GENERAL REVISION OF THE PATENT LAWS THURSDAY, MAY 18, 1967 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE No. 3 OF THE The subcommittee met, pursuant to recess, at 10:15 a.m. in room 2226, Rayburn House Office Building, Hon. Robert W. Kastenmeier presiding. Present: Representatives Kastenmeier, Edwards, Poff, and Hutchinson. Present also: Herbert Fuchs, counsel, and John W. Dean III, associate counsel. Mr. KASTENMEIER. The subcommittee will come to order for further hearing and consideration of H.R. 5924, the Patent Reform Act of 1967. This morning we are pleased to have as our first witness the Honorable Eugene M. Braderman, Deputy Assistant Secretary for Commercial Affairs and Business Activities, Department of State. Mr. Braderman, you are quite welcome. Will you identify your colleagues. Mr. BRADERMAN. Yes, Mr. Chairman. I am accompanied by Mr. Harvey Winter and Mr. Simon Tucker, who are in the Business Practices Division in the Department of State. Mr. KASTENMEIER. Mr. Braderman, you may proceed. STATEMENT OF HON. EUGENE M. BRADERMAN, DEPUTY ASSISTANT Mr. BRADERMAN. Mr. Chairman and members of the committee, I am delighted that you have given me the opportunity to present to this committee the views of the Department of State on this important bill, the Patent Reform Act of 1967, H.R. 5924. We believe this bill will, if enacted, establish a modern and effective patent system. The bill, as the committee well knows from its hearings to date and from its own studies, was shaped from the recommendations of the Report of the President's Commission on the Patent System. I was privileged to participate in the work of the Commission as an Observer representing the Secretary of State. In my judgment, the Commission did an outstanding job of giving careful and objective consideration to all of the important domestic and international aspects of patent protection in developing its recommendations. In the Department's judgment, this legislation will make a significant contribution to the interests of the United States in the international patent field. It could provide guidelines for other nations which may be developing patent systems of their own or considering changes in their current patent operations. It would also make easier our ultimate participation in an international patent system. Before commenting on specific features of the bill, I would like to discuss briefly some of the problems in the international patent field today and why we believe this legislation will help to resolve these problems. During the past two decades patents have assumed a role of growing importance to American industry at home and abroad because of unprecedented technological development and the rapid expansion of international trade in this period. Not only are U.S. companies filing more applications at home than ever before in our history but they are also undertaking more and more foreign filings. Thus, in 1965 our firms filed more than 100,000 applications outside the United States. Further, the nationals of other industrialized nations are also filing increasing numbers of applications in their own countries and abroad. In 1965 about 650,000 applications were filed worldwide, representing an increase of more than 50 percent in 10 years, with a large part of this increase due to foreign filings. As a result, two critical problems have arisen. First, examining patent offices such as those in the United States and Germany have been faced with large backlogs of patent applications. Duplication of effort contributes heavily to these backlogs. About half of the estimated 650,000 applications filed worldwide in 1965 were duplicate or multiple filings of the same invention in two or more countries. The second problem concerns the applicant who wants to file abroad in two or more countries. Such an applicant is confronted not only with the task and cost of prosecuting the same application in several countries but also with the burden of prosecuting each application under different laws and procedures. Since patent rights are closely tied to much of our international trade and investment activity, both of these problems have an adverse effect on related business planning and decisionmaking. It has become increasingly clear to this Government-and to governments of other industrialized nations-that far-reaching steps must be taken to deal with these problems. Government is not alone in recognizing this need. So is industry. In February of this year, for example, the Patents Committee of the National Association of Manufacturers-a committee with broad representation from large and small industry and private patent attorneys-indicated its support for updating U.S. patent laws and procedures and coordinating such efforts with other countries. The NAM Patents Committee has stated that the "urgency for action by governmental agencies has increased" because of the (a) backlog problem. (b) continuing technological progress and increasing international trade, and (c) new national and regional patent law approaches which "increase the complexity of international coordination." The NAM committee noted that "the entire patent system concept is in jeopardy and in a state of flux-need for action has become evident." Various national patent offices have taken unilateral actions in recent years to attempt to resolve or alleviate some of their pressing problems. For example, the U.S. Patent Office has initiated changes in its procedures and practices aimed at increasing examining efficiency and has added personnel in an effort to control patent application backlogs. Several countries have already made or are presently considering changes in their patent laws to cope with the situation. We do not believe, however, that unilateral action alone will provide a long-term solution either to the problems of patent offices or to those of applicants. It is our view that international cooperation is necessary. In this connection, the U.S. Patent Office has in recent years developed programs in two major areas: (a) cooperative studies and exchanges of search results on a bilateral basis; and (b) cooperative multilateral programs in the documentation area which are aimed principally at developing improved search files and techniquesmechanized searching, for example. Other efforts at international cooperation in the patent field, particularly in Europe, should be noted. The work of a committee of patent experts in the Council of Europe resulted in three conventions which are aimed at harmonizing the formalities of patent applications (1953), the adoption of an international patent classification system (1954), and harmonizing certain points of substantive patent law (1963). The first two conventions are in effect. The United States is not a party to any of these conventions. Two other Western European efforts to deal with patent matters multilaterally should also be noted. These are the draft European Patent Convention to establish a single patent for the six EEC countries and the Nordic patent system for the mutual recognition of patents issued by Denmark, Norway, Sweden, and Finland. Both of these projects are still under consideration. International cooperation in the patent field with a view to improving patent protection abroad is especially important to the United States because of the extensive foreign patent interests of American industry. Foreign patents are of particular importance and interest to American corporations with multi-national interests. Such corporations look for markets on a worldwide basis and consider foreign patenting programs in this context. Corporations of this type may file for a patent on the same invention in five or more countries. As more and more firms, large and small, engage in international activity, the problem will grow. This development, of course, is not exclusively a phenomenon of the United States but may be found in virtually every industrialized country. Therefore, as I have noted earlier, the major industrialized nations, including the United States, are actively supporting a policy of international cooperation to attempt to resolve pressing patent problems. I would now like to deal with some specific provisions of H.R. 5924 which are important in terms of our foreign policy objectives. One of the major objectives set forth in the report of the President's Commission on the Patent System was "to make U.S. patent practice more compatible with that of other major countries, wherever consistent with the objectives of the U.S. patent system." I emphasize that because it was firmly the conviction of the Commission that what was recommended should be good for the United States. That was the first criterion. The keystone of the recommendations of the President's Commission is in our view the recommendation that the United States adopt a first-to-file system to determine which invention has priority when two or more persons apply for a patent on the same invention. This recommendation is reflected in section 102 of H.R. 5924. The institution of a first-to-file system is most important from the viewpoint of harmonization with the practices of almost every other country. Only three out of 77-Paris Union member states-the United States, Canada, and the Philippines-do not have this system. The Canadians had a Commission a few years ago that recommended a change in the system. The institution of a first-to-file system would result in the elimination of the interference procedure which is followed under our present law in cases where there are competing claims to an invention and the question must be resolved as to who invented first. Foreign experts have claimed that our "interference procedure" is a violation of article 2 of the Paris convention concerning "national treatment" because the foreign national is almost always limited to his convention priority date in such a proceeding whereas the U.S. national may introduce evidence establishing a date which may often be substantially earlier— that is, the so-called conception date as the date from which his rights are determined. As a result, this procedure has been an irritant in our industrial property relations with certain Western European countries. The elimination of the 12-month grace period-also dealt with in section 102-is significant in terms of foreign economic policy in that U.S. inventors no longer would forfeit their foreign patent rights through disclosures made in reliance on it. Foreign patent rights are of great potential value to American industry-small as well as large. They may be used to promote exports, and they do, serve as a foundation for establishing an overseas manufacturing operation, and they do, or they may be licensed to foreign entrepreneurs on a royaltybearing basis. All of these uses are of great consequence in relation to our balanceof-payments situation. According to Department of Commerce estimates, in 1965 the licensing abroad of intangible property, that is, patents, unpatented know-how, trademarks and copyrights brought into the United States about $650 million in royalties and management fees associated with licensing arrangements. Although there is no breakdown for the proportion that came directly from patent licensing, it seems certain that it is substantial in view of the large number of foreign patents held by our nationals. These figures do not take into account the value of exports of products covered by American-owned patents in various foreign markets which in some cases might be lost to foreign manufacturers. The extension of prior art to include foreign knowledge, use, and sale from a foreign policy viewpoint would be important in terms of encouraging acceptance of a common definition of universal prior art. Not all of the industrialized countries operate on a universal prior art basis, but the trend seems to be in that direction. For example, the Council of Europe treaty on unification of substantive patent law has this standard of prior art. And in a world which is being made smaller every day by the rapid advances in transport and communications, any other approach would appear to be a step backward. This bill would also in our view make an important contribution toward the "ultimate goal" of a "universal patent," set forth in recommendation XXXV of the Commission's report. Thus, the first-to-file provision, in addition to its importance in terms of harmonization and simplification, is also a necessity if a universal patent system is ultimately to be achieved. Provision for universal prior art is also an essential element in a universal patent system, for a single application for a universal patent could not be evaluated against prior art if the prior art base differs among the countries encompassed in such a system. Further, retention of the present grace period in the United States would be inconsistent with the evaluation of patent applications under a uniform standard of novelty and priority of invention, which would be essential to a universal patent system. As a first step, and largely as a result of the impetus provided by the President's Commission on the Patent System, the United States initiated a resolution in the Executive Committee of the Convention of Paris for the Protection of Industrial Property looking toward the development of a multilateral system designed to eliminate or alleviate the duplication of effort on the part of patent applicants and patent offices. This resolution was adopted and the secretariat for the Paris convention-BIRPI (United International Bureaux for the Protection of Intellectual Property)-has been developing a plan within the framework of the Paris convention which would provide for central filing and the issuance of certificates of patentability. I understand that the plan will be made public on May 31. This plan would in no way impinge on national sovereignty, and this is one of the important features of it. Mr. POFF. Do you think that is in harmony with the work being done in connection with the EEC countries to which you referred earlier? Mr. BRADERMAN. Yes, sir. The plan does not provide for the issuance of an international patent. U.S. patents will continue to be issued by our Patent Office, and the decision to issue the patent will be made by our Patent Office under our national patent law. Nor does the plan provide for any supra-national court, or contain any prescriptions as to specific matters after grant of the patent. However, it would help to eliminate or alleviate the duplication of effort among participating examining patent offices in that the searching for novelty and examination for patentability would only have to be done once rather than several times. Further, it would save money for patent applicants in that a single international application would extend to all the countries designated by the applicant. Finally, the plan would result in savings for taxpayers in examination countries like our own since it would reduce the workload of patent offices in participating countries. If this project is successful, it will result in an international treaty which would require the advice and consent of the Senate. It will also require implementing legislation which would come before your committee, I assume, Mr. Chairman. In conclusion, may I say, Mr. Chairman, that the dynamic events of the 1960's in the industrial property field point up the desirability |