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Turning to the importance of the bill itself to small businesses we must concede that nevertheless, the question of whether a particular small firm which has an invention will be able to utilize the patent system effectively_under existing law is frequently a real problem to that concern. Factors which can severely limit the value of the system to small concerns include lengthy delays in obtaining patents, uncertainty as to the validity of the patent which is obtained, and the costs and problems of interference proceedings and infringement litigation. We believe that the provisions of H.R. 5924 would greatly aid in making the patent system more efficient and more useful to small business concerns, and that the measure would thus promote technological invention, innovation, and development by small firms.

As I indicated earlier, both research-minded small concerns and other small firms can benefit from an improved patent system. Absent a patent system, we would have an industrial society which has been described as a “cesspool of secrecy-an industrial environment filled with spies, an environment in which the true scientist would be embarrassed to participate because he could not use freely what he had learned." The bill would encourage early filing and early disclosure of patent applications; would aid in the issuance of valid patents and the denial of unsound applications; and would provide simpler, less expensive procedures to test validity and infringement. All these benefits, we believe, would be particularly helpful to small firms.

I shall not review the detailed provisions which would accomplish these ends, since previous witnesses have fully explained them. But I would like to comment briefly on what is clearly the chief feature of the bill, its first-to-file provision.

This provision is the heart of the bill. In effect, as to competing claims for a patent on the same invention it changes the rule from a first-to-invent rule (with all its attendant complexities and uncertainties) to a first-to-lile rule. This has the advantage of a simpler, clearer test as to who is entitled to the patent. Of course, the new rule would thus make easier both obtaining and enforcing a valid patent. In addition, the new rule (in conjunction with other provisions of the bill) would serve the important public purpose of prompt filing and disclosure of inventions.

On balance, we believe that in most cases this prompt filing requirement would not present serious problems for small concerns. Not infrequently the present approach of a small concern to the patent system is as though the first-to-file rule already governed. This rule would also have the benefit of eliminating the need for elaborate recordkeeping—a need which is of particular concern to small businesses. Small concerns too often do not have the knowledge of their larger and more sophisticated competitors as to the ground rules determining which records will be effective in proving prior inventorship and which will not qualify.

Of particular importance to small concerns is the provision the bill makes for a preliminary application, which would be an informal description of the invention which could be filed so as to secure an early filing date. The applicant would then have a year to perfect his claim by filing the complete formal application. We note that the Patent Office has indicated that it believes short forms can be de

veloped for this preliminary application. Such forms should allow as uncomplicated descriptions as possible in providing for disclosure of the features of the invention. The preliminary application would also require only a nominal filing fee, which would be a significant benefit to small concerns who may wish to establish an early filing date, but who are not ready to pay substantial fees for preparation and filing of a formal patent application. There is one additional matter which we believe

may

warrant particular exploration by the committee from the viewpoint of its effect upon small business.

Under the present law, an inventor is entitled to a patent even though there was public use or sale or public disclosure of the invention before an application for the patent was filed, provided such public use did not antedate the application by more than 1 year. The Commission's Report and the bill make no provision for a similar grace period. The Commission's first recommendation which is reflected in section 102 of the bill states: “Prior art shall comprise any information, known to the public, or made available to the public by means of disclosure in tangible form or by use or placing on sale, anywhere in the world, prior to the effective filing date of the application. A disclosure in a U.S. patent or published complete application shall constitute prior art as of its effective (United States or foreign) filing date.” Thus, the Commission's Report and the bill would abolish the existing grace period under today's law.

The Commission, however, recognized the need for a technique whereby the inventor could seek support of or test his invention and whereby the scientific community could engage in discussions of new discoveries, before completing application filing. It, therefore, recommended the preliminary application as a substitute for the grace period. As noted, the preliminary application concept is contained in the bill, and it is a valuable addition to the patent system. But, in order that small concerns and independent inventors may effectively experiment, market test, and otherwise determine whether they should file patent applications, the committee may wish to consider a personal grace period which would permit the inventor a period of time during which he may use or disclose his invention without being barred from obtaining a patent.

In conclusion and summary, Mr. Chairman and members of the committee, the Small Business Administration strongly supports H.R. 5924. We believe it would strengthen the patent system and increase its usefulness to small business and the economy. I would like to stress that the Small Business Administration is closely following the information and views submitted at these hearings. We would be happy of course to attempt to provide the committee with any additional comments or data within our knowledge on what might be called the small business aspects of the bill.

Mr. Chairman, that completes my prepared statement; however, Mr. Davidson or I would be happy to attempt to answer any questions for the record that you wish to submit to us.

Chairman KASTENMEIER. Mr. Zeidman, to restate your presentation, you do support the bill before the committee except insofar as it fails to include a grace period, and there you have a modified recommendation; is that correct !

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Mr. ZEIDMAN. I would not say "except." We endorse the bill. We also suggested, with respect to the bill, that you may wish to consider a personal grace period as an additional provision.

Chairman KASTENMEIER. Are there any exceptions or additions to this present bill that you would recommend?

Mr. ZEIDMAN. Mr. Chairman, on a matter as complex and as interwoven as the Commission report on this bill, there are areas in which individuals feel more strongly than in other areas. And in some cases, particularly in view of the large nature of the small business community, there are areas in which there have been some conflicts. But on balance we support the Commission report and we strongly endorse the bill in its present form.

Chairman KASTENMEIER. I take it your views not only reflect the views of the small inventor, but also the views of the small businessman who perhaps wants to become a licensee. So on balance you are considering both the holder of the patent and the user of the patent, the subsequent licensee?

Mr. ZEIDMAN. We have sought to represent the views of small businessmen who fall in both those categories and others as well; which is a large job, but we will say that we have tried to accommodate those interests.

Chairman KASTENMEIER. Generally, how do you react to the 20-year term? Do you prefer a longer or a shorter term balancing all these equities and interests?

Mr. ZEIDMAN, On balance we believe that the existing 17-year term from patent issuance makes sense, and the 20-year term makes sense if the term is to run from application filing. We support that provision of the bill.

Chairman KASTENMEIER. Could a personal grace period be included without losing the benefits that you get from moving over from the first-to-invent to the first-to-file concept? Do you lose some of the benefits?

Mr. ZEIDMAN. We believe that a personal grace period of a sort which was suggested for study and consideration could be accommodated without losing significant benefit from the proposed law. But I do think this requires study by the committee and I think you may wish to obtain the views of other groups before you decide. We will be following that testimony with interest, as well.

Chairman KASTENMEIER. On page 2 of your statement summarizing the benefits to small businesses, you speak of opportunities for alert small firms to utilize the information disclosed by patents in connection with their own innovation and invention outside the bounds of the patent. Would you enlarge upon that; what are these opportunities?

Mr. ZEIDMAN. Well, we believe much as Judge Rifkind noted; many large firms today are pretty well able to pursue their own interests and needs without the benefit of a system such as the patent system. They have the capability, they have the resources, they have the knowledge of what is going on in their fields of endeavor. It is much more difficult for the small firm to do that, and to the extent to which the patent system facilitates that by making information available, the patent system helps them. The proposed changes in the bill would increase these benefits through more rapid publication of information and more rapid disclosure of technological innovation. We believe therefore that a small firm which can build upon or around existing invention and

innovation is benefited from today's patent system. Those benefits would be increased by the legislation before you.

Chairman KASTENMEIER. Thank you, Mr. Zeidman.

Mr. EDWARDS. It seems to me that what you are suggesting, regarding the personal grace period, could be regarded as a return to the first-to-invent system.

Mr. ZEIDMAN. No, Mr. Chairman; it is not intended as a return to the first to invent. It is suggested that the committee may wish to consider whether the benefits of existing grace period would be adequately taken care of by the preliminary application. A good deal of the answer to that question, of course, would depend upon the nature of the requirement for the preliminary application. It is quite possible that the preliminary application system would take care of the need to test and look more carefully into the potentiality of the product, which the grace period provides today. We are simply suggesting that the committee may wish to study whether the preliminary application system would adequately fill that need—a need, which we believe, is particularly important for a small firm.

Mr. EDWARDS. Thank you.

Mr. HUTCHINSON. Mr. Zeidman, how long should this grace period be?

Mr. ZEIDMAN. Well we don't suggest in our statement how long that period should be. I have heard suggestions ranging from 3 months to 6 months to a year. I would not-we are not suggesting a very lengthy personal grace period and we are not necessarily endorsing such. We are simply saying that there is such a period of time during which a small inventor may very well need to market test his product and to give further exploration to it and to experiment with it. And depending upon the nature of the preliminary application which is required, he may not be adequately taken care of unless there is some provision in that respect.

Mr. HUTCHINSON. Would this period of time, this grace period, run before his preliminary application was filed!

Mr. ZIEDMAN. Well Mr. Hutchinson if the preliminary application were indeed the short form which has been suggested it would be, then he could utilize that period between the preliminary application and the filing of the complete application in order to experiment, market test and so forth. If on the other hand, the preliminary application is required to be in effect the equivalent of a complete application, then there may very well be a need prior to that during which he can effectively experiment and market test. I might ask Mr. Davidson if he would like to comment further on this point.

Mr. DAVIDSON. It could, but if I may suggest sir, the grace period would not be a return to the first-to-invent rule because it would be personal to the inventor and the disclosure which the inventor would make during this grace period would bar the rest of the world.

Mr. EDWARDS. May I interrupt at the moment Mr. Hutchinson? Mr. HUTCHINSON. Yes.

Mr. EDWARDS. Wouldn't you be getting back into the same problems of proof that the judge was referring to, little notebooks as to whose grace periods were being utilized? You may have three or four grace periods going on throughout the country and each applicant would say his was first?

Mr. DAVIDSON. No, each inventor's disclosure before application filing would bar the other inventors.

Mr. EDWARDS. But you are getting back into that same burden of proof.

Mr. DAVIDSON. That does not follow, sir. If I may illustrate. A invents on Monday, B invents on Tuesday. A makes the disclosure, or publicly sells his invention on Wednesday. B does it on Thursday. They both file either preliminary applications or complete applications on Friday. It is immaterial which type application is filed. Neither one is entitled to the patent because A's Wednesday disclosure would bar B and B's Thursday disclosure would bar A. The only time the grace period would have any applicability is where there was no other public disclosure intervening before the filing of either the preliminary application or the complete application whichever came first.

Mr. EDWARDS. Thank you.

Mr. HUTCHINSON. I wonder if you would care to respond as to what you think a practical situation would be, even if we had the most simple kind of preliminary application required such as a short form. Of course it would have to be some kind of description of the claimed invention on that preliminary application and even if it were the shortest form, don't you suppose as a practical matter the small inventor or the small businessman would feel it necessary to employ legal counsel in order to assist him in the preparation of even a preliminary application

Mr. ZEIDMAN. Congressman, that depends upon the form of preliminary application which would be required. It has been suggested that it could be simply a speech, or a letter would take care of it. On the other hand, at the other extreme it has been suggested that it could be virtually the equivalent of a complete application. I must tell you candidly that we have been watching this development and will continue to do so with regard to the preliminary application requirements. I am certainly hopeful that it would not be necessary for a small inventor to always require a patent attorney.

Mr. HUTCHINSON. I should suppose that it would depend too, upon the inventor. Some inventors would feel that they could adequately express their ideas in writing without assistance but I feel that a gre many of them, no matter how simple you made it, would feel that it was necessary in their own interest to a fair description of what they claim even on a preliminary form to feel that they would have to employ counsel, I would suppose.

Mr. ZEIDMAN. I don't have any basis for agreeing or disagreeing with you and I would certainly not be surprised if that were the case.

Mr. HUTCHINSON. One last idea I would like to get your reaction to. The 20-year term running from the date of filing would tend to hurry things up in the Patent Office. Do you anticipate that there would be an increase in the number of interested applicants who would begin to blame the Patent Office for delays and call for additional forces of patent examiners? This would be true because this time would all be counted against their effective patent term. What I am suggesting is the possibility that as a result of this change, there would be an increasing amount of pressure upon Congress, to enlarge

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