VICTOR SIBER

SENIOR CORPORATE COUNSEL

IBM CORPORATION

MR. SIBER:  Good afternoon, and thank you for the opportunity of allowing me
to deliver my comments this afternoon.

I am Victor Siber, Senior Corporate Counsel for the International Business
Machines Corporation.  My comments do represent the views of IBM.

The IBM Corporation spent 6.5 billion dollars on research and development in
1962.  In that same year, over 22,000 software programmers were employed by
the company, and we sold approximately 18.5 billion dollars of software
products and services.  So obviously, we are intensely interested in the
subject matter of these hearings.

We protect the detailed expression in every one of our software products by
copyright.  And approximately 3 to 5 percent of these programs contain new
and unobvious functions that are protected by patent.  Patent coverage on
these inventive functions protects our investment, gives us important
business leverage, as well as access into foreign markets.

I understand that this hearing was scheduled, in part, to address questions
raised by some broad software patents that have recently issued.  These
patents are alleged to cover old processes.  The response by some is to call
for changes in the law to prevent the issuance of patents in this
technology.

In the short term that would hurt the U.S. computer industry.  And in the
long term all industries that use computers to gain competitive advantage
will suffer.

The argument over these controversial patents is not that they cover
unpatentable abstractions.  These patents cover quite useful functions,
which others in the industry want to use. The issue, and the key to the
controversy is something quite different: whether these patents cover truly
new and nonobvious functions and thereby add something to the useful arts. 
In the final analysis that is the job expected from the U.S. Patent and
Trademark Office.  And it is a job that is doable.

The United States was the first and continues to be the global leader in
computer hardware and software technology.  This technology is important not
only in itself, but as a driver of innovation in other fields.  And today,
it is facing stronger and broader global competition.  As the industry
matures and competition from overseas increases, patents will be the key to
protecting the most valuable US_originated innovations.

You have posed a number of questions at the today. Beginning with Question 3
relating to altering the standards for patent eligibility for
software_related inventions, I want to make it clear that we completely
oppose such a proposal.

Going into the next century, the key inventions will be in information
processing.  Altering the standards for patent eligibility for
software_related inventions will shift investment away from this area.

The purpose of research and development in any technology is to gain an
advantage over your competitor.  But if your competitor can legitimately
copy the fruits from your R&D and can create a product that can compete
head_on with your product while you are still trying to build a market for
the product, then you've lost.

The long term value of R&D in the marketplace is in the new functions
implemented by software.  If such new functions are protected, investment
flows to the industry.  If not, investment will dry up.

There are several other points I want to make on this issue.  We can't
divorce computer program_related inventions from computer hardware and other
microprocessor inventions.  The overlap between the two is so great that
cutting back on one automatically cuts back on the other.

An alteration in the standards for patent eligibility will also put the
courts and your office in a quandary.  That is because computer
program_related inventions can be implemented in either hardware or
software.  Applicants will simply cast their patent claims in terms of
electrical circuitry.  And if you limit claim coverage over computer program
implementations of circuit inventions, you will turn electrical patents into
nullities, because the circuit functions can be implemented by a programed
computer.

Furthermore, if process patents cannot reach computer implementations of the
process steps, there will be a negative impact on every industry that uses
computer_controlled industrial processing or uses microprocessors in their
products.

From an international standpoint, a cut_back on patent eligibility for
computer program_related inventions sets a truly unfortunate precedent for
the developing world.  It would violate GATT and NAFTA provisions that
prohibit discrimination of patent eligibility based on technology.  The
biotechnology area provides a graphic example of what happens when countries
limit protection for a technology.  Leading European companies working in
this area of technology simply moved their biotech R&D operations to the
United States.

Concerning the issue of sui generis protection, replacing patent protection
for new and unobvious program and process functions, and replacing copyright
protection for the original expression contained in computer programs with
some form of sui generis right would be devastating to the industry.

In a single act, U.S. industry would unilaterally be disarmed relative to
our competitors in Japan and Europe.  We would lose patent priority rights
in the 114 countries of the Paris Convention, and we would lose the
copyright protection automatically afforded American program works in 102
countries as required by the Berne Copyright Convention.

As you know, the Trilateral Work Studies conducted jointly by the U.S. PTO
and the Japanese Patent Office and the European Patent Office, concluded
that the standards for patentability in the area of software_related
inventions are generally the same except at the far margins.

The Japanese Patent Office has published for opposition in the last six
years approximately (45) patent applications on software_related inventions,
while the European patent office has issued approximately 2700 patents since
1980 which have resulted in multiple European member country patents.

The majority of these software_related patents in the European Patent Office
and the great majority in Japan are issuing to non_U.S. companies.  Without
U.S. patents of a reasonable scope to bargain with, U.S. companies will
potentially lose access to those markets.

With the introduction of a sui generis system, there would be __

COMMISSIONER LEHMAN:  Can I ask a question?  Why do you think that is, that
the majority of those patents __ we issued 8,600 patent this last year in
the United States, so clearly we've got 8,600 people, and I think I cited
those statistics before, two years ago it 6,500 or something like that. 
Clearly, we have the inventions, but people aren't seeking, American's
aren't seeking patent protection in those foreign markets, why that is?

MR. SIBER:  I think there's a questions of maturity of the industry, many
smaller companies are not familiar with the process of filing overseas,
possibly may not be able to afford it or feel they can't afford it.

Secondly, it is natural, particularly in Japan to have a large number of
Japanese patent holders where the filings of large Japanese companies is
very high.

COMMISSIONER LEHMAN:  So, but IBM, I assume does file in those.

MR. SIBER:  Yes, we do.

COMMISSIONER LEHMAN:  And pretty extensive.  I would assume when you file a
patent application here, you file there too, since you're a worldwide
company.

MR. SIBER:  Correct.

COMMISSIONER LEHMAN:  Is that generally  true?  Are there situations where
you don't file there and you would file here?

MR. SIBER:  We do not file a counterpart patent in Europe and Japan for
every patent that we file in the United States.  It is selective, it is a
selective process.  We too have budget limitations, even though we just
turned a substantial profit last quarter.

(laughter)

COMMISSIONER LEHMAN:  Sorry, to interrupt.

MR. SIBER:  With the introduction of a sui generis system there would be an
extended period of uncertainty, the bane of businessmen and investors, as
the body of case law were developed interpreting the new sui generis law and
determining its scope.

Additionally, there would be a complete absence of effective international
protection for the new right.  The internationalization of a sui generis law
would require a sui generis treaty.  Such a treaty would be negotiated
without any of the international consensus on what sort of protection regime
would be appropriate.  As you know, the primary multilateral treaty to date
for a sui generis right, The Treaty on International Property in Respect of
Integrated Circuits, known as the Washington Treaty, was strongly influenced
by developing countries that were hostile to IP protection generally.  The
result was a treaty so flawed that not one single major chip_producing
nation supported it.

The only remaining way to internationalize that sui generis chip_protection
right was through reciprocity.  But reciprocity has it rewards and its
vices.  The European community now points to the reciprocity provisions in
the U.S. Semiconductor Chip Law to justify its discrimination against
America's authors through the reciprocity provisions in the E.C. Directive
on Copyright Term Extension, and for denying U.S. authors the benefit of
unfair extraction right in the draft E.C. Directive on Database Protection,
and in refusing to grant movie and music producers and authors their fair
share of the blank tape and movie levies.

Finally, regarding the series of claim format examples in Question 1, we
believe that the format of the claim should be viewed from the perspective
of patentable subject matter.  If the claim as a whole is directed to a
machine, article of manufacture, or a machine_operated process, then subject
matter eligibility should not be an issue.  The focus of the examiner should
be on the normal statutory tests of novelty, nonobviousness, and utility of
the claim as a whole.  And to insure compliance with the formality
requirements of 35 USC 112.

Specifically, a claim directed to an article of manufacture comprising
computer_usable medium and a plurality of computer_readable program code
means for causing a computer to effect a plurality of specific and
interrelated functions should be eligible for patenting under the statute. 
Such an article of manufacture constitutes a machine part that is
commercialized separately.  And it should be protected separate, like other
machines parts, if it meets the statutory test of novelty and
nonobviousness.

In summary, the patent system is designed to instigate the invention of new
nonobvious and useful functions that add to the arts.  The key to seeing
whether the system is working is to see if there is strong competition in
the marketplace; to see if new products are introduced in the market on a
regular basis; to see if employers and investors vote for the system with
their pocketbooks by funding new development work.

As for my company, we rely heavily on the patent system to protect our
investment in new products.  And we are negatively impacted probably more
than most by poorly_examined patent applications.  Thus, we want the
issuance of poorly_examined patents curtailed.  And that is clearly doable
if the PTO would invest in hiring and training the best possible examiners,
as well as in the creation of an adequate database for software prior art.

Thank you for the opportunity.  I would be delighted to answer any
questions.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Siber. Is there anybody else
that wants to ask something?

Thank you very much for joining us today.

Next, I would like to call on Mr. Ewald Detjens, CEO of Exemplar Logic,
Incorporated.


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