I must say after listening to yesterday's session during the morning, it is with some trepidation that I approach the stand this morning. As a lowly high-tech copyright lawyer, I guess it's malpractice per se to be even testifying here today.
What we're going to talk about is the patent system and how the patent system is critical to stimulating investment in the software products and technologies areas.
We will recommend some refinement to that system. We want to have a system that is designed to support high technology, this industry which gives us high-tech, high-wage jobs. We want to continue to be the world technology leader in software. I will talk about both start-ups and large companies and how the patent system benefits both.
We want to stimulate investment, that's what we're all about. There's lots of various interpretations of whether the patent system will help or hurt venture capitalists and others make decisions on whether to invest in software. We certainly have an opinion on that that we'd like to share with you today.
So I'm going to discuss three things: Why software is important to new ventures, why software patent protection and related inventions is important to new ventures, why the patent system attracts investment, and the refinements that we discuss to the current system.
Taligent, as an example, is a new, founded in 1992, small, starting with 170 employees -- we now have 350 employees and by the end of this year will have 450 employees -- innovative, high-tech, high-risk venture. We're going into an extremely competitive marketplace, we're going to have an object-oriented operating environment that will compete with Microsoft's offerings, clearly the dominant player in a lot of competition in the area.
We are going to compete on the basis of innovation. We are going to try and establish a foundation technology for the industry, a new type of technology that will be an operating environment that's open and extensible at all levels, based on a brand-new technology.
As I was sitting here this morning listening to our first speaker talk about the fact that two of his programmers could program a million lines of code, I was thinking about our own efforts. We have been developing this technology before the company began -- it's been now six years in development. And by the time we're done, we will have a very elegant program with 750,000 lines of code. I would think that some of our developments may be a little obvious than those this morning, which were the million lines of code.
This architecture is being developed from the ground up -- a clean sheet of paper. That's why it's going to be innovative, that's why it's foundation technology. We're not unique. There's going to be lots of other foundation technologies that will have to be established for the information superhighway, and they will not be done by garage shops. They will be done by larger ventures, by people in the industry who understand the technology, who understand the risks. We could have never attracted venture capitalists to our venture, we are too risky. We're funded by the industry, like now three separate large companies in the industry who will be funding us.
So as we look at our architecture, as we look at our developments, we see ourselves very much like the beginning processor developers. We're looking at an architecture that's extensible, we're looking at functions and features that are new, and we think that software should be protected in the same way as hardware.
We don't think there's any material difference and we think that the policies of the patent system are in favor of protecting software the same way as hardware.
Next I'd like to talk about why that patent system attracts investment.
The software industry is different than some other industries. It has a very front-end loaded investment. You have to invest all of your risk capital before you know whether or not your product is going to be competitive, before you know whether or not anyone will buy your product. So you have a lot of risk and you have a lot of uncertainty.
If you add on that additional risk and uncertainty associated with not knowing whether or not you'll be able to protect your new and innovative product from a major competitor, you may not have any investment at all. The market risks are very high, and if competitors can take a utilitarian function which you spent a lot of time and effort designing, as we mentioned, and use those against you without having the same R&D expenses, you would not be able to support these investments.
The other reason, policy reason, is as we look at this technology, copyright law will not be adequate to protect the types of object-oriented programming that we're developing. We have designed our system so that in object code developers using our development environment can go in and modify almost every portion of our system. The entire architecture is open. We cannot protect it by trade secret. There will be those, I'm sure, who will argue that the entire system is an interface. That raises some copyright issues -- as us lowly copyright lawyers know.
We think that the patent law encourages disclosure. In the absence of patent protection for this technology, I would certainly advise my client to make sure that we keep as many of the interfaces closed and not open as possible, make sure that most of the important functions aren't disclosed in documentation.
With the patent system, we're able to disclose those not only in the patent applications but we also will want to make sure that for those important utilitarian aspects that we can't afford to patent, that we'll publish and establish the prior art in those areas.
We want to make sure that the United States continues to be the world leader. As you probably have read, there is now more R&D dollars going into software ventures and software technology in Silicon Valley than hardware. That wasn't true two years ago; it's true now and it increases every year, and this investment is dependent on having a system that protects that technology.
One other point I would make on this is, an earlier speaker said that there was presumption that the first to market would win. I would challenge that presumption. If you look at Excel, if you look at Word, I do not believe that they were the first spreadsheet or the first word processor on the market, but they have substantial market share.
Next I'd like to go back and talk about some refinements that can be made to the current system. There's been lots of suggestions that have been offered today, and I would like to just offer a few additional suggestions, and also some endorsements of some of the suggestions that have been made.
We applaud the Patent Office's initiatives on education. We have been very active with Gerry Goldberg in trying to educate the Patent Office. We spent time, money and effort sending Mike Patel, our VP of Advanced Technology, back to the Patent Office. He educated a large number of people for half a day. His talk was not about Taligent; it was about object-oriented programming from its inception. And he was a professor for eight years before he came to Taligent, so he had a very good background.
It was so well-received that the Patent Office invested in sending 17 senior supervisors out to Taligent and to other companies in the Valley. They spent a day and a half at Taligent understanding our technology in great detail. And most of the responses we got from them were extremely positive.
And I was there for the wrap-up of that session, and I heard one of the senior supervisors saying, "You know, this is great, we learned a lot, we now have new innovative ways to deny your claims."
One of the other things that I think would really help the Office -- and I know that you have begun this and we think you should continue it and with even greater speed -- hire more computer science graduates who don't have engineering degrees. These are the type of people who understand this technology, the type of people that should be evaluating these types of inventions.
I think that some of the other problems of obviousness, there are lots of issues with obviousness, but one of the things, consistency and having people that understand the technology better would certainly help the nonobvious issue.
In addition, I have one other proposal that's a little different than some of the proposals. To deal with this problem of having all of the prior art not found anywhere or searchable by advanced technology -- and I know that you're trying to put together databases in advanced technology -- we would propose a human database.
There are people, there are consultants, there are people who can be hired who have lots of expertise and lots of industry experience in the relevant areas that a lot of the software patents will be filed on. These people, because of Internet and because of advanced technology, don't even have to be located with the Patent Office; they can be reached through advanced electronic communication, so that people in California who have a general reluctance to move back to Washington, D.C., especially after the snow storms of this winter -- except of course the people in Los Angeles -- can be reached by Internet.
Finally, on publication, we would be in favor of publication prior to issuance. I think that one of the issues that hasn't really been addressed is that there needs to be some certainty in this publication scheme, a publication scheme that would be tied to when the patent issued and publication prior to that would have a great deal of uncertainty because of the great deal of uncertainty in when the patent is processed through the Patent Office and when it gets issued.
It would be important to understand whether or not your product is out in the marketplace before the patent issues, and before the publication. So I think having a set time period, like 18 months, or some other time period that's appropriate for the industry, is the best way to proceed.
So let me just conclude. We think that protecting software-related inventions is critical to investment and for ensuring certainty on return in those investments. We propose some refinements to the current system; we think with those refinements we should be able to enhance competitiveness of the software industry in the United States, particularly the high risk, high level of investment foundation technologies, such as our company, which will be needed for the information highway.