Home page for digital-law-online.info

- Table of Contents -

Introduction to the online version

Chapter 1 – The Commission and Its Recommendations

Chapter 2 – The Establishment, Mandate, and Activities of the Commission

Chapter 3 – Computers and Copyright

- Background

- Computer Programs

   - Recommendations for Statutory Change

   - Recommendation for Regulations

   - Case for Copyright Protection for Programs

   - Copyright and Other Methods Compared

   - Scope of Copyright in Programs

   - Economic Effects of Program Copyright

   - Cultural Effects of Program Copyright

   - Concurring Opinion of Commissioner Nimmer

   - Dissent of Commissioner Hersey

   - Dissent of Commissioner Karpatkin

- Computer Data Bases

- New Works

Chapter 4 – Machine Reproduction – Photocopying

Chapter 5 – Summary

Appendix A – Summary of the Legislative History of Computer-Related Issues and the Photocopy Issue

Appendix B – Public Law 93-573 and Public Law 95-146

Appendix C – Commissioners

Appendix D – Staff

Appendix E – Lists of Witnesses

Appendix F – Alphabetical Listing of Persons Appearing before the Commission

Appendix G – Transcripts of Commission Meetings

Appendix H – Summaries of Commission-Sponsored Studies

Appendix I – Bibliography

Appendix J – Selected Provisions of the Copyright Act of 1976 and Copyright Office Regulations

Full table of contents

PDF version of the report

Picture of commissioners and staff

Final Report of the National Commission on New Technology Uses of Copyrighted Works

Chapter 3 – Computers and Copyright

Copyright and Other Methods Compared

The purpose of copyright is to grant authors a limited property right in the form of expression of their ideas. The other methods used to protect property interests in computer programs have different conceptual bases and, not surprisingly, work in different ways. An appreciation of those differences has contributed to the Commission’s recommendation that copyright protection not be withdrawn from programs. Patents are designed to give inventors a short-term, powerful monopoly in devices, processes, compositions of matter, and designs which embody their ideas. The doctrine of trade secrecy is intended to protect proprietors who use a “formula, pattern, device or compilation of information” in their business “which gives [them] an opportunity to obtain an advantage over competitors who do not know or use it.”81 Unfair competition is a legal theory which, among other things, proscribes misrepresentation about the nature and origin of products in commerce. Each of these forms of protection may inhibit the dissemination of information and restrict competition to a greater extent than copyright.

In certain circumstances, proprietors may find patent protection more attractive than copyright, {Page 17} since it gives them the right not only to license and control the use of their patented devices or processes but also to prevent the use of such devices or processes when they are independently developed by third parties. Such rights last for seventeen years. The acquisition of a patent, however, is time consuming and expensive, primarily because a patentee’s rights are great and the legal hurdles an applicant must overcome are high. A work must be useful, novel, and nonobvious to those familiar with the state of the art in which the patent is sought.82 The applicant must prove these conditions to the satisfaction of the Patent and Trademark Office or, failing that, to the Court of Customs and Patent Appeals or the Supreme Court.

It is still unclear whether a patent may ever be obtained for a computer program. On three occasions the Supreme Court has considered cases involving program patents.83 In each it has found the programs before it to be ineligible for such protection. However, the Court has never addressed the broader question whether programs are patentable subject matter. The holdings of these three cases, although carefully limited in scope, make it appear that it would be difficult for any applicant to secure a patent in a program, since novel and useful mathematical formulas may not be patented and since useful “post-solution applications” of them meet the same fate.84 In most countries where the patent question has been answered, it has been held that programs are ineligible for patent protection.85 Even if patents prove available in the United States, only the very few programs which survive the rigorous application and appeals procedure could be patented. Once such protection attached, of course, all others would be barred from using the patented process, even if independently developed.

Trade secrecy is a doctrine known in every American jurisdiction. As a creature of state statute or common law it differs somewhat from state to state.86 The premise on which trade secrecy is based is this: if a business maintains confidentiality concerning either the way in which it does something or some information that it has, then courts should protect the business against the misappropriation of that secret. Although many proprietors feel secure when using trade secrecy, there are several problems they must face with respect to its use in protecting programs. Because secrecy is paramount, it is inappropriate for protecting works that contain the secret and are designed to be widely distributed.87 Although this matters little in the case of unique programs prepared for large commercial customers, it substantially precludes the use of trade secrecy with respect to programs sold in multiple copies over the counter to small businesses, schools, consumers, and hobbyists. Protection is lost when the secret is disclosed, without regard to the circumstances surrounding the disclosure. The lack of uniform national law in this area may also be perceived by proprietors as reducing the utility of this method of protection.

From the user’s standpoint, there are additional drawbacks. Users must cover the seller’s expenses associated with maintaining a secure system through increased prices. Their freedom to do business in an unencumbered way is reduced, since they may need to enter into elaborate nondisclosure contracts with employees and third parties who have access to the secrets and to limit that access to a very small number of people. Since secrets are by definition known to only a few people, there is necessarily a reduced flow of information in the marketplace, which hinders the ability of potential buyers to make comparisons and hence leads to higher prices.88

Experts in the computer industry state that a further problem with respect to trade secrecy {Page 18} is that there is much human effort wasted when people do for themselves that which others have already done but are keeping secret. This was emphasized in the reports to the Commission prepared by the Public Interest Economics Center and the New York University economists.89

The availability of copyright for computer programs does not, of course, affect the avail-ability of trade secrecy protection. Under the Act of 1976 only those state rights that are equivalent to the exclusive rights granted therein (generally, common law copyright) are preempted.90 Any decline in use of trade secrecy might be based not upon preemption but on the rapid increase in the number of widely distributed programs in which trade secret protection could not be successfully asserted.

The common law doctrine of unfair competition of the misappropriation variety is based upon the principle that one may not appropriate a competitor’s skill, expenditure, and labor. It prohibits false advertising and the “passing off” of another’s work as one’s own. While there is a small body of federal unfair competition law,91 it is largely a state doctrine with the same lack of national uniformity that besets trade secrecy. Although unfair competition may provide relief ancillary to copyright in certain situations, its scope is not as broad, and it seems unlikely that it alone could provide sufficient protection against the misappropriation of programs. For example, the unauthorized copying of any work for any purpose could be a copyright infringement without amounting to unfair competition.

Table 1 presents some of the considerations weighed by the Commission in reaching its conclusion. The answers to such economic questions as the effect of protection on the market and the opportunity it creates for an uncompetitive rate of return tend to show that, of the various potential modes of protection, copyright has the smallest negative impact.


Table 1 – Characteristics of Protective Mechanisms




Trade Secrecy





National Uniformity




Protection effective upon

Creation of work

Successful prosecution of application

Entrance into contractual relationship

Cost of obtaining protection




Term of protection

Life plus 50 years or 75 years

17 years

Possibility of both perpetual protection and termination at any time

Cost of maintaining protection1




Cost of enforcing rights against violators2




Availability of (a) statutory damages (b) attorney’s fees from infringers

(a) Yes

 (b) Yes

(a)   No


(a)     No

(b)     No

Protection lost by

Gross neglect

Unsuccessful litigation


Software, including effects of Commission proposals




Consistency with other copyright areas




Availability of protective mechanism for some programs3




Universal availability of protective mechanism for all programs4




“Process” protectible




Suited to mass distribution




1 Once copyright or patent is secured. it costs little or nothing to keep it in force; on the other hand, expensive security measures must be taken to avoid losing a trade secret. At least part of the cost of this security is passed on to the user.

2Copyright and patent infringers in some instances may be persuaded to comply without the institution of a lawsuit. If litigation is necessary, it may be expensive, but in copyright and patent case, attorneys’ fees may be awarded to successful plaintiffs. At trial, the proprietor bears the burden of proving that the trade secret is valid; in patent cases, there is a presumption of validity; and in copyright actions, a registration certificate is prima facie evidence of the copyright’s validity. The proof of the validity of a trade secret may be expensive and difficult, as it almost necessarily involves the retention of expert witnesses. Although witnesses may be needed in copyright and patent suits, in those cases there will have been at least some compliance with federal law regarding public notice of claimed rights before the lawsuit is initiated. A suit to enforce a trade secret, even though successful, may destroy the secret if it is offered into evidence and becomes part of the public record of the trial.

3As of the present, serious doubt exists whether programs are proper subjects for patent protection. (See this chapter under Copyright and Other Methods Compared.)

4Even if programs are patentable, only those that are truly novel and non-obvious will be protected. Trade secrecy is, of course, unavailable when the contents of a program have been disclosed.


Next section: Scope of Copyright in Programs

81 Restatement, Torts, § 757, comment b (1939).

82 35 U.S.C. § 101, 102, and 103.

83 Gottschalk v. Benson, 409 U.S. 63 (1972); Dann v. Johnston, 425 U.S. 219 (1976); and Parker v. Flook, __U.S.__, 98 S.Ct. 2522 (1978).

84 Benson  and Flook,supra note 83.

85 See the decision of the Supreme Court of the Federal Republic of Germany in Siemens AG v. AEG Telefunken, June 22, 1976; the discussion in Pagenberg, Patentability of Computer Programs on the National and International Level, 5 INT’L. REV. OF INDUST. PROP. & COPYRIGHT LAW 1 (1974); and the new patent convention adopted by the European Economic Community which explicitly excludes computer programs from patent protection.

86 See Bender, Trade Secret Software Protection, 3 Computer L. Svc. §4-4, art. 2 (1977); and Nycum, The Criminal Aspects of Computer Abuse (Stanford Research Institute, 1976).

87 See Milgrim, Trade Secrets,§ 2.05(21(1976).

88 Samuelson, Economics, 10th ed. (1976) 48; Braunstein, et al., Economics of Property Rights as Applied to Computer Software and Data Bases (1977).

89 See Appendix H for a description of these reports.

90 17 U.S.C. § 301(a).

91 See 15 U.S.C. § 1125(a), and Allison, Private Cause of Action for Unfair Competition under the Lanham Act, 14 Am. Bus. L. J. 1 (1976).