Intellectual Property Protection for
Software
William Fisher
June 23, 2004
Activities that Software
Developers Might Control
• Consumer reproduction of object code
• Commercial reproduction of object code
• Incorporation of parts of source code in new
programs
• Preparation and distribution of improved
versions/derivative works
Forms of IP for Software
1950
1960
1970
1980
1990
2000
Forms of IP for Software
Trade Secrecy
1950
1960
1970
1980
1990
2000
Forms of IP for Software
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Forms of IP for Software
Copyright
CONTU
Apple
TRIPS 10(1)
EC Directive
91/250
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Forms of IP for Software
Patent
Flook
Benson
Alappat
Diehr
State Street
Copyright
CONTU
Apple
TRIPS 10(1)
EC Directive
91/250
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Forms of IP for Software
Trade Secrecy
1950
1960
1970
1980
1990
2000
Subject Matter
• Restatement Definition: a process or device
for continuous use in the operation of a
business. Includes:
– information pertaining to contents of or
manufacture of a product
– process of treating or preserving materials
– information relating to business operations
– computer programs; customer lists
• UTSA expands protected matter to include:
– single or ephemeral events
– negative information
Subject Matter
• Restatement Definition: a process or device
for continuous use in the operation of a
business. Includes:
– information pertaining to contents of or
manufacture of a product
– process of treating or preserving materials
– information relating to business operations
– computer programs; customer lists
• UTSA expands protected matter to include:
– single or ephemeral events
– negative information
Requirements for Protection
(1) Information must have been “secret”
initially
some courts add explicit novelty requirement
Requirements for Protection
(1) Information must have been “secret”
initially
some courts add explicit novelty requirement
(2) Plaintiff must have made reasonable
efforts to keep it secret
Requirements for Protection
(1) Information must have been “secret”
initially
some courts add explicit novelty requirement
(2) Plaintiff must have made reasonable
efforts to keep it secret
(3) The information must be commercially
valuable
Requirements for Liability
• Breach of Confidence
– confidential relationship
– reliance on commercial custom and tacit
understandings
• or: Secret was discovered through
“improper means”
– e.g., overflights; fraudulent misrepresentations;
phone taps
– Not reverse engineering
Requirements for Liability
• Breach of Confidence
– confidential relationship
– reliance on commercial custom and tacit
understandings
• or: Secret was discovered through
“improper means”
– e.g., overflights; fraudulent misrepresentations;
phone taps
– Not reverse engineering
Remedies
• Injunctions
– debate over length and breadth
– not available after plaintiff obtains a patent
• Damages
– actual damages
• plaintiff’s lost profits, or
• defendant’s gains
– consequential damages
– punitive damages
– attorneys’ fees
Trade Secret Protection for Software
• Companies sell copies of object code, keep
source code secret
• Courts rule that public distribution of object
code does not forfeit TS protection, so long as
source code is hard to reverse engineer
– Data General v. DCI (Del. 1971)
– Telex v. IBM (CA10 1975)
– Q-Co Industries (SDNY 1985)
Trade Secret Protection for Software
• Appropriate to an era in which software is
custom-made by vertically integrated hardware
suppliers for large commercial customers
• Weaknesses
– Gradual improvement of decompilers
– No protection against “piracy” of object code
– Limited protection against “downstream”
consumers
– Consumers’ demand for access to source code
Forms of IP for Software
Trade Secrecy
1950
1960
1970
1980
1990
2000
Forms of IP for Software
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Typical Shrinkwrap Licenses
• Restraints on resale or rental;
• Limits on the manufacturer’s warranties;
• Prohibitions on modifying or tampering with the
product (including disassembling or reverse
engineering);
• Prohibitions on uses of the product that would
have been permitted by the fair-use doctrine;
• Requirements that the consumer not contest the
validity of the producer’s copyright or patent;
Contractual Protection
• Pro-CD v. Zeidenberg (CA7 1996):
– copyright law does not preempt state contract law,
used to enforce shrinkwrap license restriction on
commercial uses
• Bowers v. Baystate Technologies (CAFC 2003):
– Copyright law does not preempt state contract law
used to enforce shrinkwrap license restriction on
reverse engineering
• UCITA
Forms of IP for Software
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Forms of IP for Software
Copyright
CONTU
Apple
TRIPS 10(1)
EC Directive
91/250
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Copyright Protection
• 1964: Register of Copyrights announces
willingness to register published software
programs – upon proof of sufficient “original
authorship”
– But object-code versions might not constitute
“copies”
• 1964-1977: 1,205 programs registered
– 80% by IBM and Burroughs
• 1978: CONTU recommends full copyright
protection for software
• 1980: Congress adopts recommendation
Copyright Protection
• 1991: EC Directive 91/250: All member
states must modify domestic copyright law to
recognize copyrights in software
• 1994: TRIPS Art. 10(1):
– “Computer programs, whether in source or object
code, shall be protected as literary works under
the Berne Convention”
Basic Copyright Protection
Entitlements -- §106
(1) Reproduction
(2) Derivative Works
(3) First Distribution
(4) Public Performance
(5) Public Display
Exceptions:
Fair Use -- §107
Merger
“essential” or “archival” copying -- §117
Apple v. Franklin (CA3 1983)
Apple v. Franklin (CA3 1983)
Apple
Apple v. Franklin (CA3 1983)
Apple O.S.
Apple
Apple v. Franklin (CA3 1983)
Borland
Free access
Apple
Apple O.S.
Apple
Apple v. Franklin (CA3 1983)
Borland
Free access
Apple
Apple O.S.
Apple
Franklin
Apple v. Franklin (CA3 1983)
Borland
Free access
Apple
Apple O.S.
Apple
Franklin
Apple v. Franklin (CA3 1983)
Borland
Free access
Apple
Apple O.S.
Copy of Apple O.S.
Verbatim
copying
Apple
Franklin
Apple v. Franklin (CA3 1983)
Borland
Free access
Apple
Apple O.S.
Copy of Apple O.S.
Verbatim
copying
Apple
Franklin
Forms of IP for Software
Copyright
CONTU
Apple
TRIPS 10(1)
EC Directive
91/250
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Dimensions of Diminishing
Copyright Protection
• Copying Nonliteral Features of Programs
• Reverse Engineering for the Purpose of
Interoperability
• Menu Hierarchies
• Ineffective Enforcement
Dimensions of Diminishing
Copyright Protection
• Copying Nonliteral Features of Programs
• Reverse Engineering for the Purpose of
Interoperability
• Menu Hierarchies
• Ineffective Enforcement
Copying Nonliteral Features of
Programs
•
•
•
•
Whelan (CA3 1986)
Plains Cotton (CA5 1987)
*Altai (CA2 1992)
Kepner-Tregoe (CA5 1994)
Altai Test
(1) Abstraction
(2) Filtration
Unprotected Material includes:
(a) Elements dictated by efficiency
(b) Elements dictated by external factors
(i) mechanical specifications of the computer
(ii) compatibility requirements of other programs
(iii) computer manufacturers' design standards
(iv) demands of the industry being served
(v) widely accepted programming practices
(c) Elements taken from public domain
(3) Comparison
Nichols “Pattern” Test
Expression
Nichols “Pattern” Test
Expression
Nichols “Pattern” Test
Elements dictated by efficiency
Expression
Nichols “Pattern” Test
Elements dictated by efficiency
Expression
Nichols “Pattern” Test
Elements dictated by external factors
Expression
Nichols “Pattern” Test
Elements dictated by external factors
Expression
Nichols “Pattern” Test
Elements taken from public domain
Expression
Nichols “Pattern” Test
Elements taken from public domain
Comparison
Protected Parts of Plaintiff’s program
Comparison
Elements of defendant’s program
Protected Parts of Plaintiff’s program
Comparison
Elements of defendant’s program
Protected Parts of Plaintiff’s program
Dimensions of Diminishing
Copyright Protection
• Copying Nonliteral Features of Programs
• Reverse Engineering for the Purpose of
Interoperability
• Menu Hierarchies
• Ineffective Enforcement
Dimensions of Diminishing
Copyright Protection
• Copying Nonliteral Features of Programs
• Reverse Engineering for the Purpose of
Interoperability
• Menu Hierarchies
• Ineffective Enforcement
Organization of Computer Programs
Organization of Computer Programs
Hardware
Organization of Computer Programs
Operating System
Hardware
Organization of Computer Programs
Application
Program
Application
Program
Operating System
Hardware
Interoperability
Application
Program
Application
Program
Operating System
Hardware
Interoperability
Application
Program
Application
Program
Operating System
Hardware
Interoperability Strategy #1
(e.g., Microsoft, Apple)
Borland
Free access
Microsoft
Microsoft
Dell
Interoperability Strategy #2
(e.g., Sega, Nintendo)
Licensee
License fees
Nintendo
Nintendo
Nintendo
Interoperability Strategy #3
(e.g., MAI Systems Corp.)
MAI
MAI
No licenses
MAI
MAI
Sega (CA9 1992)
Licensed
Games
License fees
Sega Games
TMSS
Sega Genesis III
Sega (CA9 1992)
Licensed
Games
License fees
Sega Games
Accolade
Games
TMSS
Lock-out
Sega Genesis III
Sega (CA9 1992)
Microcode (copied
by Accolade)
Licensed
Games
License fees
Sega Games
Accolade
Games
TMSS
Lock-out
Sega Genesis III
Sega (CA9 1992)
Licensed
Games
License fees
Sega Games
Accolade
Games
TMSS
Lock-out
Sega Genesis III
TMSS
initialization
code
Sega (CA9 1992)
Licensed
Games
License fees
Sega Games
TMSS
Sega Genesis III
Accolade
Games
Fair Use Doctrine
• Purpose and Character of the Use
–
–
–
–
commercial use
transformative uses
parody
propriety of defendant’s conduct
• Nature of the Copyrighted Work
– fictional works/factual works
– unpublished/published
• Amount of the portion used
• Impact on Potential Market
– rival definitions of “market”
– only substitution effects are cognizable
Fair Use Doctrine -- as applied in Sega
• Purpose and Character of the Use
–
–
–
–
commercial use: purpose of A’s copying was “study” (noncom)
transformative uses: concede no transformative use
parody: n.a.
propriety of defendant’s conduct: stress decency of A’s behavior
• Nature of the Copyrighted Work
– fictional works/factual works: computer programs deserve less
protection that fictional works
– unpublished/published: sale of program = publication
• Amount of the portion used: concede A copied entire program
• Impact on Potential Market
– rival definitions of “market”: implicit adoption of narrow version
– only substitution effects are cognizable
Reverse Engineering for
Interoperability
• Courts finding this to be fair use:
–
–
–
–
CAFC (Atari 1992; Bowers 2003 [dictum])
CA5 (DSC Communications 1996)
CA 9 (Sega 1992; Sony 2000)
CA11 (Bateman 1996)
• EC Directive 91/250, Art. 6, takes same
position
Dimensions of Diminishing
Copyright Protection
• Copying Nonliteral Features of Programs
• Reverse Engineering for the Purpose of
Interoperability
• Menu Hierarchies
• Ineffective Enforcement
Dimensions of Diminishing
Copyright Protection
• Copying Nonliteral Features of Programs
• Reverse Engineering for the Purpose of
Interoperability
• Menu Hierarchies
• Ineffective Enforcement
Menu Hierarchies: Litigation
History
• Lotus v. Paperback (DMass 1990)
• Lotus (CA1 1995)
Dimensions of Diminishing
Copyright Protection
• Copying Nonliteral Features of Programs
• Reverse Engineering for the Purpose of
Interoperability
• Menu Hierarchies
• Ineffective Enforcement
Dimensions of Diminishing
Copyright Protection
• Copying Nonliteral Features of Programs
• Reverse Engineering for the Purpose of
Interoperability
• Menu Hierarchies
• Ineffective Enforcement
Source: Business Software Alliance
Possible Explanations
•
•
•
•
Local Self-Interest
Ideology
Pressure
Improved Marketing
Possible Explanations
• Local Self-Interest
– United States in 19th century
– Developing countries today
• Ideology
• Pressure
• Improved Marketing
Possible Explanations
•
•
•
•
Local Self-Interest
Ideology
Pressure
Improved Marketing
Possible Explanations
• Local Self-Interest
• Ideology
– Global:
• From “monopoly” to “Intellectual Property”
• From nationalism to comity
• Habit yields sense of entitlement (VCRs, MP3)
• Pressure
• Improved Marketing
Possible Explanations
• Local Self-Interest
• Ideology
– Local:
•
•
•
•
Labor theory
Romantic conception of authorship/personality theory
Communal conceptions of creativity
Socialism; anti-individualism
• Pressure
• Improved Marketing
Possible Explanations
•
•
•
•
Local Self-Interest
Ideology
Pressure
Improved Marketing
Possible Explanations
• Local Self-Interest
• Ideology
• Pressure
– TRIPS
– Bilateral Agreements
– Trade sanctions
• Improved Marketing
Possible Explanations
•
•
•
•
Local Self-Interest
Ideology
Pressure
Improved Marketing
Possible Explanations
•
•
•
•
Local Self-Interest
Ideology
Pressure
Improved Marketing
Piracy Rates
Within the United States
Source: Business Software Alliance
Source: Business Software Alliance
WA
MT
ME
ND
VT
MN
OR
NH
ID
WI
SD
NY
WY
RI
CT
MI
PA
IA
NE
NV
OH
IL
UT
MD
WV
KS
MO
VA
KY
NC
TN
AZ
OK
NM
AR
SC
MS
AL
GA
TX
LA
FL
AK
HI
Blue = Gore
Red = Bush
NJ
DE
IN
CO
CA
MA
WA
MT
ME
ND
VT
MN
OR
NH
ID
WI
SD
NY
WY
RI
CT
MI
PA
IA
NE
NV
OH
IL
UT
MD
WV
KS
MO
VA
KY
NC
TN
AZ
OK
NM
AR
SC
MS
AL
GA
TX
LA
FL
AK
HI
Blue = below average piracy rate
Red = above average piracy rate
NJ
DE
IN
CO
CA
MA
35 states fit the pattern; 15 do not
WA
MT
ME
ND
VT
MN
OR
NH
ID
WI
SD
NY
WY
RI
CT
MI
PA
IA
NE
NV
OH
IL
UT
MD
WV
KS
MO
VA
KY
NC
TN
AZ
OK
NM
AR
SC
MS
AL
GA
TX
LA
FL
AK
HI
Blue = below average piracy rate
Red = above average piracy rate
NJ
DE
IN
CO
CA
MA
Forms of IP for Software
Copyright
CONTU
Apple
TRIPS 10(1)
EC Directive
91/250
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Forms of IP for Software
Patent
Flook
Benson
Alappat
Diehr
State Street
Copyright
CONTU
Apple
TRIPS 10(1)
EC Directive
91/250
Contracts
Pro-CD
Bowers
Trade Secrecy
1950
1960
1970
1980
1990
2000
Processes
Products
Processes
Processes
Processes
Machines
Processes
Machines
Processes
Machines
Processes
Machines
PbP
Product-by-process
Processes
Machines
Laws of Nature
Processes
Machines
Laws of Nature
Algorithms
Processes
Machines
Laws of Nature
Algorithms
Processes
Machines
Naturally
Occurring
Substances
Laws of Nature
Algorithms
Processes
Machines
Naturally
Occurring
Substances
Laws of Nature
Algorithms
Processes
Machines
Naturally
Occurring
Substances
Laws of Nature
Algorithms
Processes
Genes
Machines
Naturally
Occurring
Substances
Laws of Nature
Algorithms
Processes
Genes
Machines
Naturally
Occurring
Substances
Laws of Nature
Algorithms
Processes
Genes
Machines
Naturally
Occurring
Substances
Laws of Nature
Algorithms
Processes
Genes
Machines
Naturally
Occurring
Substances
Laws of Nature
Algorithms
Processes
Genes
Machines
Naturally
Occurring
Substances
Laws of Nature
Algorithms
Processes
Genes
Machines
Naturally
Occurring
Substances
Laws of Nature
Surgical
Procedures
Algorithms
Processes
Genes
Machines
Naturally
Occurring
Substances
Laws of Nature
Surgical
Procedures
Algorithms
Processes
Genes
Software
Machines
Naturally
Occurring
Substances
Laws of Nature
Surgical
Procedures
Business
Algorithms Methods
Processes
Genes
Software
Machines
Naturally
Occurring
Substances
Patent Protection
•
•
•
•
Gottschalk v. Benson (US 1972)
Parker v. Flook (US 1978)
Diamond v. Diehr (US 1981)
Federal Circuit Relaxation of the Test, 1982present
Federal Circuit Relaxation of the Test
• Freeman-Walter-Abele test (1977-1982)
– Is the algorithm applied as part of an otherwise
statutory process or apparatus claim?
• gradual weakening, 1982-1994
– Iwahashi (1989)
– Arrhythmia (1992)
• In re Alappat (CAFC 1994)
– an algorithm embedded in a general purpose
computer becomes a patentable machine
• PTO Guidelines (1996): will accept applications
for software on disks
• State Street Bank (CAFC 1998)
• AT&T (CAFC 1999)
State Street Bank
Mutual Fund 4
Investment
Portfolio
State Street Bank
Individual
Investor
Mutual Fund 4
Investment
Portfolio
State Street Bank
Individual
Investor
Mutual Fund 4
Investment
Portfolio
State Street Bank
Individual
Investor
11%
30%
25%
14%
Data Processing System
Mutual Fund 4
Investment
Portfolio
20%
State Street Holdings
• Transformation of data by a machine into a
final share price constitutes a practical
application of an algorithm and is therefore
patentable subject matter
• Repudiate the “business-methods”
exception to patentability
Software Patent Grants
14000
12000
10000
8000
6000
4000
2000
0
1995
1996
1997
1998
1999
2000
2001
Software Patent Grants
• Over 100,000 software patents issued to
date in U.S.
Patent Doctrines by Technology Sector
Patent Doctrines by Technology Sector
= average
Patent Doctrines by Technology Sector
= average
Utility
Patent Doctrines by Technology Sector
= average
Utility
Novelty
Patent Doctrines by Technology Sector
= average
Utility
Novelty
Obviousness
Patent Doctrines by Technology Sector
= average
Utility
Novelty
Obviousness
Disclosure
Patent Doctrines by Technology Sector
= average
= software
Utility
Novelty
Obviousness
Disclosure
Patent Doctrines by Technology Sector
= average
= software
= biotechnology
Utility
Novelty
Obviousness
Disclosure
Patent Doctrines by Technology Sector
= average
= software
= biotechnology
Utility
Novelty
Sophisticated PHOSITA;
Mature technology
Obviousness
Disclosure
Patent Doctrines by Technology Sector
= average
= software
= biotechnology
Utility
Novelty
Sophisticated PHOSITA;
Mature technology
Unsophisticated PHOSITA;
Unpredictable technology
Obviousness
Disclosure
What sorts of IP Protection (if any?)
are appropriate for softeware?
Patent Rights Most Likely to
Foster Innovation in field where:
1) High R&D Costs
2) High degree of uncertainty concerning success
of particular lines of research
3) Content of technological advances can be
ascertained easily by competitors through
“reverse engineering”
4) Technological advances can be mimicked by
competitors rapidly and inexpensively
5) Innovators highly responsive to monetary
incentives
6) Innovation not cumulative