of other types of lawsuits, and that such separation and specialization seems, on balance, a step in the wrong direction." We feel that this comment is equally applicable to the appellate review plan of S. 2597 and therefore strongly oppose its enactment.

RECOMMENDATION NO. XV: CANCELLATION

Under existing law, the United States Attorney General is the only person who can institute a suit to cancel a patent. Walker Process Equipment Inc. v. Food Machinery & Chemical Corp. 382 U.S. 172 (1965). There is no authority for the cancellation of patent claims by the Patent Office except as a result of a decision in an interference proceeding adverse to the patentee under section 135. The President's Commission recommended that the Patent Office, upon receiving a relatively high fee, consider prior art cited by the public within a three year period after issuance of the patent. The patent owner would have an opportunity to rebut an adverse determination of patentability and to narrow the scope of the claim. A final determination adverse to the patentee would result in the cancellation of the claim. Anyone unsuccessfully seeking cancellation of a claim would be required to pay the patent owner's reasonable cost of defending such claims, including attorney's fees.

The Patent Reform bill adopts the Commission's recommendation [§ 257]. The person petitioning the Patent Office to obtain a determination that a claim of a patent is invalid must pay a fee of $500 and may be liable for attorney's fees up to $1000.

S. 2597 has no provision for cancellation of a claim from an issued patent. Although the citation provisions of section 136 go far to protect the public interest, the Department supports the provision of a supplementary period after the issuance of a patent by which the public could question the validity of the patent.

RECOMMENDATION XVI: REISSUE

Under existing law a patentee may apply for a "reissue patent" to correct errors in the original patent. The scope of the claims in the original patent may be broadened if the reissued patent is "applied for within two years from the grant of the original patent." There is a provision for the intervening rights of third parties whose activities prior to the reissue were not infringements (35 U.S.C. 252).

The President's Commission recommended that "a claim shall not be broadened in a reissue application." The Patent Reform bill adopts this recommendation in section 251 (c).

On the other hand, S. 2597 would permit the broadening of a claim but would change the two year period to one year. [§ 251 (c)]. S. 2597 would also retain the existing substantive law on the protection of the intervening rights of third parties [§ 252 (b)].

By reducing the period during which a broadened reissue could be filed, S. 2597 represents a not unreasonable compromise between S. 1042 and existing law. If the reissue provisions of S. 2597 are adopted, however, we would urge that section 252(b) be amended to provide for the continued practice of an invention without the payment of royalties where substantial preparations for such practice were made.

RECOMMENDATION NO. XVII: INTERIM LIABILITY

Under existing law, liability for the infringment of a patent begins on the day it is granted. In view of the recommended publication of patent applications prior to the issuance of a patent [Recommendation No. VII], the Commission recommended that the owner of an invention be protected against the unauthorized practice of the invention by third parties after publication of the application but prior to the grant of a patent. Accordingly, the Commission recommended that the owner of a patent, under certain circumstances, be permitted to collect damages for the unauthorized practice of the invention by third parties during the interim period after publication of an application but prior to the grant of a patent.

The Patent Reform bill adopts the Commission's recommendation and provides in section 273 that a patentee after issuance of a patent may obtain damages for the unauthorized practice of the patented invention during the interim period. S. 1042 limits these damages to reasonable royalties and provides that "no injunction" may be had with respect to subsequent use or sale of items made prior to the patent grant for which the patentee has elected to obtain such damages.

Under the interim liability provisions of S. 2597, an applicant need not have an allowed claim in a published application to obtain reasonable royalties for its infringement so long as it also appears in the issued patent. In addition, the patentee does not have to elect between damages or an injunction until he actually brings suit. Under the Patent Reform bill, the applicant elects to recover damages by notifying an alleged infringer of his unauthorized practice of the invention. Although there may be a slightly greater opportunity for harassment under the interim liability provisions of S. 2597, the opportunity for an applicant to request early publication and obtain reasonable royalties for the unauthorized use of the invention defined by any claims which also appear in the issued patent would encourage prompt publication. Accordingly, we believe that the interim liability provisions of S. 2597 merit careful study.

RECOMMENDATION NO. XVIII: TERM OF PATENT

Under existing law, the term of a patent is seventeen years from the date the patent is granted.

The Commission recommended that "the term of a patent shall expire twenty years after its earliest effective U.S. filing date."

This recommendation is adopted in section 154 (b) of both the Patent Reform bill and S. 2597. The Department considers it extremely important that the provision of a twenty-year term from filing be included in any legislation enacted by the Congress.

RECOMMENDATION NO. XIX: SECRECY ORDER

Existing Title 35 provides in section 181 that the issuance of a patent may be delayed whenever publication or disclosure by the grant of a patent will be "detrimental to the national security." Since the term of a patent under existing law is measured from the date the patent is granted, the term is not shortened by a secrecy order. In addition, section 183 provides that any applicant whose patent is delayed may recover compensation for the damage caused by the order of secrecy.

The Commission, in view of its previous recommendation that the term of the patent be measured from its U.S. filing date rather than its issue date, recommended that "the term of a patent, whose issuance has been delayed by reason of the application being placed under secrecy order, shall be extended for a period equal to the delay in issuance of the patent after notice of allowability."

The Patent Reform bill adopts in section 154 (c) the recommendation of the Commission and also retains section 183 of existing law.

Under S. 2597 the term of a patent delayed by an order of secrecy would not be extended to compensate for the delay. Section 183 of the existing law would be retained in S. 2597.

Although the provisions of section 183 would be operative under the provisions of both S. 1042 and S. 2597, it would be more equitable to extend the term of the patent for a delay in issuance caused by the needs of the Government which was beyond the control of the applicant. Thus, in the view of the Department, the term extending provision of section 154 (c) of S. 1042 should be included along with the twenty-year term provision.

RECOMMENDATION NO. XX: TERMINAL DISCLAIMER

Under existing law, a patentee or applicant may disclaim the entire term or any terminal part of the term of a patent granted or to be granted. A holding of double patenting (i.e., that an applicant is attempting to obtain or has obtained two patents on the "same invention") can be overcome in some circumstances by a "terminal disclaimer" which results in both patents expiring at the same time.

The President's Commission recommended that "the filing of a terminal disclaimer shall have no effect in overcoming a holding of double patenting." The Patent Reform bill adopts the recommendation of the President's Commission and provides that terminal disclaimer shall have "no effect in the determination of the patentability or validity of a claim." [§ 253 (c)]

S. 2597, on the other hand, would provide that a patent may not be refused or declared invalid solely because of the existence of one or more other patents where the "patent will expire on the same date as a result of filing on the

same date or as a result of a terminal disclaimer . . . so long as the right to sue for infringement of said patents is maintained in the same legal entity" [§§ 131 and 282(b) (2)].

Adoption of the provisions of S. 2597 on terminal disclaimer, in conjunction with the provisions permitting the filing of an unlimited chain of continuing applications, could present substantial problems. For instance, a member of the public, noting the first patent issued from such a chain, might make a substantial investment in introducing into commerce a development which did not infringe the first patent and later find this development to be an infringement of one of the subsequently issued patents in the chain. Accordingly, the Department opposes the provisions in S. 2597 by which terminal disclaimer would be effective in overcoming the holding of double patenting and supports the provisions of S. 1042 which would introduce the opposite result.

RECOMMENDATION NO. XXI: IMPORTATION

Under existing law, the importation of a product made outside the United States by a process patented in the United States is not an act of infringement. The patentee's only remedy is to seek exclusion of the product under the Tariff Act of 1930 on the ground that its importation will tend to cause injury to an "efficiently and economically operated" domestic industry [19 U.S.C. 1337 (a)].

The Commission concluded, however, because of these requirements that the patent owner had little prospect for success. Accordingly, the Commission recommended that "the importation into the United States of a product made abroad by a process patented in the United States shall constitute an act of infringement."

The importation problem is particularly relevant in cases where patent protection for the process is not available in the country of origin. To alleviate this problem, section 271(b) of the Patent Reform bill would adopt the Commission's recommendation but would limit its application to those situations where "patent protection for the process is not available" in the country in which the product was made. We would recommend, however that the proviso be amended to read "patent protection for that general class of process is not available" to insure that it was not intended to apply to situations where the particular process in question was merely found to be unpatentable.

Both S. 2597 and Amendment No. 184 to S. 1042 (introduced by Senator Long of Missouri) adopt the importation recommendation without the proviso; that is, they would outlaw importation of a product made abroad by a process patented in the United States whether or not process patent protection could have been secured abroad. The Department strongly opposes the broad importation provision since there has been no showing of a compelling need for such a provision. Moreover, a broad importation provision would appear to pose an unacceptable burden to importers who would be faced with the costly task of determining by what process the products they imported were made, the facts being unavailable in the United States. Without the limitation of the proviso, the proposed legislation would assume a serious threat to the public interest.

RECOMMENDATION NO. XXII: PATENT RIGHT TRANSFERABILITY

The President's Commission believed it necessary, for the purposes of assignments and licenses, to define in explicit statutory language the nature of the patent grant presently recognized under the patent statute and by decisional law. To accomplish this end, the Commission recommended approval of field of use restrictions in license provisions and clarification of the rights of the patent owner by making clear that the “rule of reason" should constitute the guideline for determining patent misuse.

The Patent Reform bill does not contain any provisions for this purpose; however, Amendment No. 183 to S. 1042 would adopt the Commission's recommendation verbatim.

S. 2597 would also adopt the Commission's recommendation and includes a section identical to Amendment No. 183.

Section 263 (a) of S. 2597 would permit patentees to license any part of the field-of-use to which the subject matter of the claims of a patent are applicable. This provision might well be construed to legitimate the use of any field-of-use restriction whatever. It would be highly objectionable because field-of-use restrictions in some contexts have a severe and unjustifiably adverse effect on competition.

Proposed section 263 (b) would permit patentees to impose such licensing conditions as would, in the words of the proposal, secure to the patentee the full benefit of the invention and patent grant. The sweep of this language, evidently derived from the 1926 decision in United States v. General Electric Company, 272 U.S. 476 (1926), is so broad that it is meaningless as a guide for action. Any restriction imposed by a patentee, unless the patentee is irrational, is imposed for the purpose of making more money. Taken literally, the language of proposed section 263 (b) would make lawful price-fixing, tie-in sales and virtually every other form of misuse or abuse of patents that the courts have condemned in the past. We regard this provision as an invitation for a protracted course of litigation to test its interpretation. For these reasons the Department strongly opposes enactment of section 263 of S. 2597.

RECOMMENDATION NO. XXIII: IN REM INVALIDITY

Under existing law, a court decision holding a patent claim invalid does not necessarily preclude later action based on the infringement of the claim. Adopting the Commission's recommendation for In rem invalidity, the Patent Reform bill provides that a final federal judicial determination "limiting the scope of a claim or holding it to be invalid, shall constitute an estoppel" against the patentee, and further provides that a court may order cancellation from the patent of any claim finally held invalid [§ 294].

S. 2597 has no comparable provision.

The Department is in complete agreement with the reasoning of the Commission that once a patentee has had his day in court, he should not be allowed to harass others on the basis of an invalid claim. Thus, we support the estoppel and cancellation provisions of S. 1042.

RECOMMENDATION NO. XXIV: CIVIL COMMISSIONERS

The Commission recommended that the offices of "Civil Commissioner" be created in those United States District Courts where justified by the volume of patent litigation.

The Patent Reform bill adopts the Commission's recommendation [28 U.S.C. 757 as would be added by Sec. 3 (a) of S. 1042].

S. 2597 has no provision for Civil Commissioners.

The Commission felt the provision of Civil Commissioners should help to bring about more effective utilization of the discovery procedures of the Federal Rules of Civil Procedure. Of course the problem is not unique to patent cases and the Committee may find it preferable to consider this issue separately in the context of all litigation in the federal courts.

RECOMMENDATION NO. XXVI: STATUTORY ADVISORY COUNCIL

The President's Commission recommended the establishment of a Statutory Advisory Council comprised of members selected to represent the principal areas served by the patent system. The Council would advise the Secretary of Commerce of its evaluation of the current health of the patent system, the quality of the patents being issued, and the effectiveness of any internal patent quality control program then in operation.

The Patent Reform bill adopts the recommendation of the Commission in Section 15.

S. 2597 includes no such provisions for the establishment of an Advisory Council.

Although such an advisory body can be created administratively as well as by statute, a statutory basis would, in our view, enhance the prestige and effectiveness of the body.

RECOMMENDATION NO. XXVII: PATENT OFFICE FINANCING

Under the existing law, patent fees are established by statute. Increases in the fees to maintain a reasonable relationship between cost and expenditures can only be obtained through legislative action.

The Commission concluded that any long-term fixed relationship between fees received and office expenditures could not be maintained without continuing and prompt legislative adjustments. Accordingly, the Commission recommended that fees be set by regulation with Congress specifying a desired rate of recovery.

S. 1042 would adopt the recommendation by providing that "the Commissioner shall prescribe by regulation the fees to be paid in connection with the filing and examination of patent applications, the issuance of patents and other matters," designed to effect an overall recovery from sixty-five to seventy-five percent of the cost of operation of the Patent Office [§ 41(a)].

S. 2597 would continue to set patent fees by statute and is virtually identical to existing law.

The Department favors the added flexibility which would be given to the Patent Office in shaping its programs by the enactment of legislation authorizing the Commissioner to establish fees.

RECOMMENDATION NO. XXIX: CLASSIFICATION AND INFORMATION RETRIEVAL

The Patent Office presently has several programs underway to automate the searching of patent applications. These programs are experimental in nature and are designed to develop methods of effective information storage and retrieval. The President's Commission, to accelerate the attainment of such systems, recommended a program to aid in the search, storage, and retrieval of new technology. This recommendation is embodied both in S. 1042 and S. 2597. Under these bills "the Commissioner shall conduct a program of research and development to improve and expedite the handling, classification, storage, and retrieval of patents and other scientific and technical information." [§ 12(a) of both bills].

The Department favors enactment of the provision for the development of an effective information storage and retrieval program.

In addition to the changes previously mentioned, S. 2597 would also make a number of changes in existing law unrelated to the recommendations of the President's Commission. These changes will be considered in the order in which they appear in S. 2597.

CHAPTER 3 OF S. 2597: PRACTICE BEFORE THE PATENT OFFICE

Under existing law and section 31 of S. 1042, both "agents" (i.e., not a member of any bar) and attorneys at law, upon showing they possess the necessary qualifications, may be recognized to represent applicants before the Patent Office.

S. 2597 would provide in section 31 that "only members of the bar of a State, territory, District, Commonwealth or Possession of the United States may be recognized as representatives of applicants, or practice before the Patent Office” with an exception for those agents previously recognized.

Under S. 2597, the number of persons registered to practice before the Patent Office, a specialty in which there is presently no over-supply of qualified people, would be further reduced. Absent a compelling need for such a change, the Department would be opposed to the enactment of such a provision.

Utility

CHAPTER 10 OF S. 2597: PATENTABILITY OF INVENTIONS

Section 101 of the existing law provides that an invention must be "useful" to be patentable. There is no definition of the term "useful" in the statute. The Supreme Court has held that inventions of chemical compounds not having any known or disclosed use except in further research to discover possible usefulness do not satisfy the "useful" requirement of section 101. [See Brenner v. Manson, 383 U.S. 519 (1966)]

S. 2597 provides in section 100 (h) that "the term 'useful' shall include, but shall not be limited to, utility in agriculture, commerce, industry, health, or research."

The thrust of the definition of the term "useful" contained in S. 2597 would be to ease the requirement for utility of the existing law. The Department opposes the enactment of any provision by which the value of the disclosure given to the public in exchange for the patent monopoly would be reduced, or by which patents would be granted on products for which there is no presently known practical use. In addition, we believe that the section is vague. It might even be construed as overruling Brenner v. Manson, which could raise constitutional questions.

Unobviousness

Under existing law, section 103 provides that a patent may not be obtained if the differences between the invention sought to be patented and the prior art are