PATENT POLICY

                           Patent and Trademark Office
                             Software Patent Hearings
                        San Jose, CA on  Jan. 26-27, 1994

    Oracle Corporation opposes the patentability of software.  The Company
believes that existing copyright law and available trade secret protections,
as opposed to patent law, are better suited to protecting computer software

    Patent law provides to inventors an exclusive right to new technology
in return for publication of the technology. This is not appropriate for
industries such as software development in which innovations occur rapidly,
can be made without a substantial capital investment, and tend to be creative 
combinations of previously-known techniques.

    Even if patent law were appropriate for protection of software, due to the
large volume of recently-granted software patents and the rising number of new
applications, the current patent process would continue to be troublesome for
the software industry. Software patent examinations are hindered by the
limited capability of searching prior art, by the turnover rate among
examiners in the Patent and Trademark Office, and by the confusion surrounding
novelty and innovation in the software arena. The problem is exacerbated by
varying international patent laws, which both raise the cost and confuse the
issue of patent protection.

    Unfortunately, as a defensive strategy, Oracle has been forced to protect
itself by selectively applying for patents which will present the best
opportunities for cross-licensing between Oracle and other companies who may
allege patent infringement.


    The policy rationale for patent protection in many industries is
understandable. In exchange for making an invention available to the public,
inventors are rewarded with a seventeen-year monopoly giving them exclusive
right to the new technology. In such cases, this opportunity to monopolize
the commercial application of the invention is justified as an appropriate
reward given the capital resources dedicated by the inventor to the invention,
including time and money spent in innovation, production, distribution, etc.

    This policy, however, does not fit well with the software industry. Unlike
many manufacturing-intensive industries, the development of software requires
a minimum of capital investment. Producing and distributing a product is
simpler, faster, and less expensive in the software industry than in
manufacturing sectors. New developments influential to the software industry
frequently emanate from individuals and small companies that lack substantial

    Software varies from manufacturing in another key aspect. The engineering
and mechanical inventions for which patent protection was devised are often
characterized by large "building block" inventions that can revolutionize a
given mechanical process. Software, especially a complex program, seldom
includes substantial leaps in technology, but rather consists of adept
combinations of many ideas. Whether a software program is a good one does not
generally depend as much on the newness of a specific technique, but instead
depends on the unique combination of known algorithms and methods.  Patents
should not protect such methods of innovation.

    The U.S. software industry has evolved to a multi-billion dollar industry
that leads the world in productivity, and accounts for substantial portion of
US GNP. The software industry has advanced the efficiency of other industries
through the proliferation of computing and computer-controlled processes.  All
of these gains have come prior to the application of the patent process to
software, and consequently without patent protection for software. There is no
justification for a policy that would not only drain capital resources (which
are better spent on software development) into patent applications and other
legal fees, and also actually serve to reduce innovation by limiting the
availability of previously-developed techniques.

   In sixteen years, Oracle Corporation has grown from a start-up company with
a handful of employees to the world's third-largest independent software
producer employing 8,000 people. Oracle filed its first patent application in
November 1991, not because it felt that its software was suddenly worthy of
patent protection; it filed that application because of concerns that other
inventors, afforded patent protection by a flawed patent system, might find
themselves in a position to seriously weaken the Company's competitive edge by
alleging patent infringement. Even if Oracle had developed a certain invention
first and could produce the appropriate prior art to prove its case, thousands
of dollars in attorneys fees and other expenses would be spent in defense of
its rightfully-owned technology. Oracle consequently believes that it must
have a patent portfolio with which to respond to potential aggressors, so as
to settle with them by cross-licensing to avoid litigation. Oracle is forced
to channel a significant portion of its financial resources into patent
protection of its assets, rather than using those resources in further
innovating and expanding its computer software products.

    Copyright protection for computer software is sufficient to preserve
the rights of software developers, who rely on the unique combination of
algorithms and techniques to produce successful software programs. Copyright
law, including relief from those who copy or distribute copyrighted works
without permission, in combination with careful handling taken to preserve
trade secrets, has afforded adequate protection to software developers against
the losses they may encounter from the wrongful use of their software.
Compared to adequate copyright and trade secret protections, patent protection
is excessively broad and enormously expensive.


    Oracle has recommended that patent protection not be provided for computer
software or computer software algorithms, for the reasons described above.

    If software continues to be protected by patent law, however, we recommend
the changes described in the following paragraphs. These recommendations in no
way endorse the use of patents for protecting software, but rather serve to
assuage the existing problems if patents must ultimately affect software

    Patent law should be consistent throughout the world and, if it is to be
applicable to software, should extend for much shorter periods of protection
than exist now, unified prior art searching capabilities, equal standards of
novelty, the elimination of patent rules that allow "patent flooding," and
identical standards for prior use restrictions (bar dates).

    The evolution of software moves very quickly. The term of software
protection should be cut back accordingly from the current 17 years from grant
date to three years from application date (the application period must be
drastically reduced). A balance of fifty years protection for direct copying
of code would continue to be provided by copyright law.

    If the patent system is to remain an entrenched part of the software
industry, then the following changes need to be made:

-   Prior art capabilities of PTO records must be vastly improved to confirm
    effectively the novelty and non-obviousness of software patent that is the
    subject of applications. New classifica~ions, as well as an effort to
    record the current state of prior art would be necessarv

-   Because of the unusual speed with which software innovations are
    incorporated into products, the PTO's patent review process must be made
    much more efficient so that it takes no more than six months from
    application to registration. In the software industry, if a patent
    application takes two years to process, the patented "invention" is often
    either widely used or obsolete by the time the registration is issued.

-   Examiners skilled in computer science and software programming must be
    trained on the nature of software inventions, and the state of existing
    art. Qualified examiners must be hired and retained by the PTO at much
    higher rates than they are today. Compensation rates equal to those
    provided by industry are essential to recruit qualified personnel.

-   PTO, in conjunction with industry, must establish additional committees
    to clearly delineate the standards of novelty and non-obviousness that
    will be required for software inventions to receive patents.