MS. CALLAN;:  Good morning, Mr. Secretary.  My name is Diane
Callan and I am Deputy General Counsel of Lotus Development
Corporation.  I am speaking to you this morning on behalf of
the Business Software Alliance.
On behalf of the BSA I would like to thank you for convening
this hearing to consider these important issues and we
appreciate the opportunity to speak to you.
The BSA was organized in 1988 to promote the continued growth
of the software industry through its public policy, education
and enforcement programs in the United States and in more than
50 countries throughout North America, Europe, Asia and Latin
BSA members are actively involved in nearly all aspects of
microcomputer software development, including production of
operating systems, application software and networking
The current BSA members who are participating in this
statement include ALDUS Corporation, Apple Computer, Inc.,
Autodesk, Inc., Intergraph Corporation, Lotus Development
Corporation, Microsoft Corporation, Novell, Inc. and
WordPerfect Corporation.
In the last five years every government, academic and industry
study of technologies that are key to America's futures have
identified the vital role to be played by the software
industry.  Software is characterized by both rapid
technological innovation and widespread use in downstream
Software innovation improves the competitiveness of other
industries which utilize software products to make them more
innovative and more competitive.  The benefits of continuous
software innovation permeate much of the American economy.
In March of last year the BSA released a study prepared by
Economists, Inc. entitled "The U.S. Software Industry/Economic
Contribution in the U.S. and World Markets."  Based on
government and industry information, the study reviewed the
economic contribution made to the American economy by U.S.
core software industry.  By core software we mean prepackaged
software, custom computer programming services and computer
integrated design.
The Economists' study found that the core industry is the
fastest growing industry in the United States, is now larger
than all but five manufacturing industries, is contributing to
the economy of virtually every state in the nation, and is
achieving tremendous success in the international marketplace.
Notwithstanding this impressive record, the software
industry's role in the growth of the nation's economy will be
even more critical in the future as new and more advanced
technologies continue to evolve.
The BSA has several views which we would like to share at this
hearing.  First of all, we believe that strong intellectual
property protection is essential to the continued health and
growth of the software industry.  Software is difficult and
expensive to create, yet easy to steal or duplicate.
Moreover, the real value of the software and the principal
assets of a software company are not its tangible factories or
raw material inventories.  Apart from its employees, buildings
and computer equipment, the assets of a software company are
intellectual property, the technology embodied in the computer
programs that are their products.
Second, the BSA does not believe that a new form of protection
for software-related inventions is necessary or desirable. 
There is, however, an urgent need to improve the operation of
the United States patent system as it pertains to
software-related inventions.
Patents continue to be issued, which do not appear to meet the
statutory mandates of novelty and nonobviousness.  And these
patents impose a substantial cost on the software industry and
on society as a whole.  Those aspects of the patent system
that permit long gestation periods for patents also cause
economic cost to society without providing commensurate
Let me emphasize that members of the BSA have widely divergent
views as to the values of patents being granted for
software-related inventions.  However, all the members
recognize that the current patent system does not adequately
deal with such patents.
Therefore, these comments which are the minimum common points
agreed upon by the participating BSA members primarily suggest
procedural changes to the operation of the patent system to
improve its effectiveness regarding the protection of
software-related inventions.
The BSA respectfully suggests several changes to improve the
effectiveness of the system.  First, the patent system should
run for a fixed time from the filing date.  An important
problem with the patent system is the issuance of patents
after inordinately long application periods, brought about by
continuation and continuation in part applications and
occasionally interference proceedings.
Whatever the cause, the result is that the sudden appearance
of a patent years after the technology to which it relates has
been developed and commercialized is an important problem for
the industry.
At that point design around possibilities may no longer be
feasible and the patent consequently can assume an enormously
enhanced power to disrupt long established expectations for a
full 17 years from the issue date.
The BSA supports the Commissioner's intention to establish a
fixed term from the original filing date, as that would give
the patent owner a strong incentive to have her patent issued
promptly and would in any case reduce the likelihood of the
stealth patent that suddenly appears having lain hidden in the
PTO for 15 or more years.
Furthermore, the spur to an applicant to timely present all
claims and applications stemming from a single disclosure
would promote additional efficiencies in the examination
process.  The BSA is gratified to learn that the PTO will
support legislation embodying this concept.
Our second suggestion is that the examination process should
be improved as to the content of the prior art database, the
accessibility of this database to the examiners and the
training and treatment of the examiners.  Most of the prior
art regularly available to the PTO examiners comprises
collections of patents and publications.
However, especially in the field of software-related patents,
much of the relevant art exists not as patents or publications
but rather as companies internal technical manuals, reference
works, bulletins and other similar documents.
Thus, often the most relevant prior art is not readily
available to the examiners of software-related patents. 
Groups such as the Software Patent Institute have undertaken
to compile databases with these types of software-related
patent prior art.
It is important, especially in this area, that the PTO expand
the universe of the prior art on which it relies and to
improve access to that universe.  The BSA hereby offers to
provide ongoing assistance in establishing and providing
content for suitable databases as well as examiner training
and software tools for searches in these databases.
Our third suggestion is that applicants should be encouraged
to conduct a patentability search before filing and to present
the results of that search to the PTO before the application
is examined.
Because of the quantity of prior art relating to
software-related inventions, as well as the diversity of the
nature and location of such prior art, we think that the
applicant should be encouraged to conduct a reasonable prior
art search and to present those results.
Our fourth suggestion is that an opposition procedure should
be established with provisions that ensure expedited results. 
A third party may often be aware of prior art not readily
accessible to the PTO and may also be the entity with the
greatest interest in preventing the issuance of a patent
covering what is in the prior art.
The BSA believes that providing an opportunity for submissions
during prosecution, as is done in the EPO after publication of
the application and the EPO search report, would facilitate a
more complete view by the examiner of the relevant prior art.
In addition, once claims are allowed an opposition period of
sufficient duration to permit reasoned investigations
pertaining to those claims would provide the public with a
timely and efficient opportunity to submit relevant
information pertaining to the claims as they are expected to
Our position, however, is premised on some assumptions.  First
of all, the fact that a period for filing an opposition has
expired without any oppositions having been made would not in
any way affect the presumption of the validity of the patent.
Second, that any opposition activity or proceeding would take
place in an expedited manner, so that the opposition process
cannot be used, as in some countries, including Japan, to
unduly delay the issuance of the patent.
And finally, any opposition proceedings would include
appropriate procedural safeguards to limit the potential
abuses of the process.
The last suggestion that we would like to present today is
that the examination procedures should be strengthened and
expanded substantively to include non-prior art validity
The current examination process, as was discussed earlier, is
generally not viewed as a viable option by opponents to a
patent due to the largely ex parte nature of the process.  The
BSA urges that reexamination be modified to provide more of an
inter-parte proceeding, allowing opponents to a patent to feel
more comfortable in relying on the procedure to efficiently
resolve their concerns in what may be the most efficient
Further, the scope of the reexamination proceedings should be
expanded to additionally cover all prior art categories as
well as non-prior art, validity and enforceability issues. 
For example, inequitable conduct regarding an applicant's
nondisclosure of material prior art during the prosecution of
an application.
The BSA acknowledges and supports the Patent Office's intent
to forward to Congress legislation making reexamination a more
attractive vehicle for challenging a patent's validity.  We
appreciate the opportunity of speaking to you.
COMMISSIONER LEHMAN;:  Thank you very much, Ms. Callan, for
sharing that with us.  It was a sufficiently complete
statement that I really think I understand it and don't really
have any questions where you stand.
Before I call our next witness, I just want to say that since
we're running a little bit ahead, we may be able to get
through to shorten our afternoon session if we can call some
of the people who are scheduled to appear this afternoon.  I
have a list of some people -- Richard Jordan, Jonathan Band,
Vern Blanchard, and Jeffrey Berkowitz.
If any of you are here, what I'm going to do is, after the
next witness I'm going to at least call one or two of you. 
And if you're able to, then we can, you know, get your
testimony included in the morning session.
With that I'd like to call next R. Duff Thompson, who's the
Executive Vice President and General Counsel of the
WordPerfect Corporation.
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