first inventor of the invention [§§ 136, 151]. This latter ground follows from the provisions in H.R. 13951 for limited priority contests.

In addition to the citation period, the President's Commission, in an effort to provide an administrative procedure for the cancellation of patent claims that would be less costly than court proceedings, also recommended that there be a cancellation period following the issuance of a patent. Under this procedure, members of the public for a period of three years after the issuance of a patent could, upon payment of a relatively high fee, notify the Office of patents and publications affecting the patentee's right to a patent.

The present Administration support for a modified first-to-file system in which there would be priority contests conducted following the issuance of a patent would add to the proposed reform of the patent laws a third procedure affecting a person's right to obtain a patent. Were all of the procedures which affect the quality and reliability of patents included in the law in their present form, there would be three different procedures-the citation period, interference proceedings and the revocation procedure each being operative within a different time period for raising questions affecting the ultimate validity of a patent. Accordingly, there might well be merit in simplifying the system by consolidating all of these procedures into a re-examination chapter.

Under such a re-examination chapter, members of the public could, for a period of no less than one year after the issuance of a patent, notify the Commissioner of any circumstances having a bearing on the patentee's right to a patent. If the Administration's original approach is to be modified, we would regard one year as an absolute minimum and would strongly oppose a shorter period. In addition to the citation of prior art, a member of the public could seek cancellation of a patent on the ground (1) that the invention was in public use or on sale in this country more than one year prior to the filing date of the patent, or (2) that the inventor named in the patent had derived the invention from the party seeking cancellation, or (3) that he was a prior inventor. Finally, a junior party applicant would be permitted to provoke an interference proceeding with an issued patent. Interference proceedings would be governed by the rules previously discussed with regard to priority systems.

The public use proceedings, derivation contests, prior inventorship contests and interferences could be inter partes proceedings with both parties having full rights of appeal to the courts from a decision on the merits. These proceedings would be limited, however, to the parties in interest and, as previously mentioned, could only be initiated during the first year of the life of a patent.

RECOMMENDATION NO. XIII: PRESUMPTION OF CORRECTNESS

There is no provision in existing title 35 regarding the weight to be given a Patent Office decision denying a patent claim when that decision is appealed. The United States Court of Appeals for the District of Columbia stated in Reynolds v. Aghnides, 148 U.S.P.Q. 245, that “doubt as to patentability is to be resolved in favor of the correctness of administrative action."

The President's Commission felt this should be the rule in all review of Patent Office decisions and recommended that "a Patent Office decision refusing a claim be given a presumption of correctness, and shall not be reversed unless clearly erroneous."

The Patent Reform bill, in adopting the Commission's recommendation, provides that "Patent Office decision shall be given a presumption of correctness" and "shall be upheld unless . . . without substantial basis or not in accordance with law" [§ 148].

H.R. 13951 has no similar provision.

Some members of the private sector have expressed the opinion that this provision, as written in H.R. 5924, goes too far and that it might possibly lead to arbitrary decisions on the part of examiners. In our view, there is no logical basis for a statutory presumption that a decision of an administrative agency is correct only when in favor of a petitioning party. In our view, Patent Office decisions should be given the same presumption of correctness that attach to decisions of other administrative agencies, and, with regard to findings of fact, should not be set aside unless clearly erroneous. We do feel, however, that the first half of the provision in H.R. 5924 is sufficient to accord the proper weight to the decisions of the Patent Office and would therefore recommend deletion of the phrase "and such decision shall be upheld unless it is without substantial basis or not in accordance with law."

RECOMMENDATION NO. XIV: REVIEW BY COURT OF APPEALS

Under existing law an applicant dissatisfied with a decision of the Patent Office may either (1) appeal on the record to the Court of Customs and Patent Appeals [§ 141] and thence to the Supreme Court by a writ of certiorari or (2) file a civil action against the Commissioner of Patents in the District Court for the District of Columbia [§ 145] with appeal to the Court of Appeals for the District of Columbia and review by the Supreme Court by writ of certiorari.

The President's Commission recommended that "Either the applicant or the Patent Office may appeal from a decision of the Court of Customs and Patent Appeals to the United States Court of Appeals for the District of Columbia Circuit, and from a decision of the latter court either may petition the Supreme Court for a writ of certiorari."

The Patent Reform bill follows the recommendation of the Commission in section 147 providing that any party or the Commissioner of Patents dissatisfied with the decision of the Court of Customs and Patent Appeals may seek a review by requesting permission of the U.S. Court of Appeals for the District of Columbia Circuit to allow an appeal.

H.R. 13951 would consolidate the review of all Patent Office decisions in the Court of Customs and Patent Appeals which would be increased by four judges making a total of nine sitting on the Court [28 U.S.C. 211 as would be amended by Sec. 2(a) of H.R. 13951]. The Court would have a trial part for civil actions under section 145 and an appellate part for appeals from the trial part and appeals from the Patent Office under section 141. The judges of the Court of Customs and Patent Appeals would "sit on the Court and in its divisions in such order and at such times as the Court directs" [28 U.S.C. 215 as would be amended by Sec. 2(a) of H.R. 13951]. Decisions of the Court might be reviewed by the Supreme Court by writ of certiorari.

In recommending Court of Appeals review of decisions of the Court of Customs and Patent Appeals, the Commission was endeavoring to eliminate conflicting decisions on points of substantive law and to achieve uniform standards of patentability. The Commission chose the Court of Appeals as the reviewing court because it is a court of general jurisdiction which is exposed to a broad spectrum of cases involving many fields of law.

On the other hand, H.R. 13951 would provide for direct review of Patent Office decisions solely by a special court of limited jurisdiction. H.R. 13951 would create a unique federal court in which there would be no clear line between the appellate body and the lower court and in which the judges of the same court could presumably review each other's decisions. In commenting on a similar arrangement provided for by H.R. 7454, Assistant Attorney General Donald F. Turner stated that the "proposal would further divorce the trial of patent cases from a trial of other types of lawsuit, 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 H.R. 13951 and therefore strongly oppost 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 and Chemical Corp. 382 U.S. 172 (1965). There is no authority for the concellation 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 $1,000.

H.R. 13951 has no provision for cancellation of a claim from an issued patent. While the cancellation provisions of H.R. 5924 would increase the quality

and reliability of patents, it might be preferable, as previously discussed with regard to the citation period, to merge the cancellation provisions with other procedures which affect the validity of a 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" (35 U.S.C. 251). 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 Patent Reform bill adopts the Commission's recommendation that claims should not be broadened in a reissue application. This recommendation followed from its conclusion that the public should be free to use the unclaimed disclosure in an issued patent without the possibility that it might subsequently be included in broader claims in a reissued patent.

H.R. 13951, on the other hand, would permit broadened reissues if filed within one year of the granting of the original patent [§ 251]. We regard this recommendation as a reasonable compromise between the recommendation of the Commission and the existing law which permits broadened reissues to be granted within two years of the issued patent. Not only is the public interest protected by the reduction of the period for filing reissues from two years to one, but we feel that there are equities in favor of granting broadened reissues when there is so much emphasis placed on prompt filing and prosecution of patent applications. To insure that the public interest is fully protected, however, we would urge that the section 252 (b) which protects the intervening rights of third parties be amended to provide for the continued practice of an invention without the payment of royalties where substantial preparations for such practice were made prior to the issuance of the reissue patent.

RECOMMENDATION NO. XVII: INTERIM LIABILITY

Under existing law, liability for the infringement of a patent begins on the day it is granted.

Because of the recommendation of pre-issuance publication of applications, the Commission recommended that a patentee whose claims were infringed during the interim period between publication of the application and the issuance of a patent be given some degree of protection. H.R. 5924 adopts this recommendation of the Commission in section 273 by providing for interim liability for the unauthorized practice of a claim of a published application where the Patent Office has indicated that the claim is allowable and the alleged infringer has been given actual notice as to how the acts are considered to have infringed the claim. Under the Patent Reform bill, an applicant elects to obtain interim liability by his transmittal of the notice to the alleged infringer and cannot thereafter obtain an injunction with regard to the use of a machine, manufacture or composition of matter which is made prior to the issuance of a patent.

H.R. 13951, on the other hand, while providing for interim liability, only requires that the application be published, that the infringed claim also appear in the issued patent, and that actual notice be given to the infringer [§§ 271 (f), 283 (b) and 284 (b)]. H.R. 13951 does not require a prior indication by the Patent Office that the claim is allowable. In addition, an applicant does not elect between an injunction or damages until he brings suit following the issuance of the patent.

We feel that the interim liability provisions of H.R. 13951 provide some advantages over those of H.R. 5924. By permitting interim liability from the date of publication for the infringement of a claim which later appears in the patent, even though the claim is not allowed at the time of publication, the interim liability provisions of H.R. 13951 encourage early voluntary publication. Moreover, the interim liability provisions of H.R. 13951 permit the applicant the flexibility of electing his remedy-injunction or damages-at a later date when he is in a position to have a better understanding of the total situation. For these reasons, we feel that the interim liability provisions of H.R. 13951 might well be included in any patent reform legislation.

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 H.R. 13951. 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 H.R. 13951, 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 H.R. 13951.

Although the provisions of section 183 would be operative under the provisions of both H.R. 5924 and H.R. 13951, 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 H.R. 5924 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 patentably indistinct subject matter) 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)]

H.R. 13951, 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 "patents 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 H.R. 13951 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 H.R. 13951 by which terminal disclaimer would be effective in overcoming the holding of double patenting and supports the provisions of H.R. 5924 which would introduce the opposite result.

90-355 0-68-pt. 2

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 make it clear that it was not intended to apply to situations where the particular process in quesion was merely found to be unpatentable.

H.R. 13951 adopts 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 [§ 271(b)]. We oppose 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.

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. H.R. 13951 adopts in section 263 the Commission's recommendation which would approve field-of-use restrictions in license provisions and clarify the rights of patent owners by making clear that the rule of reason should constitute the guideline for determining patent misuse. This provision is not clear and might well be construed to legitimate the use of any field-of-use restrictions. For these reasons, we would strongly oppose the enactment of section 263 of H.R. 13951.

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].

H.R. 13951 has no comparable provision.

The Department is in 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 cancellation provisions of H.R. 5924.

RECOMMENDATION NO. XXIV: CIVIL COMMISSIONERS

In an effort to help bring about more effective utilization of the discovery procedures of the Federal Rules of Civil Procedure, the Commission recommended that the Office of Civil Commissioner be created in those U.S. District Courts where justified by the volume of patent litigation. While the Patent Reform bill adopts the Commission's recommendation [28 U.S.C. 757 as would be added by Sec. 3(a) of H.R. 5924], H.R. 13951 does not provide for Civil Commissioners.