Interfaces on Trial: Intellectual Property and Interoperability in the Global Software Industry
Book by Jonathan Band, Masanobu Katoh; Westview Press, 1995

Introduction
During 1988, things seemed to get progressively worse for James Williams and his small Texas software company, Altai, Inc. Several years earlier, Altai had been successful enough to interest Computer Associates International, one of the world's largest independent mainframe software firms. Altai refused to be acquired by Computer Associates, but agreed to a subsequent offer by Goal, one of Computer Associates' competitors. Just after the announcement of the Goal-Altai merger in July, 1988, Computer Associates filed a copyright infringement suit against Altai, alleging that Altai had copied portions of a Computer Associates program. The filing of the suit killed the merger. Williams then confronted the programmer who had written the Altai program, his friend and employee Claude Arney. Arney, who had worked at Computer Associates before joining Altai, confessed that he had brought Computer Associates' program code with him to Altai, and that he had copied this code in certain discrete sections of the Altai program.

On advise of counsel, Williams purged the Altai program of the Computer Associates code, and had a new team of programmers, who had never seen the Computer Associates code, fill in the holes. These new sections still bore some resemblance to the Computer Associates program, however, because both programs were designed to run on IBM operating systems which imposed certain programming constraints. So long as Altai sought IBM compatibility, the programs inevitably would contain similarities. Computer Associates claimed that these similarities amounted to copyright infringement; Altai responded that computer program elements dictated by external functional constraints could not receive copyright protection.

As the case wended its way through the federal courts in New York, another case emerged in the federal courts in California. Al Miller had sought to expand his computer game company, Accolade, into the home video game market. Accolade could penetrate this lucrative market only if its games could interoperate with the consoles of the two large Japanese companies that dominated this market, Nintendo and Sega. Because of Introduction During 1988, things seemed to get progressively worse for James Williams and his small Texas software company, Altai, Inc. Several years earlier, Altai had been successful enough to interest Computer Associates International, one of the world's largest independent mainframe software firms. Altai refused to be acquired by Computer Associates, but agreed to a subsequent offer by Goal, one of Computer Associates' competitors. Just after the announcement of the Goal-Altai merger in July, 1988, Computer Associates filed a copyright infringement suit against Altai, alleging that Altai had copied portions of a Computer Associates program. The filing of the suit killed the merger. Williams then confronted the programmer who had written the Altai program, his friend and employee Claude Arney. Arney, who had worked at Computer Associates before joining Altai, confessed that he had brought Computer Associates' program code with him to Altai, and that he had copied this code in certain discrete sections of the Altai program.

On advise of counsel, Williams purged the Altai program of the Computer Associates code, and had a new team of programmers, who had never seen the Computer Associates code, fill in the holes. These new sections still bore some resemblance to the Computer Associates program, however, because both programs were designed to run on IBM operating systems which imposed certain programming constraints. So long as Altai sought IBM compatibility, the programs inevitably would contain similarities. Computer Associates claimed that these similarities amounted to copyright infringement; Altai responded that computer program elements dictated by external functional constraints could not receive copyright protection.

As the case wended its way through the federal courts in New York, another case emerged in the federal courts in California. Al Miller had sought to expand his computer game company, Accolade, into the home video game market. Accolade could penetrate this lucrative market only if its games could interoperate with the consoles of the two large Japanese companies that dominated this market, Nintendo and Sega. Because of has a direct impact on the fortunes of software development firms, and an indirect but still significant impact on the fortunes of both software users and the rest of the $350 billion global computer industry. 2

The focus of the debate has shifted over time. Initially, it concerned which intellectual property regime, if any, should protect software. When governments settled on copyright, the debate turned to which elements of a program copyright should protect. Should only the human readable source code receive protection, or should the machine readable object code as well? Further, should copyright protection be limited to the literal elements of the program -- the lines of code -- or should it also extend to the non-literal elements? These questions were resolved in favor of broad protection for software.

For perhaps the last decade, the debate has centered on two even more detailed questions: the appropriate scope of copyright protection for the non-literal elements of computer programs (the issue in Computer Associates); and the permissibility of certain forms of software reverse engineering -- that is, analysis of a competitor's product (the issue in Sega). Underlying these two questions was the central competitive issue confronting the software industry: could one firm prevent other firms from developing software products which were "compatible" or "interoperable" with the products developed by the first firm?

The first firm had an obvious economic interest in controlling whether others could market products which attached to or replaced its own products. Control over such interoperability conferred upon the first firm the ability to lock its users into its product line while locking out competitors. The locked-in users thus would experience less choice and higher prices.