RICHARD LeFAIVRE

APPLE COMPUTER, AND,

COMPUTER AND BUSINESS EQUIPMENT MANUFACTURING ASSOCIATION

MR. LeFAIVRE:  Thank you, good morning. My name is Rick  LeFaivre
from  Apple  Computer  and  today I'm actually wearing four hats,
first as a computer scientist with twenty_five years' of  experi-
ence  in  software technology as a researcher, a professor and an
Ldirector, second as Vice_President of Advanced Technology at Ap-
ple Computer.  My organization is responsible for a large percen-
tage of the patents that are granted to Apple, and the protection
of the innovation that we do is very important to me.  In partic-
ular over the years we've seen a marked shift in  our  innovation
focus  from  hardware  to software, and so I'm very interested in
the topic of these hearings in particular.

Third, I'm the founding member of the Executive Committee of  the
Software Patent Institute. As you may be aware the SPI was found-
ed to provide training in software technology and access to prior
art,  to help insure that those software patents that are granted
are of high quality, and we're working very  closely  with  Gerry
Goldberg  in that task.  I should point out that the Software Pa-
tent Institute has chosen to take a neutral stance on  the  broad
issue  of the patentability of software so the views I'm about to
express do not necessarily reflect those of the SPI.

Finally and most importPy I will be testifying today on behalf of
the  Computer  Business  and Manufacturer's Association CBMA, and
let me give you a little background of  this  group.  CBMA  is  a
trade  association  whose  members  represent the leading edge of
high technology companies in the computer business equipment  and
telecommunications   industries   in  the  U.S.  In  1992  CBMA's
twenty_six members had a combined estimated sales  of  more  than
two  hundred seventy billion dollars, which represents about four
and a half percent of the  U.S.  gross  national  product.   CBMA
member  companies employed approximately a million workers in the
U.S. in this past year.

The computer industry performs about twenty percent of the  total
private_sector  R&D  investment  in the U.S. That figure is about
five times the investment of the aerospace industry, three  times
the  investment  of the health care industry, and four times that
of the chemical industry.  This investment allows our members  to
rapidly advance the capabilities of their products and to get ac-
cess Tand compete successfully in,  a  very  tough  international
marketplace.  It also results in significant numbers of jobs just
within R&D alone.  I'm here today because patent  protection  for
new  computer functions is absolutely crucial to all our members.
Software_related inventions fit within our present patent  system
and  patents issued under a sound application examination process
support the Constitutional mandate of promoting the  useful  arts
and  sciences.   CBMA  members  file  for  and obtain patents for
software_related inventions. They also enter into  agreements  to
utilize such patents held by others.  Because our companies typi-
cally have broad product lines, they  address  patent  issues  in
many   areas   of   technology.  They  see  no  reason  to  treat
software_related patents differently from patents related to oth-
er technologies.

In the first question set forth in the hearing notice, there  are
a  number  of subparts relating to claim subject matter and claim
formats. CBMA's response to this  question  is  simply  that  ifX
claim  is  drawn to the solution of a real_world commercial prob-
lem, and the claim functional steps or elements as a  whole  meet
the  strict  legal  requirement to be new, nonobvious and useful,
then a patent should issue.  The function claimed, not  the  for-
mat,  is  what  is  important.   It shouldn't matter whether new,
nonobvious and useful process steps are claimed in the context of
a program or a disk or claimed in a hardware or method format, or
in the context of a semiconductor chip.  Software_related  inven-
tions  are  valuable  to the purchaser not for what they communi-
cate, but for the functions they perform.  The functions are what
are  important and what should be assessed for novelty and nonob-
viousness.

Relative  to  Question  2,  our  members  have  integrated  their
software_related patents into their overall patent portfolios and
practices so that separating out their impact is quite difficult.
However,  this  integration itself demonstrate that these patents
are just like all others.  They are sought when the inven hiso  her
employer believe that the investment in obtaining the patent will
be returned.  Conversely, CBMA members  often  must  respect  the
software_related  patents  of  others,  which they do in the same
manner as further technologies.

Regarding Question 3, the standard  for  patent  eligibility  for
software_related inventions should be maintained at the same lev-
el as for all other technologies. An alteration in that  standard
would negatively impact investment in our industry.  If the stan-
dard were to be restricted severely it would disarm  CBMA  member
companies  in  their  dealings  with  foreign competitors because
licenses under U.S. patents  are  used  to  negotiate  access  to
foreign  markets  and  foreign  technology. Obtaining patents for
software_related inventions in our principal competitor countries
is generally equivalent to that of the U.S.

Software_related technology will be one of the leading  technolo-
gies  of the 21st Century. Discrimination against this technology
would set a terrible example sure  to  be  ra`y  adopted  by  the
developing  world.   To  now have the leading country in software
creation and patents declare that such  inventions  are  excluded
from  the  statute, despite falling within the terms of statutory
subject matter, or are to be treated differently from patents in-
volving other technologies, would reverse much of the hard_fought
progress that has been made over the last decade in improving in-
tellectual property protection throughout the world.

Relative to Question 4, patents provide the relatively broad pro-
tection necessary to bring in risk capital for new and useful in-
ventive  functions  that  are  generally  defined  in  terms   of
processes or methods of operation.  This protection should be af-
forded only after a  detailed  examination  to  insure  that  the
claimed  functions  are truly novel and nonobvious.  This, by the
way, is one of the places where the SPI is trying  to  work  with
the  Patent  Office to make that process more efficient.  In con-
trast, copyright protects only the expression  contained  in  the
compudprogram,  as  it  does for other literary works. High_level
functional processes are expressly excluded  from  protection  by
statute.  Thirdly, trade secrets provide the necessary protection
to facilitate the  disclosure  of  confidential  software_related
designs  to  employees,  joint venture partners and others within
the structure supporting that confidentiality.

Thus, each protects different aspects of the intellectual proper-
ty. The inventor, who may not wish to or be able to author a com-
plete software product, deserves protection. The author of a pro-
gram  deserves protection from piracy and plagiarism.  Those with
confidential information, willing and able to keep  it  confiden-
tial,  should  be  able  to protect that value against those from
which it has a fiduciary relationship.

Finally, with regard to Question 5, CBMA supports continued reli-
ance  on  the tested, well_developed protection of patents, copy-
rights and trade secrets.  We strongly support continued improve-
ment  in the patenting process for software_related hntions.  But
nothing suggests the need to treat software differently.   A  new
and  untested  regime would fail to provide inventors and authors
with any certainty of protection for an extended period  of  time
while  judicial precedent was developed to determine the scope of
the law.

Additionally, international protection for our software  research
and  development  is  critical.  There is no certainty that a new
protection system could be implemented worldwide, whether through
multi_ or bilateral negotiations.  The hard_fought protections in
the GATT, TRIPS and NAFTA treaties regarding literary  work  pro-
tection for programs and the issuance of patents without discrim-
ination based on technology were just obtained last year.  It  is
inconceivable  that  such protections would now be abrogated with
the ink hardly dry on these provisions by the adoption of  a  sui
generis protection.

In closing, our message to you is this:  Don't cut back on patent
protection  for  software_related inventions because some invalid
patents mayle been issued. The current reexamination process  and
the Federal Court system do provide mechanisms for the removal of
these mistakes.  We believe that further training for  examiners,
and  access  to a larger library of prior art can and will reduce
the possibility of future mistakes.  Overall, the system is work-
ing  and  should be improved, not abandoned.  If the standard for
patentability is changed for software_related inventions,  or  if
patent protection is dropped in favor of some new form of protec-
tion, it will severely and negatively impact  CBMA  members,  our
industry and the country.

Thank you for letting me submit these remarks and we look forward
to continuing to work with the Patent Office on these issues.

COMMISSIONER LEHMAN:  Thank you very much. I have one question if
you  have a moment, and that is that, there's obviously a differ-
ence of opinion about the application of the patent system to the
software  industry that is represented in the room, we've already
heard it this morning and I think we'poing to hear more testimony
about  it.   Apple certainly is a company, and I gather that CBMA
is a company now that very  much  favors  patent  protection  for
software, and Apple's certainly a very important, successful part
of American enterprise today.

One question that I have is that obviously the purpose of patents
is  to  incent  people to invent and to make investments. And can
you point in your own experience to an  example  where  that  has
happened?   Has the patent system actually been a factor in a de-
cision to go into a new technology, the fact that it might be pa-
tentable?  Has it been a factor in getting financing from capital
markets?

MR. LeFAIVRE:  Yeah, that's a good question. Apple thinks  a  lot
about  patentability of any technology, software or any other, in
looking at some of our innovations.  We do feel  that  there  has
been  a  lot of investment made in technologies that, to be quite
honest have been appropriated, copied, whatever,  by  other  com-
panies,  that  have  not  helped our situation in the marketplatI
think it's fair to say, and so we  certainly  are  interested  in
trying to evaluate the patent potential of different technologies
as we develop them, so I wouldn't point to any particular  issues
or topics, but yes, we certainly take that into effect when we're
looking at technology investments.

COMMISSIONER LEHMAN:  So that is an  important  part  of  Apple's
decision_making process.

MR. LeFAIVRE:  Yes. I think that's probably  true  for  all  com-
panies now.

COMMISSIONER LEHMAN:  Thank you very much.

MR. LeFAIVRE:  Okay?  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to call Mr. Tom Lopez who  is
President of the Interactive Multimedia Association.

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