“You Have to Make Sure Your IP Assets Don’t Walk out the Door”

Feature Article | January 9, 2008 by admin

When you were awarded the first patent for software nearly 40 years ago, it kick-started the independent software industry, did you think it would have such an effect?

Goetz: No. But it wasn’t my 1968 patent that kick-started the software industry. It was the Department of Justice’s (DJ) 1969 antitrust suit against IBM and IBM’s unbundling of its software in early 1970.

What was your patent awarded for and what made you think you had created something that was patentable?

Goetz: It was awarded for a unique method of sorting data using tape units that could only read and write in a forward direction. My former company Applied Data Research (ADR) and I had developed many sorting programs for hardware manufacturers in the 1950’s and 60’s and we were well aware of all the known sorting techniques for computers.

We were also aware of IBM’s free sorting programs which did not use our unique technology. Our attorney convinced us we should try and get patent protection in case IBM ever decided to copy our method of sorting but competing against free software was difficult and we decided not to try and compete against IBM’s free sort program.

You basically started the war against “bundling software” that was practiced by hardware manufacturers like IBM and others. How did that war pan out in those early days?

Goetz: It panned out well. ADR and other independent software companies visited the Department of Justice in 1967 and 1968 to complain about IBM’s bundling of its software and hardware and how it was impeding our growth. At that time the DJ was concerned about IBM’s dominance of the Mainframe market and when they sued IBM in 1969 they added our complaint to their list of antitrust violations. So when DJ joined our war, I believe that forced IBM to “voluntarily” unbundle in early 1970.

Martin A. Goetz

You have been quoted as saying that your story is not really about software patents but about software protection. What do you mean by that?

Goetz: ADR started marketing its Autoflow product, an automatic flow charting program, in 1965 and shortly thereafter other independent companies also started licensing software products. These few software companies were concerned against illegal copying. How could we protect these proprietary programs? Were the copyright, patent, and trademark laws applicable to software? Were there ways to protect any innovative techniques embedded in the software from being copied?

And of course, IBM was still giving away its programs free. So we formed trade associations and together tried to figure out how to protect our software investments. Patent protection was only one part of the puzzle.

While we don’t have bundling per se today, we have tie-ins and, for instance, Microsoft that puts everything under the Windows’ umbrella. What are your thoughts on that?

Goetz: The handwriting is on the wall for Microsoft. The European Union (EU) has slapped Microsoft’s hands with huge fines and their requirement that Microsoft untie its Media Player from Windows though a separate version of Windows without MediaPlayer.

Recently, the developers of Opera, an Internet browser are asking the EU to untie Microsoft’s Internet Explorer (IE) from Windows as it reduces their ability to compete against IE. So at least the EU is telling Microsoft that it can’t put anything and everything into Windows. Now if we could only get the DJ to take that position in the US.

What are your thoughts on the incredible number of software related patents that are filed these days? And why do you think the industry is now seen as being plagued by lawsuits and legal squabbling?

Goetz: It’s a real mess. When the Patent Office started issuing Business Method Patents in 1998 based on a court decision, they never appealed the case and it really opened Pandora’s box. That led to a flood of applications such as Amazon’s “One Click” patent in 1999. Now the business and legal world, which was still unsure if software is patentable subject matter, really questioned what the patent office was doing when they started it all.

There are definite inventions in software, and the patent system can protect them. It is well recognized that whatever you can design in hardware circuitry can be developed in a computer program to perform the same functions.

Handwriting analysis, voice recognition, video frame analysis, data compression, language translations, artificial intelligence, searching techniques, network monitoring and security – to name just a few functions – are examples of where such implementations have been done in both hardware chips, in computer software programs, and a combination of both.

But there are no inventions in business methods which just automate common business practices, and the Patent Office should ban them as has been done in Europe by the European Patent Convention. If the Patent Office followed Europe’s lead, I believe it would bring a little order in the US to a chaotic situation.

You’ve mentioned interface information, pre-announcements and maximum separation as major issues today that are similar to issues of decades ago. Could you explain what you mean?

Goetz: In the 1960’s the issues of pre-announcement and maximum separation were of great concern to software companies. IBM’s very early announcement, without a prototype or detailed specifications, of a planned time-sharing computer was dubbed a “fighting machine” by its competitor and resulted in a suit against IBM. Similarly, IBM often announced new software upgrades which would freeze the market.

I remember when a company that had a product called Taskmaster complained when IBM announced a new version of CICS, which it competed against. The new CICS version was going to be available in about a year and it literally killed the market for Taskmaster.

Interface information became a big issue in the early 1980’s when IBM stopped distributing source code with their software products, making it difficult for software companies to have interoperability with IBM programs.

Would you share your thoughts on intellectual property (IP) management?

Goetz: IP management is today of critical importance for software companies’ both from an offensive as well as defensive posture. Software companies should be aware of their competitors IP, especially patents. For defensive purpose, software companies should investigate whether they have any technology that might be patentable.

Very often such patents would permit a company to counter sue if they were hit with patent infringements or have cross licensing agreements. Companies should also copyright all their programs as well as make certain their employment agreements and outsourcing agreements explicitly cover IP ownership. So you need to worry that your employees and third parties don’t walk out the door with your IP assets. Companies should have someone, preferably a lawyer, worrying about that.

Looking back over the last 40 years what is the one thing you are most proud of?

Goetz: Besides my very happy marriage (of 34 years), I’m very proud of my early years fighting IBM for a level playing field for software companies. These battles helped make the software industry one of the worlds most important industries today.

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