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Another major reform measure under S.1321 would be the institution of deferred examination (Chapter 18). The deferred examination proposal is patterned after those adopted in other countries. The concept is that some suhstantial percentage of applications relate to subject matter which will ultimately fail to achieve commercial significance, and it is wasteful of the patent examining facility to subject such applications to the same examination procedure as applications directed to commercially significant subject matter. I understand that the expectation is that something in order of 50% or more of the applications filed would never require examination, and that this would make it possible for the examining corps of the Patent Office to do a more thorough job of examining the significant applications. At the same time, deferred examination would also result in a comparable reduction in opposition activity, for the application which is never examined need never be opposed.

I favor institution of the deferred examination procedure, but only if deferral is not accompanied by extension of the patent term. An applicant should not be permitted to prolong the patent monopoly by simply being dilatory. Rather than a term of 12 years from the filing date plus any deferral period as under the draft bill, or 17 years from the issue date as under the present statute, a term of 18 or 20 years from the filing date would seem most appropriate.

S.1321, if enacted, would institute for the first time in the United States a system including the imposition of annual maintenance fees to keep a patent in force. The principal reason advanced in support of the maintenance fee concept is to encourage lapsing of insignificant or commercially unimportant patents. However, the vast majority of patents issuing today are granted to corporations rather than to individual inventors. I believe the overall proportion is something in the order of 80%, and in high technology industries such as the radio/television industry, I am sure the percentage is much higher. Major corporations maintaining substantial patent portfolios will not be deterred from seeking or maintaining such portfolios, or induced to seek fewer patents, by the imposition of maintenance fees unless such fees are so high as to be confiscatory with respect to individuals and small companies; the constitutional purpose of the patent system will not be served by so favoring major corporations. Moreover, even if the maintenance fee system worked ideally as intended, only dead wood would be eliminated, and dead wood has not been a major problem. Lapsed patents, while no longer available for licensing or infringement litigation, could not simply be expunged from the records because they would still constitute a substantial portion of the body of prior art to be examined with respect to new inventions; in other words, the imposition of maintenance fees to encourage the lapsing of monopoly rights on inventions without commercial significance would constitute a solution looking for a problem.

It is not the purpose of this statement to identify all of the specific provisions that are either well or poorly adapted to the specific purposes of patent reform nor to propose detailed changes to improve workability or effectiveness. There are many individual provisions which will require major changes in the practice and which will draw heavy fire from the patent law profession; my view is that we patent attorneys can effectively adapt to most of them. In this category are discovery practice, universal prior art, public appeals, prohibitions against broadening of claims by reissue, more stringent disclaimer requirements, and others. The bill also contains uncontroversial changes which are clearly desirable, such as assignee filing, easing of technical requirements concerning joinder of inventors, measurement of the patent term from the application filing date, and pre-issuance damages for infringement based on a finding of allowability. Two sections, however, are both unwise and unworkable, in my opinion. These are Section 112 on disclosure requirements and Section 263 on the rights of employee inventors.

Under the present statute, Section 112 sets forth the basic requirements for the disclosure to be made in the patent specification. The first requirement is that of making an enabling disclosure, i.e., a disclosure which is sufficiently complete to enable those skilled in the art to make and use the invention. Secondly, the present Section 112 requires that the disclosure include a description of the best mode known by the inventor of making and using the invention. Over the years there has developed a large body of judicial precedent to assist in interpreting the detailed scope of these requirements.

Section 112 of the draft bill carries forward these requirements but also expands greatly upon them in several respects. The proposed Section 112 requires a listing of specific invention dates for each claim, including reduction to practice dates. It requires a description of all know-how required to use or commercially exploit the invention. It requires a specific definition of the range of equivalents to which any element of the claim shall be entitled to extend. These new requirements are obviously onerous, and in many instances are even impossible of fulfillment as a practical matter. For example, it may seem simple in principle to ascertain an invention date or a date of reduction to practice, but a little library work will readily show that what constitutes an invention date and the rules for determining the same are complex and involved and not without conflict of authorities. One of the rules, for example, is that no conception or reduction to practice can be established without corroborating evidence by some one other than the inventor. Indeed, the determination of invention date in contested cases requires long and involved interference proceedings. Accordingly, any requirement to specify invention dates in the specification is obviously totally unrealistic and unworkable.

The proposal to require inclusion of all know-how relating to the practice of the invention, even if the metes and bounds of such know-how were subject to such definition, would greatly expand the volume of written material in patent specifications with respect to any invention as to which such know-how has been developed. And the requirement for an express definition of the range of equivalents to be accorded to claim elements amounts to requiring omniscience on the part of the inventor with respect to future developments in the art as well as presently available alternatives for such elements. The whole purpose of the doctrine of equivalents is to recognize that an applicant cannot be allknowing about available substitutes for components of his inventive embodiment and that as a matter of basic equity he should be entitled to cover other embodiments, even unvisualized ones, which utilize the inventive teaching upon which his patent is based. A hypothetical example or two may help to clarify this. One element of the claim combination may be a fastener. There may be absolutely nothing new or inventive about the fastener itself and just what type of fastener is employed may be totally immaterial to the realization of the inventive results and benefits. The inventor in his application may show a nut and bolt as the fastener. He may recognize and state in his specification that there are many types of fasteners that may be used instead, and may even give a couple of examples such as a rivet and a weld. But there are many, many types of fasteners known to man. Indeed there are literally thousands of fastener patents, many expired, to say nothing of other publications and commercial products. No purpose would be served by making the inventor list each and every one of them under penalty of making his claim avoidable simply by using an unspecified type of fastener. And no benefit would accure to the public by making him list all known types of fasteners in his description. Indeed such an itemization would serve only to obscure the disclosure of the invention, which is a combination of many elements of which the fastener is only one.

As a second example, an inventor of an electric circuit using vacuum tubes in 1940 could certainly not know in advance that within the next ten years the transistor would be invented as a vacuum tube substitute, and indeed that the technical community would come to recognize that as a general rule any known circuit using a vacuum tube amplifier could be convereted to a transistorized equivalent by following simple recipes which would be developed right on the heels of the basic transistor invention. Consequently this inventor could not possibly specify the transistor as coming in the range of equivalents to be accorded to the vacuum tube amplifier recited in the claim. And yet anyone making, using or selling the transistorized counterpart circuit ten years later would be realizing the full benefit of the invention.

In Section 112(d), there is a provision which would purport to restore the pre-1952 doctrines concerning “aggregation” and “old combination". It was to eliminate great confusion that had sprung up in the application of these very same doctrines that Section 103—the unobviousness section which is carried over in the draft bill-was developed for the patent act of 1952. Here again, we have had 20 years and more of judicial interpretation of the meaning of


Section 103, and to revert now to the antiquated doctrines of old combination and aggregation would undo all that progress.

For these and other reasons, I respectfully urge that Section 112 be carried over from the present statute unchanged at this time. To the best of my knowledge, there is no experience with similar legislation elsewhere. If experience under the new Patent Reform Act should reveal a need for extraodinary disclosure requirements, that can and should be taken up as a separate matter.

Section 263 would require an employer of a patentee to share savings or royalties with the employee/inventor even though the invention was made with company facilities, on company time and at company expense as part of the employee/inventor's employment. There are several basic objections to this provision and also to the similar laws which have been enacted in Germany and elsewhere.

First and most important, such a requirement could, and would be expected, to result in a competitive disadvantage to the originating company, and would therefore tend to stifle corporate research and development. It would have this effect because the patent would be conclusively presumed to be valid for purposes of profit sharing with the employee/inventor, but the employer's competitors would be free to challenge validity and, in at least some cases, to copy the product without suffering any cost burden whatsoever on account of the patent.

Secondly, a provision of this sort is totally unfair to other employees whose extraordinary contributions to the company do not fall within the cateogry of patentable subject matter and would therefore not qualify for profit sharing or royalty sharing as an employee/inventor under this section. Employees in marketing, advertising, manufacturing, financial, legal, personnel, and other corporate functions are expected to make major contributions without profit sharing or royalty sharing, and I see no reasons for favoring the employee/inventor in this way. Thirdly, a profit sharing requirement would not

reward the employee/inventor whose patentable contribution is not in the nature of cost saving but rather in providing improved performance at the same or even higher cost.

Finally, I can visualize no equitable way to allocate royalty sharing or profit sharing between several employee/inventors each of whom has originated a patent on some aspect of the product or its manufacture. A color television receiver, for example, may embody literally dozens of patented inventions each of which is addressed to some specific aspect of the receiver or to one of its components or sub-assemblies. Some of these patents are addressed to circuits or systems embodied in the product, others to construction of components, and yet others to manufacturing processes or improvements on such processes.

In closing, my commentary with respect to S.1321 would not be complete without noting that the draft bill contains no provision purporting to define licensing rights—nothing like the controversial Scott Amendments proposed in connection with predecessor bills. In my view, this is another commendable feature of the bill. Such proposals are founded on the premise that the patent system is primarily designed to reward the inventor, whereas the primary purpose of the patent system is to create a public benefit, namely to promote progress in science and the useful arts, and the inventor's reward is merely a means to that end. I see nothing about the patent property which should make it any more or less susceptible to misuse in violation of the anti-trust laws than other types of property. I therefore see no reason for attempting to carve categoric exemptions or immunities for patents from application of the antitrust laws by statutory enactment.

The 1966 Presidential Commission recommendation to enact licensing rights legislation was accompanied by the statement that “The Commission .... does not favor any proposal which would weaken the enforcement of the anti-trust laws or which would curtail in any way the power of the courts to deny relief to a patent owner misusing the patent he seeks to enforce.” In other words, the recommendation was to clarify or codify existing law, not to reform or amend it. The difficulty which has been encountered in drafting acceptable statutory language to meet this objective was not visualized by the Commission, and I see nothing in its Report to suggest that the licensing rights question is not severable from the need for patent reform. The controversy over licensing rights legislation has now delayed the much-needed patent reform for several years. In my view, it is a severable question and should be taken up separately without delaying the present bill.

To summarize my views concerning S. 1321, important revisions are needed and some provisions should be omitted altogether, but with appropriate changes it can be made a useful and effective patent reform measure.



Mr. PEDERSON. Mr. Chairman, my purpose in appearing is because of deep concern over the obvious need for a basic change and reform in our patent system. We all bemoan the vital statistics that we do have as to the mortality rate of patents in the court. I think from that it is fair to conclude that the patient is sick.

In partial response to a question asked of Mr. Hogan, I do not think you can extrapolate those figures and state the same percentage would apply to all patents. I do not think there is any way of guessing which way it would go.

But in any event there is need for this change and a need for reform; and it is time that we do it.

In my view the problem with the patent system has been inherent in the fact that all the patentability proceedings are and historically have been ex parte administrative proceedings; and what we need is an adversary system.

Now, I do not mean to imply that the Patent Office's examining corps is not an able and dedicated group of people. I think they are, and much has been done in recent years to upgrade their professional status and professional ability. There has been the institution of the Patent Office Academy. There are many more career examiners today proportionately than there were when I started in the practice 25 years ago; and they are doing well.

The problem we have is not the problem of professional accountability and dedication. It is a problem of difficulty with the system. The system is not well tailored to produce good patents and reject inferior patents.

As a practical matter, nobody can run a search on the basis of the amount of time allocable to an individual patent application to determine all the relevant prior art, even from among the library of prior art that is available to be researched.

But even of greater significance is the fact that there are entire categories of what often turns out to be the most relevant prior art, namely copending patent applications which represent the most recent innovation in the field to which the application we are talking about is directed. And they are not accessible to the examiner or to the applicant, and there is no way that they can be found as a part of an ex parte examination practice.

In an adversary proceeding, the applicant in these relevant copending applications could bring them forward as grounds for opposition.

A Patent Office examiner cannot identify them. He is prevented by statute. The applicant cannot have access in any kind of search. He cannot find them. And so, he is helpless to ascertain at the time he files his application what the real state of the prior art is.

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I might also say in recent years the Patent Office has, I think, been pennywise and pound-foolish, probably in response to budgetary restraints, in curtailing search facilities; for example, it is no longer possible to run a decent search of the foreign patent literature in the U.S. Patent Office. It used to be that they had a library of classified foreign patents classified by subject matter. You could do a search and find out what the state of the art was. Today that library is nonexistent as a public facility, I assume because of unavailability of space and budgetary allocation. Examiners cannot search it either.

So that we in industry when we want to run a search of the foreign art have to go overseas. There are search agencies in Japan, the Hague in Holland and other places that perform these services on retainer.

So on the basis of fundamentals it seems to me that if we are to have an effective system, an adversary system, we must bring for

, ward those that have knowledge of the prior art, that is, industry members, competitors. We must find some way to bring that knowledge to bear in the patent application proceedings.

But unless we do something to urge them and make them come forward during the application proceedings, I fear that many of them, if not most, will just sit back and say, “I would rather reserve my defenses until such time that I go to court.” And they may never have to defend the patent, in which case they save a lot of trouble. Somebody else may have to defend it, and they may be saved a lot of trouble.

So it one has an option—and section 138 (b) in S. 1321 would give him that option as I read it-he very well might not come forward, and spurious patents will continue to be issued.

We have to put teeth into the system. We cannot make patents easier to get and harder to bust at the same time. If we are going to make them harder to bust, we have to make them harder to get. If we make them harder to get, we are going to have to have some consequences for people who are in a position to take part in these proceedings and refrain from doing so.

There are many things that can be done in that regard, ranging all the way from incontestability—that many people would find too harsh, probably most-to personal estoppels to raise defenses in court proceedings that could have been brought before the Patent Office.

My purpose is not necessarily to come up with an ultimate prescription, but to say in principle that some consequence is needed some definite specific strengthening in the presumption of validity. Something that makes patents tangibly less susceptible to attack in the courts should result from these adversary proceedings for those that survive.

I also am mindful that historically in European countries that have opposition proceedings, there is oppressive use of oppositions to suppress competitive patents, keep them from issuing, delay issuance, perhaps encourage them to drop their applications because of economic considerations; so I believe that there should be effective sanctions against such abuses.

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