Mr. POFF. Is there objection to having that letter appear in the appendix rather than at that point? I am thinking simply of the orderly procedure of preparing the record for publication.

Mr. GRAVES. I think possibly it might be better to put it in the appendix. You can always find these additional statements by reference. Mr. KASTENMEIER. It will be received and, as it hasn't been printed yet, we can take under advisement the exact point of reference in the record. But it will appear in the record and will be in proper order. You may proceed, sir.

Mr. GRAVES. I may state for the record the reason we have selected this Eastland letter was that it seemed to be the best document with which to work as a statement. There have been other statements.

Mr. KASTEN MEIER. The committee will hear from the Patent Office next week for a more definitive statement on that point.

Mr. GRAVES. It seemed that although Commissioner Brenner already has testified before the Senate Judiciary Committee, I didn't feel I should be quoting his testimony here at this time. I would prefer to use the Eastland letter.

Mr. POFF. I think it would be relevant, too, Mr. Chairman, to identify that letter by some date. I don't find the date on my copy.

Mr. GRAVES. It is not dated and it is not signed, Mr. Poff.

Mr. KASTENMEIER. May I note that the Commissioner of Patents is in the room? Does the Commissioner have any objection to the inclusion of this statement in the record at this point?

Commissioner BRENNER. No, sir. I think it would be a good addition to the record.

Mr. KASTEN MEIER. Could the Commissioner identify the date? Commissioner BRENNER. I believe the date is January 24, 1968. Mr. KASTENMEIER. We will assume that that is the date, then. Thank you for the information concerning this. It will be received and will be dated January 24.

(Mr. Graves' prepared statement and an appendix thereto containing (a) his letter of January 26, 1968, to Chairman Kastenmeier and (b) the letter of January 24, 1968, to Senator Eastland, are as follows:)

STATEMENT OF EBEN M. GRAVES, PRESIDENT OF THE AMERICAN PATENT

LAW ASSOCIATION

Mr. Chairman and Members of the Subcommittee, 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 thirty 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 three 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 APLA.

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 fiftythree 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 1957 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.

"(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 manufac turer 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 a most important subject matter. However, it should be kept in mind that possibly less than one-half of one 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, a 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 firstto-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 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 Comission recommendation without the crippling exception included in Section 271(b) of H.R. 5924.

Recent expressions of administrative positions 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 allow

ing the claims of a published application; also Section 154 (b) providing that a patent should expire twenty years after the effective United Sates filing date; also Section 273 (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 recommends the extension of the principle of the patent system to all of 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 twenty year patent period, and a simplified interference procedure limited as to carry back, 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". This would, of course, seem reasonable in view of the recommendation on page 5 of the letter that an absolute grace period would be considered.

(b) Grace Period.-The Administration states at pages 4 and 5 of the letter, in discussing "preliminary application" versus a grace period, that

"If a modified first-to-file rule with a time period provision as suggested above were to be adopted, it would not be necessary to eliminate the one-year absolute grace period of existing law. In fact, a one-year absolute grace period would be consistent with a modified first-to-file rule under which an inventor would be permitted to establish a priority date up to one year prior to his effective filing date for interference purposes." (Emphasis added.)

(c) Universal Prior Art.-The letter discusses at pages 5 and 6 the trends towards universal prior art without pressing for such a definition as presently in H.R. 5924, Section 102 (a). Dr. Kincaid, in his speech, indicated that the Department of Commerce was no longer pressing for a universal prior art definition at this time in view of the fact that a universal type of patent was not imminent. (d) Joinder of Inventors and Correction of Inventors.-The Administration at page 10 of its letter supports the provision of H.R. 13951, Section 116 (b) as to joinder of inventors and correction of inventors, Section 111(e).

(e) Priority.-The Administration also now supports the provision of H.R. 13951, Section 119 (b), for amending a claim of priority as discussed in Recommendation VI at page 11 of their letter.

(f) Publication.-The Recommendation VII, Publication, of the letter indicates an approach toward agreement. It points out that in view of the contemplated work schedules, there would be an allowance or final rejection of an application within twenty-four months after filing. In the event of an interference, the concern of the Administration as to delay would be met by the

APLA suggestion that the first-filed interfering application upon allowance be issued and thus published.

(g) Continuing Applications. With regard to Recommendation VIII, Continuing Applications, in view of the provision of H.R. 13951, Section 154(a), for a twenty year term for a patent, the Administration indicates at page 13 there is a common ground for agreement.

(h) Deferred Examination.-With respect to Recommendation IX, Standby Optional Deferred Examination, the letter states "the matter is not of major significance at this time in view of our anticipated work schedules". This removes a controversial issue.

(i) Citation Period.-With regard to Recommendation XI, Citation Period, it is submitted that the American Patent Law Association recommendation to eliminate Section 136(d) (3) of H.R. 13951 as to interference procedures between applications would provide a common ground for the settlement of this issue.

(j) Reissue.-Recommendation XVI, Reissue, of this letter indicates the acceptance of H.R. 13951, Sections 251 (c) and 252(b), but with the latter amended "to provide for the continued practice of an invention without payment of royalties where substantial preparations for such practice were made." This amendment raises an issue to be considered but the possibility of an agreement in a limited area is indicated.

(k) Interim Liability.—Recommendation XVII, Interim Liability, at page 19 of the letter states "the interim liability provisions of H.R. 13951 merit careful study." (Section 271 (f)). This is progress.

(1) Term of Patent.-Recommendation XVIII, Term of Patent, both H.R. 13951 and H.R. 5924 contain Section 154(b).

(m) Civil Commissioners and Advisory Council.-Recommendation XXIV, Civil Commissioners, states that the requirement for civil commissioners as provided in H.R. 5924 is no longer pressed. The same is true with regard to the Statutory Advisory Council referred to in Recommendation XXVI.

(n) Classification and Information Retrieval.-Recommendation XXIX, Classification and Information Retrieval, points out an agreed area in that both H.R. 5924 and H.R. 13951 contain Section 12(a) relating to this matter.

(0) Unobviousness.-With regard to unobviousness, page 27 of the letter, the Administration states that "in the context of the priority system having a oneyear absolute grace period which would be adopted by S. 2597 (H.R. 13951), the one-year limitation on disposing of references would be desirable. Thus, if the Committee were to recommend the priority system embodied in S. 2597 (H.R. 13951), the Department would favor the reference to one year of section 103 of S. 2597 (H.R. 13951)."

Progress is being made in developing an agreed position for consideration by your Committee although there is indefiniteness in several areas which make it difficult to determine exactly what the Administration may mean by "modified first-to-file rule". Also, the Administration has suggested no amendment to implement these suggested revisions.

However, this list of areas of some agreement is impressive and there may be additional overlapping areas which are still obscure. It is true that there remain important areas of disagreement with some of the provisions of H.R. 5924. These have been developed in the statements of Mr. Pugsley for APLA and Mr. McKie for ABA. However, it may be that this Committee will wish to consider the advisability of have before it for consideration a redrafted bill with all of the areas of agreement developed in order more specifically to consider and evaluate the areas of disagreement. I am sure that Mr. McKie will join me in an offer to supply skilled manpower to assist in such a redrafting effort.

Also, we must not lose sight of the fact that as a result of the efforts of Commissioner Brenner, in developing sound business and housekeeping procedures within the Patent Office and with the benefit of additional funds and manpower which the Congress has provided, the prosecution of applications into patents has been and can be materially expedited. The early publication of application disclosures by way of patenting has progressed to a point where the Administration has been able to modify its position as to the publication provisions of H.R. 5924. This resulted in another important step in developing areas of agreement.

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