TOM CRONAN

TALIGENT, INC.

MR. CRONAN:  Good morning, Mr. Commissioner.  My name is Tom Cronan, and I'm
the General Counsel and Secretary of Taligent, and I'm testifying today on
behalf of Taligent.

I must say after listening to yesterday's session during the morning, it is
with some trepidation that I approach the stand this morning.  As a lowly
high_tech copyright lawyer, I guess it's malpractice per se to be even
testifying here today.

What we're going to talk about is the patent system and how the patent
system is critical to stimulating investment in the software products and
technologies areas.

We will recommend some refinement to that system.  We want to have a system
that is designed to support high technology, this industry which gives us
high_tech, high_wage jobs.  We want to continue to be the world technology
leader in software.  I will talk about both start_ups and large companies
and how the patent system benefits both.

We want to stimulate investment, that's what we're all about.  There's lots
of various interpretations of whether the patent system will help or hurt
venture capitalists and others make decisions on whether to invest in
software.  We certainly have an opinion on that that we'd like to share with
you today.

So I'm going to discuss three things:  Why software is important to new
ventures, why software patent protection and related inventions is important
to new ventures, why the patent system attracts investment, and the
refinements that we discuss to the current system.

Taligent, as an example, is a new, founded in 1992, small, starting with 170
employees __ we now have 350 employees and by the end of this year will have
450 employees __ innovative, high_tech, high_risk venture.  We're going into
an extremely competitive marketplace, we're going to have an object_oriented
operating environment that will compete with Microsoft's offerings, clearly
the dominant player in a lot of competition in the area.

We are going to compete on the basis of innovation.  We are going to try and
establish a foundation technology for the industry, a new type of technology
that will be an operating environment that's open and extensible at all
levels, based on a brand_new technology.

As I was sitting here this morning listening to our first speaker talk about
the fact that two of his programmers could program a million lines of code,
I was thinking about our own efforts.  We have been developing this
technology before the company began __ it's been now six years in
development.  And by the time we're done, we will have a very elegant
program with 750,000 lines of code.  I would think that some of our
developments may be a little obvious than those this morning, which were the
million lines of code.

This architecture is being developed from the ground up __ a clean sheet of
paper.  That's why it's going to be innovative, that's why it's foundation
technology.  We're not unique.  There's going to be lots of other foundation
technologies that will have to be established for the information
superhighway, and they will not be done by garage shops.  They will be done
by larger ventures, by people in the industry who understand the technology,
who understand the risks.  We could have never attracted venture capitalists
to our venture, we are too risky.  We're funded by the industry, like now
three separate large companies in the industry who will be funding us.

So as we look at our architecture, as we look at our developments, we see
ourselves very much like the beginning processor developers.  We're looking
at an architecture that's extensible, we're looking at functions and
features that are new, and we think that software should be protected in the
same way as hardware.

We don't think there's any material difference and we think that the
policies of the patent system are in favor of protecting software the same
way as hardware.

Next I'd like to talk about why that patent system attracts investment.

The software industry is different than some other industries.  It has a
very front_end loaded investment.  You have to invest all of your risk
capital before you know whether or not your product is going to be
competitive, before you know whether or not anyone will buy your product. 
So you have a lot of risk and you have a lot of uncertainty.

If you add on that additional risk and uncertainty associated with not
knowing whether or not you'll be able to protect your new and innovative
product from a major competitor, you may not have any investment at all. 
The market risks are very high, and if competitors can take a utilitarian
function which you spent a lot of time and effort designing, as we
mentioned, and use those against you without having the same R&D expenses,
you would not be able to support these investments.

The other reason, policy reason, is as we look at this technology, copyright
law will not be adequate to protect the types of object_oriented programming
that we're developing.  We have designed our system so that in object code
developers using our development environment can go in and modify almost
every portion of our system.  The entire architecture is open.  We cannot
protect it by trade secret.  There will be those, I'm sure, who will argue
that the entire system is an interface. That raises some copyright issues __
as us lowly copyright lawyers know.

We think that the patent law encourages disclosure.  In the absence of
patent protection for this technology, I would certainly advise my client to
make sure that we keep as many of the interfaces closed and not open as
possible, make sure that most of the important functions aren't disclosed in
documentation.

With the patent system, we're able to disclose those not only in the patent
applications but we also will want to make sure that for those important
utilitarian aspects that we can't afford to patent, that we'll publish and
establish the prior art in those areas.

We want to make sure that the United States continues to be the world
leader.  As you probably have read, there is now more R&D dollars going into
software ventures and software technology in Silicon Valley than hardware. 
That wasn't true two years ago; it's true now and it increases every year,
and this investment is dependent on having a system that protects that
technology.

One other point I would make on this is, an earlier speaker said that there
was presumption that the first to market would win.  I would challenge that
presumption.  If you look at Excel, if you look at Word, I do not believe
that they were the first spreadsheet or the first word processor on the
market, but they have substantial market share.

Next I'd like to go back and talk about some refinements that can be made to
the current system.  There's been lots of suggestions that have been offered
today, and I would like to just offer a few additional suggestions, and also
some endorsements of some of the suggestions that have been made.

We applaud the Patent Office's initiatives on education.  We have been very
active with Gerry Goldberg in trying to educate the Patent Office.  We spent
time, money and effort sending Mike Patel, our VP of Advanced Technology,
back to the Patent Office.  He educated a large number of people for half a
day.  His talk was not about Taligent; it was about object_oriented
programming from its inception.  And he was a professor for eight years
before he came to Taligent, so he had a very good background.

It was so well_received that the Patent Office invested in sending 17 senior
supervisors out to Taligent and to other companies in the Valley.  They
spent a day and a half at Taligent understanding our technology in great
detail.  And most of the responses we got from them were extremely positive.

And I was there for the wrap_up of that session, and I heard one of the
senior supervisors saying, "You know, this is great, we learned a lot, we
now have new innovative ways to deny your claims."

One of the other things that I think would really help the Office __ and I
know that you have begun this and we think you should continue it and with
even greater speed __ hire more computer science graduates who don't have
engineering degrees. These are the type of people who understand this
technology, the type of people that should be evaluating these types of
inventions.

I think that some of the other problems of obviousness, there are lots of
issues with obviousness, but one of the things, consistency and having
people that understand the technology better would certainly help the
nonobvious issue.

In addition, I have one other proposal that's a little different than some
of the proposals.  To deal with this problem of having all of the prior art
not found anywhere or searchable by advanced technology __ and I know that
you're trying to put together databases in advanced technology __ we would
propose a human database.

There are people, there are consultants, there are people who can be hired
who have lots of expertise and lots of industry experience in the relevant
areas that a lot of the software patents will be filed on.  These people,
because of Internet and because of advanced technology, don't even have to
be located with the Patent Office; they can be reached through advanced
electronic communication, so that people in California who have a general
reluctance to move back to Washington, D.C., especially after the snow
storms of this winter __ except of course the people in Los Angeles __ can
be reached by Internet.

Finally, on publication, we would be in favor of publication prior to
issuance.  I think that one of the issues that hasn't really been addressed
is that there needs to be some certainty in this publication scheme, a
publication scheme that would be tied to when the patent issued and
publication prior to that would have a great deal of uncertainty because of
the great deal of uncertainty in when the patent is processed through the
Patent Office and when it gets issued.

It would be important to understand whether or not your product is out in
the marketplace before the patent issues, and before the publication.  So I
think having a set time period, like 18 months, or some other time period
that's appropriate for the industry, is the best way to proceed.

So let me just conclude.  We think that protecting software_related
inventions is critical to investment and for ensuring certainty on return in
those investments.  We propose some refinements to the current system; we
think with those refinements we should be able to enhance competitiveness of
the software industry in the United States, particularly the high risk, high
level of investment foundation technologies, such as our company, which will
be needed for the information highway.

Thank you.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Cronan, for sharing those
ideas with us.

Next I'd like to ask William Neukom, Vice President of Law and Corporate
Affairs for Microsoft Corporation to come forward.

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