Unsung innovators: Marty Goetz, holder of first software patent

In 1965, Marty Goetz filed the first software patent in history — sparking a 15-year controversy about whether that should even be allowed. In the 1960s, he led a challenge against IBM’s monopoly, in particular its bundling of various software programs as part of its operating systems.

That business practice, in which all the major hardware vendors of the day engaged, had the result of locking out software innovators.

“If you really wanted to sum it all up, my story is not about software patents; it’s really about software protection,” says Goetz, now retired and living in New Jersey.

But it was software patents that set the nascent computer industry abuzz back in the 1960s. Computerworld ran a story on June 19, 1968 with the front-page headline: “First Patent Issued for Software, Full Implications Are Not Yet Known.”

While patenting software seems straightforward enough today, 32 years ago, it was a groundbreaking idea. Goetz, already a veteran programmer with stints at Sperry Rand Corp. and IBM, began working for Applied Digital Research (ADR) when it started up in 1959.

While there, he worked on a number of programs, among them a method of helping mainframes sort through data more quickly. His friend, lawyer Mort Jacobs, “convinced me I could get patent protection for my new sorting technology.

“It was a radical idea that slowly seemed to make more and more sense,” says Goetz. “I knew what IBM did with bundling software into its hardware, and I wanted to protect my program,” he says. “Plus, Mort convinced me — and this is true — that software and hardware are interchangeable.”

That is, you can put software on a chip, or build chips with circuitry to accomplish what a particular piece of software performs. “Hardware was patentable, so why not software?” Goetz says.

Software, after all, was a set of instructions put together to do a task, that task being an invention, Goetz and Jacobs agreed. So on April 8, 1965, Goetz filed for the patent. He received it three years later — on April 28, 1968 — as U.S. Patent No. 3,380,029 for “Sorting System.”

He kept going. Goetz then filed a patent for a flowchart product he produced called Autoflow. He says it was a huge step ahead of what IBM was offering its customers for free at the time. Users could actually print their flowcharts out on printers, rather than having to hand-draw boxes, as IBM’s software had required. That patent, filed in December 1965, was granted in October 1970.

But controversy was afoot. Trade journals and the general press started writing stories wondering whether the patentability of something as seemingly intangible as software was even possible. Goetz says in his memoirs (download PDF) that prominent journalists at the time, including Patrick McGovern, chairman of Computerworld parent company International Data Group, questioned whether hardware makers would voluntarily unbundle software from their hardware — leading to unbridled competition and the beginning of a whole new market.

But this new market might never have taken hold without Goetz and his software patents. He also helped it along by educating the judicial system about software and why this “invisible asset” needed legal protection.

Goetz also did whatever he could to force IBM’s hand.

Despite Goetz’s legal victories, IBM kept bundling its flowchart software with its best-selling mainframe operating systems of the day and essentially ignored ADR’s patent protection, Goetz says. Then, in 1968, Goetz’s cause was helped by the U.S. Department of Justice’s landmark lawsuit against IBM. The DOJ’s complaint: IBM, with its 80%-plus monopoly share of the hardware business, had hindered the growth of the software industry since the early 1960s as a result of its bundling practices.

In April 1969, ADR, with Goetz leading the charge, also sued IBM. “We were trying to anticipate the future,” he says. “We also were interested in collecting damages for any reduction of revenues we experienced while IBM was bundling software we’d patented.”

ADR and IBM eventually settled out of court for $2 million in cash. As part of that deal, IBM agreed to start marketing ADR’s Librarian source-code maintenance program, as well as Autoflow, which Goetz says “guaranteed us millions after this.”

The experience triggered his passion for protecting the independent software vendor community — “and for about five years, we were alone in this.”

It was a bumpy ride, too. The software patent issue was continually turned round and round in the courts. It wasn’t until 1990 that the U.S. Supreme Court finally ruled that software was patentable.

With that background and mind-set, it was a relatively short hop for Goetz to help shepherd Adapso, the Association of Data Processing Service Organizations. One of Adapso’s core missions was to help protect software makers against hardware suppliers that could drive the software creators out of business with the practice of bundling.

Goetz gives a wry laugh at the mention of Microsoft Corp.’s antitrust battles and its successful bundling of Internet Explorer into Windows, decimating competition including Netscape Communications Corp. Goetz is particularly outraged that Microsoft has been allowed to do many of the same things that IBM did in the 1960s and was ultimately forced to stop.

In Goetz’s view, Microsoft is “more aggressive” than IBM was back in the day. Goetz recalls being particularly upset with Bill Gates’ comment that he should “be able to put anything under the sun into Windows.” Goetz claims that’s called tying — in other words, making the sale of one product contingent on the consumer buying another, separate product — and says it’s illegal.

(Editor’s note: The legal status of tie-ins is still evolving. On one hand, a lawsuit filed in early November 2007 alleges that Apple’s tie in of iTunes with the iPod is illegal. But there was also a 2006 Supreme Court case that casts some doubt over whether tie-ins are always illegal.)

Computerworld front page 1968

Furthermore, Goetz claims that Internet Explorer, the Real Player and several other parts of Windows have no “intrinsic” need for being part of the operating system.

In addition, Goetz has watched with ire the new wave of “software business method patents.” He says he never meant to open the door to that one. “Amazon’s ‘one-click’? Come on, we’ve been doing that forever,” he says. “That should have been obvious to everyone from Day One.”

But while Goetz sounds alarm bells about the issues of today reappearing even after he fought so strongly against them in the 1960s, he is optimistic in the end. He believes that in a decade or two, a new company — perhaps one even based on open-source technology — will level the playing field once more.

When asked what he was proudest of, this father of the software patent and pioneer fighter against monopolies had no hesitation. “I helped ADR grow into a $200 million company. I was instrumental in helping the software industry become the third-largest manufacturing industry in the world,” Goetz says. “And most importantly, I’ve enjoyed 34 years of happily married life.”