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From a VC’s viewpoint:

LATEST TRENDS on SOFTWARE COPYRIGHTS

Henry H. Wong, Chairman, CSPA.com December 7, 2012

Henry Wong - CSPA.com

Confidential 2

Henry H. Wong

– Managing Director, Asia BrandTech Capital (Cross Pacific VC Fund)

– Venture Partner, Garage Technology Ventures LLC (a CalPERS Fund)

– Founder & Managing Director, Diamond TechVentures LLC Family Ofc

– Managing Director, Crystal Ventures (US$250M Cross Pacific Fund)

– Founder, Chairman & CEO, SS8 Networks Inc (merged with ADC ESD)

– Co-founder, IP Communications (acquired by Ramp Networks/NOKIA)

– Co-founder, XaQti Semiconductor (acquired by VITESSE)

– Co-founder, CNet Technology Inc. (IPO)

– Co-founder, Combinet/ISDN Systems (acquired by CISCO)

– B.S. Business, University of Utah, 1979

– M.B.A., Telecom Mgt ’83, Golden Gate University,

– Finalist, Ernst & Young “Entrepreneur of the Year 2002”

– Mentor, Stanford GSB Entrepreneur MBA Program

• What does it take to be venture funded ?

• How VC valued attributes on software start-ups in Silicon Valley ? “ Show me the Money ! “

• USA VC and point of view on the future of Software Copyright Development (First to File)

• US Software Copyright Trends & Regulations

• How the government regulations will shape the industry ?

• Observations & Insights from USA's perspective

LATEST TRENDS on SOFTWARE COPYRIGHTS


How to get VC Funding ?

Five Fingers Mountain Theory: • Technology & Barrier-to-Entry

Unique patented technology? Software Copyrights?

• Market Size

Can you reach your market potential? TAM & SAM ?

• Team

Cohesive team? Understanding technology & market ?

• Customers

Who? Why buy? How much? Competitive Matrix?

• Guanxi Relationship

Who know you? Remember the Old-Boys-Network ? Henry Wong - CSPA.com

Software Innovations Are Both Encouraged and Protected in

the U.S.

Intellectual Property systems provide the means through which

Software Innovations can be both Encouraged & Protected

3 Basic Forms of Legal Protection of Software Innovations

The present framework of intellectual property laws provides

three basic forms of legal protection that are most relevant to

the development and protection of software:

1. Copyright Protection

2. Patent Protection

3. Trade Secret Protection

Software Protection In The United States USA Patent Trade Office ( USPTO )


Google vs Oracle: SUMMARY OF RULING (1) Case3:10-cv-03561-WHADocument1202Filed05/31/12Page4 of 41

• So long as the specific code used to implement a method is different, anyone is free under the Copyright Act to write his or her own code to carry out exactly the same function or specification of any methods used in the Java API. It does not matter that the declaration, or method header lines are identical. Under the rules of Java, they must be identical to declare a method specifying the same functionality — even when the implementation is different. When there is only one way to express an idea or function, then everyone is free to do so and no one can monopolize that expression. And, while the Android method and class names could have been different from the names of their counterparts in Java and still have worked, copyright protection never extends to names or short phrases as a matter of law. It is true that the very same functionality could have been offered in Android without duplicating the exact command structure used in Java.

• After the jury verdict, the Court granted Oracle’s Rule 50 motion for judgment as a matter of law of infringement of eight decompiled computer files, which were literally copied. Google admitted to copying eight computer files by decompiling the byte code from eight Java files into source code and then copying the source code. These files were not proven to have ever been part of Android.

Google vs Oracle: SUMMARY OF RULING (2) Case3:10-cv-03561-WHADocument1202Filed05/31/12Page4 of 41

• By re-arranging the various methods under different groupings among the various classes and packages (even if the same names had been used). In this sense, there were many ways to group the methods yet still duplicate the same range of functionality.

• But the names are more than just names — they are symbols in a command structure wherein the commands take the form java package Class method.

• Each command calls into action a pre-assigned function. The overall name tree, of course, has creative elements but it is also a precise command structure — a utilitarian and functional set of symbols, each to carry out a pre-assigned function. This command structure is a system or method of operation under Section 102(b) of the Copyright Act and, therefore, cannot be copyrighted. Duplication of the command structure is necessary for interoperability.

1.VC wants Software Copyright Protection Software code is protected under Copyright Law as an original work of authorship

Software Copyright Protection

1. Software Copyright provides protection against literal copying. It

also provides some protection against non-literal infringement, such as

the creation of "cloned" software.

2. A Copyright gives its owner the ability to control the reproduction, adaptation, public distribution, public display and

public performance of the software code.

3. However, Courts have recently been reluctant to interpret copyright

protection of computer software in a broad manner.

4. Copyrights can be used to prevent others from copying the software

program, either through direct duplication or through appropriation of the

software's expressive (as opposed to functional) elements.

5. Under U.S. law, copyright owners can also prevent the unauthorized

rental of software.


The Software Copyright Act & Cases Law 1. Historically, computer programs were not effectively protected by

copyrights because computer programs were not viewed as a fixed,

tangible object.

2. United States Congress passed laws along with many court decisions

have given "computer programs" the copyright status of literary works.

3. In 1998, the Software Copyright Act, also known as the Digital

Millennium Copyright Act (DMCA), went into effect. It was designed to

modernize U.S. copyright law in response to new technology and to meet U.S. international obligations.

4. The DMCA has outlawed technology that allows software to be

illegally copied by cracking antipiracy code. It also criminalizes any

other means of evading software antipiracy devices. Libraries,

academic institutions & research projects are granted limited

immunity from these prohibitions.

End-User License Agreements (EULA)

1. Most software vendors claim that they "licensed" but did not sell their

products, in order to avoid the transfer of rights to the end-user via the

doctrine of first sale. These software license agreements are often

labeled as end-user license agreements (EULAs).


The Software Copyright Act And Cases Law (con’t)

2. A software vendor delineates the specific terms of use in an End-User

License Agreement (EULA). The user may agree to this contract in

writing, interactively, called click wrap licensing, or by opening the box

containing the software, called shrink wrap licensing. License

agreements are usually not negotiable.

3. American courts are divided on the enforceability of an EULA. Some

courts have found some EULAs to be invalid, characterizing them as

contracts of adhesion, unconscionable, and/or unacceptable. Other

courts have determined that some EULAs are valid and enforceable.

Caveat

1. Copyright protection cannot be used to prevent the use by others of the

functional aspects of software.

2. Copyright protection cannot be used as a basis for action against

independently developed software.

3. The fair use doctrine under copyright law provides third parties some

flexibility in their use of copyrighted works.

Software Copyright Infringement or Software Piracy

1. It is the unauthorized duplication, distribution or use of computer

software. This can be done by copying, downloading, sharing, selling,

or installing multiple copies onto personal or work computers.

2. It is subject to civil and criminal penalties. It's illegal whether you use the

copied software yourself, give it away, or sell it. And aiding piracy by

providing unauthorized access to software or to serial numbers used to

register software can also be illegal.

3. A company or an individual found using unlicensed software and

violating copyright laws can pay damages of up to $150,000 for each

software title copied. In addition, the government can criminally

prosecute you for copyright infringement. If convicted, you can be fined

up to $250,000, or sentenced to five years in jail, or both.

Limitations

1. Fair use is a defense to an allegation of copyright infringement.

2. Copyright does not protect the technical form nor R&D of original work.

3. There is no standard or universally accepted test to evaluate

alleged software copyright infringement in a court. Some courts

apply broad test and others favor narrower testing criteria..


2. Patent Protection Patents can be used to protect processes implemented using software, as well as

computer based systems. Inventions that are eligible to receive patent protection

include "any new and useful process, machine, manufacture, or composition of

matter, or any new and useful improvement thereof."

Patent Protection

1. To obtain patent protection, the inventor must apply for protection and proceed

through an examination process before the Patent and Trademark Office

(PTO). The examination process is used to assess whether the invention for

which protection is sought meets all of the statutory criteria for patentability.

2. Patent protection allows the patent holder to preclude others from making, using

or selling the patented invention, as it has been defined in the patent claims, for a

period of seventeen years measured from the date the patent is granted.

Caveat

1. The issuance of a patent does not automatically preclude infringing activity. The

party granted a patent must take action to enforce rights provided under the

patent.

2. The Federal courts have developed a limited exception to liability for infringement

for non-commercial experimental use of inventions described in patents.

3. Trade Secrets Protection

Software can also be protected through use of Trade Secrecy.

Trade Secrets Protection

1. Protection of trade secrets in the United States is governed

by state, rather than Federal law.

2. Trade secret laws typically require the party asserting a

trade secret right to take reasonable steps to prevent the

public disclosure of the information held as a trade secret.

3. Trade secret rights can be enforced against parties that

unlawfully obtain the information held as a trade secret.

Caveat : Accidental or other public disclosure of a trade secret

will eliminate the protection. Absent such disclosure, the trade

secret rights will remain effective indefinitely. Henry Wong - CSPA.com

Emerging Trend in the US concerning

Software Copyright Protection

Software developers are recommended to seek to protect

their source code through copyright registration to

guard against copying and piracy.

In the US, while Copyright Registration is not required to

assert copyright protection, registration does provide certain

advantages and it is a pre-requisite in order to file suit in

US courts for works of US origin.

A recent court decision suggests that companies might in

the future seek patent rather than, in addition to, copyright

protection for software that is essentially functional or

contains interoperability features, regardless of how original

and creative the code may be.

WHEN DOES IT MATTER ? Software Copyright Protection v. Patent Protection

1. Software patent protection provides greater protection to software developers

than copyright law. An issued patent may prevent others from utilizing a

certain algorithm without permission, or may prevent others from creating

software programs that perform a function in a certain way.

2. Copyright law can be used to prevent the total duplication of a software

program, as well as the copying of a portion of software code. It also

provides some protection against non-literal infringement, such as the creation

of "cloned" software. However, courts have recently been reluctant to interpret

copyright protection of computer software in a broad manner.

3. Copyright law will not prevent the creation of a competing program that utilizes

the same ideas as an existing program.

4. A patent can only be issued when an invention is new, useful, & non-obvious.

In addition, obtaining a patent on computer software can be an expensive

process, costing five to ten thousand dollars, or more.

5. The choice of whether to pursue patent protection for a software invention

should be made by comparing the value of the program (the potential revenue

from its distribution) to the cost of the patent application process and the

likelihood of obtaining significant patent protection.

1. A recent decision in Oracle America, Inc. v. Google Inc. in the U.S. District Court for the Northern District of California suggests such companies might in the future seek patent rather than (or in addition to) copyright protection for software that is essentially functional or contains interoperability features, regardless of how original and creative the code may be.

2. In this case, the court granted Google's motion to dismiss Oracle's copyright infringement claim, finding that a portion of Oracle's Java(r) application programming interface (API) allegedly used by Google was not protectable under the Copyright Act because it constituted excluded subject matter under the Act.

3. The court also found that the specific code used by Google was protected by the copyright-merger doctrine, which bars protection of expressions that offer the only-or one of only a few-ways of expressing an idea, instruction, system or method. Specifically in finding that Google did not violate the Oracle's copyrights, the court noted the danger of "conferring a monopoly by copyright over what Congress expressly warned should be conferred only by patent." Consequently, companies that desire to protect their software should consider seeking patent protection for these features.

Protect Software ? Consider Patent Protection A Case Study: Copyright Protection v. Patent Protection

How USA Law Change activate a race

to file Software Copyrights & Patents

Last Sept, Congress passed the America Invents Act (“AIA”). The law takes effect in three principal stages:

1. The first stage took effect immediately on September 16, 2011. It focused mostly on procedural matters.

2. The second stage took effect on September 16, 2012. It was mainly related to post grant review procedures, i.e., things that happen after a person or company is granted a patent.

3. The third stage will take effect on March 16, 2013, when U.S. Patent Law is scheduled to formally move from a first-to-invent system to a first-to-file system


The Changes to Patent Law That Became

Effective, September 16, 2012

1. Third Parties Allowed To Submit Patents, Published Applications, and

other Published Documents for Consideration

2. A Second Swipe At Business Method Patents

3. "Applicant" now can be the Assignee, not the Inventor

4. Post-Grant Review Procedures Narrowed and Significantly More

Expensive

5. Patent Owner's Right To Supplemental Examination

6. Changes to Patent Trial and Appeal Board


The Changes to Patent Law Will Be Effective on March 16, 2013

1. First To File, Not First To Invent

Perhaps the most significant change in the America Invents Act ("AIA") is that all patents filed after March 16, 2013, will be subject to new first-to-file and prior art rules, effectively ending the long-held first-to-invent rules in the United States and creating a "race to the Patent Office.”

Potentially impacted patent applications should be filed before the changes take effect.

2. Derivation Hearing Replaces Interference Proceeding


Thank You Henry H. Wong [email protected] ASIA BRANDTECH

mailto:[email protected]