Can Las Vegas sue Atlantic City?

Intellectual Property Rights and Computer Language Copyright

By Kathleen K. Wiegner and John Heins
Forbes

March 6, 1989

IT WAS A SMALL ITEM at the Constitutional Convention, thrown in at the suggestion of James Madison of Virginia and Charles Pinckney of South Carolina. Among the briefly enumerated powers of Congress was one to grant limited monopolies to inventors and authors. In 1790 Congress enacted the world's first comprehensive patent and copyright laws. Little notice at the time, this enactment was a landmark.

England had already created a law of patents built around custom rather than formal statute. And it had issued copyrights, originally as a mechanism for censorship. But it was the Americans who saw in these forms of property a natural fit with a free enterprise society. Said Thomas Jefferson, an inventor and the first administrator of the American patent system, "The issue of patents for new discoveries has given a spring to invention beyond my conception."

Thus did our founding fathers encourage the future Edisons, McCormicks and Bells, songwriters, movie actors and computer programmers. Could they have imagined that entertainment would one day become one of the country's largest export industries? That intellectual property rights would come so far that Woody Allen could successfully claim a legal right not only to his name and his face but even to his very nerdish charm?

From this same instinct to protect the fruits of invention came the protection for computer software, currently one of the jewels in our economy, with U.S. companies controlling 60% of a $55 billion world market. But this system of intellectual property, which has created so much wealth, is now straining. Some of the country's best-known computer and software makers have become embroiled in a tangle of lawsuits. Depending on the outcome, the cases could drastically slow the rate of innovation that has kept U.S. companies well ahead of foreign competitors.

Ashton-Tate Co., Lotus Development Corp. and others, developers of software used on millions of computers, want exclusive rights not just to the way a computer accomplishes a certain task but also to the task itself. They want to own not just the insides of a computer program but its "look and feel." It's reminiscent of that recent court case in which Woody Allen stopped a clothing store from advertising itself with an Allen-like character. Says Phillipe Kahn, chairman of Borland International, which makes software products that compete with those of Lotus and Ashton-Tate: "It's as if Las Vegas were suing Atlantic City for copying its look and feel."

Who is answering this basic question of software ownership? Judges who don't necessarily know much about the technology whose future they are determining. They are stumbling from one hard case to another, making bad law built around an already obsolete 1980 software copyright act and around court precedents going back to the 18th century.

At stake is not just the profit margin of a Lotus or an Ashton-Tate but also the billions of dollars of their customers' money sunk into learning computer languages. Here we mean "language" in the very broad sense of whatever enables computer users to communicate with machines: the commands in Lotus' 1-2-3 spreadsheet package, the trash can pictured on an Apple Macintosh (which, when selected, causes a file to be discarded), the plus sign in a scientific program.

Computer languages are as essential to man-machine communication as human languages are to man-man communication. Without them, users would have to speak to their machines in the 1s and 0s spoken by the chips inside. The computer industry as we know it could not exist. Can you imagine having to type in several thousand 0s and 1s, in exactly the right order, to get your computer to print a letter?

The earliest software was thrown in free by computer makers to buyers of their systems. But nowadays software itself is a big business. Lotus Development netted $59 million on sales last year of $469 million, mostly of its 1-2-3 spreadsheet program. For the year ended in January, mainly from sales of its dBase products, Ashton-Tate earned an estimated $48 million on sales of $310 million.

Now the language makers are attempting to protect their competitive positions in the courthouse. Ashton-Tate is suing rival Fox Software, Inc., which makes products that can understand the command words of dBase. Lotus is suing two small software houses for selling imitations of its Lotus 1-2-3 language. Apple Computer, Inc. is suing both Microsoft Corp. and Hewlett-Packard Co., saying the companies illegally appropriated the "look and feel" of Apple's Macintosh computer screens. These companies are saying, in effect, that once you've learned how to add a new record to a dBase address file, or how to sort a list in 1-2-3, or how to trash a file on a Macintosh, you can't apply that knowledge to a rival product.

What's wrong with that? Shouldn't the creator of a new kind of software own it? Sure, but the question is how much can be owned. To use the gambling analogy, should Atlantic City be prevented from opening casinos if Las Vegas got there first?

Unfortunately, the situation is much more complicated than that.

One of the things that make computers valuable is the portability of computer knowledge and computer programs. Lotus' 1-2-3 borrows from the first spreadsheet program, VisiCalc, and both Apple's Macintosh interface and Ashton-Tate's dBase language have their origins elsewhere. "It's important for languages to be public property," says John Backus, the IBM researcher who led the development of Fortran, the standard programming language for scientific applications, in 1957. "If you want to get something done, you don't want to have 50 different languages."

Imagine the confusion when the developer of the first modern typewriter patented the placement of the keys, so that succeeding typewriter makers had to change the order of the keys to avoid infringement. That way, if you learned typing on one keyboard, you had to relearn to use a different keyboard. That's comparable to what Ashton-Tate, Lotus and Apple are trying to do.

Four million copies of 1-2-3 have been sold, for at least $300 apiece. That billion-dollar investment, however, pales beside the human capital invested in learning how to work a spreadsheet using the Lotus language. There are some 7 million 1-2-3 users worldwide, and Berkeley, Calif.-based software consultant Judd Robbins estimates that it costs--very roughly--$1,000 (including both direct costs and lost time from other work while training) to train someone in 1-2-3 to get a minimum level of proficiency. Two million copies of dBase have been sold for an average price of $420; some 5 million users have learned the language.

Then there is the time and money that companies spend developing custom applications around dBase and 1-2-3. A company might spend millions of dollars creating programs consisting of computer commands written in the dBase language (see sample, p. 136). Nolan, Norton & Co., a technology consulting unit of accounting firm Peat Marwick, did some arithmetic on these costs. It found that about 70% of the $18,000 total annual cost of running a single business personal computer is in technical support, training and internal software development. Add it all up and you get big trouble for users if the copyright hardliners win their cases.

Fox Software's FoxBase isn't a copy of dBase by a long stretch. In its Dec. 12 issue, InfoWorld published benchmark comparisons of several database products. It said that dBase III Plus, the version in widest use, took 87 minutes to sort 100,000 records of a test file, while FoxBase+ took 24 minutes. The new, improved dBase IV was somewhat better than its older sister, at 60 minutes. Not surprising that Ashton-Tate wants to outlaw the 24-minute version.

So, how much power should the creator of a new language have? Users, of course, want competitors to be allowed to innovate around a standard like 1-2-3 or dBase. "If {software} protection becomes too all-encompassing," says Robert Martin, manager of executive support systems at Eaton Corp., the industrial equipment company, "there will be less incentive to continue to innovate." Users also would benefit from rice competition between software originators and their rivals. "I don't know if users would have gone with Lotus 1-2-3 if they knew it would end up being something Lotus could monopoly price," says Ronald Evans, director of end-user computing at Nolan, Norton & Co., "but they did, and now they're stuck." Stuck? Lotus and the other strict interpretationists see it differently. A legal monopoly is what a patent or copyright is all about. It's the reward for invention. Further, Ashton-Tate worries that look-and-feel protection is necessary to prevent foreign competitors from flooding the market with cheap copies of popular software programs.

Courts, alas, have come to this debate with a very confused law of intellectual property that ill fits the computer age. "Managers are in the difficult position of having to run 21st-century businesses with guidance from a 19th-century legal system," complains Peter Marx, counsel for the Information Industry Association, a trade group.

Traditionally, the patent system has protected "functional" works, the machines and processes that helped fuel the country's growth. Alexander Graham Bell's telephone, Thomas Edison's incandescent electric lamp and Henry Ford's transmission mechanism all received patents. Patents are powerful, since they rule out look-alike designs, even those independently arrived at. But the Standards are high: The device must advance the "state of the art" to qualify. Moreover, the public filing means that, following the relatively short protection period of 17 years, other inventors have the opportunity to improve upon patented works.

The copyright system has traditionally protected works with aesthetic value: music, literature and art. The protection is weaker: Generally, only substantial copies of a copyrighted work are illegal. Coverage lasts for the author's life plus 50 years (or, in the case of a work-for-hire, for 75 years from publication).

If the two sets of rules are different, it is for a very good reason. Society is not harmed if Margaret Mitchell and her heirs own an exclusive on Gone with the Wind for 50 or 100 years. If it's overpriced or badly edited, you can always buy some other novel of love in a time of civil war, if that's what you need.

It's good thing, though, that the fellow who came up with the idea of putting a gasoline-powered engine on wheels couldn't stop Henry Ford. George Selden, the self-proclaimed "inventor" of the automobile, did get a very broad patent, but Ford defeated it in a long court battle. After that, an inventor such such as Ford could still get a patent on a particular transmission, but couldn't prevent rivals from getting the same results with different arrangements of gears.

Congress decided in 1980 that computer software was more like a novel than a transmission, even though it has elements both. That's when the problems began.

"What you have is copyright giving effective, long-term monopolies to functional subject matter that would not have qualified for patent protection," argues Stanford law professor Paul Goldstein, a leading expert on intellectual property.

Consider Intel Corp.'s long-running suit against Japan's NEC Corp., resolved only last month. Intel alleged that NEC had copied "microcode"--computer instructions etched in silicon--from two of Intel's microprocessors. Was microcode, even though part of a silicon ship, a computer program protectible by copyright? The federal judge hearing the case said it was. But the judge also ruled that NEC did not infringe, since it claimed it developed its ships through legal reverse-engineering techniques.

Or take Lotus' suits against Mosaic Software's Twin and Paperback Software International's VP-Planner. Lotus doesn't claim that either program copies 1-2-3's program code. Rather, the imitators have created, from scratch, software that duplicates the behavior of 1-2-3. Thus, having learned the 1-2-3 language, you can shift to one of the rival products with little adjustment.

Think of it this way: You learned to drive a manual transmission Ford. Now Chevrolet comes out with a car with a manual transmission. Chevy didn't copy the gears. But it so engineered the thing that you can switch brands without learning to drive all over again. Ford sues.

Apple Computer, in its suit against Microsoft and Hewlett-Packard, tries to take the concept of compatibility a bit further. Building on some innovations made years earlier by Xerox, Apple developed the snazzy Macintosh graphical interface. Instead of having to type in commands like "delete" or "store," a user points at screen pictures of a trash basket or a file folder. If Apple wins, competitors won't be able to utilize similar characters, which would make trouble for everyone who has invested any effort in learning this graphical language.

Ashton-Tate goes further, claiming that the "screens, menus, file structures and dBase language" embodied in its products are "an integral part of the look and feel elements of dBase." In short, it wants to own not just the software that translates this language into machine instructions but the language itself.

Naturally, Fox Software President David Fulton takes a different view. He contends that Ashton-Tate lured other companies into investing their efforts in programs that build on what Ashton-Tate started: compilers and interpreters (software that translates user words into machine instructions) and applications. Now that the personal computer world is hooked--Ashton-Tate has some 60% of the market for personal computer database software--Ashton-Tate wants to change the rules.

Ashton-Tate President Edward Esber replies simply that his company spent millions creating dBase and should own it. "With major advances in the law, there will have so be some short-term dislocations for users," says Esber.

What worries many users and software developers is that companies like Lotus and Ashton-Tate are using lawsuits to replace innovation as a competitive weapon--or at least as a stopgap measure until they can get their new products into the marketplace. For example, Lotus' latest version of 1-2-3 is more than a year late. Ashton-Tate's new dBase IV, released late last year, was at least two years late and still has serious flaws.

Where in all this arguing does the public interest lie? In encouraging innovation and creativity, of course. Too powerful protection of software can also foster plainly anticompetitive market practices. Nintendo, the Japanese electronics company, has capture a roughly 80% share of the market for videogame players. No one begrudges it that. But it may now be using intellectual property law to unfairly control the separate market for the replaceable game cartridges that go in the player. In court, Nintendo is arguing that Atari Games Corp., a rival cartridge manufacturer, violated its patent by reverse-engineering a chip that is necessary to make the game software play in a Nintendo player. Says Atari Games general counsel Dennis Wood, "It's like saying if I buy my car from Ford, I also have to buy my gas from Ford. That's ridiculous."

The U.S. needs a powerful software industry, one that can continue to beat the Japanese and create export earnings. (Overseas sales by U.S. software makers were some $11 billion in 1988, and are growing at better than 20% a year.) The system must reward innovators but promote a rapid evolution of their product lines.

Is there a way to protect innovators without strangling further innovation? Congress could create a separate protection system for software, taking elements from both patent and copyright law. To foster innovation, such a system would specifically prevent copying of codes but permit imitation of results, including looks and feels and languages. The period of protection would be shorter, say ten years. In the quickly moving science of software, that would still leave the originator of a language with a valuable lead of several years over its rivals. It would, to fall back upon the automotive analogy, inventors patent gear arrangements but not the idea of having a car with a stick shift.

ILLUSTRATION: cartoon

Copyright Forbes Inc. 1989