Intellectual Property Rights in Computer Software:Issues at Stake for Developing CountriesK. Gopinath and M.K. RavishankarComputer Science & AutomationIndian Institute of ScienceBangalore, 560 012 INDIAgopi@csa.iisc.ernet.inOctober 9, 1996Contents1 Introduction 12 Background on IPR 23 Brief History of Software Industry and IPR Issues 34 Analysis of IPR in Software 54.1 Software Characteristics and Links with IPR : : : : : : : : : : : : : : : : : 54.2 Software Components and Corresponding IPR : : : : : : : : : : : : : : : : : 64.3 Select Issues and Policy Options in Software : : : : : : : : : : : : : : : : : : 74.3.1 Patents : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 74.3.2 Copyrights : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 95 Implications of TRIPs for Developing Countries 105.1 Impact on National Economies: A Synoptic View : : : : : : : : : : : : : : : 105.2 Impact on Software Production : : : : : : : : : : : : : : : : : : : : : : : : : 125.2.1 Negation of Third World Countries' Strengths : : : : : : : : : : : : : 125.2.2 Aggravating Technological Backwardness of the Third World : : : : 125.2.3 Procedural Impediments : : : : : : : : : : : : : : : : : : : : : : : : : 135.2.4 Di�culty of Adapting Software to Local Needs : : : : : : : : : : : : 145.3 Impact on Issues Concerning IPR Protection : : : : : : : : : : : : : : : : : 146 Conclusions 15A Appendix A: Excerpts from TRIPs 16B Appendix B: Economics of IPR 18C Appendix C: Recommended Changes to Indian Copyright AmendmentAct '92: 20i

D Appendix D: Recommended Changes to TRIPs in the area of ComputerSoftware 20

ii

1 IntroductionThe recently concluded Trade Related Intellectual Property Rights (TRIPs) / GeneralAgreement on Tari�s and Trade (GATT) negotiations are very critical for a country's in-formation economy1. Studies have shown that the information sector has reached at least25% of the economy in the OECD2 countries, whereas it is only about 12-14% in India[1].It has also been shown that there is a direct relationship between economic growth and thesize of the information sector[1]. This appears reasonable as additional information inputincreases the possibility of more e�ective use of physical resources in producing variouseconomic goods.Since the landmark judgement granting a patent to a software-related invention in 1981in the US, and the many litigations involving user interface copyrights, the issue of intellec-tual property in software has become crucial. It has become all the more important since thebeginning of the Uruguay Round of the GATT talks in 1987, where the issue of protectionof intellectual property has been debated in a general setting. In Dec'91, the then Secre-tary General of GATT, Arthur Dunkel, proposed a draft (the Dunkel Draft Text, or DDT)for signing by member countries and it was accepted in '93 at Marrakesh. Since the newTRIPs requires all signatory countries to have patents \in all �elds of technology", there isno special dispensation for software techniques even though this area is quite di�erent, aswill be argued in this paper.While the question of intellectual property in computer software is not well understood,TRIPs contains many new proposals that a�ect this area and that may have far reachinge�ect in the future. TRIPs systematically extends the rights of patentees[17] well beyondthe provisions in the Paris Convention3. Patent protection has been increased to 20 years,whereas the Indian Patent Act of '70 has �xed it at 14 years except in areas relating to food,medicines, drugs and chemical processes where it is 7 years. The Indian Act requires thata patent be worked in this country or else be subject to compulsory licensing after threeyears (as in the Paris Convention). TRIPs, on the other hand, considers importation of aproduct to be the same as working a patent4 and has no provision for mandatory licensing,thus making the patent monopoly ripe for abuse. Moreover, the patentee has been extendedthe exclusive right of importation of the patented product into any country. Additionally,the patentee has exclusive marketing rights even while a patent application is pending5 inone country if a patent is available in another country. In the case of process patents6, theburden of proof has been shifted to the defendant in litigation concerning infringement.Many of the provisions in TRIPs run counter to the research on the economics of intellec-tual property rights (IPR). One of the conclusions of this research is that \easy" inventionswarrant protection only for short duration. In the case of software, most innovations are1As used by an OECD study[2] and Kelkar et. al.[1], information economy includes information technologyand other sectors such as education, broadcasting, publishing, etc., that process information. All these sectorsare likely to be heavily in uenced by advances in information technology in the immediate future.2Organization for Economic Cooperation and Development|or \First World"|mostly Western nationsand Japan.3Paris Convention is a multilateral economic treaty, begun in 1883, for the protection of industrialproperty, dealing with patents, trademarks and designs. India has so far not signed this convention asit has weakened the bargaining position of developing countries with each revision[36].4In software, this does not have the same force as in other industries, there being no manufacturing stageexcept making copies.5Or 5 years, whichever is shorter.6Broadly, process patents do not prevent another party from duplicating an invention as long as a di�erentprocess is adopted, whereas product patents do. 1

small and incremental but TRIPs has the same duration of protection for all inventions.See Appendix B for details.Some of the most vexing issues in IPR are embedded in the area of software technology.Because of the newness of this industry compared to other well established ones like theautomobile industry, both the legal and patenting establishments in the US have tended tomake ad hoc judgements that have often been confusing or contradictory.For example, it is argued[37] that \... a patent claiming a pure `algorithm that does x'would be rejected by the courts, but a patent claiming `a computer running an applicationthat uses an algorithm that does x' would be accepted as patentable subject matter [in theUS]," and that \... one cannot get a patent on `a oppy disk containing a program thatdoes x,' but one can get a patent on `a program running on a computer doing x' ". Thecustomary practices in the US in the software area are important as they are either adaptedin other countries or become de facto positions in multilateral fora.There is widespread confusion as to what aspects of software technology can be patentedand the extent of rights conferred on copyrights. However, the considerable weakening ofprocess patents and the systematic extension of the rights of patentees in TRIPs, as well assome of the judgements that have been delivered by courts in the US are pointers to whatmight be future directions.In this study, we investigate IPR in computer software and their implications for de-veloping countries (sometimes with speci�c reference to India) with respect to TRIPs. We�rst provide a brief background on IPR in Section 2, and a short history of IPR in softwarein Section 3. Section 4 contains detailed analyses of IPR policy issues in software. Finally,in Section 5, we discuss the impact of TRIPs on developing countries in general, and Indiain particular. Appendix A contains some brief excerpts from TRIPs on patents and copy-rights and Appendix B has a brief summary of the research so far on the economic impactof IPR. The last two appendices give some recommendations with respect to copyright lawand TRIPs amendments that may be useful for developing countries.2 Background on IPRIPR is a contract between society and inventors and authors to promote science and usefularts by disclosure. It is an economic tradeo� between social bene�ts and private incentives.Monopoly rights are granted since public goods (including research and development) arenot produced without \incentives" [24]; market forces alone cannot exclude \free riders"from sharing the fruits of such investment. The economic criterion is that the marginalcost of greater protection must equal marginal bene�t to society: availability of more variedand better products to society versus costs of research and administering IPR, losses dueto monopolistic exploitation and inhibitive e�ects on inventive activity.There are three varieties of IPR in the main: trade secrets, copyrights and patents. Tradesecrets do not prevent anyone from rediscovering or reinventing the secrets, as the ownerhas not disclosed the intellectual property in his possession to anyone. This approach isoften followed in many high technology areas such as computer packaging, semiconductorprocessing and atomic processes (the last by law as a national policy in many countries), asother forms of IPR require documentation to be �led that becomes available to all, includingcompetitors and unfriendly parties. There is legal protection for prevention of disclosure oftrade secrets to unauthorised persons7. The practice of reverse engineering can be adopted7This is the provision AT&T is using to �le a case against BSD Inc. (which is planning to release a version2

by competitors as no claim about IPR has been made by the original inventors. However,since the passing of an act that allows mask copyrights in semiconductor processing in '84in the US, reverse engineering in chip manufacture has become more di�cult. It is verylikely that similar approaches might be adopted in other high technology areas.Patents give the owner the exclusive right to practice an invention for a speci�ed amountof time. They can be licensed to others but this is the prerogative of the owner of the patent.However, the Indian Patents Act of '70 has provision for compulsory licensing in case thepatent is not worked in India (this is similar to the provision in the Paris Convention),whereas TRIPs allows compulsory licensing only under exceptional circumstances. Patentsdo not cover systems8; they cover particular techniques used to build systems or partic-ular features that a system o�ers[5]. Mathematical algorithms, abstract ideas, scienti�cprinciples, etc. are non-patentable.For a patent to be granted, considerable documentation has to be �led (so that otherscan practice it after the period of patent protection and also to de�ne what constitutes in-fringement) and there should exist no \prior art". It may take considerable time and moneyto get a patent but it gives broader powers than, say, copyrights. For example, a patentis infringed even if the accused is not aware of the patent, whereas a court might acceptignorance as an excuse in the case of a copyright. The cost of obtaining a domestic patentin the US is said to be around $10,000, and closer to $50,000 for a broader internationalcoverage[3]9. TRIPs goes by the �rst-to-�le rule for a patent while the current US practicefollows the �rst-to-invent rule.Copyrighting is a simpler procedure for preventing one from copying another's expres-sion of ideas|it does not protect ideas and the subject matter of copyrights need not beinventions. Copyright law assumes that the same idea can be stated in di�erent ways; hencemonopoly over one does not injure public good. Copyrights have been devised to protectexpressions of ideas (e.g., story lines, plots) in books, poetry, novels, �lms, plays, paintings,music and, since the late '70s, to prevent copying of software. It stresses free speech andself-expression (hence one can reproduce portions for criticism or parody), but this is notan issue with software[3].Obtaining copyright registration10 for software is straightforward and quick. In the USit just involves �lling up a form and sending $20 to the Copyright o�ce along with thesoftware. In the case of a dispute, it is the responsibility of the copyright owner to provethat the accused copied the owner's work[3].3 Brief History of Software Industry and IPR IssuesSoftware industry is currently an important sector of the information technology industryand is likely to become a dominant sector in the next decade. Software development be-tween 1950-1980 has had di�erent characteristics from the period after 1980. During theof Unix that is free of AT&T source code but contains some of the underlying ideas), as this company wasformed by individuals who had access to AT&T source code while they were working at the University ofCalifornia, Berkeley.8This is in the context of pure software systems|patents are allowed on systems that have software asone component.9These costs are su�ciently high that even US universities have to think carefully before pursuing apatent application and are lobbying to have a two stage process where a preliminary application at a lowercost is �led and a more comprehensive application within a year (as is the case in some European countries).10Under the Berne Convention, registration is not necessary to have a copyright[8].3

earlier period, software development was an adjunct to the design and development of hard-ware. There was little standardization among vendors (except possibly some in the area ofcomputer languages like Fortran and Algol) and software developed on one machine wouldrarely be attempted on other machines. Hence, the craft of programming was essentially aclosed shop in any one company. Third-party software was not much in evidence.Neither was there much e�ort towards patenting the developing \computing folklore" assoftware was understood to be unpatentable. (For example, in a landmark US judgementin the Gottschalk vs Benson case in '72, methods that converted BCD to binary withoutany reference to any apparatus were held to be unpatentable.) In addition, the techniquesinvented were often felt to be too obvious or particular to the hardware. Patents thatwere granted almost always were of systems involving software in conjunction with somehardware. Also, companies like IBM opposed software patents11 in the 60's on the groundsthat there was no way to classify such patents[8]. Additionally, the economic value ofsoftware was not realised as the hardware costs were preponderant at that time. For thesereasons, software had to be protected using the provisions of trade secrets. Copyrights werenot available for software in the US until '78 and in India until '84.However, with the rise of standards like Unix12 and the IBM PC in the '80's, a signi�cantamount of software development is being practiced as a craft by small third-party teams ofprogrammers. Much of the software sold in the PC market is due to such teams. As morepeople have become involved in software development, the issue of intellectual propertyrights has become critical. Unfortunately, this has not been due to the invention of newmethods, but primarily due to changes in the legal system in the US and the changes thattook place in its wake in the economic and marketing worlds. Since '81, software patentshave been widely believed to be o�cially possible in the US, following an interpretation ofthe rulings in a court case (Diamond vs Diehr)13. This interpretation gave rise to successfulattempts at patenting some well known techniques which had been a part of \folklore",but had not been written up to constitute \prior art" as they were considered to be either\obvious" or unpatentable.Possession of patents helps in the negotiating position of a company both defensively (inentering into cross-licensing agreements) and o�ensively (lawsuits claiming infringement).This has further increased the attractiveness of owning patents. IBM, for example, hasabout 9000 patents and this has helped it considerably (through cross-licensing) in gettingaccess to key software technologies developed elsewhere. In addition, lawyers have had somesuccess in persuading courts to interpret copyrights in \creative ways", so that they almostfunction as if they were \patents" (discussed in more detail in Section 4.3.2). Anotherreason for the interest in obtaining IPR protection for software has been the increasingshare of software costs in total system costs. Since software determines the ease with whicha computer can be used, it has recently become a determining factor in choosing betweencompeting hardware products.Other changes in the software industry in the late '80s are the explosive growth of pack-aged software (due to the PC market and the resulting \downsizing"), increased barriersto the entry of small �rms, the maturing of industry with increasing �rm size and increas-11The terms \software patent" and \software-related invention" are used interchangeably here, though theUS patent o�ce uses only the latter (in addition to other categories like computer process and computer-related inventions that could be implemented in hardware).12Unix is a trademark of AT&T.13Currently, it is believed that there is no provision for software patents in India but case law is lacking.TRIPs would necessitate an appropriate amendment to the Indian Patents Act of 1970.4

ing concentration and the continuing prominence of hardware manufacturers as softwareproducers (though not at the same level as before).Software technology is unusual in that copyright plays a more important role than inother technologies. However, patents are becoming more important in countries that haveallowed patenting in this area.4 Analysis of IPR in SoftwareIn this section, we �rst consider the behavioural aspects of software over its life-time. Theseinclude features such as the incremental evolution of software, commonplace reinvention ofsoftware techniques, interoperability of various software packages, fast pace of technologicalchange in software, etc. We examine the implications of these aspects on software IPR.This is followed by a detailed discussion of the components of software from a technicalangle and their relation to IPR. Contrary to what one might expect, software is not onesingle monolithic entity, but can be broken up into several components with varying degreesof intellectual and innovative content. Di�erent forms of IPR protection are appropriatefor the individual components. Furthermore, IPR protection for each of these componentsa�ects software practice in di�erent ways. This section can be skipped by the casual reader.Finally, we examine some selected IPR policy issues in software, indicating the preferreddirections.4.1 Software Characteristics and Links with IPRAn important feature of software is its incremental evolution over a period of time.The advances need not be substantial or foundational to result in a better product. It isneither practical nor appropriate if each of the advances is to be patented. However, if theinventor does not go in for a patent, but has incorporated an (\obvious") invention in aproduct without publishing the technique, considerable legal di�culties can ensue if someone else later patents the technique, as the original inventor has no \prior art" established.(For example, the technique of backing store was used at MIT in the Lisp machine systembut not published in time before AT&T patented it[5].) This is especially invidious forsoftware techniques that are reasonably simple for most programmers to discover on theirown but do get patented in course of time14. Stallman[8] observes that defenders of thepatent system could respond that if the patent system carried out its rules properly, then atechnique that most programmers could discover on their own would be judged \obvious",and thus unpatentable. However, this requires substantial changes in the workings (i.e.,sta�ng and procedures) of a patent o�ce. He further observes that this problem existseven for techniques that only 1% of programmers working on a certain kind of programworldwide would discover on their own, as even this 1% is a very large number. Hence, atechnique that is almost certain to get into the public domain in the absence of patents islikely to become a monopoly for the �rst successful party otherwise.For the above reasons, another important feature of software is the commonplaceand independent reinvention of many concepts[5]. This makes product patenting an14For example, in the Iwahashi case in '89, a patent was granted to Sharp Corp. for e�ecting multiplicationas the di�erence of two squares that are stored in a read-only memory (ROM): a�b = ((a+b)2�(a�b)2)=4.This basic idea is often taught to children at school! The US patent o�ce initially rejected the patentapplication on the grounds that it was an algorithm but an appeal against this ruling was successful as theROM could be construed as a machine. 5

extremely harmful procedure as it grants an absolute monopoly to the �rst party thatregisters with the patent o�ce. The product patenting policy assumes that inventionsare rare and precious and that the inventor has to be given an exclusive privilege as anencouragement to undertake the di�cult and arduous task of invention. However, this policyis not appropriate in software. The software practitioner works with abstract and idealelements[5] at the lowest level. In comparison to inventions in other disciplines, it is thereforepossible for a competent programmer to re-invent many of the techniques independently.In addition, any reasonable and useful piece of software is likely to use many suchinventions; arranging licensing for each of these inventions is likely to be expensive both interms of time and money. This is likely to make software development the preserve of largecompanies located in the major OECD countries, as only they would have the resources ingetting the required licenses (either through cross-licensing or by monetary means). Sincethe current TRIPs does not support mandatory licensing, it may be necessary to removefeatures from a software product so that patent infringement does not occur. This situationcan arise even after product development is complete|if a technique used in the productis patented by another party subsequently, and it is not possible to get licensing for it atreasonable rates. This was the case with Xywrite, a company that had to \downgrade" itssoftware to avoid the use of a popular feature that used command completion to correctspelling mistakes and expand abbreviations[5].The real challenge in software is the composition of several individual techniques, takinginto account their various interactions, in developing a product. The crux of the problemis in modelling some segment of reality consistently at the desired level of abstraction,not in the invention of new techniques by themselves. For example, the use of softwaretools has been pioneered in Unix to build larger software packages. Though each tool is notsubstantial in its own right, the ability to compose several of them to build larger structureshas enabled Unix to gain dominance in the technical segment of the marketplace.Another important aspect of software currently is its technological dynamism andfast pace of change. If the IPR regime does not take this into account, innovation canbe sti ed. We discuss this further in Section 4.3.1.Yet another important feature of software is the need for interoperability of variouspieces of software on widely di�erent machines. It is quite usual to integrate many softwaresystems to realise a more useful and more comprehensive software package. Since softwareis akin to mathematics in that complete arti�cial universes that have no counterpart in thereal world can be created, the constraints that are present in other physical and biologicalsciences are absent. It is not possible to integrate di�erent abstractions of various systemsunless they conform to standardised interfaces. The use of standardised interfaces is sub-ject to vagaries of licensing if they are given IPR protection. For example, user-interfacecopyrights, as interpreted in the Lotus vs Paperback case15, may prevent other parties fromincremental innovation or incorporation of the user-interface into larger systems.4.2 Software Components and Corresponding IPRA software system generally consists of the following components:� Program Function, which is the domain of algorithms. Currently patents and tradesecrets are the types of IPR in use.15Paperback used the same user interface as Lotus for its spreadsheet and lost the court case moved againstit by Lotus[4]. 6

� Program Interface, which covers �le formats, application program interface (API) andOS system calls, communication protocols and speci�cations (for example, very high-level speci�cations or those in object oriented languages). The issues of compatibility,inter-operability and openness are very crucial here. User interface is also part ofprogram interface but this has been separated out below as another category becauseof its importance in IPR. Copyrights are mostly used; design patents are used forornamental aspects.� User Interface, which covers programming languages, command languages, menu-based dialogs, graphical user interfaces (GUIs), multimedia (colour graphics, sound,video, animation) and ornamental designs. Same as previous.� Program code itself, either in binary or text form. Mostly copyrights and licensingagreements are the rule here.The impact of TRIPs is not the same on these various components because di�erentforms of IPR protection are either customary now or appropriate to them ideally. Due tothe highly technical nature of the issues involved, we do not discuss this further16.4.3 Select Issues and Policy Options in SoftwareIn this section, we consider questions such as what quali�es for patenting, and what shouldbe the breadth and duration of patents. We also examine the scope of copyrights in software.Many of the arguments are illustrated with brief case-studies.4.3.1 PatentsWhat is Patentable. As we have discussed earlier, patents are not permissible on math-ematical algorithms. However, US case law holds that \nonmathematical" ones (especiallycomputer algorithms) are patentable. This legal distinction does not make any sense tocomputer science practitioners yet[22]! In addition, it has been held that a machine systemthat employs an algorithm is patentable; the \machine" has been as simple as a read-onlymemory (ROM) in the Iwahashi case in '89!Stallman[9] makes the following clari�cations and observations about \patents on algo-rithms" and software patents that are helpful in understanding this confusing area:Software patents are not, strictly, \patents on algorithms" because no patentcovers just a single algorithm. A claim in a patent describes a combination ofcertain steps or elements. If an algorithm involves using all of those steps orelements, then use of the algorithm is prohibited by the patent. ... As a result, asingle patent can easily make many related algorithms o�-limits to programmers.Sometimes a patent covers so many related algorithms that for practical pur-poses it covers all possible ways of producing a given result. The well-known caseof LZW data compression (used in the `compress' program and in all modemsthat do data compression) is an example of this. Experts on data compression,the discoverers of other compression techniques, have been unable to �nd anymethod of computing the same output as the LZW algorithm without infringingthe patents that cover it. This particular case is important in practice because16For more details, refer to [23]. 7

a new modem must be able to talk with existing modems; one could conceivablyuse a di�erent algorithm to produce the output, but it must be the same output.Another reason software patents are not, strictly, \patents on algorithms"is because they generally include a statement about what the algorithm is usedfor. (This may be narrow or broad.) Thus, you could be permitted to use theLZW algorithm for something other than data compression.Patents cover only \mental steps" (computer code) according to law in most countriesbut not data (which is typically protected, if appropriate, by copyright). However, ac-cording to computer scientists, data and code are interchangable: this follows from one ofthe most important insights in computer science. This insight is particularly importantin declarative programming and its applications which arise in many areas including AI(Arti�cial Intelligence) systems.Many IPR regimes envision a two-level hierarchy (the \ideas and expressions" dichotomywhich neatly divides intellectual property into patents and copyrights). However, computersoftware is typically designed using multiple hierarchies and the two-level hierarchy becomescompletely inappropriate. TRIPs does not address this issue that is important for newertechnologies like software.Though the patent system is not supposed to grant or uphold patents that are judgedto be obvious[5], many \obvious" patents have been issued in practice. A concrete mani-festation of an abstraction is typically considered \obvious". The standard of obviousnessdeveloped in other �elds (where even \minor" changes in processing, for example, are consid-ered non-obvious) is inappropriate for software[5]. Some examples of \obvious" techniquesthat have been successfully patented are listed below:� Scrolling on multiple windows. No patent exists on techniques for scrolling a singlewindow and it is not too di�cult to think of how to scroll multiple windows.� Well known graphics techniques such as airbrushing, stenciling, and combining twoimages under control of a third.� \Natural order recalc" in spreadsheets (recalculation of all spreadsheet entries thatare a�ected by changes the user makes).� The technique of \backing store" in window systems.� Use of exclusive-or to write a cursor.� Interoperability of machines with various endian formats on a network.� Verifying at link time that a call on a procedure in a separate compilation unit matchesthe procedure's de�nition[16].It has been the experience of many system designers that once a decision has been takento provide some desired functionality within the constraints of available subsystems, manysituations arise where newer techniques have to be devised for achieving the functional-ity. These may be su�ciently constrained by the subsystems that they are \obvious" topractitioners in that area. 8

Breadth of Patent Protection. There is a requirement in many patent laws that thebest way of implementing an invention be given in the patent application, but, in practice,claims are written much more broadly and thus their particular \expression" is diluted. Inaddition, the doctrine of equivalents in patent laws makes the scope of a patent broader. Ifpatent claims are not interpreted broadly, problems with patents like the LZW algorithm,described above, can be avoided.It is necessary to interpret claims narrowly as there has been a tendency so far to grantclaims that have wide applicability but little intrinsic novelty. For example, a patent hasbeen granted to one R.E. Billings in Dec'87 for \Functionally Structured Distributed DataProcessing System", which is, in essence, a client-server system for banking applications. Itis believed that this patent, if vigorously enforced, would cover all banking automation thatuses a central computer (�le server) and a client with some processing power (as opposedto a dumb terminal).Duration of Patent Protection. Some assumptions behind patenting policies do notseem to capture today's reality in the area of software.As argued earlier, software is not like other disciplines because of the ease with whichmany inventions can be independently discovered. Hence, it has been argued that it requiresshorter period of protection[29]. Patent policy in the US assumes that technology changesslowly and that patent protection has to be given for a reasonably long period (17 years).This may have been appropriate in the 19th century, but de�nitely not for the last 4decades in information technology. If the rate of technological change were slow relativeto the time taken for processing a patent application, techniques that have been patentedwould be published in time for one to negotiate licenses for patented techniques needed in aproduct. However, processing a patent application takes a few years, whereas the marketinglifetime of a software product is often no more than 6 months to two years17. It thereforeproves di�cult or impossible to be on the right side of patenting laws; i.e., avoid infringingpatents. A software developer can be dragged into court for using methods that he did noteven know were being patented. This can e�ectively kill a software product whose windowof opportunity is short. An additional problem is that patent searches are unreliable as theclassi�cation of patents is not obvious and has serious shortcomings[5].Conclusions. Given the considerable di�culties with the current software patents, itmight be advisable either to do way with software patents altogether, as advocated bythe League of Programming Freedom (LPF)[5], or examine more seriously a sui generisor hybrid IPR[39] for software. Many practitioners in the software �eld do not believethat software product patents help. It is felt that copyrights might be the right balancefor protection of intellectual property and that user interfaces should be excluded fromcopyright protection[8].4.3.2 CopyrightsCopyrights, though distinct from patents, also require careful consideration as many copy-rights are disingenuously being attempted to be defended in courts as \patents"|and someof the courts have accepted this interpretation[3]. For example, in Apple's suit againstMicrosoft, its lawyers invented the theory of \look and feel" and doctrines against copying17For example, Windows 3.0 was released in mid-90, Windows 3.1 in mid-92 and NT in mid-93.9

of \nonliteral elements" of a program. Even though the case has not yet been resolved,it has e�ectively given Apple a near monopoly on one of the most popular graphical userinterfaces|a monopoly that would be characteristic of a patent. If commonly accepted userinterfaces cannot be used due to copyrights on them, interoperability of di�erent softwarepackages cannot be guaranteed.Another legal device to prove copyright infringement has been to argue that a copy-right on a computer program also extends to the computer language that the program usesor enables. This e�ectively makes the copyright equivalent to a patent on the computerlanguage[3]. Such a strategy has succeeded for Lotus against Paperback. Paperback reverseengineered Lotus 1-2-3 on which Lotus has copyright. Lotus successfully sued Paperback[4]claiming that they copied the same keystroke commands. Thus, the input command lan-guages and the keystrokes corresponding to commands have been deemed to be covered bythe copyright protection.In a poll Samuelson[6] conducted at a technical conference in the US around '89, it wasdiscovered that most programmers are not averse to copyrights not involving user interfaces,whereas they are opposed to patents in software altogether. The o�cial position of orga-nizations like LPF is similar. This form of IPR protection seems judicious for developingcountries as well, since it facilitates the development of software using standardised inter-faces without requiring expensive patent searches, and at the same time meeting customerneeds for popular interfaces. It has also been found that without proper enforcement ofcopyright protection, many of the software clones developed in India languished due to theready availability of unauthorised copies of the original software[21]. In summary, betterenforcement of copyright rules is needed, but not new types of IPR that can constrain thesoftware industry18.5 Implications of TRIPs for Developing CountriesWe will explore the implications of TRIPs for developing countries at two levels: one witha broad sweep and the other at a more technical level. We will discuss the impact of TRIPson developing countries in general, and India in particular.5.1 Impact on National Economies: A Synoptic ViewAs not much research has been done so far in evaluating the impact of TRIPs on nationaleconomies, we can only make considered judgements at this time. We will look at areas suchas its impact on alleviation of poverty, e�cient resource utilization, and the likely impactof the latter on the environment.It has been widely understood that e�cient resource usage determines many aspects ofa country's life (we use India as an example in the discussion below):� Growth rate of the economy: Due to ine�cient resource usage, India's incrementalcapital to output ratio (ICOR) is poor. ICOR is a macroeconomic aggregate that hasa critical bearing on the growth rate of an economy.18The growth of the PC industry is due to the \openness" of the architecture and it is likely that asimilar openness in software would not only enlarge the software industry but also help the world economyin utilizing scarce resources more e�ectively. 10

� Sustainability: Owing to environmental abuse and resource mismanagement (typicallyresulting from destruction of traditional lifestyles), the food sector in many SaharanAfrican states has been in a precarious situation for the last few decades.� International competitiveness: Looking at just one facet, the steel industries in Japanand Korea are held to be much more energy e�cient compared to those in India andthe former Soviet Union. Some commentators have estimated that this factor is ashigh as three, and even higher if downstream processing is also considered.� Pollution load: Poor energy utilization in E. European countries and India has alsoresulted in higher levels of pollution.� Trade balance: India makes heavier and more ine�cient use of petroleum-based prod-ucts than warranted, making it very vulnerable to balance of payments problems. Ithas been reported that Japan, in contrast, uses less petroleum-based products cur-rently than it did before the '73 oil shock.Historically, the �rst world bootstrapped itself out of poverty by obtaining ready accessto \weakly defended" lands by subjugating native peoples and appropriating resources fromall over the world. E�ciency of resource use was not critical at that juncture, but it is ofparamount importance now. Due to the availability of better technology and managementskills, the First World has attained far higher e�ciency in resource usage|except in aspectsinvolving \lifestyle". The Third World's chances of bootstrapping itself out of poverty aresmall if resource usage is as poor as in India. The pollution load is increasing alarminglyand sustainable growth of the economy is in doubt due to the destruction of the naturalfertility of soil via waterlogging, deserti�cation, deforestation, monoculture, ground watermisuse, etc.One possible hope lies in the growth of the information economy which can mediate theuse of physical resources in the economy by creating an awareness of the most e�ective useof resources. These may include practices like conserving vegetable matter for compostinginstead of burning, careful use of forest resources instead of serial deforestation, careful useof groundwater and canal water without excessive withdrawals or creating saline conditions,etc. Primary and other higher levels of education, telecommunication, and even creationand dissemination of cultural icons that re ect the aspirations and needs of a communityare other aspects of information economy.For the growth of the information economy, information technology is crucial. If anIPR regime throttles the growth of information technology|hence, of the informationeconomy|in the future, Third World countries cannot hope to achieve the desired levelof e�ciency in resource usage. In addition to hindering the alleviation of poverty in theThird World, this can also a�ect the rest of the world by introducing substantial pollutionload and unsustainable growth patterns. For this reason, it is in the interest of all coun-tries to provide for a more favourable IPR regime in information technology for developingcountries like India than TRIPs. (Such a provision already exists in TRIPs for the leastdeveloped countries like Somalia.)Creative use of information technology is critically needed to make a developing countrylike India a meaningfully information-rich society across all economic strata so that scarcephysical resources are more e�ectively utilized in the economy19. The transition to an19As a notorious example of administrative ine�ciency, World Bank loans worth approximately $24 billionremain unutilised in India[20] due to its inability to raise internal resources, while the loans continue to incurinterest. 11

information-rich society is possible, especially in a poor country like India, only if theeconomy is self-reliant, rather than being dominated by multinational corporations who arelikely to use the developing countries only as auxiliary markets. An information-rich societyrequires a competitive domestic software industry to meet its varied and unique needs andthis is not possible with an IPR regime such as TRIPs.5.2 Impact on Software ProductionA self-reliant and e�ective software industry is congruent with a competitive domestic soft-ware industry; this state of a�airs has to exist before a large country like India can aspire tobe a global player in the software industry[10], [12], [21]. However, an IPR regime such asTRIPs can foreclose many options for Third World countries in developing the informationtechnology sector to the extent necessary, as described below.5.2.1 Negation of Third World Countries' StrengthsThe software industry has a strong appeal for developing countries, as the cost of entryis low and the only critical bottleneck is manpower training. In the case of India, owingto various policies pursued since Independence (mostly, highly subsidized higher educationeven at the cost of primary education), there is a substantial capability for manpowertraining. (Already, India supplies many graduates to the high technology industries in theOECD countries.)Software development has another important characteristic that has so far not beenexploited by any of the developing countries20, namely, the cost of maintenance is highcompared to the development cost. In addition, the development of complex software istypically an evolutionary process, and staying power is more important than outstandinginnovation. Since manpower costs are low in India, both development and maintenance ofsoftware can be economical.In this context, any patenting regime that grants monopoly powers for as long as 20years as in TRIPs (more than the 17 years currently in the US!) cannot but impede orcripple the growth of indigenous software industry. The above advantages are likely tobe exploited mostly by MNCs that have the legal and �nancial resources to engage insoftware production. In addition, even patentable techniques developed on-site in ThirdWorld countries by MNCs would become the property of the MNCs.TRIPs is also inimical to developing countries due to its acceptance of restrictions onfree movement of labour by immigration rules in OECD countries while IPR is expected tobe trans-national. Free movement of labour may be important to third world countries inproviding certain software services; this is currently the bulk of the export monies (about75% [18]) that accrues to India in the area of software.5.2.2 Aggravating Technological Backwardness of the Third WorldDue to the incremental evolution of software (note, for example, successive revisions ofDOS and Windows, and NT), there exists little opportunity for late entrants to developcompetitive software if they have been thwarted in this evolutionary process. If softwarepatents become the norm, this problem is likely to be aggravated much further. For example,a compiler is a basic piece of software that enables a programmer to express algorithms in20A beginning has been made by MNCs such as TI and Motorola in Bangalore since the late '80s.12

a high-level language. However, a class of graph algorithms that accomplishes the crucialtask of mapping program variables to registers in the machine (the problem of registerallocation in a compiler) has been patented in the US. Hence, no compiler can be developedthat uses this important and almost unavoidable step without arranging for a patent license.This problem might be tolerable if it were one of a few isolated cases. But any worthwhilesoftware system would need to use a large number of patented techniques, thus makingsoftware production costly.5.2.3 Procedural ImpedimentsAs TRIPs goes by the �rst-to-�le rule for a patent21, only those organizations that cana�ord the legal infrastructure will be able to succeed in the timely �ling of a patent. Thisis not in the interest of countries like India whose organizations are not likely to have suchresources.The Department of Electronics of Govt. of India has placed great emphasis on opening\Software Technology Parks" at various locations in India, but this policy will be madeine�ective if the procedural and �nancial aspects of obtaining software patent licenses be-come prohibitively expensive. Only multinational software companies (which are almostexclusively American) with subsidiaries in countries like India will have either the IPR or�nancial resources to undertake development of software there under this constraint. Thiscan permanently tie India into the role of a cheap supplier of software services. This isextremely unfortunate as India has some of the factor endowments that make software de-velopment very attractive. It is true that more sophisticated software tools are being usedfor software development with greater productivity by the advanced countries when com-pared with developing countries, but with appropriate manpower training this de�ciencycan be bridged[10].Currently, the software activity in many developing countries can be categorised intothree main areas: on-site services in OECD countries, development of software by sub-sidiaries of MNCs, and independent native software development. For the �rst two cate-gories, the issue of IPR is not critical as the developing countries' role in these cases is thatof a dependent junior partner. However, in the last category, IPR plays a critical role andnative software developers can be hamstrung in their operations if they desire to be indepen-dent. It is likely that no independent software developer in India can operate in the futurewith a TRIPs patent regime without some tie-up|in a weak negotiating position|withsome MNC.Even in the US and other First World countries, the implications of patents for softwareindustry can be deleterious. Expensive legal patent checks have to be conducted beforeproduct design and development can begin. There exist litigation companies like Refac andCadtrak in the US which do not carry out any software development but have obtainedan interest in some patents. No procedure is known to avoid being dragged into courtfor infringement (in the US) in the case of a patent granted after a software product isdeveloped. In some European countries, however, anyone already using a technique before itis patented may continue using it even afterwards[8]. But TRIPs would reduce the situationin all countries to that prevailing in the US. This would hamper software development ina peripheral country like India as obtaining details of all patents granted and conductingneeded negotiations to secure licenses is likely to be di�cult.21This is di�erent from the current US practice which favours the �rst-to-invent rule.13

Small software houses in the US are already experiencing the above di�culties as they donot have the clout of larger organizations like IBM to enter into cross-licensing of patents. Itis instructive here to note the experience of Free Software Foundation (FSF), an organizationthat believes in making system software like C compilers and Unix available free to everyoneso that users can study, copy, change and improve the software[8]. As FSF uses public-domain software such as X which employ some patented techniques, they may be subject tolawsuits for infringing software patents. Others who have used these software have alreadybeen threatened with similar action.5.2.4 Di�culty of Adapting Software to Local NeedsStrong copyright rules, such as protection for program and user interfaces, prevent recus-tomization and improvement of software, hinder maintenance and subsequent innovation.They also hinder debugging, detecting viruses, investigating safety, reliability, and systemsintegration. These are important issues as the conditions in developing countries may bedi�erent from those existing in the developed countries. As an example, many spellcheckprograms can recognise Anglo-Saxon names, but fail to recognise Indian names. It shouldbe possible to attach auxiliary software to handle such names, in addition to building aware-ness of alternative spellings for some names. Such additions may be outside the IPR regimeif �le structures or the structure of database of names are protected. Though there havebeen attempts like the universal character code for representing various language scripts, itwould still be too much to expect all software to be aware of all local variations.5.3 Impact on Issues Concerning IPR ProtectionProductivity software, such as spreadsheets, used widely in developed countries, is too ex-pensive for many developing economies. For example, Lotus 1-2-3 costs around Rs 15,000[19]or about $500 per machine. (As a comparison, a well paid job in India o�ers between Rs4000-Rs 6000/month to a person with a masters degree.) Individuals and small businesseseven in middle income countries, leave alone developing countries, cannot easily a�ord theinstallation of more than a very few such applications (plus Windows 3.1 at approx. $150).As a result, there is often unauthorised duplication of software in both developed and de-veloping countries22. If such software is to be reengineered in developing countries for theabove cost reasons, it does have to satisfy standard interfaces while respecting intellectualproperty rights extant at the time. These requirements may make this task much morecostly or di�cult.The strategies and options that are being used to control unauthorised duplication iscreating situations where the due process of law is being set aside. For example, an organi-zation called InFAST (Indian Federation Against Software Theft) in India has been seeking(along with the police) sweeping powers for search, seizure and punishment on suspicionthat unauthorised duplication of software has occurred. Even possession of unauthorisedduplicated software for gain, as opposed to making copies of a copyrighted work, is to beheld as a legal o�ence leading to mandatory punishment23. The provisions sought by In-FAST are open to abuse and fundamental human rights may be compromised. A similar22It has been estimated that the extent of unauthorised duplication in the US is as much as 50%, andeven higher in developing countries.23With literary works, illegal copying of, or trading in, copyright protected works is an o�ence, butpossession of such illegally produced copies is not[11].14

issue has become important in the US, where the human rights of maintainers of electronicbulletin boards are under attack on suspicion that con�dential information has been postedby users of these bulletin boards[14]. A similar situation has also risen due to raids|withoutwarrants|by Software Publishers Association in the US to check if system administratorsare complying with legal requirements of how many users can use a package concurrentlyand how many spatial copies can coexist in the network[13]. These are known to be di�cultto enforce even with the best of intentions by system administrators. TRIPs also sanctionssuch setting aside of the due process of law by its provision for the reversal of burden ofproof in the case of process patents.There is no doubt that a vigorous enforcement of copyright is not possible in the devel-oping countries unless legitimate copies of imported software are made available at conces-sional rates commensurate with their ability to pay (say, about a tenth or less of the UScost, as with textbooks currently). Software is an example of a technology in which a copyis about two to three or more orders of magnitude cheaper; hence, selling at a lower costis de�nitely feasible. In addition, developing countries can make such a scheme attractiveby reducing the transaction costs for the vendors of imported software by providing forduplication through well understood means like electronic bulletin boards or the use of �letransfer protocols (ftp), instead of the current costly marketing and distribution channels.Again, due to the evolutionary nature of much software, such a mechanism is necessaryfor updates, bug �xes and on-line support. The above proposal is similar (except for themandatory registration and payment) to \shareware", which is a cost-e�ective way of mar-keting and distributing copyrighted software that some independent software developershave been using for some time in the OECD countries.6 ConclusionsIn conclusion, it is vitally important that developing economies seek ameliorative reliefs fromTRIPs. The current legal basis for software patents in the US is not sound (among otherreasons, being dependent on the distinction between mathematical and non-mathematicalalgorithms, which is not comprehensible to computer scientists). If software patents cannotbe abolished altogether as the League of Programming Freedom has demanded in the US,a more favourable IPR regime should be made available for developing countries (and notjust for the least developed countries, as provided in TRIPs). Such a regime in OECDcountries would also be in the interest of independent software developers there. It is alsoimportant that if software patents are allowed, their claims should be clearly and narrowlydemarcated instead of being widely interpreted as in the Billings patent (Section 4.3.1).Another desirable change would be a provision to make important software packagesavailable to third world countries at substantially lower prices than in the OECD countries;just as the copyright law (Berne Convention) allows the developing countries to print andsell textbooks at substantially lower cost, for the exclusive use in those countries.An IPR regime that a majority of practitioners of software all over the world (includingthose in the US) would advocate is roughly the same as what developing countries also would�nd helpful. In summary, this position does not allow patenting in software, but allowscopyrights for all but user-interface software. Without proper enforcement of copyrightprotection, development of software becomes unremunerative owing to the ready availabilityof unauthorised copies[21]. 15

AcknowledgementsThanks are due to R.M.Stallman, C.E.Veni Madhavan, P.R.Kumar, Matthew Jacoband Dilip Ahuja for reading and commenting on earlier drafts. Also, thanks are due toS.Chatterjee and U.Shrinivasa for encouraging KG to look seriously in this area.A Appendix A: Excerpts from TRIPsHere are brief excerpts from the TRIPs text[15]; the term PARTY in this text refers toa contracting nation. The text in square brackets is commentary by R.M.Stallman of theLeague of Programming Freedom[7].PATENT RIGHTSArticle 27: Patentable Subject Matter1. Subject to the provisions of paragraphs 2 and 3 below, patents shall be available for anyinventions, whether products or processes, in all �elds of technology, provided that they are new,involve an inventive step and are capable of industrial application24...without discrimination as tothe place of invention, the �eld of technology and whether products are imported or locally produced.[Paragraphs 2 and 3 (omitted) provide some exceptions, but none of them applies to software.]Article 28: Rights Conferred1. A patent shall confer on its owner the following exclusive rights:(a) where the subject matter of a patent is a product, to prevent third parties not having hisconsent from the acts of: making, using, o�ering for sale, selling, or importing for these purposesthat product;(b) where the subject matter of a patent is a process, to prevent third parties not having hisconsent from the act of using the process, and from the acts of: using, o�ering for sale, selling, orimporting for these purposes at least the product obtained directly by that process.[This rules out any form of mandatory licensing scheme that might mitigate the problem ofpatents.] Article 29: Conditions on Patent Applicants1. PARTIES shall require that an applicant for a patent shall disclose the invention in a mannersu�ciently clear and complete for the invention to be carried out by a person skilled in the art andmay require the applicant to indicate the best mode for carrying out the invention known to theinventor at the �lling date or, where priority is claimed, at the priority date of the application.2. PARTIES may require an applicant for a patent to provide information concerning his corre-sponding foreign applications and grants.Article 30: Exceptions to Rights ConferredPARTIES may provide limited exceptions to the exclusive rights conferred by a patent, providedthat such exceptions do not unreasonably con ict with a normal exploitation of the patent and do notunreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimateinterests of third parties.[This would seem to rule out making an exception for software in the scope of patents. Anyexception for a program that would be used widely would enable the patent holder to claim to have"lost" signi�cantly.]24For the purposes of this Article, the terms \inventive step" and \capable of industrial application" maybe deemed by a PARTY to be synonymous with the terms \non-obvious" and \useful" respectively.16

Article 31: Other Use Without Authorisation of the Right HolderWhere the law of a PARTY allows for other uses of the subject matter of a patent without theauthorisation of the right holder, including use by the government or third parties authorised by thegovernment, the following provisions shall be respected:(a) authorisation of such use shall be considered on its individual merits;(b) such use may only be permitted if, prior to such use, the proposed user has made e�orts toobtain authorisation from the right holder on reasonable commercial terms and conditions and thatsuch e�orts have not been successful within a reasonable period of time. This requirement may bewaived by a PARTY in the case of a national emergency or other circumstances of extreme urgencyor in cases of public non-commercial use...[Exceptions in accord with these provisions will be very few.](h) the right holder shall be paid adequate remuneration in the circumstances of each case,taking into account the economic value of the authorisation;[So it will be expensive for a government to make any sort of exception.]Article 32: Revocation/ForfeitureAn opportunity for judicial review of any decision to revoke or forfeit a patent shall be available.Article 33: Term of ProtectionThe term of protection available shall not end before the expiration of a period of twenty yearscounted from the �ling date.[This requires an increase in the term of a US patent in many cases. It also rules out the ideaof making patents for software last for a shorter term commensurate with the rate of progress.]Article 34: Process patents: Burden of proof1. For the purposes of civil proceedings in respect of the infringement of the rights of the ownerreferred to in Article 28.1(b), if the subject matter of a patent is a process for obtaining a product,the judicial authorities shall have the authority to order the defendant to prove that the processto obtain an identical product is di�erent from the patented process. Therefore, PARTIES shallprovide, in at least one of the following circumstances, that any identical product when producedwithout the consent of the patent owner shall, in the absence of proof to the contrary, be deemedto have been obtained by the patented process:(a) if the product obtained by the patented process is new;(b) if there is a substantial likelihood that the identical product was made by the process andthe owner of the patent has been unable through reasonable e�orts to determine the process actuallyused.2. Any PARTY shall be free to provide that the burden of proof indicated in paragraph 1 shallbe on the alleged infringer only if the condition refered to in sub-paragraph (a) is ful�lled or only ifthe condition refered to in sub-paragraph (b) is ful�lled.3. In the adduction of proof to the contrary, the legitimate interests of the defendant in protectinghis manufacturing and business secrets shall be taken into account.COPYRIGHT AND RELATED RIGHTSArticle 9: Relation to Berne Convention1. PARTIES shall comply with Articles 1-21 and the Appendix of the Berne Convention (1971).However, PARTIES shall not have rights or obligations under this Agreement in respect of the rightsconferred under Article 6bis of that Convention or of the rights derived therefrom.2. Copyright protection shall extend to expressions and not to ideas, procedures, methods ofoperation or mathematical concepts as such. 17

Article 10: Computer Programs and Compilations of Data1. Computer programs, whether in source or object code, shall be protected as literary worksunder the Berne Convention (1971).2. Compilations of data or other material, whether in machine readable or other form, whichby reason of the selection or arrangement of their contents constitute intellectual creations shall beprotected as such. Such protection, which shall not extend to the data or material itself, shall bewithout prejudice to any copyright subsisting in the data or material itself.Article 11: Rental rightsIn respect of at least computer programs and cinematographic works, a PARTY shall provideauthors and their successors in title the right to authorize or to prohibit the commercial rental tothe public of originals or copies of their copyright works...In respect of computer programs, thisobligation does not apply to rentals where the program itself is not the essential object of the rental.Article 12: Term of protectionWhenever the term of protection of a work, other than a photographic work or a work of appliedart, is calculated on a basis other than the life of a natural person, such term shall be no less than�fty years from the authorized publication, or, failing such authorized publication within �fty yearsfrom the making of the work, �fty years from the end of the calendar year of making.B Appendix B: Economics of IPRA brief summary of the work in economic theory regarding IPR is given here; for a detaileddiscussion refer to [23].Research in this area has typically concentrated only on patents. Models have taken intoaccount process/product dichotomy, patent term, breadth of protection and static/dynamicmodels of innovation.Monopoly rights are known to have adverse e�ects (such as higher cost, fewer numberof products, administrative costs, litigation) and may have unintended spillover e�ects (forexample, bundling of software may be an anti-competitive strategy) and adverse impacton di�usion of technology, skills, etc. In addition, grave distortions of the market maytake place through pioneer patents, fencing-in a �eld of technology through systematicpatenting and strategic licensing to structure industry with \weak" competitors|resultingin an e�ective protection longer than the patent term.There is no clear consensus on the strength of protection needed for securing maximalsocial bene�ts. Industries vary in giving competitive advantages to IPR holders: privatereturns are typically lower than bene�ts to society unless IPR holders also happen to controlcomplementary assets. With a weak IPR regime, inventions typically end up in publicdomain, especially if there are multiple inventors. With a strong IPR regime and multipleinventors, immature technologies may be patented as there is a race to patent.According to some[26], there is no reason for strong IPR protection since leadtimeadvantages in an industry, licensing and service agreements, anticopying technologies andsecrecy help the innovator. Similarly, tuning of government policies regarding monopoly,standards and research support can decrease the need for strong IPR protection. US IPRmix currently favours an inventor much more than Japan's or EC's [27].With respect to e�cacy of IPR, it should be borne in mind that public disclosure is notthe same as knowledge needed to make economic use of an invention. Empirical studies (for18

example, at Yale in the '70's) have shown that 60% of patents have only 4 years of usefullife. However, these studies have investigated this aspect only with respect to the OECDcountries. This observation is not valid if developing countries are also considered as theuseful life of a patent may not overlap in developed and developing countries.Patents impose higher barriers than copyrights. If product variety is not critical toconsumers, higher barriers (i.e., patents) are better, otherwise copyrights are better. Ifconsumers regard products with similar features to be important, the value of copyrightsincreases and a monopoly ensues. This is particularly true for user interfaces.Investigations concerning multiple inventors and cumulative research show[35] that withbroad patent protection, outside �rms do not have incentives to produce second-generationproducts. Narrow patent protection, on the other hand, results in greater reliance ontrade secrecy. Furthermore, �rst-generation products are held o� the markets till second-generation products have been developed.Research concerning cumulative progress and novelty indicates that an IPR regimefavouring high novelty makes patents di�cult to displace. As minor incremental innova-tions cannot be patented, weaker parties cannot compete. However, duplication of researchis avoided. If the IPR regime grants patents for low novelty inventions, there is a strongincentive to stay in the patent race. \Easy" inventions (those yielding big cost savings withrespect to R&D expenses) warrant shorter protection [29]. In addition, the same studyshows that there should be provision for compulsory licensing or open licensing after 3-5years unless the patent holder shows existence of special conditions.Research concerning patent breadth and term has shown [28] that it should be narrowand long if there is a stable environment and a single product. With multiple productsand cumulative innovation, however, such a policy blocks subsequent innovation. Dynamicmodels that have incorporated multiple inventors, cumulative innovation, network exter-nalities, etc. support shorter terms of protection[25]. The latter study also concludes thatif consumers have similar costs of substituting rival products but vary in cost of switchingout of the product class, patent protection should be very narrow and long, and it shouldbe broad and short in the opposite case.Research concerning compatibility, network externalities and installed base shows that,in certain cases, if a product becomes more popular, there is more customer satisfaction (e.g.,telephones, fax, e-mail, user interfaces, workstations, programs, etc.). A large installed basealso gives some information about the quality of a product. Also, the information neededto use a product e�ciently is more easily available.IPR regime determines strategy: If patent protection is broad and enforcement is strict,industry standards tend to get adopted widely. Otherwise, unilateral actions of adaptersprevail. If user interfaces are granted copyright protection, �rms with brand name recogni-tion would be inclined to introduce proprietary standards [30]. Hence a copyright regimewithout protection for user interfaces is needed in software to promote compatibility [31].Software is an unusual technology (compared to other industries) in that copyright hasso far been crucial and authorship constitutes \progress". Attempts to apply traditionalcopyright protection may restrict e�cient technology development [33]. In particular, copy-right protection for user-interfaces is virtually equivalent to patent protection with a longerterm and without the criteria of novelty and nonobviousness of patents[32]. Also, strongercopyright rules prevent recustomization of software, improvement and subsequent innova-tion. 19

C Appendix C: Recommended Changes to Indian Copy-right Amendment Act '92:Software piracy in India is indeed a serious problem. One cannot hope to develop a pro-ductive computer industry without good copyright protection of software. While endorsingthe broad e�orts underway to strengthen the Copyright Act to a�ord protection of soft-ware in India, we also recommend speci�c changes to the pending amendments in light ofsome technical nuances in computer software. Note that most of these recommendationsare based on international precedents in this arena. Some of the following recommendationshave been distilled from Karjala's excellent article[34].1. Explicitly introduce the following changes to avoid expensive litigation:(a) No copyright protection for structural elements of programs (Upheld in US courtsin '92: Saga vs Accolade; Atari vs Nintendo)(b) No copyright protection for programming languages, rules, or algorithms used tocreate program works (as in Japan).(c) No copyright protection for communication protocols, software-software and hardware-software interfaces (application program interfaces, application binary interfaces)(d) No copyright protection for functional aspects of user-interface. (Apple vs Mi-crosoft has been almost thrown out.)2. Explicit permission to allow a small number of copies to be made to study a programfor possible use of its unprotected elements (Possible in US due to fair use provisionsin Copyright law; Opinion of a group of 10 US copyright law professors '89)3. Seek permission for low-cost copies for educational institutions/ charitable organiza-tions/NGOs/small businesses. (Similar to provisions in Berne convention for text-books).D Appendix D: Recommended Changes to TRIPs in thearea of Computer SoftwareAs TRIPs bases itself on the Berne Convention for copyright protection for software, thereis not much controversy here as long as the national legislation has the above recommendedchanges. In the case of patents, there are some fundamental problems for computer softwarethat remain in the IPR regime implicitly advocated by TRIPs.The real challenge in software is the composition of several individual techniques, tak-ing into account their various interactions, in developing a product. The product patentingregime assumes that inventions are rare and precious and this assumption is simply inap-propriate in software. Some other problems are listed below.1. US courts make the dubious distinction between mathematical and non-mathematical(computer) algorithms: this position has serious di�culties from the viewpoint ofcomputer scientists. TRIPs does not clarify this issue.2. Patents cover only \mental steps" (computer code) according to law in most countriesbut not data (which is typically protected, if appropriate, by copyright). However,20

according to computer scientists, data and code are interchangable: this follows fromone of the most important insights in computer science. This insight is particularlyimportant in declarative programming and its applications which arise in many areasincluding AI (Arti�cial Intelligence) systems.3. Many IPR regimes envision a two-level hierarchy (the \ideas and expressions" di-chotomy which neatly divides intellectual property into patents and copyrights). How-ever, computer software is typically designed using multiple hierarchies and the two-level hierarchy becomes completely inappropriate. TRIPs does not address this issuethat is important for newer technologies like software.Recommendations:1. Disallow software patents.2. Failing the disallowal of software patents:(a) Make the criterion for awarding patents more stringent.(b) Patent protection for 5 or at worst 10 years, not 20!(c) Provide for mandatory licensing.(d) Pardon inadvertant use of other's patents if independently reinvented- failingwhich, eliminate at least the possibility of "landmine" patents (ie., independentinvention and use of a software technique by a party A that gets patented bysome party B after independent invention by A but before A gets the patent orA does not apply for it at all). In these situations, the reversal of burden of proofas present for process patents in TRIPs should not apply.(e) The cost of introducing the patent system for software in the Third World shouldbe borne by GATT and/or countries that are insisting on it.References[1] V.L.Kelkar, D.N. Chaturvedi, M.K.Dar, \India's information economy: Role, size andscope," Economic and Political Weekly, Sep 14, '91.[2] OECD (Paris), \Information Activities, Electronics and Telecommunication Technolo-gies," '81.[3] R. H. Stern, Micro law column, IEEE Micro, Jun '91.[4] R. H. Stern, Micro law columns, IEEE Micro, '89 - '91.[5] The League of Programming Freedom, \Against Software patents," CACM, Jan'92.[6] Pamela Samuelson, Legally Speaking columns, CACM, '89-'92.[7] R.M.Stallman, \GATT Treaty Excerpts - commentary," Programming Freedom, Jan92.[8] R.M.Stallman, Personal communication.[9] R.M.Stallman, \Patenting Algorithms and Mathematics".21

[10] R. Narasimhan, \Is Globalization the Answer to our problems? The case of the IndianSoftware Industry," CMC National Fellowship Lecture, Feb 3, '92.[11] R. Narasimhan, \TRIPs: The case of software and India," Platinum Jubilee Lecture,80th Indian Science Congress, Jan'93.[12] M.E. Porter, \The competitive advantage of Nations," McMillan, '90.[13] Data Communications Magazine, Nov'92.[14] Mitchell Kapor, \Civil Liberties in Cyberspace," Scienti�c American, Sep'91.[15] GATT Secretariat, \Draft Final Act Embodying the Results of the Uruguay Round ofMultilateral Trade Negotiations," Dec 20, '91.[16] Paul W. Abrahams, \Software Patents: An example of the threat," ACM SigplanNotices, Aug'92.[17] Biswajit Dhar, C. Niranjan Rao, \Dunkel Draft on TRIPS: Complete Denial of Devel-oping Countries' Interests," Economic and Political Weekly, Feb 8, '92.[18] NASSCOM, \Indian Software Industry," Nov'91.[19] Advertisement in Economic Times, Dec'92.[20] Editorial in Economic Times, 23 Jan'92.[21] Robert Schware, \Software Industry Entry Strategies for Developing Countries: A`walking on two legs' Proposition," World Development, Vol. 20, No.2, '92.[22] Allan Newell, \The Models Are Broken, The Models Are Broken," Univ. Pitts. LawReview, summer '86.[23] O�ce of Technology Assessment (US Congress), \Finding a balance: Computer Soft-ware, Intellectual Property and the Challenge of Technological Change," May'92.[24] Kenneth J.Arrow, \Economic Welfare and the Allocation of Resources for Invention",in National Bureau of Economic Research, The Rate and Direction of Inventive Activity:Economic and Social Factors, Princeton, NJ: Princeton University Press, 1962.[25] Sidney G.Winter, \Patents in Complex Contexts: Incentives and E�ectiveness", inVivian Weil and John W.Snapper (eds.), Owning Scienti�c and Technical Information,New Brunswick, NJ: Rutgers University Press, 1989.[26] Peter S.Menell, \Tailoring Legal Protection for Computer Software", Stanford LawReview, Vol 39, No.6, July 1987.[27] Janusz A.Ordover, \A Patent System for Both Di�usion and Exclusion", Journal ofEconomic Perspectives, Vol.5, No.1, winter 1991.[28] Paul Klemperer, \How Broad should the Scope of a Patent Be?" RAND Journal ofEconomics, Vol.21, No.1, spring 1990, pp. 113-130.[29] F.M. Scherer, \Nordhaus' Theory of Optimal Patent Life : A Geometric Reinterpreta-tion," The American Economic Review, vol.62, June 1972, pp.422-427.22

[30] Peter Menell,\An Analysis of the Scope of Copyright Protection for Application Pro-grams," Stanford Law Review, vol. 41, No.5, May 1989, pp. 1045-1104.[31] Joseph Farrell, \Standardization and Intellectual Property," Jurimetrics Journal,vol.30, No.1, fall 1989, pp. 35-50.[32] Pamela Samuelson, \Why the Look and Feel of Software User Interfaces Should Not BeProtected by Copyright Law," Communications of the ACM, vol.23, No.5, May 1989,pp. 563-572.[33] Dennis S. Karjala, \Copyright, Computer Software, and the New Protectionism," Ju-rimetrics Journal, fall 1987, pp. 33-96.[34] Dennis S. Karjala, \Theoretical Foundations for the Protection of Computer Programsin Developing Countries," Proceedings of the IFIP International Conference on Intellec-tual Property Rights in Computer Software and their Impact on Developing Countries(IPRS-93), ed. K. Gopinath, Indian Institute of Science, Aug 1993[35] Suzanne Scotchmer, \Standing on the shoulders of giants: Cumulative research andthe Patent law," Journal of Economic Perspectives, winter'91.[36] K. Balasubramaniam, \Pharmaceutical Patents in Developing Countries: Policy Op-tions," Economic and Political Weekly, Annual Number, '87.[37] Paul Heckel, \Patent War Continues," ACM Forum, CACM, Nov'92.[38] Paul Heckel, \Debunking Software Patent Myths," CACM, Jun'92.[39] J.H. Reichman, \Legal Hybrids Between the Patent and Copyright Paradigms," mono-graph presented to ATRIP and tenth annual Conference on Information Law Towardthe 21st Century (Amsterdam, June, l992).

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