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Mr. POFF. And the appeal would lie directly to the Supreme Court ? Mr. CAPPELLO. That is right. Mr. POFF. And your concern is that the judges that hear such cases will have some expertise in the field. Yet your proposal does not allow for the possibility that the Associate Justices and the Chief Justice of the Supreme Court may not have such expertise.

Mr. CAPPELLO. Of course, this is the area that Judge Rifkind was addressing yesterday. I think the U.S. Supreme Court is the appropriate area for broad social and economic policy to be incorporated into the decision process. This is why I am not so much concerned with the incorporation of general knowledge into the patent appeals system at the first level. I think their problem is to decide technical problems. Appeals to the Supreme Court are not very likely in patent cases, but that Court would take those cases where there are broad social and economic purposes to be served.

Mr. Poff. On page 10 discussing the award of damages by the court you suggest language which would allow the court to award costs when it "determined that the bringing or defense of the suit was undertaken not in good faith or without probable cause," I think it might be easy in some cases to decide that a case was not brought in good faith or was brought without probable cause. I would think it would be more difficult to make such a decision with respect to the defense of a suit. When a person is sued, he usually responds. Do you think that your language might encourage a defendant who was impecunious to sit on his defense, a defense he might otherwise litigate, if he thought that the judge might assume that his defense was not in good faith and that he would thereby be saddled with additional court costs and costly attorney fees.

Mr. CAPPELLO. I don't really believe so. I think you hit the nail on the head when you say a defendant will inevitably defend a suit and in this case it would be almost impossible to show that his defense was not a meritorious defense. I do believe that there may be some cases, but if I know the courts I think that their exercise of discretion in this area is going to be a rather limited one. And that is one of the reasons why I feel it is important that the legislative history indicate very clearly the purpose of the Congress in enacting this type of legislation. Because if it does not, the judge is inevitably going to say “No, we are not going to allow attorney fees and court costs in these cases." I think that is one of the problems with the language we have now. The words "in exceptional cases” lead to that conclusion, and no court costs and no attorney fees are allowed.

Mr. POFF. Do you think that the purpose you seek might be served as well by comments in the committee report as by language in the statute.

Mr. CAPPELLO. I would prefer both, frankly, Mr. Poff.

Mr. Poff. You have had some experience before the courts before, haven't you?

On page 13, you recommend the inclusion of the Commission's recommendation No. XXII. In testimony before the subcommittee earlier the man responsible for the enforcement of the antitrust laws spoke otherwise about recommendation XXII. I understand you are speaking for small business interests. Would you care to be more

specific about why you think recommendation XXII would promote the interests of small business concerns ?

Mr. CAPPELLO. I think that it will promote the interests of small business concerns primarily because their legitimate activity in licensing, cross-licensing, mergers, the whole gamut of tying arrangements, if I may use that term, the whole gamut of tying arrangements between small businesses, does not have the odor that it does with large business. And I think that it is necessary in some cases to encourage small businesses to do this sort of thing. As a matter of fact I believe that the Small Business Act contains a specific exemption from the antitrust laws which was designed to encouraged this, but it has never been implemented, to my knowledge. So to the extent that the law can be clarified to say where there are no improper antitrust connotations to this type of activity, many small businesses, who may now be reluctant to tie themselves to other businesses, because of the antitrust implications, will be encouraged to do it. And I might state also, that we believe that the bulk of antitrust enforcement by the Justice Department and by the Federal Trade Commission in connection with, not necessarily patents, but mergers and other similar types of activities, the bulk of these activities are directed against small and medium businesses, who really don't effect that restraint of commerce which the antitrust laws are directed against.

Mr. POFF. As I understood your recommendation if the committee grants standby authority for deferred examination you would favor additional language which would require the Patent Office to submit its plan to the Congress and the Congress to pass a resolution approving the implementation of the standby authority; is that correct?

Mr. CAPPELLO. That is correct, Mr. Poff.

Mr. POFF. Do you have any language to implement that recommendation ?

Mr. CAPPELLO. We will attempt to submit such language. We believe this is one area that should be presented to the Congress for a determination once we have had some sort of experience with these deferred filings. We believe the determination should be made at that time by the Congress based on the record which the Patent Office is able to produce.

Mr. POFF. You oppose the recommendation that the Patent Office be granted authority to fix fees. What fears prompt your position on that point ?

Mr. CAPPELLO. The general fear that we expressed in our testimony, that the interest of small business inevitably will be disregarded, because this is the easiest thing to do. Now we have in the Congress a forum where, if we are hurting very badly, we can get a little attention. But I don't think this is particularly true of the administrative agencies.

Mr. Porf. Does the Patent Office today in the present law have some discretion in the fixing of small fees of an administrative nature?

Mr. CAPPELLO. I don't believe I can answer that question, Mr. Poff.

Mr. POFF. One final question, you've made a series of recommendations for changes in the bill, recommendations which in whole or in part are at odds with the recommendations of the Commission. You have not undertaken to assign any priorities to your recommendations.

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And my question is, Is there one recommendation without the approval of which you would feel obliged to oppose the bill?

Mr. CAPPELLO. So much of the structure that is proposed by the bill is interrelated; so many of the provisions are interrelated, I could not address myself to such a specific proposal. I think the whole structure has to be examined. I think it has to be made a workable whole and I think no particular provision is good or bad without reference to practically every other provision in the legislation. So I could not give you an affirmative answer to that, Mr. Poff.

Mr. Poff. Well, I don't want to harass you, but I'd just like to pursue the point a little further. Do you regard one of your recommendations more vital than another?

Mr. CAPPELLO. I would say that if we had a vital recommendation it would be the recommendation that a personal grace period be provided.

Mr. POFF. I yield to my colleague.
Chairman KASTENMEIER. The gentleman from Michigan, Mr.
Hutchinson.

Mr. HUTCHINSON. Mr. Cappello, I'd like to discuss a minute this concept of a personal grace period, as it fits into the idea of the firstto-file system. Now I understand you to say your association favors the first-to-file concept but you also want this grace period. Now do I understand correctly that by a grace period you mean a period of time, perhaps as much as a year during which an inventor might be protected in his rights without filing any kind of an application with the Patent Office but during that time he could try out his invention, perfect it, find out just what he had, and so on, and the actual fact that something had been invented by him might be—while unpublished—might be known throughout industry. During that period of time this would be a grace period but on the other hand all of the impetus of this bill would favor the man who was first to file. I can't make those two concepts fit together because I would think that this man doing all of this 1-year period, he would realize that no matter what, he would have to get in there ahead of somebody else who filed ahead of him. Now do I have a misconception?

Mr. PERRY. I think basically, Mr. Hutchinson, that the first-to-file concept, on behalf of the Commission and ourselves, is to promote the inventor and actually getting this information to the Patent Office as expeditiously as possible. Basically, the Patent Office exists to give the American citizen the benefit of the latest technical advancements. Today we have instances where inventors intentionally withhold information that in many instances is vital to the American public. He does this most generally because we are now in an era where again our technological advancements have been so rapid. If I can use a hypothetical example, a number of years ago we had what we refer to as dynamite, several years later we had TNT, today we have hydrogen bombs. Each of these three things will do one thing; each will destroy. And if you were today to dump all of the information relating to these different commodities, with no priority existing, into the hands of competent inventors, the people working on dynamite obviously would have this product available rapidly because it is not too complex. TNT would follow quickly. But if you consider the

hydrogen bomb—and this is again hypothetical-you have a first benefit, you have secondary benefits, and fringe benefits.

Now to be comprehensive and provide what we must, it takes time for research and this cannot be accomplished in a matter of days. We feel that to submit basic information is good, so that it can be more readily available. However, this could be in the form, and I could use a personal case as an example, in the electronics field where original invention disclosure was a two-and-a-half-page document. Some 212 years later the file information which was submitted to patent attorneys to be presented in the form of a patent application was some 10 pages of information. The application when submitted was also 50 pages. Now this, in terms of pages, doesn't sound like much, but there are so many aspects that must be considered to provide for the Patent Office information that would not be regarded as trash, and it takes time to do it. And in the case of Mr. Cappello's example, as related in his formal statement, even after this information is worked with and developed you still find areas that you had not exploited. Under the first-to-file concept, if you take a large industrial complex or corporation with a staff of 50 engineers working on å given program, the concept may be filed. One of the engineers the next day might go to another place and start another chain of events which can lead to a first-to-file concept which, in turn, would lead to another and by the time they present the concept in its final form you would have so much existing priority form different sources, the beneficial patent would be precluded from issuance.

Mr. HUTCHINSON. Well then are you arguing against the first-to-file concept?

Mr. PERRY. No; what we are emphasizing is that the first-to-file concept is good to get the information on record, but we want to qualify this by saying that the inventor, also, in doing this must have more time to present comprehensively to the Patent Office the backup data to make a complete disclosure.

Mr. HUTCHINSON. I can understand that argument alright except that the inventor realizes that under this first-to-file concept his patent rights are going to depend upon his getting there first. Under the present system if I understand it if he actually is the first inventor he is protected but under this new—under this bill in order to protect his rights he's got to get there first. And while he may desire to have a year or 2 years or whatnot, in order to better perfect his claims prior to his filings, this other thing is going to urge him on, he is going to rush it, he is going to be urged to rush-in other words the whole thing suggests to me that we are going to get a tremendous lot of claims. I don't know. I would count it as frivolous but it might prove to be quite—what you may call trashy—simply because you have got to get it in there in order to protect yourself.

Mr. CAPPELLO. May I interject something here, Mr. Hutchinson, in this regard. I think that one of the problems the small people faceand I have faced it myself—is that an inventor's idea, in connection with existing technology, is not necessarily the province of one man. Many, many people come up with it—the same logical conclusion as to the next stage in the development of any particular type of art. What we have now is an almost impossible situation from the standpoint of the small man. I am not going to suggest that people falsify their records which are produced to substantiate their claim of prior invention, but I am going to suggest that the most equitable situation is that of the various people who all go down the same line. The one who ought to be entitled to the patent rights is the first one to get there with a reasonably complete application. The personal grace period merely means that

any intervening art which may be developed is not going to be cited against that particular individual inventor. So I don't think the two answers are inconsistent.

Mr. HUTCHINSON. Well I thank you for the explanation. I had some questions about your appellate procedural ideas, but I think you sufficiently answered them in response to Mr. Poff, so I don't think I will pursue them further at this time.

Chairman KASTENMEIER. The gentleman from Delaware, Mr. Roth.

Mr. Roth. I have only one question. I'd like to go back again to this concept of a preliminary application. Is it possible irrespective of what your language is, for an individual inventor to make the application himself, or isn't it always going to be necessary for him to go to the patent attorney to protect himself.

Mr. CAPPELLO. Well I certainly think with the language that is in the proposed legislation now, that it is impossible for the individual inventor to file the application.

Mr. Rors. Do you think any language can be developed that would make it sufficiently simple, so the individual inventor could do so?

Mr. CAPPELLO. Mr. Roth, we are going to try to develop such language. We have some definite ideas how this should be done. But again I would like to suggest that if we have a sufficient personal grace period, as far as the individual inventor is concerned, this will tend to eliminate the problem of the preliminary application, because the inventor within a period of a year should be in a position to file a substantially complete application. And if he has the ability to file a continuation, and continuations in part, and to apply for reissue in appropriate cases, he will be able to improve his claims as time goes on.

Mr. Roth. Going back to the other concept just a minute, I think you used language reasonably related to the disclosure. Now as I understand, one of the principal purposes of course is to avoid interference proceedings or at least to minimize them, would you run the danger with the language of "reasonably related" of having considerable litigation as to whether or not it is reasonably related. Wouldn't we be back in the same bind ?

Mr. CAPPELLO. I believe, Mr. Roth, we are going to have some type of litigation, inevitably, connected with preliminary or complete applications, filing dates, and intervening art. I think, inevitably, some type of litigation will result. I do believe, however, that the use of the first-to-file concept is going to substantially reduce this type of interference, used in a broad term of interference litigation.

Mr. Roth. One final question. Going back to your statement that there is going to be some litigation whatever scheme is devised, is the real solution perhaps to be found in your proposal of how the matter is to be litigated, is this where we can simplify it?

Mr. CAPPELLO. This is the area where the cost to the individual inventor can be reduced. This is the problem for the small businessman, the small inventor—the litigation cost. Our proposals, hopefully, are directed toward reducing the cost of litigation. We can't eliminate

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