MR. IRLAM:  Good day. The League for Programming Freedom's an or-
ganization  of roughly six hundred people within the software in-
dustry.  It's a combination of software  developers  employed  by
various  companies  and  small  people who own their own business
which typically are anywhere between like one or two people up to
fifty or a hundred people, and they also have a number of members
that are either academics, researchers or students.   The  League
for  Programming  Freedom  has  two main policy areas it's cprned
with.  It has a belief in doing software development on the basis
of  competition  and  between  different  implementations of what
could be the same technology, and we believe by doing  that  that
such  software  is  going to be in a sense like economically more
efficient impact, if you can  get  multiple  products  that  will
represent the same technology; and prices __ and efficiencies are
going to be driven up by the competitive ventures involved.

So to do that we believe in what you  might  term  a  traditional
literal  aspects  doctrine  of  copyright. That's very useful for
software developers.  It basically means if you  copy  code,  you
know,  you  can't  do  that,  but if you wrote the code yourself,
that's all you need to know.  You can then go out  and  sell  it,
and  you're  safe in the knowledge that you can, and you won't be
sued later on.  You know you owned it.

So based on this belief the League has two positions.  We're  op-
posed to the look and feel copyright, and extensions that seem to
have been happening over ttast few years, and we're also  opposed
to software patents. And we take various actions to try and raise
these issues and submit these to courts and so on.

Fundamentally I think this whole question of software patents  is
being  approached in what might be the wrong direction. In fact I
think the whole issue has to be looked at as  one  of  economics,
and  not  either based on, you know, the direct, uh, interests of
any party or, uh, you know, you've got to stand back  a  bit  and
take a big picture view of, you know, what effect do software pa-
tents have on competition and market structure. So therefore  I'm
rather disappointed, but as far as I know, there hasn't been any-
body with any economic background that's been speaking  on  these
matters.   And  you know, I think it would be really important if
the Commission or whatever could like seek  out  people  with  an
economic  background that can provide the input on these matters.
And so I think, you know, if you start analyzing patents  and  in
particular software patents frox economic standpoint, then you'll
get a lot of benefit.  But I think  it  should  be  obvious  that
every  industry  has different economic characteristics.  This is
both like market size, market  structure,  with  availability  of
market  information,  extent  of  competition, and there's just a
huge range of economic parameters  that  differentiate,  for  in-
stance,  the  pharmaceutical industry from the software industry,
and you know, because of this, the application of patents to  one
industry might be sound public policy, but the application of the
same rules to another industry will have an adverse effect on the
overall public welfare.

So for instance, one of the big things about computer software is
it's  protected  by  copyright in a way that pharmaceuticals, for
instance, aren't. And that provides a  good  basis  for  allowing
different  people  to  develop different products and compete, so
you know, the important thing is  if  you  look  at  it  from  an
economic  standpoint,  every industry's different, and so the im-
pact of patent|ll be different on every industry; and  I  contend
that in the software industry, patents are harmful.

And I believe it's because, based on my experience, the  software
industry  appears to be a highly competitive industry, and I feel
software patents have potential to  stifle  this  competition  in
terms  of  they can take away profits from, you know, some of the
firms, perhaps significant value to the industry, and they'll  be
transferred to firms that don't add a lot of economic value.

I think the important thing about software is it's  not  so  much
new  ideas  that  are important; it's building real products that
solve customer problems, and I'm a software engineer in my  regu-
lar  employment,  and my job doesn't consist of trying to come up
with new ideas all the time. There's just hundreds of ideas. It's
trying  to  implement those ideas, build real products that solve
real customer problems and, you know, if they  solve  them  well,
that  both they integrate well with other products and are __ and
easily usable.  I thinkyou look at the last ten or  twenty  years
with  like  the microcomputer revolution, that's what it's really
all been about, you know, the firms that have been successful are
the  firms  that  have been able to take ideas and turn them into
something that's useful for end_users, and add  value  that  way.
So  you  know, the successful firms are companies like Microsoft,
Novell, Borland, Adobe, and you know, the list goes on, all these
new  companies  that  have, you know, typically been started some
time in the last ten to fifteen years.

And so when you start looking at  software  patents  you'll  find
that it's quite disturbing because if these are the companies you
want to attract, if you actually start to count  which  companies
have how many software patents, you'll find things that are quite
alarming in terms of the companies that you'd imagine  should  be
being  rewarded by the patent system for developing real economic
value hardly hold any patents. And indeed,  many  of  them  don't
even  hold  any patents at all.  And evenhe large company such as
Microsoft count very few patents.  And on the other hand, if  you
look  at  companies  like  Hitachi  and IBM and AT&T which people
within the software industry will tell you have been more or less
totally  inept  at  bringing their software ideas to market, they
can come up with ideas but they just can't  implement  them  suc-
cessfully in a way that fulfills real customer needs.

And so I think if the software patent system continues, then it's
going  to  have  a very adverse effect in terms of resources from
the economy are going to be diverted away from the firms that are
adding  real value and put towards these very large conglomerates
which are like multifactored  concerns  that  have  large  patent

And so because of this I think, you know, the patent system's got
to  be  analyzed from an economic point of view and, you know, in
the case of software I believe that that's  __  the  patents  are
harmful  to  the  software industry and I think the best solution
will be to make software nonpatent.

You know, I'd like to  just  mention  briefly  on  the  issue  of
economics,  there seems to be very little real research into like
the fundamental functioning of the patent system in  terms  of  I
know  there was a study way back in I think 1958 by Fritz Matlock
(phonetic) that, you know, did an  economic  evaluation  for  the
Senate,  and  raised  an  awful lot of questions about the patent
system, which I think was good, but then they tended to  be  just
left  off, and I feel, you know, if someone had taken those ques-
tions and started evaluating them and gathering real  data,  we'd
be  in  a  much  better  position today to actually know what the
state of the patent system is, exactly how it works  on  deciding
important public policy issues such as this.

All right. In the remaining time I'd like to just read, if I may,
one or two things by some of our members who haven't been able to
attend today, have sent.  Okay.

So this is from James Hellman (phonetic) who's a  member  of  the
League for Programming Freedom, and he says, "Aple of years ago I
was involved in a start_up that was shut down by a bogus software
patent.  We  were  well  on  our  way  to  having several hundred
thousand dollars of private_placement venture capital. Out of the
blue another company was awarded an extremely broad software sys-
tems patent for an obvious concept through  substantial  existing
prior art.  We received a cease and desist letter and our funding
evaporated.  The sad thing is that the company that received  the
patent were so incompetent that they went out of business shortly
afterwards.  Business success should be determined by who has the
best ideas, best implementations and best marketing.

Okay. Have you got any questions?

COMMISSIONER LEHMAN:  No, other than to say that I think you make
a  very  good  point  about  lack  of  really  effective economic
analysis about how the patent system works. It is something  that
is  lacking.   I know we've attempted to survey the literature on
that subject, and there really isn't any.  It's interesting  that
certainly  thearing was made available to everybody; we're within
a few miles of one of the great  research  institutions  in  this
area  of  the  country.  Nobody, no professor, no great economist
saw this subject as worthy of advising us on and it's  a  problem
we  have,  frankly, it's a problem, and unless we go out and com-
mission the work to be done I'm not sure that we're going to  get
that  kind  of  information,  but  it does put us at some kind of
disadvantage so we have to do the next best thing and that is get
the  kind  of anecdotal information that we're getting here today
from people like you and other witnesses.   The  difficulty  with
that  is  that  we're  hearing  exactly  the  opposite thing from
several different witnesses.  We heard people earlier who  testi-
fied  that  it's  an absolute fact that there would not have been
investments made in innovation, companies  would  not  have  been
formed  if they had not had the patent incentive. You've given us
in your letter that you just read to us an assertion of an  exact
opposite situation. we'll have to sort through all of this.

MR. IRLAM:  I believe there will be value if,  you  know,  longer
term,  the  Patent  Office  was  to maybe develop some of its own
skills at doing like economic analysis for its like  policy  sec-
tion or whatever that may exist.

COMMISSIONER LEHMAN:  Well, we may well have to  do  that.  Thank
you very much.

Next I'd like to ask Mr. Robert Yoches to step forward, who  has,
I  assume,  come all the way out there from Washington, Finnegan,
Henderson, Farabow, Garrett & Dunner.

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