Senator HART. Do you know whether there has been developed firms? Who would engage them? The patent holder or the Patent Office?

This computer business that you mentioned, who has got it?

Mr. BRENNER. As far as I know, the foreign patent offices do not send out notices, and the responsibility rests with, say, your patent agent in Germany or England to keep track of when these fees are due and to send through a notice saying that it is now time to pay, say, the third annuity in Germany.

I happen to work as a consultant for an organization in the United States that has a computerized system, and companies that use that system, and there are other systems, have in a data bank all the information on the foreign patent holdings of different particular clients, and the computer then generates on a quarterly basis which foreign assets have taxes due on a quarterly basis. Then you say pay these, do not pay those. Then these companies will execute your orders by seeing that the fees are paid; and if they are not paid, the patent will then be dropped in a particular case. Senator HART. How expensive is that?

Mr. BRENNER. I think depending upon which type of system you operate, you probably have to pay a fee between $10 and $25 per payment over and above the payment per se. Actually in some of these countries the cost of paying the fee is more than the particular fee at a particular time.

Senator HART. The last question, how would you suggest the amount of the maintenance fee be set?

Mr. BRENNER. I think it would be interesting to maybe look at those previous studies in the Patent Office. I forget what we had. I think we may have had something like $100 at 5 years and $200 at 10 years and $300 at 15 years.

I think the studies indicated that this would provide enough income to keep the level of recovery at this 50 percent level for quite a while in the future. The higher the fee, of course, the more people you discourage, and you get less income. We based our estimates on some European experience, and I think we were satisfied that you could operate, say, on a 5, 10, 15 year level, with something on the order of a fee of $100 or $300.

Senator HART. Mr. Brennan.

Mr. BRENNAN. Mr. Brenner, why should the taxpayers bear half the cost of the examination process in the Patent Office?

Mr. BRENNER. You can compare a full examination system, with say a registration system such as France had for many years, where nobody has to pay anything. In this case the patent system works in that you encourage people to come into the patent system, have their applications published, and disclose new technology.

That is the basic purpose, to give people, to encourage people, to provide them with an incentive to come forward and have this technology published. Yoy will do that and fulfill the basic principle of the patent system by encouraging people to come in and having their application published for the benefit of the public.

You do not have to have an examination, but I think it is helpful to the public to know if the invention is patentable; and if so, what

is the scope of it. I think it is also perhaps equally beneficial to an applicant to know that when the chips are down he does have a patentable invention of such and such a scope.

So in my judgment it is clearly to the benefit of both to have a system of examination. It is of benefit to both of these parties. What the exact share is I do not know, but our studies said, well, it is of equal benefit, 50-50.

Mr. BRENNAN. You can make the same argument about many other government functions, for example the public benefit from radio and television stations. Should they pay part of the filing fees of the broadcaster at the FCC?

Mr. BRENNER. Mr. Brennan, I am not an expert in that field. Perhaps that might be the case.

Mr. BRENNAN. I am not trying to belabor this particular issue. Since I work for the chairman of the Appropriations Committee, I have to bear in mind the burdens which the committee has in trying to live within the existing budget.

Turning to another issue, the previous witness emphasized that much of the reduction in the backlog in the Office was accomplished by stressing quantity at the expense of quality; and hordes of invalid patents have been pouring out of Crystal City in the last several years.

Would you comment on that in two parts? First, during the term of your service as Commissioner, and then your observation of the scene since you left the Patent Office.

Mr. BRENNER. First of all I would say I do not think the system will ever be perfect, and I think there is no doubt that there are invalid patents that are issued for one reason or another—some because certain prior art was not available before the examiner, some because one person might think it is patentable while another person may not.

I think that when you work with this matter of quality you must consider many different factors. If you want to run full-scale validity proceedings at the Patent Office such as in the case of litigation, instead of spending a hundred or a thousand dollars for the proceeding and somebody has got to pay for it-you are up to the tens of thousands or the hundred thousands of dollars.

I do not think that it is an economic procedure to try to have the Patent Office operate as a court. I do not think you can afford to give that kind of treatment to 100 percent of the applications.

But when I was there as Commissioner of Patents we did change. our procedures, which increased the output of the Patent Office, and we kept very careful figures on those. And we changed the system in a way in which-actually we increased the percent of the amount of time that was spent on searching the prior art.

I knew that some people who had not made an analysis started going around and saying that the quality was lower, but I will be happy to sit down and go over those figures we have in the Patent Office with anybody and show that we actually did improve in my judgment, improve the quality of the product and increase the search time.

As far as I know, this has continued. I have no reason to believe that there has been any change in this quality in the past 10 years.

Mr. BRENNAN. One final question. Did you become Commissioner of Patents because of your political influence and active role in politics?

Mr. BRENNER. I am glad you asked me that question. Unfortunately, I would say the Commissioner of Patents has always changed as the administration has changed. I personally think that that is not in the best interest of the operation of the system, but being Presidential appointees, perhaps that is inherent.

I would say this, that I was a registered Republican, and I was appointed by a Democratic President, Lyndon Johnson. And like Commissioner Schuyler said, if that is a political operation or political plum, it escapes me.

Mr. BRENNAN. Thank you.

Senator HART. I was tempted to undertake a definition of political plum when the question was raised earlier, and I think there is not any universally agreed upon definition. Some would define it as a job that changes with administrations.

Mr. Nash.

Mr. NASI. Let me ask one question, Commissioner. This relates to the quantity and quality of patents that are issued. It has been expressed to me by a number of examiners, and indeed in the literature--and we will have some examiners in, and we will explore itit has been expressed to me that over the past 5 years or so a quota system has been reimposed on the Patent Office. Examiners are required upon pain of lack of promotion or other problems created for them, to issue a certain number of actions within each period.

And it would just seem to a nonpatent expert that any kind of a requirement for a quantity production would of necessity have to reduce the quality; and I would like your observation on the logic of that statement, as well as any information that you have on the facts of whether a quota system does exist.

Mr. BRENNER. I think the patent system has to operate, at least with respect to the operation of the Patent Office, based upon two major points. One is the patent laws, the type that we are talking about here today, as to how the patent system is to operate; and secondly, you have to operate within the budget provided by the Con

gress.

As I say, Congress says this is the kind of operation we want to run here, the amount of money we are giving you to operate it. The Patent Office and any Commissioner or anybody else in the Patent Office has to operate within that framework.

So maybe you could look at it one way, that OK, if this is a job we have to do, somebody imposed some limits on the amount of resources that we can apply to this. If you want to call that a quota system, okay. That is the way you look at it. I do not really look at it that way.

This is one of the reasons why I said that I thought that there should be greater study in depth of what is involved in this quality. I think probably if you double the budget of the Patent Office from $70 million to $140 million, increase the staff from 2,500 to 5,000, you would probably have a better quality product coming out. But the question is is that extra $70 million worth whatever you gain? Herein I think is where the problem is-how much is quality worth?

So anyway, that is the way I would answer that question. And I doubt if the Patent Office ever will get in the position where it has enough time and manpower to do the perfect job. I just do not think that would help, and it is a matter of balance.

Mr. NASH. As I understand you, you are saying that yes, a minimum output requirement exists.

Mr. BRENNER. I think the Congress tells me, when I was Commissioner, that it gives me a budget. I give you so much money to do this job, to process so many applications. If that is called a quota or whatever it is, I think that is the way the system has to operate. It is not only true in the Patent Office; it is true any place. You can look at any agency. They have got to operate within their budget. And if you wish to call the work outputs quotas, so be it.

Mr. NASH. Thank you.

Senator HART. Thank you again.

Mr. BRENNER. Thank you.

Senator HART. Because of our policy committee luncheon at 12:30, I would suggest that we recess now until 2.

[Whereupon, the hearing in the above-entitled matter recessed for lunch at 12:25 p.m., to be reconvened the same day at 2 p.m.]

AFTERNOON SESSION

Mr. BRENNAN. The first witness for the afternoon session is Charles M. Hogan.

Mr. Hogan, we have a prepared statement which I trust you wish to have printed in full at this point in the record.

Mr. HOGAN. If you please, Mr. Brennan.

And with the Senators' permission, I would like to streamline it with a few remarks.

[The prepared statement of Charles M. Hogan follows:]

STATEMENT OF CHARLES M. HOGAN, ATTORNEY AT LAW

Re S. 1321, The Senator Hart bill.

CINCINNATI, OHIO,
September 11, 1973.

Honorable Chairman and members of the committee, my name is Charles M. Hogan. I present this statement and appear to testify in favor of certain features of the Hart Bill. The views herein expressed are offered solely on my own responsibility and are not represented to be those of any other entity.

I have been employed in patent work on behalf of Avco Corporation for twenty-six years, during the last seven as General Patent Counsel. Prior to employment by Avco, and beginning in 1940, I successively worked in the general practice of law at Wellston, Ohio, as a junior examiner in the United States Patent Office, and as a patent lawyer with the Hazeltine Electronics Corporation in New York City. During my service years I was assigned to the Bureau of Naval Ordnance. Between the end of World War II and association with Avco I engaged in the private practice of patent law in Chicago.

I served one term as President of the Cincinnati Patent Law Association, participated actively in bar association committee work and published several law review articles on subjects related to patents.

While I speak from a corporation-oriented point of view, it has been my privilege to work closely with inventors, some humble, some renowned, such as Ronald J. Rockwell, chief engineer for the "Voice of America," the late Herrick L. Johnston, head of the Cryogenics Laboratory at Ohio State University, and Professor Richard H. Engelmann, head of the College of Electrical Engineering, University of Cincinnati. I have individually prosecuted several

hundreds of patents and have been attorney of record in the issue files of several hundred more.

I share the concern of this country and this honorable Committee that the United States is confronted with an energy crisis, an ecology crisis, and inflation, all at a time when Japan, the Soviet Union, and others are giving us very hot competition for technical leadership The patent system has always been one of the spark plugs of our economy and growth in technology. However, it suffers from a certain lack of confidence both in the courts and in the public eye just at the time incentives are most needed.

THE PROBLEM AND THE BROAD PRINCIPLES REQUIRED FOR SOLUTION

Various factors-including caution on the part of patent attorneys, difficulty in predicting the future course of inventions, catering to the vanity of clients and senior engineers, the reluctance of patent attorneys and agents to pass judgment and reject patent application opportunities, and the statistical fact that a fraction of the inventions zealously protected achieve success-cause the work load of the United States Patent Office to consist, not only of thousands of applications pertaining to true inventions, but also a large number-in my opinion a greater one—representing no more than the ordinary skill of the art. The efforts of the patent attorneys, in prosecuting the aggregate work load, tend to depress the Patent Office standard of invention below the level of the constitutional intent. Examination is superficial. While the veteran examines and the directors of the examining groups and the members of the appellate tribunals of the Patent Office are generally men of substantial experience and scientific knowledge, they are frequently academic types not close to industry. The front line examiner is often a junior, a recent engineering or science graduate, armed with a superficial grasp of the art. The inevitable result is that the examination is often incomplete. Even when conducted by a senior examiner, it does not extend adequately into the literature or the foreign prior art. The presentation by the applicant is unilateral, and the Patent Office has no machinery to determine effectively whether statutory bars exist.

Thousands of applications are filed which should not have been filed. Thousands of patents issue which should not have issued. The efforts of the Patent Office are so diluted in the examination of meritorious inventions that when the patent on these properly issue the absence of a complete citation of prior art often constitutes an undesirable cloud on them.

While the courts pay lip service to the presumption of the validity of patents, they declare invalid or not infringed the majority of fully litigated patents.

The usual invalid patent represents an attempt to monopolize something in the public domain. Instead of advancing the progress of science and the useful arts, it handicaps them in that it is a powerful weapon in the hands of the occasional not-too-scrupulous management. Even an invalid patent can be used as a basis for extensive, complicated and costly discovery proceedings and trials so that defendants, unable to finance $100,000-and-up defenses, are compelled to surrender rather than risk the cost, loss of time and worry of litigation, which boils down to ordeals by expert when the technical issues become abtruse. The issuance of an invalid patent is accordingly a disservice to the public. Consider now the mine field of invalid patents into which a manufacturing industry must carefully tread when it is planning a new product or an improvement to an existing product. I do not say that most patents are invalid. I do say that the many invalid patents constitute a marsh and a briar patch and an affirmative obstacle to the progress of science and the useful arts.

The objective here is to establish reforms that will greatly strengthen patents on meritorious inventions and will weed out attempts to monopolize what should not be monopolized and patent applications that do not represent an affirmative contribution to science and technology. While there is much to be said for getting all inventive concepts and disclosures out on the table, nonetheless the patent law profession must sift judiciously and the examination in the Patent Office must be elevated to a new order of rigorousness and depth.

This cannot be accomplished by multiplying the number of examiners in the Patent Office. There is no reason to assume that even an extensive completely financed recruiting program in the Patent Office is going radically to increase