patent Protection for Computer Programs."
COMMISSIONER LEHMAN;:  An Uneasier Case?
MR. ODDI;:  On Uneasier -- rather ungrammatical, but that's
the title which is based upon a previous use of the "uneasier"
in the copyright context.
I have heard this morning a couple of comments which I think
are very typical of what's happening in this field today. 
There is a League for Programming Freedom and perhaps a league
for insurance company freedom.  We love intellectual property,
as long as our ox isn't gored.  And there are costs.  Indeed,
there are costs.  They may be spurious lawsuits.  They may be
lack of access.
Intellectual property is always the context of access versus
incentive.  I want to talk about the positive aspect of it
this morning, about the incentives.
The question I'd like to address is whether the present regime
of intellectual property provides adequate incentives for the
creation of software-related inventions in general, and for
what I call revolutionary software-related inventions in
particular.
Now, incentives are fundamental to our intellectual property
system.  The instrumentalist intent of Article I, Section 8,
Clause 8 of the Constitution is clear:  To promote the
progress of science and useful arts.  This was not a novel
concept even 200 years ago when our Constitution was framed. 
It can be traced back to at least the Venetian patent statute
of 1474, which states -- and the language is rather
interesting and I'll quote it for you.
"Now, if provision were made for works and devices discovered
by men of great genius apt to invent and discover ingenious
devices so that others who may see them could not build them
and take the inventor's honor away, more men would then by
their genius would discover and would build devices of great
utility and benefit to our commonwealth."
Again, this idea of the incentive being provided.  The
underlying assumption of providing the patent incentive of
exclusivity for the creation of inventions is that in the
absence of such an incentive and inadequate number of
inventions would be provided.  This would be to the detriment
of society.
Now, there are costs associated with that.  We are willing to
suffer the indignity of the patent, the copyright monopoly, in
order to achieve these inventions.  However, as all of us
know, many inventions would still be created, even if there
were no patent system.
After all the aphorism, necessity is the mother of invention,
still rings true.  The market will induce many inventions with
such factors as lead time, learning curve advantage, market
recognition, among others, often being sufficient incentives.
Thus we can distinguish patent-induced inventions, that is,
those which are actually induced by the availability of a
patent, from market-induced inventions, which do not rely upon
this patent system for their creation.  The market drives
them.
Economists tell us that if patents were limited to those of
the market-induced variety, the result would be a net benefit
to society.  The problem is that the patent system protects
all inventions.  It boils down to a question of whether
society should pay for something that it would otherwise get
for nothing.  So we built in costs because we inherently
protect all types of inventions.
Now, the Supreme Court recognized this in Graham versus John
Deere in the context of discussing the standard for invention. 
And I quote:  "The inherent problem was to develop some means
of weeding out those inventions which would not be disclosed
or devised but for the inducement of the patent."
The requirement, however, that an invention not be obvious to
one skilled in the art is at best a fickle tool for weeding. 
There are of course many inventions that would satisfy, and do
satisfy, the nonobvious requirement, which are induced by the
market rather than the patent system.  These tend to be
inventions which are of a high benefit/cost ratio variety.
That is, those which are in the product line of the
enterprise, and which fit into existing product lines which
you need to develop for competitive purpose, or else you're
going to be out of business whether or not you're going to
patent it.
Now, in my view, the important category inventions that rely
upon the patent system for their creation are revolutionary
inventions.  These inventions, as defined by Professor F.H.
Chair, who is an economist at Harvard, are those that
revolutionize production or consumption.  These are the
industry-creating and job-creating inventions.
Examples will include telephones, geography, black and white
television, transistor, and there are many, many others.  The
revolutionary inventions tend to require the patent system for
inducement because of their uncertain benefit/cost ratio. 
They do not lend themselves to a bottom-line type of analysis
because of the uncertainty involved in even creating a viable
invention.
There's a final class of patent-inducing inventions.  These
are the detailed inventions that companies will typically use
in a defensive manner to carve out some small area, and they
tend not to be very important because there is competition. 
So they are not extremely costly.
Now, if revolutionary inventions are the important category,
how does the present patent system deal with them?  In my
view, it deals with them poorly.  And indeed, discriminates
against them with respect to requirements of patent law.  One,
the statutory subject matter requirement, and two, the utility
requirement.
Because revolutionary inventions tend to be at the cutting
edge of knowledge and very close to discoveries of scientific
principles or laws of nature, they may tend to run afoul of
Section 101 definition of statutory subject matter.
In addition, as such inventions tend to be at an early stage
of development where full utility has not been fully
determined, they may have difficulty in complying with the
utility requirement as rather rigidly defined in Brennar
versus Manson.
Now, statutory subject matter has plagued software inventions,
as all of you know.  Benson and Flute are still lurking out
there somewhere, although narrowly interpreted by the Court of
Appeals for the Federal Circuit, and also the Patent and
Trademark Office.
The utility requirement may also present some problems for
these cutting edge software inventions.  On the other hand,
market-induced inventions have little trouble satisfying
statutory subject matter in utility requirements.  The only
filtering aspect is the nonobvious standard.  And as you also
know, secondary consideration, such as commercial success, may
even open up the filter with respect to many market-induced,
because the market loves these.  They were needed in the first
place.
Now, let me change gears a bit and talk just a moment about
copyrights.  It is clear that literary and artistic works tend
to require the inducement of copyright -- novels, poetry,
musical compositions.  To a lesser extent, factual work, such
as compilations that require the expenditure of sweat of the
brow, may need some inducement.
But, the category of works requiring the least incentive would
seem to be utilitarian works that provide a function outside
of expression.
I would suggest three dimensional lamp bases, for example. 
And of particular relevance here, computer programs.  It
seemed quite clear that there was a tremendous market
incentive to create, for example, application programs.  This
symbiotic relationship between hardware and software drives
development in both directions.
Now, if I can be permitted to generalization, present
copyright law provides excessive incentives for the creation
of software in general.  There is a low substantive standard,
originality, for protection.  The scope of protection might be
quite broad, and is inherently ambiguous.  Little information
is conveyed when programs are published in object form.  And
the cost of acquisition is negligible.
Now, notable examples of excess protection in the copyright
sphere would include Welan, the Lotus case, lingering
linguistic charm of look and feel.  The Second Circuit case of
Computer Associate versus Altay at least attempts to provide
a filtering form of analysis to eliminate some functional
features of utilitarian programs.
However, there are inherent difficulties in attempting to use
a literary form of copyright infringement analysis in the
context of a utilitarian work.  Nonetheless, does the
copyright system, even as presently interpreted, provide an
adequate system of protection for what may be called
revolutionary software?
It seems clear to me that reasonable business people would not
rely on copyright alone for the protection of revolutionary
developments.  The important aspects of such developments
would reside in the ideas contained therein, which would be
subject to strong attack under even the most generous and
ambiguous literary forms of analysis.
What then about trade secrets?  Trade secrets, particularly in
combination with copyright, provide a relatively strong regime
of protection for programs.  However, with respect to
revolutionary software, once the idea has been conveyed
publicly, there is no misappropriation, and competitors would
be free to use these basic ideas, which indeed make the
software revolutionary.
Finally, a word about suigenerous protection. There's been a
lot said about that, a lot published about providing a
suigenerous protection for computer software.  This may or may
not be a good idea.  Such a system may solve certain problems,
but will create others.
In any event, with respect to revolutionary software, it does
not provide an adequate solution.  None of the proposals I
have seen have the temerity to suggest the protection of
ideas.
Now, my general conclusion is that the current regime of
intellectual property -- let me state my general conclusion
once more.  My general conclusion that the current regime of
intellectual property inadequately protects revolutionary
software invention.
What then would I recommend?  As a minimalist position, I
would urge the Patent and Trademark Office to stay the course. 
The law with respect to the patentability of software-related
inventions seems to be advancing in a desirable manner under
the benign leadership of the Court of Appeals for the Federal
Circuit in its application by the PTO.
It would be nice to have Benson and Flute overruled
legislatively.  To the extent that statutory subject matter
would include, as indicated in the Shakovardy decision,
"anything under the sun made by man."
It would also seem desirable to have Deere clarified as to the
definition of a process so that it was made clear that there
is no transformational requirement.
Also, it may be helpful, if this comes into issue, to look at
the definition of utility again.  The Manson standard, in my
view, is far too narrow.  It impacts adversely on
revolutionary types of invention.
In closing, I'd like to say a few words about the economic
importance of revolutionary inventions, and in particular
revolutionary software inventions.  The United States is the
current recognized leader in software development. 
Nonetheless, in my view, it will not retain that leadership if
development is concentrated in the creation of new game
programs or further adaptations of application programs.
The future lies in those revolutionary inventions that will
change how we do business, consume, communicate, whatever. 
This may be with reference to the information superhighway,
interactive media, data compression, and more importantly, for
uses that haven't even been thought about at this time.
Along this line, it should be noted that Americans are
probably the most creative individuals in the world.  Look at
the number of Nobel prizes awarded to Americans.  Look at the
number of revolutionary inventions created here, even though
they may be commercialized elsewhere.
In addition, Americans are noted for their entrepreneurship. 
Small businesses create the vast majority of the jobs in this
country today.  The downsizing of major corporations is
unfortunate, but it is a reality.
It is also known that entrepreneurs are willing to risk
capital in the development of inventions that do not have a
bottom line driven benefits/cost ratio.  It is this
risk-taking of the entrepreneur, when coupled with the
creativity of the individual, that is likely to produce
revolutionary inventions.
This is particularly pertinent to the software industry, which
still tends to be a cottage industry and requires relatively
little capital investment -- only access to a computer, a
creative mind, and an entrepreneurial experience.  We should
build upon our leadership in the software area and exploit the
creativity and entrepreneurship of those already working in
this field and those who will enter this field.
Thus, I would urge that the policies be adopted so that an
adequate system of protection for revolutionary inventions,
particularly in the software field, can be maintained and
implemented.
Thank you.
COMMISSIONER LEHMAN;:  Thank you very much, Professor Oddi. 
I was all set to ask you a question that I think you sort of
answered at the very end.  But when you talked about the
incentive of the patent system and really focused on the
incentive of the patent system as a means of inducing
invention.
We, not only in this forum -- and in this forum we heard it,
but definitely in San Jose and here and other places -- the
patent system also is a mechanism for inducing investment as
well.  I gather that -- as I said, I think at the end you sort
of clarified that, but you can tell me whether I'm right or
not in terms of my interpretation of your analysis -- and that
is that you indicated that actually investment in
run-of-the-mill -- that the present system actually encourages
investment in the run-of-the-mill technology as opposed to the
really innovative breakthrough technology.  So that actually
an analysis which really focuses on innovation, and a system
which focuses on innovation, are still the preferred system.
MR. ODDI;:  Yes.  Let me clarify.  When I talk about inducing,
I'm talking at all stages, not at the creation stage, which is
what I primarily focused on today.  In my article I go in and
talk about at the innovation stage -- commercialization
stage -- economists like to call it innovation when it goes
into production.  It's actually commercialized.
Yes, those would be induced, too, because certainly the basic
idea has to be implemented.  And we need incentives all the
way throughout the development.
COMMISSIONER LEHMAN;:  We also heard in San Jose quite a bit
of criticism of the way we implement Section 101, and that
we're really spending too much time on very artificial
determinations.  And I think to some degree that was an
underlay of some of Mr. Lo's comments, too, working day to day
on this, in fact to the point where he was in a sense almost
offering suggestions as to how we might further refine these,
to some degree, semantic distinctions simply so they'll create
fewer problems.
And I gather that that's something that you think really does
need review.
MR. ODDI;:  I certainly do.  So I think Section 101 should not
be a filter for inventions.  And it was mentioned here
earlier, the methods of doing business -- well, in my view,
that is an arbitrary categorization based upon 19th century
formalistic jurisprudence, which today we know that the United
States is a great service industry.  And I think there's a
great deal of creativity in the service industry.
And certainly if somebody comes up with a revolutionary
invention in the field of how you do business in the
insurance, or whatever business, I think our society benefits
at the margin from having that invention, rather than having
people invest in that so that we will have it, because it will
be a more efficient way of doing business.  We will have value
added, and I think that's important to our economic
development.
COMMISSIONER LEHMAN;:  Well, actually in San Jose I think one
of the things that came out, quite apart from whether or not
inventions get -- applications are rejected inappropriately on
these grounds, which would be your thrust -- that the mere
fact that we spend so much time worrying about it takes away
from the -- focuses our attention on the wrong issue, which is
really nonobviousness --
MR. ODDI;:  Yes, I know that.
COMMISSIONER LEHMAN;:  -- as opposed to, you know, trying to
fit this square peg in the round hole.
MR. ODDI;:  My only comment on that, that I think the
nonobvious standard ought to be a rigorous high standard
because it is the only mechanism that we have for filtering
out these costly inventions, which the market would otherwise
create.
COMMISSIONER LEHMAN;:  Well, I think that really goes to the
core of what you're talking about too.  I got the impression
there's a fair amount of satisfaction with the direction of
the Court of Appeals for the Federal Circuit on that.  That
would not necessarily be my view of --
MR. ODDI;:  With a caveat about secondary considerations and
other -- because that tends to show you that the market really
was a factor in the creation of it.  I'd like to see a more
objective evaluation of the nonobvious issue based upon the
prior art, rather than what happens post hoc.
COMMISSIONER LEHMAN;:  I really want to thank you for coming
all the way out here.  I hope you're not snowed in forever.
MR. ODDI;:  I hope not.
COMMISSIONER LEHMAN;:  You're used to it, though, in Illinois.
MR. ODDI;:  Right.  Thank you very much.
COMMISSIONER LEHMAN;:  Next, actually, because we've
dilly-dallied around, we've supplied time for Bernard Galler
of the University of Michigan Software Patent Institute to get
here.  So if Professor Galler would come forward?
MR. GALLER;:  Yes.  One plane canceled, one late.  The taxi
drivers couldn't find the place.  But I got here.
COMMISSIONER LEHMAN;:  Great.  The Federal Government is
closed today.
MR. GALLER;:  I heard that it was closed, but I had confidence
that you would continue with these hearings.
(Laughter.)
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