1 Randal C. Picker James Parker Hall Distinguished Service Professor of Law Ludwig & Hilde Wolf Teaching Scholar The Law School, The University of Chicago Senior Fellow, The Computation Institute Silicon Flatirons Center, February 1, 2016 Propertization and Depropertization in the Computer Industry,

Propertization and Depropertization n Depropertization u Via Patents: von Neumann’s EDVAC paper u Via Antitrust: The 1956 Settlements with AT&T and IBM u Via Business Model: The Vertically-Integrated IBM Mainframe Platform and Microsoft’s MS-DOS Licenses 2

Propertization and Depropertization n Propertization u Via Patents: The Emergence of the Software Patent u Via Antitrust: The 1969 U.S. Suit against IBM and the 1994 U.S. Suit against Microsoft 3

4 Chicago Daily Tribune, Feb 15, 1946 ENIAC: Electronic Numerical Integrator and Computer

5 Army/Air Force Technical Manual, Feb 1952 The Vacuum Tube

6 Chicago Daily Tribune, Feb 15, 1946 ENIAC: Electronic Numerical Integrator and Computer

7 U.S. Patent No. 3,120,606 (Feb 4, 1964) ENIAC Patent

8 von Neumann, EDVAC First Draft, June 30, 1945 Depropertization Via Publication: von Neumann and the Electronic Discrete Variable Automatic Computer

9 Honeywell v. Sperry Rand, D. Minn., 1973 Depropertization via Publication: The ENIAC Patent Dispute “The First Draft Report was a printed publication, within the meaning of 35 U.S.C. 102, by June 30, 1945, prior to the ENIAC patent critical date. … The claims of the ENIAC patent asserted in this suit are anticipated by or obvious in view of the First Draft Report.”

10 U.S. Patent No. 2,524,035 (Oct 3, 1950) Bardeen & Brattain Point- Contact Transistor Patent

11 U.S. Patent No. 2,569,347 (Sept 25, 1951) Shockley Junction Transistor Patent

12 AT&T Complaint (Jan 14, 1949) Depropertization Via Antitrust: The AT&T Lawsuit

13 AT&T Final Judgment (Jan 24, 1956) “The defendants are each ordered and directed to grant or cause to be granted … non-exclusive licenses under all claims or any, some or all existing and future Bell System patents ….” Depropertization Via Antitrust: Required Patent Licensing as a Remedy

14 U.S. Patent No. 3,138,743 (June 23, 1964) Entry Conditions and Antitrust Remedies: Kilby Integrated Circuit Patent

15 The New York Times, April 8, 1964 Depropertization Via Business Model: IBM System 360 Introduction

16 U.S. Patent No. 3,380,029 (Apr 23, 1968) Propertization via Patent: The First Software Patent

17 Los Angeles Times, June 24, 1969 Propertization Via Antitrust?: Business Model Unbundling

18 Homebrew Computer Club Newsletter, Jan Selling Software?

19 Homebrew Computer Club Newsletter, Jan Selling Software?

20 Homebrew Computer Club Newsletter, Jan Selling Software?

21 “Some letters suggested that software should be sold for a flat fee to hardware companies who would add the cost of the software to the price of their computer. Whether this is legal or not, the marketability of software to hardware companies is questionable when software is so freely shared among hobbyists.” A SECOND AND FINAL LETTER BILL GATES General Partner, Micro-Soft Selling Software?: Rebundling?

22 IBM Personal Computer, Aug 12, 1981 Intel 8088 processor 16K to 256K RAM Three operating systems available (DOS, CP/M-86 and UCSD p-System) A New Computing Platform

23 US v Microsoft Licensing Case, July 15, 1994 “Microsoft’s licenses impose a penalty or ‘tax’ paid to Microsoft upon OEMs’ use of competing PC operating systems. ‘Per processor’ licenses require OEMs to pay a royalty for each computer the OEM sells containing a particular processor (e.g., an Intel 386 microprocessor) whether or not the OEM has included a Microsoft operating system with that computer.” Depropertization Via Licensing: Microsoft’s Per Processor Licenses

Takeaways n Underlying legal tools, such as antitrust and patents, are open-ended n The key is how they are used n A 50-year arc in the computer industry suggests that differentiated property commons, public or private, have been a critical piece of the evolution of the industry 24

25 Thank You