[2]The Computer Systems Policy Project, Perspectives on the National Information Infrastructure: Ensuring Interoperability, February, 1994, p.6.

[3]Here we follow, but simplify, the definition advanced by the Computer Systems Policy Project, Ibid., at p.5.

[4] Of course, even within a highly interoperable NII, there will be significant variations of degree, including proprietary enclaves that boast of greater interoperability. Today, for example, the Netscape client interacting across the Internet with Netscape servers provides higher levels of performance and increased functionality (e.g. page layout, security functions) than when interacting with other brand servers -- even though all brands of servers implement the same protocols that permit interoperability (e.g., tcp-ip, http, ftp, etc.).

[5]On the potential for this vision to come to pass, given Microsoft's monopoly position and the economics of 'increasing returns' industries, see Gary L. Reback, et.al., "Memorandum of Amici Curiae in Opposition to Proposed Final Judgment," USA v. Microsoft Corporation, (DC District, Civil Action #94-1564), 1995.

[6]Testimony of Kodak's Dr. Robert Sanderson on behalf of CBEMA before the US Senate, Subcommittee on Antitrust, Monopolies and Business Rights, September 20, 1994.

[7] We follow here the CSPP definitions. CSPP, Perspectives on the National Information Infrastructure: Ensuring Interoperability, op. cit. p. 5.

[8] United States v. Western Electric Company, Inc., 1956 Trade Cases (CCH), 68246 (D.N.J. 1956) ("Hush-A-Phone"); Interstate Foreign Message Toll Tel. Serv. (Registration Program), 56 F.C.C.2d 593 (1975); 58 F.C.C.2d 736 (1976); MCI v. FCC (Execunet I), 561 F.2d 365 (D.D.C. 1977), cert. denied, 434 U.S. 1041 (1978); MCI v. FCC (Execunet II), 580 F.2d 590 (D.D.C.), cert. denied 439 U.S. 980 (1978); Computer I, 28 F.C.C.2d 267 (1971); Computer II, 77 F.C.C.2d 384 (1980); Computer III Notice of Proposed Rulemaking, F.C.C. 85-397 (Aug. 16, 1985)

[9] Brock, Gerald, Telecommunication Policy for the Information Age: From Monopolly to Competition, Harvard University Press, Cambridge, 1994, pp. 223-227.

[10]The Computer Systems Policy Project, Perspectives on the National Information Infrastructure: Ensuring Interoperability, op cit.

[11]See, e.g., testimony of Dr. Eric Schmidt, Chief Technical Officer, Sun Microsystems, Inc., before the US Senate, Judiciary Committee, Antitrust, Monopolies and Business Rights Subcommittee and Technology and Law Subcommittee, September 20, 1994 (hereafter: Joint Hearings), "Interoperability and the National Information Infrastructure"

[12]See, e.g., testimony of Nathan P. Myhrvold, Senior Vice President for Advanced Technology, Microsoft, before the US Congress, House, Telecommunications and Finance Subcommittee, February 1, 1994.

[13]However, some players in the CATV industry are preparing for the possibility that the set-top box interface may be forced to be more open in a world of digital TV and interactive entertainment services -- see, e.g. next generation converter box operating systems like Microware OS9 and the David OS.

[14] Bar, Fran_ois, "Network Flexibility: A Challenge for Telecom Policy", in Communications and Strategies, IDATE, Vol. 1, No 2, 1991.

[15] More precisely, we are talking about the effects of network externalities: In general, network externalities describe the situation in which the value of the network and its use increases with the number of users - thus, in a communications network, the larger the number of users, the more valuable for both the service provider who faces increasing demand for services and customers who benefit from being able to reach a wider population. On ATT-led consolidation in the industry's early history, see for example Gerald Brock, The Telecommunications Industry: The Dynamics of Market Structure, Harvard University Press, Cambridge, 1981. pp.151-158

[16] As defined by the FCC at 104 F.C.C. 2d 958 parag. 154-166.

[17]Joseph Farrell, Arguments for weaker Intellectual Property Protection in Network Industries", mimeo, 1995

[18]See Information Infrastructure Task Force, Working Group on Intellectual Property Rights, "Intellectual Property and the National Information Infrastructure," (Washington DC: IITF, 1994) --the so-called Lehmann Report.

[19]A useful summary of contending positions on 'openness' among different computer industry players is contained in Jonathan Band, "Competing Definitions of 'Openness' on the NII," (SF: Morrison and Foerster, 1994), draft

[20] Fergusson, Charles & Charles Morris, Computer Wars, Random House, New York, 1993, p. 53.

[21]This and the Microsoft information based on conversations with industry sources.

[22]Note that public domain standards need not be fully open. They can be restricted by governments who might, for example, preferentially favor domestic producers under broadcast or other scarce spectrum standards, as was done with European TV standards like PAL and SECAM to give a market advantage to selected European TV manufacturers.

[23]See the account in H. Landis Gabel, Competitive Strategies for Product Standards - The Strategic Use of Compatability Standards for Competitive Advantage, (London: McGraw Hill, 1991) p.137-142

[24]These issues can be treated in a variety of ways. Compare, for example, the table in Gable, Competitive Strategies, at p.13.

²⁵See, for example, the account of how aggressive industrial sponsorship shapes 'voluntary' broadcast standards setting in Stanley M. Besen and Leland L. Johnson, Compatitbility Standards, Competition and Innovation in the Broadcasting Industry, (Santa Monica: Rand, November, 1986).

[26] Martin B.H. Weiss and Marvin Sirbu, "Technological Choice in Voluntary Standards Committees: An Empirical Analysis, Economics of Innovation and New Technology, V.1(1), 1990.

²⁷See the discussion in Paul A. David and Shane Greenstein, "The Economics of Compatibility Standards: An Introduction to Recent Research," CEPR Technical Paper, #207, Center For Economic Policy Research, Stanford University, June 1990, at p.39ff, especially citing unpublished work by Sirbu and Hughes.

[28]It is important to note that compatability through interface standards is not the only way that interconnection/interoperability could be achieved. Converters and gateway services are alternatives. Each comes, however, with a significant likelihood of degraded performance or functionality relative to the use of compatability standards. In the NII context, gateway services are likely to arise wherever technically and economically feasible to interconnect networks running on different proprietary protocols. The degree and quality of interoperability such services will be capable of providing is greatly speculative at the moment. For that reason we presume that interface standardization will be the preferred alternative.

[29]For a brief but dense and suggestive economic analysis of standards, see "Localized technological change and the evolution of standards as economic institutions," Christiano Antonelli, Information Economics and Policy, V.6, #3-4, December 1994, p.195-216. That issue of Information Economics and Policy, edited by Antonelli, was devoted to the economics of standards and contains many fine contributions. See, also, David and Greenstein, "Compatibility Standards", supra; and two contributions, one by Michael Katz and Carl Shapiro, "Systems Competition and Network Effects," and the other by Stanley Besen and Joseph Farrell, "Choosing How to Compete: Strategies and Tactics in Standardization," in the Journal of Economic Perspectives, v.8#2, (1994), p.93-131.

[30]The complexities of such contexts are well analyzed by Douglas C. North, Insitutions, institutional change and economic performance, (Cambridge: Cambridge University Press, 1991)

[31]On technological change see, e.g., Dosi, Nelson/Winter; on organizational change see Galbraith; on imperfect markets and increasing returns see Arthur, David; on new trade theory see Krugman.

[32] See, e.g., Joseph Farrell and Garth Saloner, "Installed Base and Compatibility: Innovation, Product Preannouncements and Predation," American Economic Review, v.76, 1986 p.940-955; Michael L. Katz and Carl Shapiro, "Technology Adoption in the Presense of Network Externalities," Journal of Political Economy, V.94(4), August, 1986, p.822-841.

[33]See the discussion by Antonelli, "Localized technological change," supra, at p.201-202.

[34]Antonelli remarks that in modeling the emergence of de facto standards, the economics of technical change and of standards are so intertwined that they really cannot be separated. Ibid., at p.205.

[35]On the concept of path-dependence, see W. Brian Arthur, "Competing Technologies and Lock-in by Historical Events: The Dynamics of Allocation Under Increasing Returns," CEPR Publication #43, (Stanford: Center for Economic Policy Research, September 1985)

[36]See the account in Gabel, Competitive Strategies, at p.67-70.

³⁷See, in particular, Paul A. David, "Path-dependence and predictability in dynamic systems with local network externalities: A paradigm for Historical Events," in Dominique Foray and Christopher Freeman, eds., Technology and the Wealth of Nations, (NY and London: Pinter, 1993).

³⁸A range of the manipulative possibilities are explored for compatibility standards by David and Steinmuller, "Economics of compatibility," supra, at p. 221-223.

[39]For more detail on the economics of this point, see David and Greenstein, "Compatibility Standards", supra, at pages 10-23 and the sources cited there.

⁴⁰Hugh Collins, "Conflict and Cooperation in the Establishment of Telecommunications and Data Communications Standards in Europe," in H. Landis Gabel, Ed., Product Standardization and Competitive Strategy, (Amsterdam: North Holland, 1987), p.125ff.

[41] 17 U.S.C.A. section 106 (1).

[42] 17 U.S.C.A. section 107.

[43] 17 U.S.C.A. section 106(5).

[44] 17 U.S.C.A. section 106(4).

[45] 17 U.S.C.A. section 106(3).

[46] 17 U.S.C.A. section 106(2).

[47] Whelan Assocs., Inc. v. Jaslow Dental Lab, Inc., 727 F.2d 1222 (3d Cir. 1986).

[48] "Decompilation" is a method of reverse engineering software involving the translation of machine-readable object code into a higher level, human-readable form. Some argue that decompilation enables programmers to understand a program so as to make interoperable products; others argue that it enables them to copy the essentially creative structure of a particular piece of software and effectively engage in software piracy.

[49] Computer Assocs. International v. Altai, Inc., 23 U.S.P.Q.2d 1241 (2d Cir. 1992).

[50] Sega Enterprises, Ltd. v. Accolade, Inc., 24 U.S.P.Q.2d 1561 (9th Cir. 1992)(allowing Accolade to decompile Sega's game cartridges to discover interfaces that would enable Accolade to make games that could work on the Sega platform and adjudging those interfaces to be unprotected "functional" subject matter).

[51] See Lotus Development Corp. v. Paperback Software Int'l., 740 F. Supp. 37 (D. Mass. 1990)(in the 1st Cir.); Computer Assocs. (2d Cir.); Plains Cotton Coop v. Good Pasture Computer Serv., 807 F.2d 1222 (5th Cir. 1987); Engineering Dynamics Inc. v. Structural Software Inc., et al, No 89-1655 (E.D. Law 1991 5th Cir); Sega (9th Cir.); Autoskills Inc. v. National Education Support System, No. 91-960-M and 91-740-M (D. N.M. 1992)(in the 10th Cir.); CMAX/Cleveland, Inc. d/b/a ComputerMax v. UCR, Inc., No. 91-75-AGH (M.D. Ga., September 25, 1992) (in the 11th Cir.); Atari Games Corp. v. Nintendo of America, Inc., 975 F.2d 832 (Fed. Cir. 1992).

[52] Lotus Development Corp. v. Borland Int'l, Inc., No. 93-2214 (1st Cir. March 9, 1995); Computer Assocs. (2d Cir); Sega (9th Cir.); Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823 (10th Cir. 1993); CMAX/Cleveland (in the 11th Cir.); Atari Games (Fed. Cir.)

[53] Whelan at 1236.

[54] Computer Assocs. at 1252-53.

[55] See Sega at 1557-59.

[56]As suggested above, while the common law is evolving in the specified direction, some powerful interests would like the law changed, by legislative means if necessary. For example, draft recommendations by the Clinton Administration's Working Group on Intellectual Property Rights, could be seen as narrowing the scope of "fair use." Thus, there is no certainty that the trend will continue along its current trajectory.

[57] See Sega at 1569, 1572-74.

[58] Atari Games at 840 and 844-45.

[59]Diamond v. Diehr, 450 U.S. 175, 101 S.Ct. 1495, 67 L.Ed. 2d 311 (1981) (a mathematical algorithm used to calculate the cure rate for rubber held patentable).

[60]Gottschalk v. Benson, 409 U.S. 63, 93 S.Ct. 253, 34 L.Ed. 3d 273 (1972) (like phenomena of nature, mental processes, and abstract intellectual concepts, a mere mathematical algorithm is not patentable).

[61] See, e.g., Arrythmia Research Technology, Inc. v. Corazonix Corp., 958 F.2d 1053 (Fed. Cir. 1992) (algorithm that analyzed human heart electrocardiographic signals held patentable because its process steps "transformed one physical, electronic signal into another" and the output was not a mere number but a readable pattern).

[62] However, a revision of UCC Article 2 is underway and in that context a new article 2B is being considered which would address the issue of software licensing. Early drafts would validate shrinkwrap licenses in most circumstances-- including shrinkwrap licenses that prohibit reverse engineering. See generally, Mark Lemley, "Intellectual Property and Shrinkwrap Licences," 68 So. Cal. L. Rev. 1239 (July 1995).

⁶³For a similar view of the "essential facilities" doctrine, see Penelope A. Preovolos, "Litigation in the Interface: Connecting to 'Essential Facilities,'" Intellectual Property (San Francisco: The Recorder Publishing Co., March 1995).

[64]224 U.S. 383 (1912).

[65] Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed. 359 (1973) (Court held refusal by electric utility company to sell power to municipalities which had chosen to own their own retail distribution systems a violation of Sherman Act Section 2 since it was using its market power in one market (transmission) to further a monopoly in another market (retail distribution)).

[66]708 F.2d 1081 (7th Cir. 1983).

[67] Ibid. at 1132-33.

[68] See generally, Areeda, "Essential Facilities: An Epithet in Need of limiting Principles," 58 Antitrust L. J. 841, 844-45 (1990).

[69]Alaska Airlines Inc. v. United Airlines Inc., 948 F.2d 536 at 544 (9th Cir. 1991).

[70] Ibid. at 546-49.

[71] See Data General Corp. v. Grumman Systems Support Corp., 36 F.3d 1147 (1st Cir. 1994); and 35 U.S. C.A. section 27(d)(1988). See also, Simpson v. Union Oil Co., 377 U.S. 13, 24, 84 S.Ct. 1051, 1058, 12 L.Ed. 2d 98 (1964).

[72] Rural Tel. Serv. Co. v. Feist Publications, Inc., 957 F.2d 765, 767-69 ( 10th Cir. 1992).

[73] Associated Press et al v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945).

[74]See Data General at 1187-88.

[75] Alaska Airlines at 547-48. See also, Berkey Photo Inc. v. Eastman Kodak Co., 603 F.2d 263 at 294 (2d Cir. 1979).

[76] 13 FCC 2nd 420 at 437 (1968), cited in Brock, Telecommunication Policy for the Information Age,: From Monopoly to Competition (Cambridge: Harvard University Press, 1994) p. .83

[77] Brock at p. 86

[78] Paul David, "Narrow Windows, Blind Giants and Angry Orphans: The Dynamics of Systems Rivalries and Dilemmas of Technology Policy", CEPR Paper No. 10, Stanford University, March 1986.

[79] This argument is made, for example, by Sanford V. Berg, "Public Policy and Corporate Strategies in the AM Stereo Market," in Gabel, Product Standardization, p.149ff.