IC Layout Protection

Summary of above links:
Semiconductor layout is covered by law similar but not identical to copyright. The first such law, the SCPA is now obsolete. All signatories to the WTO TRIPS agreement (that is, practically all countries in the world) have now undertaken to pass a law according to the TRIPs recommendations. These recommendations are in the form of a set of modifications to a previous agreement, the Washington Treaty, which is in itself obsolete.
The following extract is taken (with permission) from the book Intellectual Property Rights, the WTO and Developing Countries by Carlos M. Correa (Zed Books Ltd, 2000). It explains the background to and history of the material linked to above.
Any contents in square brackets [ ] has been added by Open Collector.

Integrated Circuits

The semiconductor industry is highly concentrated. A free transnational corporations account for an overwhelming share of semiconductor production and trade and for technologies necessary for state-of-the-art manufacture. Among developing countries, only South Korea has emerged as a world-class competitor. Taiwan has also developed significant capacity in this field. Other developing countries participate as exporters of semiconductors locally assembled by subsidiaries of transnational corporations.

The high investment required for mass chip production and the intensity and cost of R&D in an extremely competitive market constitute formidable barriers for potential new entrants, particularly those from developing countries.

While the production of integrated circuits is beyond the reach of most developing countries, the design, particularly of custom and semi-custom chips, has been undertaken in many of them, particularly in the newly industrializing countries (NICs). This has been facilitated, on the one side, by the development of computer aided design tools that can run on relatively small-sized computers; and on the other, by the possibility of contracting with various silicon foundries the manufacture of a chip according to independently made designs.

Technological advance in the semiconductor industry is an interactive, cumulative process where improvements are directly based on the preexisting stock of knowledge. Studies on the role of IPRs [Intellectual Property Rights] in promoting innovation in this industry have shown that gaining lead-time and exploiting learning-curve advantages are the primary methods for appropriating the return on investments in R&D (Levin et al, 1987, p.788).

The protection of layout designs of integrated circuits as a specific subject matter was born in the United States in 1984, with the approval of the Semiconductor Chip Protection Act (SCPA). The growing concern over the decline of the United States' competitive advantages in chip production and trade during the 1980s prompted Congress to adopt a sui generis protection regime. It was assumed, in particular, that the increasing strength of Japanese firms was linked to the copying of American designs.

The sui generis regime for integrated circuits established under the SCPA provided for 10-year protection; registration was made compulsory within two years of the first "commercial exploitation" of a mask work; and a special provision allowing for "reverse engineering" was contemplated, following the prevailing practice in the semiconductor industry.

The SCPA, in addition, included stringent reciprocity rules that forced Japan to adopt similar legislation ""Act concerning the circuit lay-out of a semiconductor integrated circuit" (law No. 43)), followed by the European Communities (Council Directive on the legal protection of topographies of semiconductor products, 87/54/EEC).

The World Intellectual Property Organization, shortly after the enactment of the SCPA, initiated studies and consultations in order to establish an international treaty of the matter, based on the sui generis approach. Negotiations led to the adoption, in 1989, of the Washington Treaty. The United States and Japan, however, did not sign it, due to disagreements with compulsory licences, the treatment of innocent infringement, and the protection of designs when they are incorporated in industrial products.

These perceived shortcomings were expeditiously addressed a few years later. The TRIPS Agreement practically derogated the Treaty's provisions that had been rejected by the two chip powers, and added those obligations that they felt were missing.

So far, only some developing countries have considered legislation to specifically protect integrated cicuits' designs, but all WTO Member countries are obliged to do so.

One of the main reasons for the enactment of the SCPA and its internationalization was the alleged copying of original chip layout designs, particularly by Japanese competitors. However, the very few instances of litigation that took place on the basis of that regime would indicate that the copying of chips' layout design was not the main bone of contention[1].

The main purpose of the sui generis regime on integrated circuits is to prevent copying of original chips' designs, and the commercialization either of the infringing chips or of the products that incorporate them. As mentioned, the sui generis regime does not prevent reverse engineering.

The important controversies did not relate to the layour designs, but to the technical ideas underlying them or to their production processes subject to patent protection.

Thus, Texas Instruments was reported to have earned (by 1994) more than US$1.5 billion in royalties from its patent portfolio. Its main source of income was a broad patent originally filed 30 years ago "covering an old-fashioned technology that has been extended by peculiarities unique to the US patent system". Intel also has an aggressive IPRs strategy with a litigation budget of at least US$100 million, that few companies can match. Based on its patent US4,338,675, it has attempted to bar competition not only from other major chip producers but also from small design houses (Warshofsky, 1994, pp. 252 and 256).

Action by Texas Instruments reached competitors worldwide. It sued on the same charges at the same time seven Japanese companies, which have reportedly paid an average of around US$30 million per firm. Samsung was also sued, but it paid over US$90 million. The reason for this different outcome seems to be that the Japanese firms held "several patents of their own and were able to negotiate cross licensing agreements and thus lower the amount of royalty payments to Texas Instruments (Moody, 1989, p.38).

1. "Given the restriction on protection of the ideas in a work by the copyright statutes, the protection of integrated circuit layout was (in the absence of patent protection) not protectable [sic] under the copyright statute. The Semiconductor Chip Protection Act of 1984 (SCPA) codified at 17 U.S.C. 901-914 (1988) was an attempt by Congress to thwart what was then percieved as widespread duplication of US semiconductor mask designs by foreign semiconductor companies. These foreign manufacturers had manufacturing capacity and process technology comparable to the US semiconductor firms, but at the time lacked much of the IC design talent and ancillary CAD/CAE software tools to compete effectively with US firms. The gist of the legislation is a mechanism whereby protection is afforded to the actual photolithigraphic mask layout of a semiconductor IC, much akin to copyright protection which may be afforded a PCB layout artwork.

While the SCPA form of intellectual property protection from the semiconductor industry has been widely panned by engineers as ineffective, there are definite areas in which this legislation can have dramatic positive benefits to the overall protection afforded an IC, especially considering the relatively low cost of registration. As evidenced by the graph in Figure 6 [ which shows world registrations running at around 10000 pa from 1985-1994] registration of mask works has been relatively constant since the SCPA inception in 1985. This fact gives credence to the theory that while engineers may grouse at the incomplete nature of the SCPA's protection, they nonetheless consider it a viable IP protection tool in the semiconductor era.

Again, one must consider the IP protection afforded an IC as a 'mesh' of individual components which together provide a framework of protection greater than each individual protective element alone. Given the SCPA's track record inside and outside the courts, one must conclude that there is still life in this legislation and it does indeed have real application in everyday semiconductor IP practice." Kevin Klughart, An Overview of Intellectual Property Protection for the Electronics Industry, Test & Measurement World 2001.