MR. GRACE:  Thank you, Commissioner Lehman, for this opportunity to get some
thoughts out on software patenting.  I feel like after hearing these
comments that __ well, first I should say, I don't have a vested interest in
software patents; I have a future vested interest in the sense that I'm
starting a company.

I find the system daunting and counterproductive from my perspective, and it
keeps me up late at night because it's hard enough starting a company with
natural disasters, but when somebody can hold a man_made disaster over your
head, i.e., you write some software and somebody says 16 years down the road
on their patent that you owe them money __ they're not just flushing your
dream down the drain, they're flushing your employees down the drain,
they're flushing your customers down the drain and they're flushing your
suppliers down the drain.  To me, that just doesn't make sense.  And even if
you do succumb to that, and you don't go the way of spending a fortune on
lawyers __ I'll try to mention this only once __ I don't believe that the
software industry should subsidize the legal services industry.  So, if you
don't go down that path, which you won't because it will cost you more money
to go down that path even if you're in the right, than it would just to
knuckle under to some patent challenge, you still end up spending money you
shouldn't have to spend.  And that money may be going to a competitor who
hasn't even earned it, okay?  And this is for a system that basically
doesn't work.

If I wrote the software to represent this system, it would be riddled with
race conditions, okay?  That's a bozo no_no in software design, and it would
have deadlocks; that means you're going to court.  If you want to know an
example of a race condition, you could have two companies __

By the way, I don't think these comments are limited strictly to software. 
I think you're going to see this problem crop up in other industries as they
start using computers as intellectual development tools, because the
computers are going to accelerate their development.  The reason we're
seeing it in software is because software is already accelerated by using

For example, one of the worst race conditions that you have two companies
developing something and spend $10 million on it, seven years of people's
lives, whatever.  Somebody gets the patent first.  The patent system says
they deserve the reward for that innovation.  I disagree.  I think the
market deserves the reward of both innovations, and both companies deserve
the chance to try to build on their opportunity.

Anyhow that's my background, that's why I'm here today because this stuff
keeps me up late at night.  I don't think it's such an incredibly
complicated issue.  From here on out I'm going to try not to give you my
perspective, though this will definitely be a slanted presentation.  I'm
going to try and give you some information that I have, that I think could
help you understand why there are so many conflicting attitudes and
opinions, and how all these people can be basically telling the honest
truth.  And this is a little slanted, but with the sole exception possibly
of the lawyers, since of all people they have the most incredible vested
interest in maintaining a system which subsidizes their industry, even at
the expense of the software industry.

The title is "Software Patents and Why They Should Be Abolished."  The
reason is they are unconstitutional.  The Constitution says in Article 1,
Section 8, Clause 8, The Congress shall have power to promote __ to promote
__ the progress of science and useful arts by securing for limited times to
authors and inventors the exclusive right __ and I would put that in quotes
because that's a sort of nebulous idea __ to their respective writings and

The key word in that is "promote."  If the system stops promoting growth,
the system is unconstitutional.  Now, the lawyers may say, "Well, it's
grandfathered in because the Congress already established the patent law."
Well, that may be true, but that's a legal perspective and not a practical

Let me define patents further.  The basic idea of patent, as I see it, which
I think is pretty accurate, is promoting innovation, which is a factor in
business and an important one, over free competition, which is a principle
of business, and you don't sacrifice that principle lightly, okay? Whoever
came up with the patent idea decided that it was worthwhile to promote
innovation, even at the expense of free competition, my basic claim is that
was a wise idea and it has served its purpose.  But it's now outgrown and
outlived its purpose and it's time to move on to productivity without
patents, because now they're becoming counterproductive and slowing people
down.  And the reason basically is because it used to be that patents were
few and far between __ I call that sparce, okay? Now our industries have
matured enough that the patents, the ideas and the technologies and the
innovations are coming very rapidly __ that's dense.  You're having people
trip all over themselves.

As soon as you get into that situation, there are interdependencies between
these patents, so when you add a patent, you're not adding N goes to N+1
complexity, you're going from N to N times N+1 complexity.  That's a fact in
computer science; that's called factorial growth.  And that's heinous, okay?
We're not talking linear growth add one, we're talking factorial growth.  If
you've got thousands of patents and you multiply those by another thousand
in complexity, which is what all the inter_relationships between the patents
are, you've got a problem.  And that's why you can't keep up with the
patents, and that's also why you're not going to be able to, ever.

Well, I'm going to drift through this, because I bet I burn more time than I

I call this the Medusa effect.  You've heard plenty of views on those
conflicting accounts.  Each of these views is like an eye of the Medusa. 
And Medusa is the Medusa of unfair competition, okay.  We're sacrificing
free competition for the Medusa of unfair competition.  The nature of the
system is that its outgrown and outlived its usefulness.  It's degenerated
into a win_lose industrial paralyzing influence.  Basically that's the
nature of our patent system.  I call this degenerate influence the Medusa
effect.  It's all the same system but the view is different and conflicting
from each eye.  Each of our presenters is a different eye.  The head is
overcrowded with eye stalks, and worst of all, every seeing person in the
vicinity of Medusa has genuinely high blood pressure __ that's the
entrepreneurs who don't have portfolios of patents, okay?

Living near Medusa makes for a scary, unhealthy and unproductive situation,
i.e., unconstitutional.  The software industry already suffers from the
Medusa effect today, due to the interference of the software patent system. 
That's like interference between patents except the system is doing it to an
entire industry.

I would like to see this situation rectified and simplified, i.e., the
elimination of patents from software.

Two challenges:  To rectify this situation entails two challenges.  The
first challenge, of course, is to see the forest for the trees.  Or in the
case of Medusa and software patent, to see the whole Medusa instead of just
some eye stalks.  I shall try to solve the problem for you in the first part
of my presentation shortly.

The second challenge is to fix the system.  To fix the system is left to
you; if I had the authority, I'd take care of it myself.  This talk,
unfortunately, is the limit of my contribution so far, but I have a feeling
this will be around for ten years and I'll be back.

Fortunately, by applying __ the principle I'd like you to apply is the
"kiss" principle, which is "Keep it simple, silly," and that means get rid
of the system.  The first challenge is eyeing the Medusa of unfair
competition; that's being able to see it.  I'd like to read a fragment of a
New York Times article by John Markoff.  He says:

Critics now say that the system is creating a public policy contradiction. 
On one hand the Clinton administration is eager to foster competition in
telecommunications.  On the other, the agency continued to grant 17_year
monopolies just as it did when technologies involved at century_long

That's the crux of the problem.  Mr. Markoff identifies the basic dilemma
for the patent system: Times change.  The tradeoff in sacrifice of free and
fair competition to promote innovation may no longer be a prudent tradeoff. 
Times change and the patent system has done its job to build an innovative,
industrious, technological base.  Now the patent system needs to step aside
and let commerce generate the rest of its momentum instead of gumming up the
works with unnecessary and counterproductive litigation.

I'd like to mention four books __ I think this stuff was covered very well
in the Markoff article for an overview.  In habit four of the Seven Habits
of Highly Effective People, which is "think win_win." Right now we've
degenerated into lose_lose_lose.  The patent holder loses because the
society doesn't grow; its competitors lose because they can't even get into
the market; and the customers lose because nobody is delivering service as
rapidly as they could have.

The next book is the One_Minute Manager Builds High_Performing Teams.  This
is by Ken Blanchard.  I would like to see some situational management
understanding applied to this. He goes by stages as well.  In the early
stages you need directive, coercive management, and in the most latter
stages, you need hands_off management.

And the third book that I think applies is Crossing the Chasm, by Jeffrey A.
Moore.  He uses a multistage system as well. I think we've left the early
adoptive cycle of his technology life adoption cycle, which is where patents
are beneficial, and we have entered the early majority part of the cycle,
where they start to gum up the works because the industry can maintain its
own momentum.  That's the basic gist.

I think you should take a look at this: Where we started, where we are
today, and where we need to go.  And I think you need to look at it in terms
of stages, and I think if you do, you'll begin to understand why there are
so many conflicting remarks.  People are coming at this from different
stages, and the software engineers are coming at it from the most current
stage.  And I think that holds value.

How do you kill the Medusa?  You use this understanding as a mirror to look
at her, and you slay her.  And the weapon I would use to slay her is Akim's
razor.  That goes by the name of the kiss principle as well, and it's also
known in legal circles as necessary and sufficient, and only necessary.  And
what we have now in the patent system is no longer necessary.  Besides
which, it's also insufficient.

Thank you very much for this opportunity to talk.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Grace.  

I'd like to thank everybody who has testified over the last two days, even
those who aren't here, all those who have come to watch the process.  I'd
like to think it's a process of open government; I'd like to think it's a
process of customer service.  I hope you'll help us at the Patent &
Trademark Office to improve our customer service by taking the advantage of
keeping in touch with us over the weeks and months to come.

I can tell you this:  I'm not sure that I'm going to propose next week to
abolish the Patent Office, but I can assure you there are going to be some
real and substantive changes that are going to come out of this process, and
you will see those in the coming months.  Some of them will be
administrative changes that we can make; some them we can make right away,
just simple policy changes.  Others require work.

For example, the full potential of the Internet and electronic
communications, even if we change our policies with regard to what we can
hear from, who we can hear from and what we can get from them require
technological improvements at the Patent & Trademark Office that will
require an expenditure of capital, it will require money.  So some things
will be phased in, some things will happen very quickly.

The next category of changes that you're going to see is that we are
certainly going to be coming up with some legislative proposals to change
the statutory system.  For example, were we to decide not to have software
patents or to eliminate the Patent Office, I think those would have to be
legislative changes and we'll have to get Congress' approval. I'm not
suggesting we're going to necessarily propose either of those two
alternatives, but we are going to be proposing to Congress some changes
which will make the system work better.

So those are two examples of the things we're going to do.  The final one is
we're going to definitely be more aggressive in the Patent & Trademark
Office in not only developing our own legal policies, but in working with
the various courts, and the Court of Appeals for the Federal Circuit in
particular, in trying to help them develop clearer legal standards and do
their part in resolving some of these problems.

So in the next months and certainly during the remainder of this Clinton
presidency, you can look forward to a series of changes in the areas that
I've just outlined, and you'll be able to have many opportunities as these
changes unfold, as the decision_making process unfolds, to give us feedback,
to let us know what you think.  I am a little scared to say that in this
group, because I have a feeling the probably the Internet system and the
computer system is going to break down at the Patent & Trademark Office with
all of the feedback that we get, but let's try and see how it works.

Thank you very much for coming, and I look forward to continuing to work
with you all for the next three years. Thanks.

(Public hearing concluded)

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