7. CONCLUSION

In concluding, let me emphasize again the need for coming to grips with the serious problems that beset the patent system. S. 1321 is to be commended for attacking the issues with courage and imagination. Inevitably, in doing so, shortcomings and inadequacies occur. S. 1321 has its share of such shortcomings, many of which I have pointed out, as have others, in the course of these hearings. The task now is one of refinements, the selective retention of those features that are meritorious and the rejection of those that are bad, the revision of those features that are sound in principle but need fixing up in details, and the further study and exploration of those that may well have merit and warrant ultimate inclusion but for which an adequate foundation has not yet been laid. (In this connection, the Subcommittee might well consider reestablishment of the research program that it sponsored for several years beginning in 1955 and which resulted in the publication of 30 monographs that shed light on various aspects of the patent system.)

In broad terms, what is called for is an approach that accepts the basic principles of the patent system, seeks to correct such shortcomings as may exist in it and proceeds with determination to do this, but at the same time proceeds carefully, thoughtfully and cautiously lest we run the risk of throwing the baby out with the bath water. It is in this spirit that I have approached S. 1321 in my testimony this morning. I hope my comments prove helpful.

Senator HART. We are not going to break for lunch if at all possible but let me suggest a five-minute recess here.

[Recess.]

Senator HART. The committee will be in order.

Mr. BRENNAN. The next witness is Dr. Howard Forman, who is appearing on behalf of the National Association of Manufacturers. Senator HART. Dr. Forman, you are welcome.

STATEMENT OF DR. HOWARD I. FORMAN, ON BEHALF OF THE NATIONAL ASSOCIATION OF MANUFACTURERS; ACCOMPANIED BY REYNOLD BENNETT, VICE PRESIDENT FOR INDUSTRIAL INNOVATION

Dr. FORMAN. Thank you, Senator. We have a prepared statement. which I would like to have introduced in the record.

Senator HART. It will be in full.

Dr. FORMAN. May I just introduce myself, by the way, giving my qualifications as is normally done?

My name is Howard Forman. I am a patent and trademark attorney of some 30 years' experience. Roughly the first half of my experience was with the government, with the Department of the Army, and the latter half with Rohm and Haas Co., one of the country's major chemical manufacturers. For reasons which will become apparent later and pertinent to one of the issues to be discussed here, I will mention that in addition to my science and law degrees I have a Master's and a Doctorate in Business and Public Administration from the Wharton School of the University of Pennsylvania. For some 7 years I taught at the Temple University School of Business and Public Administration, a graduate course which was named Federal Administrative Process.

Now, Senator Hart, on behalf of the National Association of Manufacturers, I wish to express appreciation for the opportunity to present its views on the proposed critical patent law revision matters being considered at this hearing.

As you know, the NAM is a voluntary association of business concerns of varying sizes and commercial activities located in every State of the Union. Participants in NAM membership are companies and individuals involved in the scientific and technological endeavors that have enabled this Nation to earn the reputation as a leader in providing a climate for creativity which has enabled the development of some of the most important products and processes utilized today.

Senator, in your introduction to the S. 1321, which I found extremely interesting and provocative reading, there were two passages in particular I thought so cogent that I would like to repeat them at this point. I will quote your words: "Last year, President Nixon recognized the importance of a viable patent system, saying that 'a strong and reliable patent system' is an important predicate to United States technological progress and industrial strength." I completely agree with those words.

That is the end of one of your statements. In the other passage you say: "Mr. President, as I said, I know that discussion of patents can be tedious." Parenthetically, Senator, I think I have to agree. Then you continued: "However, I am sure that most members of this body would agree with President Nixon that we must have a strong and reliable patent system in order to promote invention and the public interest. It is a matter not only of life style and comfort for each of us, but of health, employment, and maintaining our technological superiority." Then you go on to say that revitalizing the patent system is a necessary prerequisite to restoring public confidences and allowing it to perform its constitutional objectives.

For these words, Senator, NAM salutes you and President Nixon, and personally I must say that I agree with both of you wholeheartedly. I feel that certainly the patent bar also salutes you and the President, and I trust the public at large agrees with you in those expressions of your views. The real question, though, is "how." How can we bring about the things that you have proposed?

We agree with you as to some of the answers that you have spelled out in S. 1321, but not with all.

Now the announcement of these hearings invited comments on five specific topics and accordingly I will briefly cover all five subjects and then, if you like, would be pleased to answer any questions as best I can. The first one is relative to public adversary proceedings. NAM views with optimism the prospect of improvements to the administrative procedures in the Patent Office which will enhance the validity of issued patents. Specifically, it supports involvement of third parties in calling attention of the Patent Office to any prior art relative to a claimed invention. However, NAM is not in favor of the particular procedures that have been spelled out in S. 1321.

At this point let me just depart from my written statement, and briefly recite some pertinent background information. I can recall some 20 or more years ago when I first heard a suggestion—it was espoused by a gentleman named Mr. Manuel Rosa, who was an official in the Patent Office, and I believe he is deceased now-that there was needed what amounts to an ex parte opposition proceeding in the Patent Office. This is essentially what you have in S. 643 of

the last Congress, it is contra to the system that you have been hearing and talking about here the past few days, namely the system in Germany and Japan which is a full blown inter partes procedure.

Mr. Rosa's idea was apparently before its time. The patent bar criticized it because of the experience in Great Britain where, if art is cited by anyone after allowance and publication of an application, the examiner gives the applicant the opportunity to amend his claims so as to get around the cited reference. It took two decades of debate and maturity of the proposal's critics to see in it the tremendous potential it possesses for giving real meaning to the statutory presumption of validity which a patent is supposed to have upon issuance by the Patent Office. The President's Commission on the Patent System, in its 1966 Report's Recommendation XI, urged that an ex parte opposition be legislated into our patent practice and procedure. I might add that I was so convinced of the merits of Mr. Rosa's proposal, when the President's Commission invited suggestions for révision of our patent laws I wrote it a 3-page letter describing the proposal and urging its adoption. It was, by the way, the only suggestion I felt moved to make to the Commission.

Ex parte opposition is a sensible, practical form of adversary procedure. With a minimum amount of delay in the proceedings, the whole world literally has an opportunity to aid the examiner or others in the Patent Office who may be assigned to review the art thus cited after allowance of the application. It is quite different from and avoids all the ills of the inter partes type of adversary procedure, and I say this based upon years of considerable personal experience with that type of procedure in Germany and Japan. It is quite obvious that inter partes oppositions are dragged out incessantly by permitting third parties to cite new references and new arguments against patentability ad nauseum. This is such an expensive procedure that only the wealthy individual or corporate applicants can afford it. Not only that, but the practice is counter-productive in the sense that it permits a cloud to hover over prospective patents for long periods of time during which the public, as well as the parties to the proceeding, are left in considerable suspense, not knowing whether to invest or avoid investing in the invention or some related development that may be unique to some extent but which still may be affected if the patent under opposition ultimately should issue. This is particularly vile if the parties to the opposition have no intention whatsoever to do anything else but harass and delay the issuance of the patent. I can tell you of one instance in which my company had a very important matter in Japan that caused me to go to that country to try to straighten it out. It had gone on for 10 years and involved no honest-to-goodness attempts to reach a decision before we were able to force an end to the proceeding by demanding a showdown in the courts. We have had them that long in Germany, too.

Now this type of harassment is bad enough where it affects corporate activities, but presumably they can afford to put up with the delay and heavy expenditure. The independent inventors however, are going to be put out of business by that sort of proceeding. They cannot afford to put up with delays of that type and the legal and

other fees that have to be paid to defray the expenses. Not only that, but from my own observations and experiences, I seriously doubt that you could end up with a better result, a better product, a more bona fide valid patent by having an inter partes proceeding, than you could with an ex parte proceeding. Again, providing that the ex parte proceeding was carried out along the lines which are bound to produce the results that you and we are seeking, I feel that it would be much superior and result in greater overall benefits than an inter partes proceeding.

Commissioner Gottschalk earlier today made reference to a procedure which the Patent Office is about to entertain. Actually, the hearings have been published in the Federal Register and they will be held on October 31. The subject of those hearings have been given the title of Voluntary Protest Proceedings. NAM is fully in favor of that type of adversary proceeding. Personally, I am strongly in favor of it, too. As a matter of fact, I believe I was instrumental in having it come to the attention of the Patent Office. Over a year ago, under the auspices of the American Patent Law Association, a special committee was established to consider problems involved in patent practice and procedure, and periodically the recommendations of this committee were funneled to the Commissioner for his consideration. Last January I happened, by letter to our chairman, to propose that the Patent Office should administratively adopt this type of voluntary ex parte opposition procedure, so in saying I am definitely in favor of it. I am in effect doing no more than endorsing my own proposal.

Now what is the voluntary protest procedure? It is essentially going to be very similar to that which is in or has been in section 191 of S. 643, of the last Congress. The only difference is that it will be volunatry, whereas S. 643 would have made it mandatory. In view of this possibility of administrative adoption, why adopt the complicated adversary procedure by legislation called for in S. 1321 until we have had a chance to test that voluntary procedure? I am in full hopes that after the hearings are held next month, they will be adopted and implemented administratively.

I trust you are familiar with the way this will work. The only difference between it and what was in S. 643 is that, in the absence of legislative mandate, it makes it possible for an applicant to voluntarily submit his application upon issuance for re-examination so that the whole world can come in and cite references, which the examiner may have possibly overlooked or failed to find. This is a true adversary procedure and it has every advantage of the inter partes type procedure without its flaws of harassment and heavy costs which I must say I seriously object to, and which I know NAM formally has objected to, also.

Incidentally, since the voluntary protest procedure was announced, it is very interesting that the comments I have informally received from numerous people in the patent profession are that, although it is voluntary, in effect it will be the same as if it were mandatory. If an applicant for patent, upon receiving notice of allowance from the Patent Office, declines to take advantage of the voluntary opportunity, what will he say if his patent should go into litigation in the

Federal courts when the court asks why the applicant failed to take advantage of it when he had the opportunity? The court may well ask whether there was some reason why the applicant didn't want to expose his patent to public review before final grant. In the absence of a satisfactory answer, the court may well be disposed toward ruling against the applicant on one ground or another.

Well, with this premise, I believe you can see that this voluntary thing may work out to be the equivalent of a mandatory proceeding. I just suggest and many people I have talked to seem to agree that this is what will happen. If so we will have accomplishes the desired objective action, without the need of legislation. What's more, if there are any problems which surface during its implementation, it will be much simpler to make necessary adjustments administratively if there are no rigid legislative requirements that restrict the making of such changes.

Now, Senator, again referring to your introduction of S. 1321, you called attention to the fact that of the patents adjudicated by the courts in recent years, 72 percent were found invalid. When you did so, you struck at the heart of one of the most critical issues involving everyone who is concerned with the patent system today, both its proponents and its critics. Actually, those figures should be re-analyzed in terms of which patents get to be reviewed by the courts, and what decisions were included. I understand the Patent Office has made such a study and has determined that the real figure is more like 50 percent than 72 percent. Anyway, I won't even attempt to discuss it at this point because I have made no study of the matter myself. But putting that aside for the minute, valid patents are all important, and from your espousing a strong patent system in this particular reference, Senator, you clearly are seeking to have legislation that will make for valid patents, as are all of us who are interested in a truly viable patent system. In this area I will depart momentarily, but only indirectly, from the specific questions you asked.

It so happens that I proposed another innovation a while back which might lead to patents that will practically never become invalid in the Federal courts. If the proposal were to be adopted. patents will become incontestable on that issue except for possible fraud

Senator HART. Except for possible what?

Mr. FORMAN. Fraud in the Patent Office, Senator.

If fraud is an issue that comes out in the courts in the course of a patent infringement suit, of course, it would then have to be adjudicated. But the issue of patent validity on any other ground, such as prior art, will not be able to be raised. In any event, sir, I remind you, if I may, that last fall I sent you and other Members of the Patents Subcommittee a copy of a paper I wrote in which that proposal was discussed. I want to take the opportunity at this time to thank you for your kind letter acknowledging it. You didn't say anything specifically about that proposal but you did remark-and if I may I am going to give this letter to your counsel that though you could not agree with everything I stated you found the paper interesting, and so forth and so on..