existing and that Mr. Graves would discuss areas of compromise and reconciliation.

At this time, the committee is very pleased to welcome to the committee Mr. Eben M. Graves, president of the American Patent Law Association. You have accompanying you today Mr. Frank Pugsley, who is immediate past president of your association.

You gentlemen are both welcome before the committee. You may proceed, sir, if you will. Your statement is somewhat less lengthy than the preceding one. Do you care to offer it for the record?

STATEMENT OF EBEN M. GRAVES, PRESIDENT, AMERICAN PATENT LAW ASSOCIATION, ACCOMPANIED BY FRANK B. PUGSLEY, FORMER PRESIDENT, AMERICAN PATENT LAW ASSOCIATION

Mr. GRAVES. I do offer it for the record. May I make a comment or two, Mr. Chairman?

It is shorter because I have relied, of course, on the earlier testimony of Mr. Pugsley, and also have had the benefit of Mr. McKie's statement. Our views generally parallel those of the American Bar Association with regard to the two pending bills and the Poff bill and H.R. 5924.

If I may, I will proceed.

I am Eben M. Graves, a partner of the firm of Brumbaugh, Free, Graves & Donohue in New York City. I have been practicing patent law for over 30 years.

As president of the American Patent Law Association, I appreciate this opportunity to testify with regard to the pending bills relating to the revision of the patent statutes. I am accompanied by Mr. Frank B. Pugsley, immediate past president of the American Patent Law Association, who testified before you on June 8, 1967, with regard to H.R. 5924.

NATURE AND DELIBERATIONS OF THE AMERICAN PATENT LAW ASSOCIATION

Mr. Pugsley, in his testimony before you on June 8, 1967, set forth in some detail the background and composition of our American Patent Law Association organization as well as the details of the extensive amount of time which our organization, through its committee procedures, questionnaires, and meetings has spent in considering, reviewing, and revising, over the past 3 years, the suggestions of the President's Commission and, later, the proposed statutory changes in title 35 of the United States Code.

I mention this because I believe it provides a solid basis for you to weigh the expressed position of APLÁ.

PRIOR STATEMENTS

Mr. Pugsley, in his statement before you on June 8, 1967, considered in some detail the provisions of the administration bill, H.R. 5924.

Mr. Edward McKie, in speaking for the American Bar Association, has reaffirmed generally similar positions with respect to H.R. 5924. Mr. McKie has also directed his statement to the Poff bill, H.R. 13951, which is the counterpart of the Dirksen Senate bill, S. 2597.

He has pointed out that there have been further amendments proposed with regard to the Poff bill, H.R. 13951, growing out of the resolutions approved at the Honolulu conference of the American Bar Association.

THE POSITION OF THE AMERICAN PATENT LAW ASSOCIATION

The position of the American Patent Law Association is expressed in the 53 resolutions which were approved at its May 1967 meeting in Boston. Inasmuch as these resolutions conform most completely, with one major exception, with the Poff bill, the American Patent Law Association strongly urges the adoption of H.R. 13951.

The important change that the American Patent Law Association urges in H.R. 13951 is the elimination of section 136 (d) (3) which permits an interference between pending applications. It is the position of the American Patent Law Association that an interference should be provoked only by an applicant and with respect to an issued patent.

This change not only would eliminate interferences between pending applications but would expedite the availability of the patent disclosure to the public. This change also, we believe, would bring H.R. 13951 into line with the recently modified administration position.

The association's suggested interference procedure was set forth in our letter to Mr. Kastenmeier of January 26, 1968, in response to a request made to Mr. Pugsley at the time of his testimony before this committee.

THE IMPORTANCE OF OUR PRESENT FIRST-TO-INVENT SYSTEM

The President's Commission and the administration have reaffirmed that our present patent system plays an integral and critical part in the success of our economic system. It is also recognized that it is unique in many ways from all other patent systems throughout the world. It is these unique features which make it the critical factor it is in our economy.

The President, in his letter of transmittal of the Patent Reform Act of 1967 to the House, H.R. 5924 (S. 1042), outlines the threefold purposes which, if achieved, would meet most of the criticisms that have been leveled at the Patent Act of 1952.

Its purposes are threefold:

(1) To raise the quality and reliability of U.S. patents.

(2) To reduce the time and expense of obtaining and protecting a patent. (3) To speed public disclosure of scientific and technological information.

The first purpose listed involves quality and the other two involve essentially time.

The inventor should receive a patent upon which he can rely. The public should have the benefit of prompt disclosures for technological growth and a manufacturer should know as soon as possible what his problems may be with regard to infringement.

The present procedures to determine the first inventor between interfering applications are particularly charged with preventing the prompt disclosure and issuance of patentable subject matter. Interferences have been a problem and are strenuously contested because they often involve most important subject matter.

However, it should be kept in mind that possibly less than one-half of 1 percent of the applications filed become involved in an interference.

It is the responsibility of every citizen to make certain that our patent system is improved and kept current with our expanding economy. However, it is just as important that all basic changes proposed be most carefully considered to determine whether they undermine the unique factors which have made our patent system vital.

The question is what improvements can be made which will maintain the rewards which give incentive and stimulus to the inventor and which will make available expeditiously to the public, full and considered disclosure so as to thereby provide the technology for another solid building block.

Our position is that H.R. 5924 does not improve our patent system. Broadly speaking, it reforms it into a different patent system— one associated with a different economic system.

In many European economies the patent does not play a vital or critical part in making the economy tick and it is possibly this failure that has brought on the widening technological gap about which Europeans have now become concerned.

CHANGES PROPOSED BY H.R. 5924 WHICH THE AMERICAN PATENT LAW ASSOCIATION OPPOSES

Mr. Pugsley, in his statement as well as his oral testimony on June 8, 1967, has set forth the position of our association as strongly opposed to the more fundamental and far-reaching changes proposed by H.R. 5924, such as the first-to-file system, the elimination of the grace period, universal prior art, deferred prosecution, publication before allowance, as well as certain other specific proposals.

In view of the complete statement by Mr. Pugsley on H.R. 5924, as well as the parallel comments made by Mr. McKie for the American Bar Association, I will not make, at this time, further detailed comments.

COMMISSION'S RECOMMENDATIONS FAVORED BY AMERICAN PATENT LAW ASSOCIATION BUT WHICH WERE OMITTED FROM OR MATERIALLY ALTERED IN H.R. 5924

I want to urge again favorable consideration by this committee of two provisions recommended by the President's Commission on the Patent System. One recommendation was omitted from H.R. 5924, and the other included but with a crippling amendment.

The first of these is the Commission's recommendation XXII, providing that the rule of reason shall constitute the guideline for determining patent misuse. The doctrine of patent misuse is plagued by so many conflicting decisions that patent owners and businessmen are unable to determine how they can safely and properly deal with patent rights.

Adoption of the general test of reasonableness with respect to patent contracts having a direct relation to the invention covered by the patent would be an important step toward clarification of the doctrine.

Accordingly, the association recommends that legislation implementing recommendation XXII be enacted and, in this connection, we

support section 263 of H.R. 13951 and reiterate the fine statement of Mr. McKie on this point.

The association also notes that recommendation XXI of the President's Commission, to the effect that importation of a product made abroad by a process patented in the United States should constitute an act of infringement, was subjected to a crippling amendment before its inclusion as section 271(b) of H.R. 5924.

This association supports the recommendation as originally presented by the President's Commission as embodied in section 271(b) of the Poff bill, H.R. 13951. The exception provided in the administration bill, H.R. 5924, would force the American inventor to attempt to patent the process in every country throughout the world and, at the same time, it would invite a potential infringer of the new process to seek out a country in which patent protection had not been obtained or was ineffectual, and then move his manufacturing facilities to that country for the purpose of using the new process to make products for the American market.

Such an infringer, not bearing any portion of the research expense leading to the development of the process, and having available cheaper foreign labor, would have a substantial advantage over American manufacturers who were using the process under a license from the inventor.

The association feels that such an advantage would be unfair, and supports the President's Commission recommendation without the crippling exception included in section 271(b) of H.R. 5924.

RECENT EXPRESSIONS OF ADMINISTRATIVE POSITION INDICATED POSSIBLE AREAS OF AGREEMENT

The American Patent Law Association is most encouraged by the present attitude by the Department of Commerce and the Patent Office. They are giving serious reconsideration to several provisions of H.R. 5924 about which we have been concerned and they have shown a willingness to accept suggestions as to revisions.

Mr. Pugsley, in his testimony, has indicated certain provisions of H.R. 5924 supported by the American Patent Law Association. For example, these areas of agreement include the proposals of section 111 permitting the owner of an invention, whether or not he be the inventor, to file the patent application, provided the inventor be named therein; also section 116 authorizing less rigid requirements for joining co-inventors and the liberalization of filing procedures in such cases; also section 136 which allows interested parties to call to the attention of the Patent Office prior art which may have been overlooked in allowing the claims of a published application; also section 154(b) providing that a patent should expire 20 years after the effective United States filing date; also section 274 (section 271 (f) of Poff) by which the owner of a published patent application may collect damages from an infringer who has received notice of infringement of a valid allowed claim of the application.

However, the association disapproves the second sentence of section 273 (c) as unnecessarily limiting the equitable remedies available in cases of infringement use after issuance of the patent.

Also the association notes with approval the provisions in H.R. 5924 for plant patents (sections 161, 162, 163, and 164) and recom

mends the extension of the principle of the patent system to all the agricultural arts.

These sections of H.R. 5924 supported by the American Patent Law Association are also to be found in the Poff bill, H.R. 13951.

The area of agreement has been materially enlarged by the change of position recently announced by the administration. Dr. John F. Kincaid, Assistant Secretary of Commerce, indicated several areas of compromise in his speech to our association on January 24, 1968, and stated he had requested the Commissioner of Patents to work with the organized bar "in an all out effort to reach agreement on the best way to modernize the patent system."

Copies of his speech were released at that time as well as a letter from the General Counsel of the Department of Commerce to the Honorable John O. Eastland, setting forth in greater detail areas of overlap and areas of compromise. Copies of these papers have been made available to this committee.

These new suggested areas of compromise have and are receiving our serious consideration and the American Patent Law Association is most encouraged by this further progress toward an agreement between the administration and the patent bar.

The letter to Senator Eastland is the most explicit statement of the administration's position so that, with your permission, our statement will be made with reference to it. This letter indicates a shift from the first-to-file rule of H.R. 5924 to a modified first-to-file rule. The exact meaning of this phrase is not clear. If, however, the several references to a "modified first-to-file rule" in the context of the letter can be interpreted as meaning, in fact, a first-to-invent system, coupled with an absolute grace period, a 20-year patent period, and a simplified interference procedure limited as to carryback, then real progress has been made in compromising the views of the patent bar and the administration.

(a) Preliminary applications. The administration states in recommendation II, page 7, of the letter that "on the other hand, if a modified first-to-file rule were to be enacted, and a grace period retained, there would not be the same necessity to provide for preliminary applications."

Mr. KASTENMEIER. If I may interrupt, the letter to Senator Eastland, without objection, will be incorporated in the record.

Mr. POFF. I concur. I was about to suggest the same thing. As a matter of procedure, do you think it would be better to insert it in context with the statement made, or as a part of an appendix to which reference might appropriately be made by future witnesses? Mr. GRAVES. I would be inclined to put it in as an appendix, Mr. Poff.

Mr. KASTENMEIER. Yes. Following your statement, which I think has been sufficiently changed so that perhaps the entire statement should be received and made a part of the record, that can appear as an appendix to it without objection.

Mr. POFF. Mr. Chairman, in the same spirit, I wonder if the witness would like to incorporate the body of the letter of January 26, 1968, addressed to Mr. Kastenmeier, referred to on page 3 of his statement? Mr. KASTEN MEIER. I am informed by counsel that that already is part of the record.