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We believe that this proposal will encourage patentees to examine carefully the question of whether patents which they have secured are serving any economic purpose, and to do so at least two occasions during the 20-year patent term. If in fact patents are not being used by their owners or by licensees thereof, substantial fees such as those proposed in the administration bill should encourage early dedication of the subject matter to the public. Thus, such patents would be removed from the economy as potential clogs on commerce. This result can only be viewed as procompetitive. Again, while there are similarities here to the proposals contained in S. 1321, an annual fee might impose substantial administrative and financial burdens on both the Patent Office and patentees. In addition, there is some danger that fees that are imposed too early in the patent term would have the effect of penalizing the patentee—who may be an individual or a small business without extensive financial resources—that has disclosed a truly significant inventive advance, an invention far enough ahead of its time that real commercialization takes a number of years to achieve. Even a chance to defer maintenance fees is not a completely adequate solution, for the preparation and the processing of such requests impose additional burdens on both patentees and the Patent Office. Accordingly, the Administration's proposal as to such fees again seeks a means of minimizing burdens and risks attending such fees while furthering the desirable goal of clearing the books of unused patents prior to the time their full terms would run.

Lastly, let me address the question of establishing the Patent Office as an independent agency. S. 1321, in section 2, would make the Patent Office an independent agency rather than continuing it as part of the Department of Commerce.

The administration opposes such a change in administrative structure, primarily on the basis of the arguments advanced earlier by the Department of Commerce. I would add to that, however, an observation. The administration reform bill contains some language designed to insure that Office decisions will continue to be made, as they have always been made in the past, solely on the basis of a reasoned application of law to particular facts. Thus, the administration bill provides that the Patent Office is subject to the Administrative Procedure Act, 5 U.S.C. sections 551-559, 701-706, and contains statutory language that would provide that the Office "shall function independently of the Department of Commerce in the exercise of discretion concerning its adjudicatory functions."

Thank you very much, Mr. Chairman, for the opportunity to express our views on these five subjects, as I am sure you are aware, most issues connected with patent reform cannot be considered in a vacuum. As my testimony today indicates, almost every issue relates to one or more other questions and one must always keep in focus the totality of the reform proposal being advanced. Let me conclude by stating that the remainder of our views on S. 1321 will be apparent when the administration reform bill is submitted to the Congress. I hope this discussion of some comparisons between that bill and S. 1321 has been helpful to this subcommittee.

Senator HART. Thank you, Professor.

As I followed your testimony, I realized how correct you were when you said it was a statement that was not susceptible to summary. It was an effectively prepared presentation.

The elements of the administration bill that you describe in response to the five subject areas that we specifically asked about all seem to be in the direction of solid reform. We disagree, as you indicated, on particulars, but the direction is the same.

What about some of the things that apparently are omitted—at least you have omitted them in the presentation? I am going to enumerate six areas and inquire whether these proposals were considered and rejected or whether they were simply not considered. It may be necessary that you respond for the record later. Perhaps you can respond to some or all now.

Did the administration consider changing the standard of invention fixed in section 103?

Mr. KAUPER. I think, Mr. Chairman, it would be fair to say that consideration has been given to making a change to that, and no changes have been made.

Senator Hart. The second, changing the standard of novelty in section 102.

Mr. KAUPER. My understanding, Mr. Chairman--and I think as with virtually all of the provisions of almost all these proposed bills mentioned at the outset of my statement-full consideration was given to changing these provisions as well. Basically, we are retaining the existing provisions.

Senator HART. That answer would apply, then, to changing the standard of utility under section 101, an proposed by the APLA?

Mr. KAUPER. I think the administration bill—and I must say, sometimes I am a little confused on some of these—but we have decided against any proposals to significantly change the law on utility. There have been a number of proposals made dealing with such things as utility in research, that sort of thing. They are not

Senator Hart. The fourth, changing the presumption of validity. That is section 282 in the proposal.

Mr. KAUPER. The present law on that, we believe, is effective, and we have considered a number of proposals with respect to that provision. No changes have been made, Mr. Chairman.

Senator Hart. Fifth, the creation of a specialized patent court, apart from the normal judicial system and the inter-relationship of the Administrative Proceedings Act.

Mr. KAUPER. I think, Mr. Chairman, there is no such provision. I think, in respect to a specialized court, that this is an idea that I am sure you are aware is involved in other matters with which we have some involvement. My general feeling has always been that I prefer generalists on matters such as this. There is no such provision for a specialized patent court in the administration bill.

Senator HART. I instinctively have this feeling that generalists are better, until I found myself chairing a patent hearing. Then, I am not so sure.

Mr. KAUPER. Being on this side, it does shake my confidence in that statement a little. I think I would have to agree, Mr. Chairman.

part of it.

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Senator Hart. Sixth, did you intend to change existing law by adopting a proposal for assignee filing?

Mr. KAUPER. A wide variety of assignee filing provisions was considered. Basically speaking, the administration bill does permit an assignee to file papers, subject to the protections for the individual inventor. It does not, however, change the existing substantive law with respect to joint inventorship or identifying inventive contributions by different individuals.

Senator Hart. There is no need to review with you the up-anddownhill business of the antitrust treatment and the subcommittee and committee's action last year and the year before last.

Let us find out, to the extent that you are free here, your own feeling, the Department's feeling, the administration's feeling, on this matter. Professor Turner and Judge McClaren, your predecessors, opposed the inclusion of antitrust licensing provisions in the patent reform legislation. Then Commissioner of Patents, Commissioner Brenner, opposed the inclusion of such a provisions in 1967 and 1968.

Since then, I believe, the Patent Office has changed its position. I would like to know the present views of the Anti-Trust Division on the need for such antitrust provisions.

Mr. KAUPER. Mr. Chairman, I do not believe it would be appropriate at this time for me to answer that. An administration position is being developed with respect to that issue and will be resolved, I hope, very shortly. At that point, I would be perfectly happy to discuss that decision and its merits or lack of merits. Í think it important that we proceed with formulating the administration position.

We have a request, as I recall, from the chairman of this subcommittee for an administration position on this issue. And in an attempt to comply with that, I think we had better keep on the tract that we are presently on.

While I would be more than happy to discuss this with you in any forum you may like once the decision is made, I think I should wait until that time.

Senator Hart. This may, at least, signal the delay that would be involved if there are antitrust provisions. I think we would have to take you up on your offer to come in and talk about it.

Mr. KUAPER. I would assume so, Mr. Chairman.

Senator HART. I should indicate that a vote has been scheduled in the Senate to begin about noon, but I would anticipate that we will be able to conclude before a recess.

This is not the most important thing in all the testimony given us, but why do you say that the administration bill is going to have the patentability brief requirement expire after 5 years?

Mr. KAUPER. I think there has been a feeling that this is simply a way to re-evaluate its effectiveness and whether there are other means of securing the same information.

There seems to be some confusion in the actual meaning of the statement, as to whether it actually expires within 5 years. The Commissioner is given some options after 5 years. What it is designed to do, without going into details of it, because there might

be,some disagreement about the precise meaning of that, is to permit a re-evaluation of the requirement at a particular point in time and permit, to a certain degree, some redesignation by regulation-perhaps even as to classes of cases where the brief would be required. The requirement is mandatory at the outset of the bill. But the provision I have been discussing would create some flexibility for the Commissioner, as well.

Senator Hart. I asked this in part because twice the Patent Office tried to require this patentability brief by rulemaking, and it was included in the bill of 1971.

I am not sure that either of us will have a better understanding at the end of these next several questions as to where we should be on how many years, but let me try anyway.

You recommended a 20-year patent term. That is 3 years—
Mr. KAUPER. From the date of filing.

Senator Hart [continuing). From the date of filing, a 3-year increase over the present.

Mr. KAUPER. Well, the extent to which it is an increase, of course, depends on when you begin the term.

Senator Hart. Your bill and ours start the term from the date of filing rather than the date of issuance?

Mr. KAUPER. That is right.

Senator Hart. The Patent Office expects to get to its goal of an 18-month pendency period. Assuming that happens, we would calculate the new patent term at 181/2 years.

Mr. KAUPER. I understand your arithmetic. A 20-year term, of course, is the term that was in the committee print earlier.

Senator Hart. What I am really leading up to, without arguing 18 months, good or bad-does the Department have or know of any economic study that suggests 20 years!

Mr. KAUPER. I think the answer to that is no.

Senator Hart. On the business of the potential anticompetitive effect in this business of deferred examination, it is your judgment that it could or would be anticompetitive because competitors would not know which claims might be allowed and hence would be disadvantaged.

Let's assume that to be correct—could you not argue that that would be better than the issuance of a large number of low quality patents ?

Mr. KAUPER. Yes; I think that is true, Senator. I think if one assumes that there is going to be a large number of low quality patents issued, then, weighing all various competitive factors, obviously that becomes fairly important.

I think, however, discussing deferred examination, that there are a vareity of choices that are present here. One way is to proceed along the deferred examination route. Another is to say, the best way to improve the quality of issued patents is to get the most effective examination as rapidly as possible from the outset. This provides more certainty. It may assure quality from the outset.

And I think what we are saying is that we believe, in essence, that that is the preferable course, rather than starting down the path of a deferred examination system.

Now, obviously, one's views depend on how successful one thinks the process will be.

Senator Hart. Thank you very much.
Mr. KAUPER. Thank you, sir.

Senator Hart. There being a vote occurring now, I would suggest a recess until 2 o'clock.

[Whereupon, at 12 p.m., the subcommittee was recessed to reconvene at 2 p.m., the same day.]

AFTERNOON SESSION

Senator HART. The subcommittee will be in order.

Mr. BRENNAN. Mr. Chairman, the first witness this afternoon is Mr. Dunne of the Patent Office Society.

STATEMENT OF MR. JERRY DUNNE, CHAIRMAN, LEGISLATION

COMMITTEE, PATENT OFFICE SOCIETY

Mr. DUNNE. Mr. Chairman, members of the committee, my name is Jerry Dunne. I am the chairman of the Legislative Committee of the Patent Office Society.

I wish to state for the record that I am appearing here today on annual leave, and that I am an employee of the Patent Office.

The Patent Office Society is an organization devoted to the furtherance of the patent and trademark systems and the professional development of its members. The society numbers among its members over 1,100 Examiners and other professionsl of the Patent Office. This represents over 90 percent of the total number of professional employees in the Patent Office. Although many of its members are employees of the Patent Office, the society conducts its affairs independently of the Patent Office, thus this report does not reflect and should not be construed to be the views of the Patent Office administration.

ESTABLISHMENT OF THE PATENT OFFICE AS AN INDEPENDENT AGENCY

Section 2 of S. 1321 provides for the establishment of the Patent Office as an independent agency. The Patent Office Society favors in principle such an administrative restructuring.

The Patent Office, in fulfilling its duties in administering the patent system, affects three separate sectors of the national community. The decisions and policies of the Office affect the business community, the scientific community, and the consuming public. Presently, decisions of policy effecting the patent system are influenced by the Secretary of Commerce, who is charged with furthering American business interests, the Assistant Secretary for Science and Technology, charged with furthering the interests of the scientific community, and the Patent Office administrative personnel. The divergent and possibly competing interests of these various sectors provides for at best, a decisionmaking process responsive to the interests of the various sectors and at a minimum, competing policy

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