DENNIS FERNANDEZ

FENWICK AND WEST

MR. FERNANDEZ:  Good afternoon, ladies and gentlemen, my name  is
Dennis  Fernandez. I am a registered patent attorney at the Sili-
con Valley_based technology law firm of Fenwick and West.   I  am
speaking today on my behalf.

Before practicing law I was an electrical engineer and a  techni-
cal  manager  for  several years at various comps in the computer
and electronics industry including NCR, AT&T,  Digital  Equipment
Corporation,  Raytheon, RayCal Limited, where I did semiconductor
chip design and processing as well as managed marketing and  dis-
tribution  of semiconductor chip products. Currently I specialize
in patent prosecution and litigation in  the  semiconductor  chip
industry.

As you know, in this highly competitive electronics industry, in-
tellectual  property  protection has become a very important part
of doing business. This afternoon, I wish respectfully  to  share
with you a few brief comments based on my practical experience in
the semiconductor industry.  As an electronics engineer and  also
as  a  legal counsel I believe I can provide many comments on how
software patents have already or might in the future  impact  the
business interests of semiconductor and software companies in the
Valley, and because of the limited time which has  been  allotted
for  speaking I direct my comments only to a few points which are
relevant to chip design  ware.

I believe these comments may reflect the  interest  of  companies
who  do  business  in the area known as electronic design automa-
tion, or, EDA. EDA  products  refer  generally  to  sophisticated
software  written  for  automating the highly complex process for
designing and testing  semiconductor  chips  and  related  system
boards.

In this EDA context, I offer  comments  on  the  following  three
areas,  number  one,  special  technical need for software patent
protection; number two, practical timing  problems  in  U.S.  pa-
tents,  and  number three, apparent effect of software patents on
innovation.

First point, which is special technical need for software  patent
protection.  Because of the highly functional nature of technical
innovations that are developed for EDA software products, patent-
ing seems to be an appropriate way for legal protection.  For ex-
ample, EDA software typically includes software programs for syn-
thesizing  logic  circuits,  generating  test  program vectors or
simulating digital and  analog  system  components$hese  software
functions  involve fairly abstract ideas, which would not be pro-
tectable ordinarily under copyright law, but would be protectable
under  patent  method  or apparatus claims if sufficiently inven-
tive.  Thus, due to the largely functional nature of  innovations
in EDA software, I believe that patent protection is appropriate.

Second point. There are practical timing  problems  in  U.S.  pa-
tents.  There appear to be two practical problems which may apply
to EDA companies with respect to timing related  to  U.S.  patent
applications.   First,  the seventeen_year patent duration may be
too long.  In the context of the  EDA  industry,  where  software
products  typically  have  product  lives that are less than half
this duration, it might be more appropriate to provide a  shorter
period  of  exclusivity.   Second, the current two_ to three_year
backlog in the United States Patent and Trademark  Office,  espe-
cially  in  the electronic and software arts, may pose some prob-
lems to companies in the EDA industry, both for those (anies  who
wish  to enforce their patents during the market window available
for their software products, and also  for  those  companies  who
wish to learn about the existence of relevant patents and thereby
avoid them.

Third and last point, the apparent effect of software patents  on
innovation.  In the highly competitive EDA business, particularly
in the Silicon Valley, it has been my experience in a  number  of
recent  cases  that  the presence of relevant software patents do
not necessarily serve to  impede  or  deter  competitive  product
development.   Typically,  clients  in  this  business tend to be
fairly sophisticated in our understanding of  patent  enforcement
matters.   Furthermore,  these  individuals  are  aggressive  en-
trepreneurs who are doing pioneering technical  work  in  product
development and are typically backed financially by venture capi-
talist institutions.  These individuals often find ways to design
around  even  what  appear  initially  to  be fairly broad patent
claims.  Also, it has been my experience that such,  clients  are
often  able to obtain reasonable licensing terms or raise reason-
able arguments for invalidity based on relevant prior art, there-
by  providing  themselves with opportunities to make, sell or use
their EDA products, possibly without legal  liability.   It  does
not seem to me, therefore, that software patents have necessarily
stifled competition, at least in the electronic design automation
industry at this time.

This concludes my prepared comments. I thank you  very  much  for
your consideration.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Fernandez. So  ba-
sically  the  bottom  line is that you really don't think we need
fundamental changes in the system, but you think we might want to
deal  with certain issues regarding the EDA industry like the ap-
propriateness of length of terms.

MR. FERNANDEZ:  Term limits. Yes.

COMMISSIONER LEHMAN:  Yes. Thank you very much.

Next I believe that Pete Antoniak has arrived now from Solar Sys-
tems  Software,  so  we can put him back on the agenda. Come for-
ward, ple0

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