TOM LOPEZ

INTERACTIVE MULTIMEDIA ASSOCIATION

MR. LOPEZ:  Thank you. Mr. Commissioner, my name  is  Tom  Lopez.
I'm  Chairman of Mammoth Microproductions of Seattle, Washington,
a multimedia development company.  I'm also President of the  In-
teractive  Multimedia  Association.   The  Association's  general
counsel, Brian Cann, who also directs our Intellectual xerty Pro-
ject,  is with me today to help answer any questions that you may
have.

The Interactive Multimedia Association is a 290_member trade  as-
sociation  headquartered  in Annapolis. We are here today because
the patent system has cast a cloud over our emerging industry, an
ambitious and motivated industry which seeks to transform the way
we play, learn, work, think and communicate.  We're  specifically
concerned  about the impact of patents on the flow of information
and fundamental principles of free expression, on the  impact  of
patents  on  enabling environments, in particular the development
of the national information infrastructure, the need for a patent
system  that  is  publicly accountable and open to industry input
specifically  through  pre_grant  publication  and  peer  review,
knowledgeable  and  informed about its operation and its economic
and social impact, and sensitive to competing  values  and  poli-
cies.

We bring a unique perspective, because our membership  spans  the
whole  of  the multimedia industry, from |e computer companies to
small publishers and developers. This makes it impossible for the
IMA  to  take  positions  on issues such as the merits and proper
scope of software  patents  where  we  encompass  many  different
views.   However,  we have historically been especially concerned
with needs and perspectives  of  developers  of  multimedia  also
known  as content_driven software.  Multimedia developers provide
the creative spark that is driving multimedia into homes, schools
and  businesses.  Therefore, we do not address competition within
the software industry, we address the impact of patents  on  con-
tent, on the organization, expression and communication of infor-
mation.

Multimedia developers depend upon computers, networks and operat-
ing  systems,  authoring  tools  and other software environments.
They build on technological platforms developed by others.   Like
traditional  publishers,  they add value through research, selec-
tion, organization and coordination, by  aggregating  rights,  by
creating  original material and by essing whatever ideas they be-
lieve will move the market, the body_politic or the  soul.   They
use interactivity as their grammar.  It is how computers speak to
people, it is how people speak to computers.  It  is  how  people
speak to other people through computers.

Historically, copyright law has provided a level of protection to
the  software  developer.  Unlike  copyright, patents control the
private use of patented processes.  Unlike copyright, independent
creation  is not a defense to patent infringement. Patents there-
fore control not only  original  implementations,  but  also  the
users of such original implementations.  Patents even control the
use of products of the process.  The extraordinary power  of  pa-
tents resonates across an increasingly_integrated and interdepen-
dent digital environment,  putting  everyone  downstream  of  the
underlying  technology at risk.  Content_integrators, publishers,
distributors, even users.  Indeed, typically  end_users  are  the
direct  infringers.  The upstream providers are technicallly con-
tributory infringers.  For example, in the  recent  case  of  the
Optical  Data  patent,  interactive method for the effective con-
veyance of information in the form of visual images,  the  direct
infringers   were  the  hundreds  of  thousands  of  teachers  in
classroooms, and by extension the local school districts and  all
of us as taxpayers.

The Computer and  Business  Equipment  Manufacturers  Association
described  this  problem sixteen years ago in arguing against pa-
tents for algorithms. Quote.  The computer has become the  engine
which  assists  in running our society and in the future will as-
sist man in numerous areas totally unrelated to the usual  appli-
cation  of  today's  computers.   These applications and computer
uses should not be clouded by problems resulting  from  unwitting
infringement by computer users.  End quote.

Looking at the list of speakers today, it is clear that users are
not represented at this hearing except for multimedia developers.
Multimedia developers are on the front lines of  the  user  commun
because  they're  developing content_driven product and services.
To the extent that they are successful, they become  targets  for
patentees.  Content_oriented developers get protection from copy-
right, not from patents.  They need protection  against  patents.
How do they get it?

For the first time, errors and omissions insurance to  cover  pa-
tent  infringement  is  available from the American International
Group for multimedia products. The cost is fifty thousand dollars
per  product,  with a fifty thousand dollar deductible.  That's a
formidable barrier for an independent developer, a regressive tax
on interactive expression.  Such insurance, costly as it is, does
not cover patents of which you are aware you may  be  infringing.
This  unfortunately is another good reason, along with the threat
of triple damages for wilful infringement, to avoid  reading  pa-
tents  entirely, a sad comment on a system originally intended to
spread technical knowledge.

And while  we  are  concerned  with  the  impact  of  patents  on
publishi.......nd  First Amendment values, we share with others a
concern for the related problem  of  patents  on  broad  abstract
processes.  Such  patents  are  extremely difficult to interpret.
They often purport to preempt basic functionality so as  to  pre-
clude  others  from  designing  around the patent.  Usually their
claims are over_broad, but can be narrowed only at great  expense
to those who would challenge them.

These abstract system_level patents threaten the  development  of
common standards, specifications and architectures, including our
Association's own  work  on  cross_platform  compatibility.  They
create information bottlenecks, or tollbooths, in the vision of a
national information infrastructure.  Mindful of the  history  of
blocking patents in the development of the radio and the aircraft
industries, we note that the highly complex and interrelated  na-
ture  of the information infrastructure makes it very vulnerable.
Broad patents are especially suspect  in  the  case  of  software
where  functions  can  be  implemented  in a widriety of ways and
where independent creation is commonplace.

This problem, along with the threat that  patents  still  pending
may be inadvertently incorporated in standards or infrastruction-
al systems, would be greatly alleviated by pre_grant publication.
The secrecy of the present application process is an anachronism,
and a primary cause of the present  uncertainty  and  insecurity.
We plan to address this issue further in the February hearings on
examination processes.

We're grateful to the Commissioner for holding this public  hear-
ing and dealing openly with the issues as a matter of public pol-
icy. We're also pleased to see a serious effort to develop patent
policy  within the larger context of economic development and the
Administration's vision of a national information infrastructure.

We would like to close by expressing our support for a strong pa-
tent  system.  By  that of course we do not mean a system that in
the name of incenting novelty  oozes  uncontrollably  into  every
corner  of  human life.  We ma system that knows its limits, that
functions spectacularly within those limits and that does not de-
base the concept of intellectual property by incenting gaming and
speculation. We mean a system that works in the real world,  that
acknowledges its regulatory nature and is tailored to the econom-
ic characteristics of the operating environment.  We mean a  sys-
tem  that operates proudly in public view, that is understood and
acclaimed not only by patentees, their agents  and  their  attor-
neys,  but  by  the  tens  of millions who also contribute to our
economy and society and face tough competition unarmed by  patent
monopolies.

Thank you very much.

COMMISSIONER LEHMAN:  Thanks. You said that you  felt  that  with
the  exception  of the Interactive Multimedia Association that we
didn't have on our witness list real representatives of users  of
the  system.   Who  are  we missing?  Who would you count in that
category of users?

MR. LOPEZ:  For instance, teachers who use the products  of  mul-
timedia  developers,  people  who  are .......s in the home who I
think would be very upset to find out that they perhaps are infr-
inging on patents without knowing about it.

COMMISSIONER LEHMAN:  How might they be infringing on, on __

MR. LOPEZ:  If they are actually the people who  are  taking  the
actions  which  would be against the patent, as teachers would be
in using the products that would violate the Optical Data  patent
as an example.

COMMISSIONER LEHMAN:  Thank you. I also wanted to  ask,  just  to
clarify  your  position  a little bit more, is your position that
you would not be in favor of such a drastic step  as  doing  away
with patentability of software_related inventions.

MR. LOPEZ: No.

COMMISSIONER LEHMAN:  So you really feel what we need to do is to
reform  the  system  to make certain that, that we have a clearer
scope of patentability and that we have better  procedures,  pri-
marily pre_grant publication for making sure we capture the prior
art.

MR. LOPEZ:  Exactly. I think as Mr. Clark has  indicated  in  his
testimony, one of the greatest prob...... for multimedia develop-
ers today is the uncertainty that exists, and  when  this  uncer-
tainty  exists  it inhibits the investment and the __ not only of
intellectual energy, but also of capital.

COMMISSIONER LEHMAN:  My colleague, Ginger Lew, who's our General
Counsel for the Department of Commerce and on Assistant Secretary
of Commerce has a question.

GENERAL COUNSEL LEW:  In Mr. Poppa's testimony he  mentioned  the
possibility for the need of mandatory API __ ADI, and I wanted to
know if the Association had any position on that.

MR. LOPEZ:  The question is does the Association have  any  posi-
tion on mandatory APIs regulated by law?  Brian.

UNMIKED VOICE:  No.

MR. LOPEZ:  No, we do not at this point.

COMMISSIONER LEHMAN:  One comment I'd just like to __ maybe  it's
more  of  a comment; we have a little more time here, and you may
have a response to it. We haven't focused very much on that,  and
I don't think our questions did, but a previous witness I believe
it was indicated that they thought it was very impo t to have the
Courts  to flesh out the patent system. There are elements in pa-
tent law at the moment, for example, the fact that, even assuming
we spruce up our examination process, right now you can go to the
Court of Appeals through the Federal Circuit, and  basically  get
de  novo  review  of  our Patent Office decisions.  The Court can
second_guess the patent examiner, judges who are not even remote-
ly experts in a given technology.

Secondly, we have a number of legal doctrines, like the  Doctrine
of Equivalence, which some have argued cloud the certainty in the
patent system, and I'm wondering if you have  any  comment  about
the  impact of those on your industry. Do those kinds of problems
that occur in enforcing __ understanding how the Courts will  in-
terpret  a  patent, do they create uncertainty that creates prob-
lems for you?

MR. KAHIN:  We really haven't addressed the problems, the techni-
cal problems you've described, at that level. I think the concern
in  the  judicial  evaluation  is  more   focused   on   a   very
hig$esumption of validity of the patent examiner's determination,
and __ that carries over into the judicial system. So  that  once
that determination of nonobviousness based on the referenced pri-
or art is made, it can't be overcome except by clear and convinc-
ing evidence.  So that that high presumption is a disincentive to
challenging the patent in Court.

COMMISSIONER LEHMAN:  Actually I think the situation is a  little
different than that. I think we have maybe a little bit the oppo-
site problem with the Court of Appeals.  The Court of Appeals for
the  12th  Circuit has de novo right to review the patent and I'm
not sure that they always do use that clear and  convincing  evi-
dence standard that you discussed.

MR. KAHIN:  But it's very expensive to get that far,  to  get  to
the Court of Appeals for the Federal Circuit. Most of our members
have enough trouble getting to a patent attorney, let alone  fil-
ing suit in a District Court.

COMMISSIONER LEHMAN:  Thank you very much.

MR. KAHIN:  Thank you.

COMMISSIONER LEHMAN:  Next I'd like to  call  Mr.  Paul  Heckel,
Acting  President  of  Abraham Lincoln Patent Holders Association
who is from Hyperracks, Incorporated.

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