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DEPARTMENT OF COMMERCE
SECRETARY'S RESERYE-DETAIL OF PATENT OFFICE ACCOUNT

FISCAL YEAR 1973

$663, 000

--20, 000

Amount reserved July 1, 1972.--
Projects assessed against reserve:

Competitive assessment study of tire and aerospace industries.-
The study determined international technological activity in these

industries and can be related to Patent Data in order to more

adequately assess its meaning for American industry. Amount returned for use by Patent Office May 2, 1973.

643, 000

FISCAL YEAR 1972

593, 000

– 60, 000

- 265, 000

- 8,000

Amount reserved July 1, 1971..
Projects assessed against reserve:

Study of multi-national corporations.-
The study provided information on methods of transfer of tech-

nology as it affects international trade. This information is useful
in determining how international patent agreements should be
designed and the impact of foreign patent filing in the United
States.
Price, Waterhouse study to design production control system

for Patent Office...
This two phase study was of direct benefit to the Patent Office, and

resulted in the implementation of PALMII, the present auto-
mated production control program of the Patent Office.

Key punch and personnel financing training---
Upgraded training of personnel in processing and finance divisions
of the Patent Office.
Departmental executive ADP program and management

training-
Upgraded key ADP personnel of the Patent Office.
Development of criteria and methodology to screen Government

held patents for commercial potential.
Part of funding used to support initial Battelle Institute studies of

Government Owned Patents in response to March 17, 1972,
Science and Technology Message of the President. The studies
resulted in the Government Owned Patent Promotion program
of the Science and Technology area.
Technology assessment and forecasting using patent data, sys-

tems design, programming, processing and analysis.---
In response to a request from Secretary Peterson, an office was

set up in the Patent_Office to assess trends in technological activity as shown by Patent data. The results of these studies are to be published in semi-annual reports.

Total, All Projects----

- 11,000

- 75, 000

-99, 000

-$518, 000

Amount Returned to the Patent Office June 30, 1972.-,

75,000

Mr. BRENNAN. Prof. John Stedman.

Senator Hart. Professor, would you identify yourself for the record please?

STATEMENT OF PROFESSOR JOHN C. STEDMAN Mr. STEDMAN. My name is John Stedman and I am professor of law at the University of Wisconsin where I have been teaching for many years. One of the areas in which I have spent considerable time and given considerable attention has been the area of patent law and intellectual property. In this connection I have been con

cerned about both the good points and the shortcomings of the patent system and equally concerned with the possible ways in which the system can be improved. For those reasons, I welcome the opportunity to appear here today.

Senator Hart. I should confess on the record that we miss your continued presence upon the staff of the subcommittee so we use any occasion that we can lay hands on to get you back.

Mr. STEDMAN. I must say that the periods that I spent with the committee were some of the more enjoyable ones of my entire experience. I equally enjoy appearing as a witness.

Mr. BRENNAN. You have a prepared statement. Would you like to have that printed in the record at this point?

Senator Hart. It will be printed in full at the appropriate place.

Mr. STEDMAN. I have submitted a prepared statement which I believe you have copies of. In the interest of time and of expedition I will simply attempt here this morning to summarize it rat! er briefly and supplement it with some brief comments if this meets with the approval of the committee?

Senator Hart. It does.

Mr. STEDMAN. In approaching the bill, S. 1321, I have done so on the assumption that two important principles are involved here. Principles that I believe the subcommittee will agree to from the very fact that they have introduced S. 1321. These are, one, that the patent system is a system that is worth retaining and, two, that it is a system that is in quite serious need of some fixing up. I don't believe I need to belabor the first point. We have had a patent system in this country for almost 200 years—from the beginning of the Nation almost-and, as far as I know, with the exception of a few occasional dissidents, no one seriously suggests throwing it out.

The matter of fixing it up is somewhat more complex. It is necessary, first, that we ask just what is wrong with the system. Then, for the purposes of these hearings, the question becomes, will the proposals that are the subject of the present hearings serve to put the system in shape?

The problems of the patent system are several. Some basic changes have occurred in our whole technological structure. The subcommittee itself stated these well back in 1956 when it made the following comment in its annual report:

The industrial and technological economy of today bears little resemblance to that of yesterday. The relatively simple, easily understood and inexpensive inventions have given way to highly complex inventions that require extensive scientific training to understand and substantial experimentation and capital to develop and perfect. The garret, garage, or basement inventor to a marked extent has given way to the laboratory technician who is both scientifically trained and versed in the latest techniques of experimentation and invention. The independent "lone wolf" inventor has given way to the coordinated group activity of the research laboratory.

It becomes necessary, of course, for the system to respond to some of these rather fundamental changes, but even taking the system as it has traditionally existed, there are certain shortcomings that are crying for correction.

As I see it, these are five in number. One is the question of uncertainty as to what you have when you get a patent. After all the proceedings in the Patent Office, one still remains completely uncertain as to whether his patent is valid or not. The second is the delay that has characterized patent procedures, both in obtaining the patents and in litigating and settling controversies concerning them. Third, has been the cost of the patent system, both in terms of obtaining patents and in terms of the cost of litigation-especially the latter. Fourth, has been the inflexibility that has characterized the patent system; we are dealing with a system in which contributions may vary but in which only one single reward is given once it has been determined that a person has indeed made a substantial contribution. The fifth shortcoming is the nonharmonization of our patent system with other patent systems of the world. This is a matter of special concern at a time when more and more international technological exchange is occurring and when serious efforts are being made to achieve a considerable amount of international cooperation.

What I want to examine here are the specific proposals that are before this subcommittee and to examine them in terms of their merits and shortcomings in dealing with these fundamental problems that confront the patent system.

Five matters are the subject of discussion here: One, onposition proceedings and related matters; two, the establishment of a public counsel in the Patent Office (one and two deal with the problem of uncertainty as to validity that I have mentioned); three, a deferred examination procedure; four, maintenance fees (three and four involve the problems of cost and delay); and finally the matter of setting the Patent Office up as a separate agency, a proposal which is designed to make the system operate more independently and effectively than it has in the past.

You will note that two elements that I have suggested as problems, have been left out. One is the matter of harmonization. S. 1321 does not address itself to that particular problem, and probably this is just as well. In retrospect, it may be that some of the difficulties the Presidential Commission Report ran into arose because the Commission was trying to key the American system to the international system and this opened the way for the contention that what we were doing was selling our own good system down the river. So there is probably much to be said for saying,

Let's get our own system in shape first and then see how we can work our system into the international picture.

The other matter that is not really dealt with by S. 1321 is this question of inflexibility that I referred to. This omission is a more serious matter and one I will discuss briefly in connection with both the opposition and public counsel proceedings.

Opposition proceedings. Let me turn now to the individual proposals that are before the committeee, starting with the opposition proceedings. There is no point in my attempting to summarize the provisions of the bill. We are all aware of what it provides. So I will limit my comments to my reactions and any suggestions I may have.

Let me start by saying that I feel that the opposition proceeding is long overdue. Other countries have had it for years. Granting that

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opposition proceedings pose some problems at times, as far as I know no country that has such a proceeding shows the least disposition to abandon it. Our own experience--and there has been ample testimony here during these hearings as well as in other instancesindicates clearly that the ex parte procedure simply will not work satisfactorily. The Patent Office examiner simply cannot do the job alone. He needs help. There are three places where he can go for it. He can go to the applicant, and there are provisions in S. 1321 which require that the applicant give him far more assistance than he has given in the past. Those who are working with the applicant, including his attorney, must also give assistance in the form of briefs, disclosures, and so forth. Second, the examiner can go to inside help. This is what is contemplated in the public counsel proposal that I will discuss next. The third source to which he can look is the outside third party, and this is what the opposition proceeding is all about.

The probabilities, I suspect, are that an adequately operating opposition proceeding is likely to prove the most effective. There is nothing like self-interest, after all, to push a person into doing the best possible sort of a job in pressing a case, and it is the self-interested individual that is the most likely to appear in an opposition proceeding

Two additional points are worth noting in connection with the opposition proceeding. The mere existence of an opposition proceeding is going to put both the primary examiner and the applicant on their mettle to do the best job they possibly can. If they know tha within a very short time after the applicant's disclosures and the examiner's search, the matter is going to become a public record and opportunity will arise for third parties to come in and show where such disclosures were inadequate or such searches were inadequate, this is certainly going to force them, if they were at all disposed otherwise, to do the best possible and most thorough job that they can.

A second factor to consider in connection with the opposition proceeding, is the probable salutary effect upon the courts. At present, the presumption of validity which is formally on the books, is almost nonexistent and probably for good reason. The courts have had before them too many instances in which it was quite clear that there was no justification for presuming that a particular patent was valid. Courts have traditionally been unwilling to accord extensive presumptions in favor of an agency where they have not had confidence in the operations of that agency. The existence of an opposition procedure, especially if the opposition occurs but probably, even if one does not occur, is likely to result in a shift in court attitudes and enable us to get away from the distressing, expensive, complex procedures in which the whole matter of validity is tried all over again before a court. I would be the last to urge that there be a strong presumption if one is not justified, but for the reasons that I have previously mentioned, a stronger presumption would be justified as a result of the opposition procedure because there would be more reasons for believing that a patent was valid once it has been issued.

There are one or two minor points that I will mention briefly in connection with the opposition proceeding. One is the question whether it may be advisable to issue the patent first and then follow with the opposition. This would prevent the kind of tieup and delay that results from a protracted opposition proceeding of the type Commissioner Gottschalk was talking about a few moments ago. This would seem especially relevant if a patent is to run from the date of application, as is proposed by S. 1321, instead of from the date of issuance.

Second, is the question whether there should be a time limit on the opposition. It is frequently proposed that one speak up within a given period of time or forever hold his peace. The suggestion seems to me a rather doubtful one. There may be various reasons—lack of motivation, lack of information, or lack of resources—which may make it impossible for one to institute an opposition proceeding within a given time. It would seem that, if it is desirable to permit this procedure before the Patent Office within a period of 3 months, then it should be desirable within 4 months; if within 3 years, then it should be desirable within 4 years. At the same time the committee might appropriately give some thought to developing means to encourage opposers to come in as fully and as promptly as possible since this would be desirable in the public interest.

Finally, I raise the question whether the opposer should be permitted, at least at this point, to become a party. Here again, some of the difficulties of the foreign systems have been the protracted, cumbersome proceedings that result from an opposition which frustrates rather than promotes the operation of the patent system. It may turn out eventually that the procedure is not meaningful unless one is permitted to become a party, but it would seem wise to start out initially by permitting an opposer to submit information to the examiner but not permit him to become a formal party to the proceeding.

A collateral matter that I might suggest is indicated in a footnote on page 6 of my statement. That is the possibility of a procedure in which courts, with litigation before them, might at their discretion submit evidence to the Patent Office for re-examination and an expression of views in the light of newly discovered evidenceviews which the court would not be bound to follow.

Public counsel. The second proposal is the matter of a public counsel. The public counsel, like the opposition proceedings and the provisions for patentability briefs, disclosures by applicants and oaths, is designed to bring out as fully as possible whatever information the Patent Office ought to have, prior to the time that the patent is granted, with respect to such grant.

The public counsel, in a sense, is playing the role within the Patent Office that a serious opposer would be playing working from outside in an opposition proceeding. Here again, the effect would be to provide a needed balance to the present one-sided ex parte type of proceeding and to that extent contribute to the integrity of the patent system.

I would suggest one caveat with respect to the public counsel. Since this is a new proposal, it may be wise to start out modestly

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