JOE CLARK

CHAIRMAN AND CEO, VIDEODISCOVX MR. CLARK:  Thank you  very  much,
Commissioner  LEHMAN. My clock says 9:28, and that's what it says
on the sheet, so I congratulate you the good timing of  your  re-
marks, and I'll try to do the same.

I really appreciate the opportunity to  come  and  talk  to  this
group.  I  have  a publishing company in Seattle, Washington that
publishes multimedia products for science  education,  and  we're
pretty  well_known at this time throughout the country, and we're
totally frustrated by our experiences  with  the  patent  system.
And  so  what  I would like to do during my time is kind of share
with you personal experiences that we had in order to  illustrate
some of the problems that I think are inherent in the current pa-
tenting process, and then I'd like to recommend two or three dif-
ferent solutions.

Now, you've sort of preempted my remarks, and I'm really appreci-
ative of it.  It's the first time that I've heard that the Patent
Office was drafting legislation that would take care of  most  of
these,  but there's one part of it that 0 to try to deal with and
maybe ask you a question about.

On the plane on the way down I thought it was in some way  almost
poetic  that  I was headed down to California. I was a little bit
anxious about earthquake country, you  know,  in  fact  I  didn't
sleep  very  well last night.  But I thought about the earthquake
thing as not being too dissimilar from the situation we find our-
selves  in  with  the  patent system, that is to say, in the last
year and a half we've heard some rumblings coming from the Patent
Office  with patents like the Grass Valley patent and the Optical
Data patent and then the Compton patent which sort of got  a  7.3
on  the  Richter  scale  as far as I could figure out, and my big
worry is that there's no end in sight, that is to say, given  the
secrecy in the Patent Office, we don't know what to expect tomor-
row, next week, next month, and so on.

In my case, I experienced a situation where a patent  was  called
to  my attention that literally could drive me out of business. I
started VideoDiscovery in`3.  I worked very hard for ten years to
get it to the point it is at, with sixty people, and for somebody
to have a patent that was a club that could just  close  down  my
operation  didn't  set well with me. I didn't know much about the
patent system until about a year ago when I got a letter from  my
competitor that called attention to the award of two patents, and
they indicated that they thought we might be infringing on  their
patents  and  suggested  that I contact their technical person to
see about licensing the technology.

Well, they had two patents. One of them was for a method  of  in-
struction that we lovingly call the Socratic Method, and the oth-
er patent was for a method to customize  a  curriculum,  using  a
computer  to  do  it, and we thought that that had been a process
that had been going on for a long, long time.

So my immediate reaction was confusion.  In  the  first  place  I
couldn't  believe  that  anybody  would patent these things. If I
could have the Number 3 slide, please.  I just want  to  describe
this  dpatent  for  you.  The patent on the Socratic Method, as I
say __ this is not the way it's described, it's  described  as  a
method of instruction __ was composed of a trilog, and the trilog
had three components.  One was a random_accessible  reservoir  of
information  like a video disk player __ could have been a CD_ROM
or a hard disk, I guess, or maybe a textbook, a teacher  was  the
second component, and the students were the third component.  The
way this system worked was that the teacher  was  given  instruc-
tions  where to go on the random_accessible reservoir of informa-
tion, withdrew the information, passed it on to the students, the
students responded, and then they would go back to this system.

Now, they got a patent for this. I couldn't believe it.   And  my
first  reaction  was  anger, disgust, you know, disbelief, and so
on.  More recently I've modified my position where I believe that
the,  the Patent Office is indeed not the culprit, but the victim
in a system.  Any system  that  operates  in  secrecy  like  that
whhthey  can't confide or consult with the members of an emerging
industry, for which there's no prior art, no experience,  no  in-
formed  judgment  on  the  part of the examiners, is ultimately a
victim to this thing where they have to __ they, they can't  dis-
tinguish  obvious from unique and are almost obliged to issue the
patent.

So the point there is that I think that if we  would  remove  the
veil of secrecy, which I hope is part of the legislation package,
and I'm not sure that is attached to,  you  know,  ultimately  or
necessarily to first_to_file process, so I'd like a clarification
about that, but that is really critical, to support change in our
industry.  At  one point it was the computer industry, it was the
biotechnology industry, it was the software  industry,  the  mul-
timedia  industry,  what's  going to happen next week, next month
and so on, but whatever the new,  emerging  industry  is,  unless
that  law  is  changed so that there's some better process, we're
going to face the same kind of dilemma.

Let me come back to lhistory on my case. As soon as we  got  that
indication, as a small company I did not have many attractive al-
ternatives. One was litigation, which was  very  very  expensive,
and  I could literally not afford that, and the other one was the
reexamination process.  In talking to no less than ten patent at-
torneys over the course of last year, I never got one that recom-
mended reexamination process, and so I'm very happy that the  Pa-
tent  Office recognizes the problem with that and is going to in-
clude more third_party involvement in that reexamination process.
But that was one of my recommendations.

As it happens, when we filed in Court in August to ask the  Court
to find these patents invalid based on the obviousness of the pa-
tent and the existence of prior art, the other  party  had  sixty
days  to  respond; and on the sixtieth day they decided to donate
the Socratic Method back to the  public  where  it  belongs.  The
second  patent,  however, they asked for reexamination in the Pa-
tent Office. That puts us in a terrible pospn.  We know that  the
inventor  has  a  tremendous  advantage through the reexamination
process as it exists.  We also have some trumps, some  prior  art
that  we know that will knock that out, and we don't know whether
to provide it to the Patent Office or to save it  for  litigation
if it emerges from the Patent Office.  So you can kind of see our
dilemma on that thing.

So a recommendation that I would have is to change the process so
it's  published  prior to award. That would solve the problem and
serve existing, you know, changes and so on (sic). Second  recom-
mendation  would be improve the examination process. I think that
that's being considered, and so on. But  a  compromise  position,
and  something  that  I would like to see for immediate relief __
I'm talking we need Federal aid now, an immediate relief  to  get
us  out  from  under this anxiety, is either a hiatus on any more
patents coming out for multimedia __ that would be preferable  __
if  you  can't do that, then I'd like to see the Commissioner em-
powered to constte a commission and do peer review of any patents
that  have come up.  The Commissioner would identify new emerging
industries, all right?  And when they saw that,  because  there's
no  prior  art,  because there's no experience with the examiners
and so on, that they work with the industry leaders in that  par-
ticular industry, to develop the prior art collection, to set the
guidelines for what's patentable, to review patents as they  come
out.

So I hope that you can sympathize with the position  of  a  small
business  person who has gone through the fear and the anxiety of
having something like that ripped out from  under  them.  I  feel
I've  been extremely lucky to get my resources together and to be
able to operate in this system.

Thanks very much for your attention; I'd be happy to answer ques-
tions.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Clark. In terms of
this  reexamination process that you're concerned with right now,
I think one of the problems that we have in  reexamination  right
now  is that generally sxing we limit the prior_art references in
a reexamination to those that are submitted by the person who  is
seeking  reexamination, and that creates a problem for third par-
ties.

MR. CLARK:  Aha!

COMMISSIONER LEHMAN:  So in this situation it sounds to  me  like
the  patentee kind of got the leg up on you by being the first to
request reexamination.  Is that problem.

MR. CLARK:  Yeah, I don't disagree. Yeah.  I don't disagree  that
I was outmaneuvered, you know, but __ yeah, you're right.  You're
right.

COMMISSIONER LEHMAN:  I really appreciate that. Does anybody have
any  other comments?  If not, thank you very much for coming down
here and sharing these thoughts with us.

MR. CLARK:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to call Mr. Ryal  Poppa,  the
Chairman and CEO of Storage Tek.

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