the basic objective of this proposal, namely, to enhance the validity of issued patents. My reasons for opposing this proposal are that I believe that it would create substantial administrative problems, that it would not accomplish its intended purpose and that there are alternative ways to spend the resources that would be involved which would better accomplish the objectives of this proposal.

In my judgment, the present Examiners in the Patent Office are in a much better position, based on education and experience, to handle the examination of patent applications than would be any member of the staff of a Public Counsel. In addition, the present Primary Examiners are each a specialist in their particular field of technology and are much better trained to find and evaluate pertinent prior art than any generalist from any Public Counsel office. The present Examining Corps is dedicated to the twin principles that they are responsible for issuing patents on patentable inventions and refusing patents on unpatentable inventions which are the fundamental objectives of the patent laws of the United States. I firmly believe that it would be a grave mistake to delegate this important responsibility to less qualified individuals.

In my view, the key to improving the quality of examination in the United States Patent Office and narrowing the ga) with respect to the review in the Federal Courts in litigation is to bring before the Examiner more pertinent information than is now available to him. At the present time, steps are underway to improve the Examiners' search files with respect to foreign patents and non-patent publications. In addition, the proposed re-examination procedure of patents should make available to the Patent Office prior art in unpublished form, such as public use or sale of an invention. Such prior art, if considered pertinent to the question of validity, would in fact be considered in an adversary proceeding. Thus, these new procedures should considerably enhance the validity of issued patents. In addition, it is recommended that the Patent Office should expand its efforts directed toward obtaining a better understanding of the quality of patent examination in order to aid it to evaluate steps that might be taken to further improve the effectiveness of their examination.

DEFERRED EXAMINATION OF PATENT APPLICATIONS

The Presidential Commission on the Patent System also considered in great detail the question of deferred examination of patent applications. The Commission concluded that it clearly favored a high quality examination system if it could be maintained without a constantly increasing backlog.

The subject of deferred examination systems arose in the early 1960's when the examination system in the Netherlands, Germany and the United States were struggling with increasing backlogs of unexamined patent applications and resultant delays in issuing patents. During this period. and under my direction, the United States Patent Office conducted studies directed toward evaluating the costs and benefits of various types of deferred examination systems in the United States. The general conclusions that were developed from these studies were the following: (1) The advantages and disadvantages of deferred examination were about a standoff in terms of the Patent Office budget; thus, although there would be savings in examination effort, these savings would be about off-set by increased printing costs and effort required to process, file, classify and search the increased number of patent documents, and (2) deferred examination would therefore only be justified if it were not otherwise possible to prevent increasing backlogs and delays in issuing patents. As a result of the streamlined examining program adopted in the 1960's and other related programs, the backlog of pending patent applications in the U.S. Patent Office has been substantially reduced. As a result, the period of pendency of patent applications has been substantially reduced toward the Patent Office goal of 18 months.

With regard to the cost impact of a deferred examination system on the private sector of the economy, I doubt that there would be any significant savings, if any, based upon my personal experience. Thus, the greatest share of the cost of obtaining a patent is involved in preparing and filing a patent

application. While it is true that the cost of prosecuting a certain percentage of filed applications could be saved, I believe that this would be perhaps more than off-set by (1) the greater cost of patent searching due to an increased volume of prior art to search (2) the greater volume of patent documents which would have to be processed and (3) the greater number of patent studies required to evaluate scope and validity of the large number of unexamined patent documents which would present current or future infringement questions.

Thus, in my opinion, a deferred examination system is distinctly a step backward with regard to trying to maintain a high degree of certainty with regard to validity and scope of patent protection. Thus, we should not overlook the great contribution the U.S. Patent Office makes to the effectiveness of operation of the system. More particularly, about 30% of the patent applications filed are not issued as patents because the inventions are not patentable. With regard to the remaining 70% of the applications, in most of them the original broad claims are limited during the examination to a more reasonable scope with respect to the patentable contribution involved. Based on first hand experience with their deferred examination systems, it is understood that the European countries are recommending basically a full search and examination system for the proposed new European patent system. Therefore, in view of the European experience coupled with the fact that the U.S. patent examination system is rapidly approaching a pendency of 18 months, it is suggested that it would not be in the interest of the country to adopt a deferred examination system.

During my term as Commissioner, the Patent Office instituted a new program known as the Defensive Publication Program under which an applicant could elect to have the examination of his patent application, in effect, deferred for 21⁄2 years. It was anticipated that perhaps several thousand applicants per year would elect to enter the program and thus the Patent Office would save a corresponding examining effort. In practice, however, only a few hundred applicants elected to enter the program each rear. Nevertheless, the program to the extent it has been utilized has been apparently highly successful from the standpoint of patent applicants and the Patent Office since, so far as is known, none of the applicants have requested examination of their applications. Therefore, perhaps the program should be strengthened such as, for example, by affording a patent application laid open to public inspection under the Defensive Publication Program the same status under Section 102(e) as in the case of a granted patent.

PATENT FEES-MAINTENANCE FEES

During my term as Commissioner, the Patent Office also initiated a detailed study of Patent Office operations in relation to Patent Office budgets and fees. Basically, this study concluded that: (1) certain Patent Office operations are conducted primarily for the benefit of the party requesting a particular service such as the procedural handling involved in the filing of patent applications and issuance of patents; (2) certain Patent Office operations are conducted for the benefit of patent applicants and the public jointly such as the examination of patent applications; (3) certain Patent Office operations are conducted primarily for the benefit of the public, such as the printing of patents and the maintenance of a Patent Search Center for the public; and (4) the Patent Office should be authorized to have a revolving fund for financing on a full cost recovery basis a variety of special user services. Overall the study indicated at the time of the study that such an approach to relating Patent Office fees to costs would recover about one-half of total costs. In my judgment, an approach to setting Patent Office fees along these lines is a better way to handle the matter as compared with "picking a number out of the hat" such as simply saying Patent Office fees should recover say 65 to 75% of costs.

On the basis of the aforementioned Patent Office study, perhaps only a relatively modest increase in Patent Office fees would be required. In this case, I would not propose instituting a system of maintenance fees. How

ever, if it is decided that Patent Office fees should be increased in the range of 50 to 100%, then I think that a system of deferring a portion of the total fees for payment at some time after the filing and issue fees should be given serious consideration. In my opinion, the present Patent Office filing and issue fees should definitely not be increased and in fact probably reduced. I base this conclusion on the information contained in the graph attached to this statement showing the change in percentage of patents issued to individuals during the period 1950-1970, which graph was published in the February 1973 issue of Action, the journal of the Association for the Advancement of Invention and Innovation. My interpretation of the figures in this graph leads me to the conclusion that the fee increase in the middle 1960's resulted in a reduction of several thousand applications in the filing rate by individual inventors. I would also predict that a further substantial reduction in patent filing by individuals would occur again if fees are raised substantially.

Thus, if Patent Office fees must be increased substantially, I would recommend that the filing and issue fees for simple cases be maintained in the range of about $100 as proposed in subparagraph (b)(1) of Section 41 of S. 1321 and that the remainder of the necessary fee be deferred under a system whereby additional fees would be paid every 3rd, 4th or preferably 5th year on those patents which are used commercially.

I believe it is clearly preferable from an administrative standpoint for both the Patent Office and patentees to avoid any system of annual fees. Also, while I am entirely sympathetic with the financial problems of individual inventors and small businessmen, I do not think it is administratively feasible to distinguish this type of patentee under subparagraph (b) (2) of Section 41 of S. 1321 from other types of patentees. Thus, I favor a system in which a portion of the Patent Office fees are deferred and are paid by successful patentees, if fees must be increased substantially, as compared with increasing substantially the present filing and issue fees or adopting a system of annual maintenance fees as used in a number of foreign countries.

ADMINISTRATIVE RESTRUCTURING OF THE PATENT OFFICE

Based upon past experience with the present administrative structure of the Patent Office, I believe the time has come to seriously consider an administrative restructuring of the Patent Office. I have proposed for several years the establishment of a new position of Assistant Secretary of Commerce for Invention and Intellectual Property to centralize and elevate the voice for invention, innovation and the patent system in the Executive Branch of the Government. While I believe that there are many advantages for such an organizational change, I originally received little support for this proposal. It now appears that there is considerable support for elevating the voice of the patent system to the Assistant Secretary level. Also, I realize that there is a certain amount of support for making the Patent Office an independent agency, such as proposed in S. 1321.

All things considered, I favor on balance continuing to maintain the Patent Office in the Department of Commerce, but on a completely different basis from the present organizational arrangement. More particularly, I would strongly support as a minimum change elevating the position of Commissioner of Patents to the Assistant Secretary level and preferably to the Under Secretary level so that the Commissioner would no longer be required to report to the Assistant Secretary of Commerce for Science and Technology. This administrative change would be similar to the change that was made several years ago in the status of the Weather Bureau which also formerly reported to the Assistant Secretary of Commerce for Science and Technology. I firmly believe a similar change in the organizational structure would have a significant effect on the climate for invention and innovation in our country and in strengthening the contribution of the United States Patent Office in the operation of our nation's patent system. This concludes my prepared statement and I would be pleased to try to answer any questions there might be on my comments as to supplying any additional information for the record.

STATEMENT OF MR. EDWARD J. BRENNER, FORMER U.S. COMMISSIONER OF PATENTS

Mr. BRENNER. Initially, Mr. Chairman, may I say I am testifying purely in an individual capacity this morning, but my testimony is based on my 5 years' service as Commissioner of Patents, as well as my work in patent work in a very large company, a medium-sized company, as well as now being in private practice.

My present work involves the patent activities of independent inventors and small companies, as well as my experience in serving as executive director of the Association for the Advancement of Invention and Innovation, which is an organization of people of many different backgrounds interested in trying to solve the problems, some of the problems that are being discussed here today, and to try to improve the climate for invention and innovation in the United States.

Referring to the matter of public adversary hearings, I would mention that I served as a representative of the Secretary of Commerce on the President's Commission during 1965 and 1966. This was one of the major subjects to which the Commission addressed itself. The Commission came out with a final conclusion that there was a need for a proceeding by which the public could bring to the attention of the Patent Office pertinent prior art which was either missed by the Patent Office or not available to the examiners.

But one of the major conclusions was that the Patent Office should serve as a screening body to identify which prior art might be meritorious and which had little if any value to it. This was based on the experience with the European systems which were evaluated and studied quite carefully, where certain abuses were recognized which have been referred to before, that sometimes patents were not issued until after the patent really expired.

So the proceedings, in many cases, were very time-consuming and very expensive. So what the Commission felt it could propose, would be if the Patent Office were to screen this art, you could get the same substantive results as in a full scale adversary proceeding, and you could eliminate the abuses.

I subscribe to that. I think that that would be in the best interests of the public of the United States.

Just a couple of points of administrative detail in connection with the subject of adversary proceedings. As I recall, the Presidential Commission did recommend that after applications were allowed. they were to be published and subject to having the public call to the attention of the Patent Office prior art that could be considered in the reexamination procedure.

However, when we evaluated this in the Patent Office, we felt that if we had to publish two sets of documents, in other words, publish everything once as an allowed application, and publish everything again as a patent, that the printing costs and the costs to the Patent Office and to the public of processing really two sets of patent documents out weighed any possible advantage.

The administration bill that was introduced to the Congress recommended that the patent be granted and then have a proceeding for