or the Western Electric system, and notify the committee whether or not this cross-licensing arrangement prevents you from manufacturing this tube for the radio field? 1

Dr. JEWETT. Prevents us, prevents the Western Electric, from manufacturing for the general field?

The CHAIRMAN. The general radio field.

RELATIONSHIP BETWEEN ISSUANCE OF VALID PATENTS AND PROPOSED SINGLE COURT OF PATENT APPEALS

Mr. COE. Mr. Chairman, I want to pursue a thought that was expressed by Dr. Jewett some moments ago. He said that he would be very happy if no patents other than valid patents were issued.

Dr. Jewett, you were a member of the Science Advisory Board which recommended, among other things, that there be established a single court of patent appeals. Dr. Bush, on his appearance before this committee yesterday, made this statement.2

The unfortunate situation that obtains today is that an individual who is granted a patent by the United States Government has no great assurance, as he ought to have, that that patent is valid and will be sustained. Anything that can be done to increase the presumption of validity of that patent when it is issued will aid in the introduction of new ideas in industry, because it will shorten and make easy the path of the man who has to forge the way.

Do you see any connection between the establishment of a single court of patent appeals and the percentage of valid patents issued by the Patent Office?

Dr. JEWETT. Most assuredly. I think it has a very direct relationship. It has been a number of years since I read that report of ours, I don't know whether that is mentioned or not, but if my understanding is correct, one of the first and most direct effects that would come out of the effect of the establishment of a single court of last instance would be the setting of more permanent standards than we have now for the guidance of the Patent Office in what does constitute a valid patent, and I should assume that unquestionably the establishment of such a single court would tend not directly, but indirectly, to increase the presumption of validity of the work that comes out of your office, because you are not going to be battered around from pillar to post with conflicting views as to what constitutes validity in different circuits. You have got some final court that tells you at least what the judgment of the court is as to its validity.

Mr. COE. In other words, in addition to the tendency to reduce the cost and duration of litigation, it will have the effect of increasing the percentage of valid patents, in your judgment?

Dr. JEWETT. Yes; I am not a lawyer and I am not a patent man, but I should assume that if this court is established along the lines that we of the committee had in mind, and of course we didn't attempt to say who would be on it, we assumed they would be competent people, competent men, men of training, and that they would serve for long periods of time, like other Federal judges do, they would inevitably build up certain standards, just as the Supreme Court has built up certain standards, that would become a background of substantial proven law, which certainly should make it easier for an

1 In this connection see letter from Dr. Jewett to Senator O'Mahoney, under date of January 24, 1939, which was entered in the record as "Exhibit No. 244" at hearings held February 8, 1939, and is included in the appendix on p. 1158.

Supra, p. 893.

examiner, looking at somebody's applications, to say whether the claims that are asked to be allowed fit in with the pattern which the courts have said constitutes validity.

Mr. COE. Thank you very much.

Dr. JEWETT. Does that answer your question?

Mr. COE. Yes; fully.

Mr. DAVIS. Mr. Chairman, if I may: Dr. Jewett, you spoke of your system getting out of the radio field, as I understood it. It is a fact, is it not, that your system has a very close relation to radio in the transmission of radio programs over your wires?

Dr. JEWETT. Absolutely.

Mr. DAVIS. You have a monopoly of that field, haven't you?

Dr. JEWETT. Substantially; yes. I think there probably are certain cases where the wires of the Western Union or Postal are used, but in the main you are correct. It is a monopoly because it is only telephone wires that can be used for this purpose.

Mr. DAVIS. Why can't telegraph wires be used?

Dr. JEWETT. For this simple reason, Judge: The Lord, in His wisdom, fixed it up so that whenever you create a telephone ciruit, almost without exception you automatically create one or more telegraph circuits, but when you create a telegraph circuit, which is for the transmission of a very much less rigid kind of transmission, you don't automatically create a telephone circuit, and while it is true that there are some telegraph circuits of more recent origin that are capable of handling telephone transmission with some degree of adequacy, the great bulk of all telegraph circuits are not capable of handling telephony adequately, without complete revamping.

Mr. DAVIS. Well, if that is true why was it necessary for the A. T. & T. and the National Broadcasting Co. to enter into an agreement to the effect that the N. B. C. would only use A. T. & T. wires? Dr. JEWETT. I don't know. Do they do that?

Mr. DAVIS. I think that is a matter of record; yes.

Dr. JEWETT. Maybe so. I don't know.

Mr. DAVIS. Do you know whether your company still requires a license from a broadcasting company now, in the United States?

Dr. JEWETT. From a broadcasting company? I don't know. I don't think so. I don't know just what you refer to.

Mr. DAVIS. I refer to the fact that it certainly formerly did. Dr. JEWETT. Are you referring to the case of where apparatus which infringed patents was made by various people?

Mr. DAVIS. I refer to the claim of the American Telephone & Telegraph Co. that was made that no broadcasting apparatus was in existence that did not infringe on their patents, and consequently if the licensee from the United States Government to conduct a broadcasting station desired to operate, he would have to obtain a license from you.

Dr. JEWETT. I think I know what you are referring to. Of course, we furnished broadcasting stations; a lot of broadcasting stations are manufactured by the Western Electric. They automatically carry a license under patents. The stations of the people affected by the cross-licensing arrangement all carry it. I think what you are referring to are the things which were in existence at one time, and there may be some still, in which apparatus not made by us or our licensees was used for broadcasting purposes, and there I think we did have a

royalty arrangement, and that was reduced at one time to $1 or something of that kind. So far as I know, there is no such thing as that, and it couldn't obtain in very many cases anyway because so many of the stations are furnished either by Western Electric or R. C. A. or General Electric or Westinghouse Co. or other licensees.

Mr. DAVIS. They all have licenses from you, you mean.

Dr. JEWETT. They are all licensed to manufacture this stuff. In what I said about getting out of the business, I was really talking about getting out of the broadcasting business as a service.

DISTRIBUTION OF TITLE TO BELL SYSTEM PATENTS

Mr. DAVIS. Well, now, of the 15,0001 patents which are owned by your company, which I believe is the number used here, Senator O'Mahoney, they are all held by the A. T. & T. itself, rather than the subsidiary companies, are they not?

Dr. JEWETT. No; they are not, Judge. The title to the patents is in three different positions at the present time. The title to some of the licenses which were entered into 50 or 60 years ago with regard to the use within the system is in the A. T. & T. Co.; the title to some of them is in the Western Electric Co., and title to those in transit, generated in the Bell Laboratories, is in Bell Laboratories. The division between the A. T. & T. and Western Electric Co. is the result of the so-called 1882 contract, before the Western Electric Co. became a part of the Bell system, or the contract was entered into way back in those days, which was a contract between two independent people in which, roughly speaking, telephone-appliance patents ownership is in the Western Electric Co., and telephone patents, things like the transmitter, receiver, and transmission apparatus, is in the hands of the A. T. & T. Co.

That is the result of a very ancient contractual relationship. And there is this third group which I have indicated which comprises only patents which were generated in Bell Laboratories, in which the title to those patents temporarily is in Bell Laboratories.

FUNDAMENTAL AND SUBSEQUENT DEVELOPMENT PATENTS OF BELL

SYSTEM

Mr. DAVIS. Were any of the key or fundamental inventions in the telephonic art discovered in your laboratory?

Dr. JEWETT. Yes. I am glad you asked that question because it bears on a question that the Senator asked, I think a while back. I think it is inevitable that the great bulk of what you might call the run-of-the-mine patents in an industry like ours will inevitably come from your own people, from your running a research department. I think that it is equally the case that those few fundamental patents, the things which really mark big changes in the art, are more likely to come from the outside than from the inside. There aren't very many of those. I am getting around to answer your question.

When I try to think of what are the fundamental patents, leaving out Bell's original patents which have been in the telephone business during its lifetime, which changed the whole picture of the future, there are only three of them. One of them came completely from the

1 Note that this number was subsequently corrected to read 9,500. See "Exhibit No. 244" entered in the record on Feb. 8, 1939, and included in the appendix, on p. 1158.

outside, that is the vacuum tube type of thing which came clear from outside.

The second one, technically, according to the rules of the game, came from the outside, although that decision was the result of a long carried-out contest between a man on the inside and a man outside. between Pupin and George Campbell, but the result is that Pupin slightly ante-dated Campbell so two came from the outside. The third came from the inside.

Mr. DAVIS. Of course, the Pupin patent on the loading coil is one of the fundamental patents.

Dr. JEWETT. That is one of those I consider fundamental.

Mr. DAVIS. And the courts held that was a valid patent.

Dr. JEWETT. They held it was a valid patent and Pupin rather than Campbell was entitled to be considered the inventor.

Mr. DAVIS. What was the third?

Dr. JEWETT. The third is what is known as the filter patents, the wave filter patents which have made possible practically all of radio telephony and much of the carrier current type of stuff which we do, which was an invention of the same George Campbell. It was the result of a high line mathematical attack on the whole problem of transmission of high-frequency currents over circuits.

So that out of the three things which I picture as fundamental patents, one certainly came from the outside, a second one came from the outside although it came almost simultaneously from the inside, and the third came from the inside.

Mr. DAVIS. The telephone receiver was a fundamental patent, wasn't it?

Dr. JEWETT. Of course, that goes back to Bell's time.

Mr. DAVIS. And that was a Bell patent.

Dr. JEWETT. There wasn't any "inside" then.

Mr DAVIS. I know, but I want to follow my line of inquiry. Now the transmitter, that didn't originate in the laboratories of your company, did it?

Dr. JEWETT. The fundamental idea of the transmitter?

Mr. DAVIS. That was originated in '78 by Berliner, was it not? Dr. JEWETT. The fundamental idea of the transmitter is covered by a Bell patent. The particular form of microphonic transmitter is claimed by Berliner and Edison and others. I don't know who they

were.

Mr. DAVIS. Of course recognizing the fact that you have been describing for some time, that refinements have been made, and we assume improvements, no doubt, I am talking about the fundamental patents, the key inventions, the principles involved, and all of these subsequent developments have simply been a development or improvement or refinement of the same key invention.

Dr. JEWETT. No; I certainly wouldn't agree with you on that, but I am perfectly willing to agree, if you like, that many of the things which came into the telephone business in the first 10 years of its life, 15 years, inevitably came from the outside. It was a little bit of a thing, there wasn't much inside. When it comes to the period of the last 25 years, there are only three of these things.

Mr. DAVIS. Are those key inventions, or refinements of them, still under patent control?

Dr. JEWETT. I don't know about the filter patents, I don't know how they stand because I have forgotten the age of them, but the

fundamental Pupin patents and the fundamental DeForrest patents

have expired.

Mr. DAVIS. But there are still patents on refinements.

Dr. JEWETT. Oh, unquestionably.

Mr. DAVIS. Well, how about the transmitter and receiver?

Dr. JEWETT. The same thing there.

Mr. DAVIS. One of them originated in '76 and the other in '78. Dr. JEWETT. The same is true of everything, Judge.

Mr. DAVIS. Is anybody manufacturing telephone apparatus in the United States to any degree except the Western Electric?

Dr. JEWETT. Oh, certainly, and there are a lot of transmitters and receivers that are being manufactured which are quite free from any Bell patents that may exist at the present time. That art is so old and so wide open that there is no control from the Bell system on that thing except insofar as specific adaptations and modifications are concerned. The Kellogg Co., Stromberg-Carlson, and a lot of people are making transmitters, and so far as I know they or anybody else can make pretty good microphonic transmitters without by your leave from the Bell system at all.

Mr. DAVIS. You mean for general telephone use?

Dr. JEWETT. Sure.

Mr. DAVIS. I didn't know that.

Dr. JEWETT. The art is like making agricultural apparatus. The fundamental patents on some of the Deering or McCormick stuff have run out, but those companies have probably got a lot of patents on detailed improvements of the stuff, but still there are other people making agricultural apparatus.

I don't see how you can escape that sort of a situation. If you go on in a continuing art, you will have these subsidiary patents, and so long as they pertain merely to improvements, until something fundamentally new comes along, while they may increase in number as the years go by, in value they tend to decrease because they pertain to more and more minute things. Of course when somebody comes along-take the telephone transmitter, if some fellow comes along now with an idea of a transmitter which is other than a microphonic transmitter, which is as good or better than a microphonic transmitter, he has then a fundamental idea with regard to transmitters.

The CHAIRMAN. But the original ideas on which the system was founded and built up are now open to the public?

Dr. JEWETT. Certainly. Bell's patents expired years ago.

The CHAIRMAN. But there are still in existence patents upon improvements which are substantially as effective in maintaining the strong position of the Bell system.

Dr. JEWETT. No; I don't think so, and I don't think the position of the Bell system is maintained by patents at all at the present time. The CHAIRMAN. What maintains it now?

Dr. JEWETT. I think the thing that maintains the Bell system is the fact I think it would be maintained as it is if there were no patents because of the fact that it is one of those few things which people have recognized as a natural monopoly. We tried in this country and tried in every country to work on a different basis and they have all come to this thing. That doesn't mean it is a monopoly that has to be run by one person, but rather telephony as it exists is a monopoly for the agency operating it.

124491-39-pt. 3-10