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Summary of CONTU - Final Report of the National Commission on New Technology Uses of Copyrighted Works - Appendix H CONTRACTOR: Harbridge House, Inc. AUTHORS: Richard I. Miller, Clarence O'N. Brown, Francis Kelley, Deborah C. Notman, and Michael A. Walker NTIS ORDER NO.: PB 283 876 Background In 1973, Harbridge House conducted a small-scale survey of the computer software industry as part of a more comprehensive project on law and technological innovation sponsored by the National Science Foundation. The survey showed that software firms relied primarily on trade secret licenses and confidential disclosure clauses to secure proprietary products. The respondents saw protection as most significant for general business and financial programs but, as a rule, knew of no instances in which fear of inade­quate legal protection had led a company to forego developing an innovative program. The survey sponsored by CONTU updates and ex­pands the work performed in 1973. The Survey The primary aim of the survey was to obtain descriptions of firms in the software industry with respect to kinds of products and services offered, size, age, ownership, and amount of investment in research and development. The next set of questions concerned what sort of legal methods had been used to protect propri­etary products, what particular products were most in need of protection, how satisfactory the legal methods employed had proved, and in what ways marketing practices might change due to legal revisions. As in 1973, the Association of Data Process­ing Service Organizations (ADAPSO) offered its help in the distribution of questionnaires. More than three hundred companies belonging to ADAPSO received questionnaires, of which more than one hundred responded. In addition, ten other companies responded to a shortened form of the questionnaire published in  Computerworld,  a weekly trade newspaper. Findings Character of Firms The typical responding software firm was in­dependently owned, young, and small. Founded within the last ten years, it employed fewer than one hundred people, had annual sales under $5 million, and spent about $100,000 a year on research and development. The most common lines of business included consulting, contract programming, developing software packages, and managing data center operations. These firms showed a certain tendency toward special­ization in one sort of product or service. A typical firm developed internally ten to twenty-five computer programs a year and a similar number for specific customers. Legal Protection The Harbridge House survey, as tabulated, showed that many of the firms surveyed were not greatly concerned with legal protection of software; many chose not to answer the question on preferred mode of legal protection. Those who did answer displayed a strong preference for contractual restraint through trade secrecy over either patent or copyright. There was a clearly discernible difference, however, in re­spondents' attitudes with respect to the distinc­tion between general business or financial pro-grams and engineering, scientific, or systems programs. The former were felt to be in some need of protection, the latter were not. Only a small minority (4 percent) of re­spondents reported having abandoned the de­velopment of a program for lack of protection. The 1 5 percent who indicated that their market­ing practices might change if legal protection improved tended to be larger companies. On the other hand, 76 percent said that the Copyright Act of 1976 would have no effect on their cur-rent scheme of marketing, and a mere one percent called for further legal protection. To a certain degree, then, the 1977 results agree with the 1973 results, particularly in the predominant use of trade secrecy. Many of the respondents in the second survey, however, seemed willing to rely largely on their tech­nological resourcefulness or the uniqueness of their products to maintain their competitive position.

Includes bibliographic references (p. 30-41)

A survey was commissioned to establish a baseline on the present modes of legal protection employed by the computer software industry. Questionnaires were distributed to 308 member companies of the Association of Data Processing Service Organizations (ADAPSO), and 116 responses were returned. Results indicated that (1) business executives typically rely upon technological resourcefulness rather than law to protect computer programs; (2) the development of new programs is only minimally dependent upon the availability of legal protection; and (3) the larger the company and the more general the program the more important is the law. Appendices include a table of copyright legal cases, a bibliography, and survey questionnaires. (Author/CMV)