Commissioner Lehman: Can I ask, are you headquartered in New York or here?
Mr. Chiddix: Actually in Stamford, Connecticut.
Commissioner Lehman: Oh, really.
Mr. Chiddix: We serve more than seven million subscribers in thirty-six states. Our parent company, Time-Warner, is the largest owner and distributor of copyrighted material in the world, and intellectual property rights are something for which we have great respect.
Two years ago we built the first one hundred and fifty-channel cable system in Queens, New York, and that remains the most advanced cable system in the world today. Currently we're building the country's first electronic superhighway, which we call the full-service network, in Orlando, Florida, and there we'll offer a host of high-speed two-way interactive services including video on demand, interactive shopping, and distance learning. Time Warner Cable plans to spend more than five billion dollars over the next five years to deploy full-service networks in the majority of our service areas across the country.
The Administration and members of Congress have indicated that building such networks is a national priority. In our experience, however, the current patent system is working against the development of an advanced communications infrastructure. Ever since we announced our full-service network plans, we and our suppliers have received a number of inquiries from individuals and companies who purport to have patent rights that cover basic but to us obvious elements of the information superhighway as well as traditional cable systems.
I'd like to describe for you two of these patents. The point is not whether these patents are valid or invalid, or whether any particular use is infringing or not infringing, although we firmly believe that nothing we are doing infringes on any valid patent. They do serve to illustrate the current patent system is out of balance and that rather than promoting the progress of science and useful arts, that system is stifling such progress.
My first example involves the Cutler patent. The Cutler patent purports to cover many uses of optical fiber to transmit television signals to receivers in the home. This patent was granted in 1979 and will expire in 1996. The use of fiber, of course, is basic to the electronic superhighway and has also been used for many years in traditional cable systems. Indeed, Time Warner Cable has been a pioneer in the deployment of broad-band optical fiber in cable systems. The inventor of the Cutler patent did not invent optical fiber.
Rather he merely filed a patent for using fiber to transport video signals to the home. The patent statute says that patents are not to be granted if the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which subject matter pertains. I'm not a lawyer, but it seems to me that the idea of using optical fiber to transport video signals to television sets is not only obvious, but also inherent in the fiber optic medium itself, which was conceived as an information conduit. If such a patent were valid, I would think it would also have been possible to obtain patents after the invention of television for using the medium to transmit drama, sports or news programming. These, however, are merely self-evident uses that are inherent in the medium of television, just like video transport is inherent in the medium of optical fiber.
My second example involves the Starside patents which purport to cover a wide variety of features used in connection with electronic program guides. Electronic program guides are on-screen guides that provide program listings for channels that are broadcast or provided by a cable system. Starside is a number of patents, but the features I discuss here are purportedly covered by a patent granted in 1987 and another that is currently pending before the Patent Office.
Pursuant to this patented application, Starside apparently claims and seeks protection for the following electronic program guide features. First, the ability to move a cursor of automatically-varying size about on an onscreen program guide, to highlight a particular program on the schedule and then press a button on a remote control to tune the channel on which that program is being transmitted. Second, the ability to combine two or more criteria, such as sports and football, to obtain a listing of the times and channels on which programmings filling those criteria will be telecast.
Again, to me these features seem obvious and inherent in the technology that provides them. Daily newspapers have long provided channel listings, often using a grid format that shows what programs are on what channel at what time. In addition, individual broadcast channels and cable systems have long-telecast on-screen programming schedules. When a television viewer uses such a schedule he finds a program of interest, identifies the channel, and punches the number into the remote. The Starside system merely does this tuning process automatically through a straightforward transfer of the process to a computer. Similarly, when I want to watch football games on television, I simply scan the program schedule for such programs. It would be a simple but somewhat time-consuming task to write out a list of such programs, but again, preparing lists from data based on multiple criteria is a simple, straightforward and obvious computer application.
Under existing law, patents for what I've just described may be valid or invalid. As I said at the beginning of my remarks, however, in either case, such patents present impediments to progress. If such patents are found to be valid, surely the patent system has gone too far in providing protection for what would seem obvious to a layperson, let alone to a person have ordinary skill in the art. The result of awarding such patents at best results in added costs for no added value, if a license is obtained, and at worst prevents consumers from fully realizing the benefits of technology if a license cannot be obtained at a reasonable price.
If such patents would ultimately be found to be invalid, however, the patent system would still not be working properly. Some of the Starside patents are currently being challenged in court. Business, however, cannot come to a halt in the meantime. Also, litigation is costly, slow, and never free from risk.
Rather than expend time and money on litigation, many prudent business people will choose to avoid the problem. Indeed, one of our suppliers of set-top boxes has informed us that rather than challenge the Starside patents, they will instead defeature the boxes they are making for one of our cable systems, removing ability of those boxes to provide some of the features that Starside claims are covered by its patents. This is not an uncommon or irrational decision. This supplier will be spending many millions of dollars to manufacture these new boxes. Even though they believe that Starside patents are not valid, it is simply not worth the risk and the cost of fighting them in court. Of course our supplier can always attempt to obtain a license for these features, but again this would result in added cost for what in our view provides no real added value.
So in our view, the present system of patent protections is not optimally promoting innovation in the field of software-related inventions. Rather, the current system is in some important instances stifling innovation, increasing costs and leading to defeaturing rather than fostering the development of new and better products and services. However, it is not the framework of the system that is the problem. The statutory tests of obviousness, and the person of ordinary skills standard, in themselves strike the proper balance.
What is needed then is not a new framework for patent protection for software-related inventions, but a more rigorous application of the present standards. For one thing, obviousness should include routine applications of a given technology regardless of whether there is prior art showing that particular application. For another, any invention that merely transfers a series of routine tasks to a computer should also be viewed as obvious.
As your Notice for these hearings states, the computer software industry has evolved into a critical component of the U.S. economy. Indeed, the importance of this component is growing greatly every day as the computer, cable and telephone industries continue to converge. If the United States is going to continue to be a the forefront of these crucial industries, it is imperative that the patent system be restored to its proper balance so that it can properly foster rather than frustrate innovation.