MR. SHAY:  I find myself in the very difficult position of  play-
ing  clean_up  and  of  trying to say something new, because many
good things have already been said and many of my remarks I think
only  serve  to reinforce those things, but perhaps that's useful
as well. My name is Jim Shay, I am with the law firm of  Morrison
&  Foerster  in  San  Francisco.   We  represent  the  Multimedia
Development Group, a trade association based on San Francisco, as
well  as  other  clients in the software and multimedia industry.
My comments today are my own, however. They  do  not  necessarily
represent the views of the firm or its clients.

I am a patent attorney. I spent three years as a patent  examiner
before  entering  private  practice.  I've also served as inhouse
counsel for a medical technology company, and I've  worked  in  a
variety  of technologies in a variety of ways, prosecution, liti-
gation, licensing, representing individual inventors, large  com-
panies and investors.

I believe in the value of pate@rotection as a tool  for  spurring
innovation  and for helping inventors, whether corporate or indi-
vidual, obtain the benefit of their contributions. In my  opinion
this  principle applies as much to software_related inventions as
to any tangible mechanical, chemical or electrical invention.

Specifically, the software industry as a whole and software  com-
panies  and  developers individually benefit from the patent sys-
tem. The software industry I'm referring to is not just the  com-
panies  whose primary products reside on floppy disks or CD_ROMs.
In my view the term software industry includes any  suppliers  of
products  incorporating  programmable  microprocessors,  products
such as medical monitors, animated  toys,  automobile  electronic
ignitions,  audio  products,  just to name a few. Advances in mi-
croprocessor technology have made software ubiquitous and protec-
tion  of  patentable inventions embodying that software is there-
fore of  concern  not  only  to  companies  writing  and  selling
software per se, but also to all manner of D, medium and low_tech
companies serving a variety of markets.

As the PTO has acknowledge in conducting  these  hearings,  there
appear to be a particularly high amount of concern over the vali-
dity of software patents. A good example is the  public  reaction
to  the  Compton's new media patent, a patent I came to know very
well in my position as  counsel  to  the  Multimedia  Development
Group.   I participated in question and answer sessions about the
Compton's patents with members of the MDG's  Executive  Committee
and  with  individual  members  of  the  MDG. Many expressed many
strong, negative opinions about the conduct of the Compton's  pa-
tent  applicants  before the PTO and about the ability of the PTO
to examine and issue valid patents in the subject area.

My review of the file history of that patent, however, showed  no
evidence  of  any  particular  lapse  or  failure on either part.
Nonetheless, the consensus of nearly all to whom I spoke was that
the broadest claims of the Compton's patent could not possibly be
valid, aHhat anyone associated with the multimedia industry would
agree.   The eventual disposition of the Compton's patent remains
to be seen.  The discussion surrounding that patent, however, has
pointed  to some possible deficiencies in the current patent sys-
tem, especially as applied to software_related inventions.

First, as other people have noted, patent examiners do  not  have
easy  access  to  the  best prior art for software_related inven-
tions. The best prior art consists of actual software,  operators
manuals,  research papers and the like.  These references are not
generally accessible to patent examiners.

Second, the PTO's relative lack of experience in software_related
inventions  because  of the relative newness of the patentability
of software makes it difficult for an examiner to  determine  how
one  of ordinary skill in the art would have approached the prob-
lem that patent claims address. Often it is the feeling  that  an
invention  would have been obvious that leads an examiner to find
the most pertinent priorL references, to make the most compelling
argument  regarding  the  unpatentability  of  the  claims.  This
disconnect between the gut feelings of the patent  examiners  and
the gut feelings of skilled artisans in the software industry un-
dermines the industry's faith in the PTO.

I would now like to make some recommendations based on these  ob-
servations.  These are not new, these will merely reinforce other
recommendations made earlier today.

First, operating within the current statutory  framework,  I  be-
lieve that the PTO and the software industry could benefit great-
ly from a more formal interaction. Specifically, the software in-
dustry  operating  through industry groups such as the Multimedia
Development Group, could provide the PTO with kinds of prior  art
references  that  the PTO currently lacks.  I have spoken to many
members of these groups who at least now are  expressing  a  wil-
lingness  to work with the Patent and Trademark Office if the PTO
will work with them in  compiling  these  prior  art  references.
Such a progrPould require the industry groups to dig up and send,
and the Patent Office to accept and classify,  prior  art  refer-
ences related to the past and present software inventions.

In addition, the PTO and  industry  groups  should  cooperate  to
train  examiners working with software inventions. I'm aware, for
example, of training programs offered by the Software Patent  In-
stitute. I also believe that the PTO should undertake the task of
teaching the software industry about the patent process  so  that
the  industry can use the existing process more effectively.  One
of the most surprising things I learned in the Compton's  process
was how little people actually knew about the patent system.

To the extent that  the  PTO  is  willing  to  support  statutory
changes  and as I learned this morning, you are, I believe that a
system of pre_grant publication and opposition proceedings  would
help  improve the quality of software patents. This one aspect of
change is the one thing mentioned more often by  more  people  in
discussing  theTrent  patent  situation. A less radical statutory
change would seem to be opening the reexamination process to pro-
vide  for full participation by interested parties in addition to
the patent owner.  I advocate the use of oral testimony.  Experts
in  the field can be the best source of prior art, and this would
be useful in the reexamination process.  This  change  could  en-
courage  the  submission of all relevant prior art instead of the
current practice of withholding the best prior  art  for  use  in
license  negotiations and in District Court infringement proceed-

In conclusion, while the emphasis of our remarks has been on  the
deficiencies I perceive in the patent system, I should state that
I believe that there is much right with the current  system.  Our
proposals  will only be minor changes to a system that has served
us well in promoting the useful arts.

Thank you.

COMMISSIONER LEHMAN:  Thank you very much, Mr. Shay, I appreciate
those very specific recommendations.

I'd like to thank everybody in the auXce for having the  interest
in  what  others  had to say, to stay all day and be with us, and
we'll reconvene tomorrow morning at 9:00 o'clock, and  our  first
witness  at  that time will be Jerry Fiddler, CEO and Chairman of
Wind River Systems. Thank you very much.

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Forward to Opening Comments, January 27, 1994