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MAINTENANCE FEES This Association certainly appreciates that a concept of reasonable maintenance fees is one intended to keep initial costs down—and this encourages greater entry into the patent process by small companies and individual inventors. We subscribe to any constructive steps that can be taken to insure the widest practicable access to the patent process.

However, we believe that the total costs involved in the patent process must be maintained at reasonable levels. Obviously, the sum of the fees directly attributable to obtaining a patent should not exceed a reasonable proportion of the costs of the Patent Office.

In addition, we are specifically opposed to the schedule of maintenance fees described in s. 1321 as being unreasonably high and bearing no foreseeable relationship to the costs of the Patent Office.

The charging of inordinate fees can result in subverting the patent process. As the costs of maintaining a patent grow to such a magnitude, the net result is that parties find it more economical to copy rather than innovate or develop new products.

INDEPENDENT AGENCY EIA is in favor of any constructive efforts which would truly result in improving the patent process for all. For instance, we object to the current vulnerability of the Patent Office budget within that of the Commerce Department which does not provide for sufficient protection against use of funds for purposes unrelated to the patent system.

In any event, it is clear that basic to any reform of the patent system is a necessity for upgrading the status, prestige, and even visibility of the Patent Office-wherever it be located.

In this context, we submit that creation of the Patent Office as an independent agency would be a positive step to achieving these general basic aims. When we say this, however, it must be made clear that the agency must be structured so as to not merely expand the bureaucy. It must be in a position to view patents as a business tool and be able to withstand any outside pressures which could ultimately subvert its purposes.

U.S. SENATE,
COMMITTEE ON THE JUDICIARY,
SUBCOMMITTEE ON ANTITRUST AND MONOPOLY,

Washington, D.C., November 15, 1972.
Mr. HOWARD I. FORMAN,
Patent Department,
Rohm and Haas Co.,
Philadelphia, Pa.

DEAR MR. FORMAN : Thank you for sending me a copy of your recent delivery entitled, “Patents/Antitrust Ecology vs. National Prosperity." Although I cannot agree with everything stated, I found your paper interesting and appreciate receiving all diverse views on this important subject. Sincerely,

PHILIP A. HART, Chairman.

ROHM AND HAAS Co.,

Philadelphia, Pa., October 25, 1972. To:

President RICHARD M. NIXON,
Dr. EDWARD E. DAVID, Jr., White House Science Advisor,
Hon. PETER G. PETERSON, Secretary of Commerce,
Hon. RICHARD O. SIMPSON, Acting Assistant Secretary for Science and

Technology,
Hon. ROBERT W. CAIRNS, Deputy Assistant Secretary for Science and Tech-

nology,
Hon. ROBERT GOTTSCHALK, Commissioner of Patents,
Hon. RICHARD G. KLEINDIENST, Attorney General,
Hon. Thomas E. KAUPER, Assistant Attorney General-Antitrust,
Hon. JOHN L. MCCLELLAN, Chairman, Senate Patents Subcommittee,
Ilon. QUENTIN N. BURDICK, Member, Senate Patents Subcommittee,

Hon. HIRAM L. Fong, Member, Senate Patents Subcommittee,
Hon. Hugh SCOTT, Member, Senate Patents Subcommittee,
Hon. PHILIP A. Hart, Member, Senate Patents Subcommittee,

Thomas C. BRENNAN, Esq., Counsel, Senate Patents Subcommittee. GENTLEMEN : Attached hereto, for each of you, is a copy of a paper I will be delivering on October 26, 1972, entitled “PATENTS/ANTITRUST ECOLOGY vs. NATIONAL PROSPERITY". In this paper I have proposed actions to be taken by the Executive and Legislative Branches in order to overcome the apparent impasse confronting those who advocate the vastly divergent views regarding the proper application of our patent and antitrust laws. The actions proposed are fully within the recommendations made in President Nixon's mes. sage to the Congress on March 16, 1972 regarding the importance to the nation of research and development, science and technology. I respectfully urge your consideration of these proposals as being of potentially great importance to the nation. Sincerely,

HOWARD I. FORMAX.

PATENT/ANTITRUST ECOLOGY Vs. NATIONAL PROSPERITY *

(By Howard I. Forman) (ED. NOTE: In a speech before The Philadelphia Patent Law Association on November 30, 1972 entitled Patents and Antitrust: How Clear is the Water", the Hon. Bruce B. Wilson, Deputy Assistant Attorney General, Antitrust Division, referred to the following paper by Mr. Forman and particularly one of the latter's proposals to make patents more reliable and to make the patent system the incentive it was designed to be in futhering this country's technological progre88," which he declared merited serious consideration. Referring to Forman's proposal for an incontestable patent, Mr. Wilson stated:

Certainly we would be taking a risk to adopt such a provision. The risk would be that an invalid patent might become incontestable. But the risk might, perhaps, be worth taking, and the idea deserves further consideration. Certainly, incontestable patents would contribute toward the resolution of the concern erpressed by the Chief Justice and a unanimous Supreme Court orer the effect of patent litigation upon a heavily burdened judicial system. As you all know, patent cases tend to be complicated and long-drawn out litigation, weighing heavily upon judicial time. Perhaps more important, however, incontestable patents would place their owners in a secure position so that large investments could be made leading to commercialization of their inventions. Research and development, in and of itself, is a fine thing, but unless the product of that research and development reaches the marketplace, the ultimate consumer is no better off than if no research or development had taken place.)

The invitation which I received to address you today was accompanied with the suggestion that I might elaborate upon a subject I discussed at a meeting of the National Industrial Conference Board about 18 months ago. That subject was the “Scott Amendments" to the current Patent Law Revision Bill.1

The paper I presented then bore the title “Changing Characteristics of Private Property". Since it has appeared in four publications ? of wide circulation I won't repeat any of its detailed points at this time. It should suffice to say that its theme consisted of analogies drawn between the well-established, universally accepted legal rights to one's real property and what we normally consider to be personal property, on the one hand, and rights to one's intellectual property (e.g. patented inventions) on the other hand.

The conclusions reached, which I will re-state in a somewhat over-simplified manner, were that acts involving the use of personal and real property, that have never previously been considered to be improper, unexplainedly and illogi

Presented before the Licensing Executives Society, Annual Meeting, Oct. 26, 1972, San Antonio, Texas.

Also published in “Les Nouvelles", the Journal of the Licensing Executives Society, December 1972.

1S. 643 (92nd Cong., 1st Sess., 1971).

2 Forman, "Changing characteristics of Private Property", Record of Hearings Before Subcommittee on Patents, Trademarks, and Copyrights, U. S. Senate, on S. 643, s. 1253, and s. 1255, Part 2, p. 633 (May 13, 1971): 53 J. Pat. Ofr. Soc'y_530 (August 1971) 8 The Conference Board RECORD 41 (October 1971); 2 Patent Trends No. 3 (March

cally have been made by some law enforcement authorities to take on the specter of illegality when they involve the use of intellectual property. Pointing to the foolhardiness of such a situation, and the detriment it has caused in interfering with the progress of the arts and sciences which the Constitution calls for in providing for our patent system, I urged adoption of the Scott Amendments to rectify this condition.

It is interesting to note that since the time I gave that speech the U.S. Supreme Court, in a decision 3 involving a garnishment of a working mother's savings account, has spoken out strongly in favor of private property rights even in the face of an attack based upon human or civil rights. Said the Court, “the dichotomy between personal liberties and property rights is a false one. Property does not have rights. People have rights. The right to enjoy property without unlawful deprivation, no less than the right to speak or the right to travel, is in truth a 'personal right whether the property' in question be a welfare check, a home or a savings account. In fact, a fundamental interdependence exists between the personal right to liberty and the personal right in property. Neither could have meaning without the other. That rights in property are basic civil rights has long been recognized. *** Congress recognized these rights in 1871 ***. We do no more than reaffirm the judgment of Congress today." 4

Editorializing on this case, the Wall Street Journal 5 noted that the Court's rejection as false any distinction between property and human or civil rights "put private property where it belongs—in the broad context of civil rights and individual liberties, not as a thing apart.” It is encouraging to note that the Court, even in the midst of current heated public arguments over civil rights and socio-economic reform, adheres to the principal that property rights are equal to such other liberal rights as freedom of speech, press and assembly. Perhaps, then, when the Court considers matters involving intellectual property rights it will give them the same recognition and the same treatment, by keeping in mind that intellectual property is but another form of private property.

I will have more to say on the subject of the Scott Amendments and private property rights later. In actuality, it is only one phase of a much broader subject, a problem of tremendous importance to our national welfare. I refer to the much too old conflict between those who administer our patent system and those who enforce our antitrust laws. In this conflict we have a strange dichotomy of two governmental groups, each bent upon fostering programs aimed at achieving identical goals of improvement to the nation's economic prosperity, and yet each claiming that the other is causing mayhem to our economy and thereby to our nation's economic welfare.

A pity it is that this conflict has led to tremendous wastes in precious manpower, time, financial and other national resources, first in the patenting process and then in the courts. These wastes are even further much aggravated by the fortunes spent uselessly in research and development programs, the construction of plants and the implementation of marketing projects, all of which may go down the drain as the aftermath of judicial decrees holding patents invalid or a business agreement involving patents illegal under some novel antitrust theories. These wastes are polluting our economic atmosphere, and the matter is as deserving of ecological consideration and treatment as much as or more than any other pollutant that has been deemed harmful to man.

Ecology, I need hardly remind you, is the "in" thing of the 1970's. A Congressional committee has labelled this period as “The Environmental Decade”, and President Nixon has called attention to the preciousness but vulnerability of our natural resources which caused a need to develop new attitudes and new management techniques in order to preserve a good environment. The House committee pointed out that a major problem is that many federal agencies are involved in programs for managing the environment which work at cross-purposes, and called for better coordination of those agency activities.?

An example of a need for better coordination familiar to most of you may be found in the governmental edicts affecting the manufacture and sale of

3 Lynch v. Household Finance Corp., 40 LW 4335 (March 21,1972).
Id at 4339.
6 “Supreme Court and Private Property", WSJ April 3, 1972.

& House Report No. 91-1082 (91st Cong., 2d Sess.) 1970, by the Committee on Government Operations, p. 2.

Id at pp. 15-16.

household laundry products. One of the first orders of the day was a ban on phosphates in such products because they were found to pollute our streams and lakes, adversely affecting the life cycles of plants and fish in those waters. The cleansing agents substituted for phosphates not only made the housewife unhappy because of difficulty in removing the dirty ring from her husband's shirt collars, but much more important were found to cause serious medical problems in man. These problems became so serious that the federal health authorities stepped into the picture to countermand the phosphate ban.

There's an important lesson to be learned in this example, and it has direct applicability to problems involved with the lack of coordination in the enforcement of our patent and antitrust laws. As background information for the point I am making let me refer you to another ecological study, “Environmental Pollution-A Challenge to Science and Technology”, a reports of the House Subcommittee on Science, Research and Development. This study also calls for coordination by the various federal agencies involved with pollution abatement -proposing the establishment of a "system management" to deal with the problem. It holds that a key to the whole affair is cost analysis, suggesting that: “Social sciences will be called upon to replace subjective evaluation with numbers of dollars. * * * The costs of abatement must be equated with quality." 9

The report contains a graphic illustration which the Department of Defense presented at Hearings held by the Subcommittee in 1966 on "The Adequacy of Technology for Pollution Abatement". Referring to that illustration, the Committees states: “... if costs are known, a portion of abatement can be written off against damages * *. Control beyond that point is a net debit to the Nation. *** The point of view that insists on cmplete prevention of waste disposal to the environment is shown by this analysis to lead to very high costs which may exceed the gains to society ***.” 10

In our economic environment there likewise are great wastes, as I pointed out previously. For our great nation, which now finds itself in a truly growing competitive struggle to maintain its economic leadership internationally, there is need as never before to abate those wastes. We can no longer afford the luxury of permitting different federal agencies free and independent rein in their actions which bear upon the progress of our national economy, particularly if those actions become involved in collision courses. Just as strong, determinative and well-coordinated action must be and is now being taken by various governmental agencies to improve our atmospheric and biological environment, it is likewise imperative that equally strong, determinative and wellcoordinated action be taken to improve our economic environment. The key word in both instances is "well-coordinated".

On March 16, 1972 President Nixon sent a message 11 to the Congress which his Science Adviser, Dr. Edward E. David, Jr., described in a press conference that day as “the first message by a President to the Congress on research and development or science and technology". Certain of the President's statements in that message are of crucial import and interest to everyone concerned with our nation's economic welfare and I shall quote them directly :

The importance of technological innovation has become dramatically evident in the past few years. For one thing, we have come to recognize that such innovation is essential to improving our economic produetivity-to producing more and better goods and services at lower costs. And improved productivity, in turn, is essential if we are to achieve a full and durable prosperity-without inflation and without war. By fostering greater productivity, technological innovation can help us to expand our markets at home and abroad

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“We know, for instance, that a strong and reliable patent system is important to technological progress and industrial strength. The process of applying technology to achieve our national goals calls for a tremendous investment of money, energy and talent by our private enterprise system.

& A Committee Print of the Committee on Science and Astronautics (89th Cong., 20 Sess., 1966).

Id at p. 34.
u From release by Office of the White House Secretary, March 16. 1972.

10 Ibid.

If we expect industry to support this investment, we must make the most effective use of the incentives which are provided by our patent system.

"The way we apply our antitrust laws can also do much to shape research and development. Uncertain reward and high risks can be significant barriers to progress when a firm is small in relation to the scale of effort required for successful projects. In such cases, formal or informal combinations of firms provide one means for hurdling these barriers * In general, combinations which lead to an approved allocation of the resources of the nation are normally permissible, but actions which lead to

excessive market power for any single group are not. *** President Nixon has aptly stated truisms that have been known for years to people involved in business built upon the fruits of research and development, people involved in inventions, in patents, in the licensing of patents and knowhow. He has stressed the need for more technological innovations, underscored the importance of the patent system in fulfilling that need, and reminded us that the antitrust laws are necessary to protect us against those who abuse the opportunities provided by the nation's investments in research and development and fostered by federal grants of patents on the fruits of those investments. Still needed, however, is the coordination necessary to prevent the administration of, and operation under, our patent laws from resulting in a collision course with the enforcement of our antitrust laws. Apparently recognizing this, the President went on to say:

I believe we need to be better informed about the full consequences of all such policies for scientific and technological progress. For this reason, I have included in my budget for the coming fiscal year a program whereby the National Science Foundation would support assessments and studies focused specifically on barriers to technological innovation and on the consequences of adopting alternative Federal policies which would reduce or eliminate these barriers. These studies would be undertaken in close consultation with the Executive Office of the President, the Department of Commerce and other concerned departments and agencies, so that the results can be most expeditiously considered as further Government deci

sions are made. Hopefully, such studies will result in unifying, coordinative actions within the Executive Branch so as to eliminate the competition and overt opposition between some of its component departments and agencies in areas where there should be a single national policy and a single approach to administering that policy. A classic example of a need for unitary action within the Executive Branch-a need which went begging, most unfortunately—took place last May when the Senate Patents Subcommittee held hearings on the Scott Amendments. As Mr. James T. Lynn, Under Secretary of Commerce, testified:

The views I express here this afternoon are those of the Department of Commerce. The Department of Justice has certain reservations about the

positions we have taken and will express its own views on the subject. To which the Subcommittee Chairman, Senator McClellan repied :

I think we can state unequivocally, then, that the Government as such or the Administration as such does not have a policy with respect to this legislation; there is a divided opinion in the administration as to the

merits of those amendments? Responded Mr. Lynn:

That is right, Mr. Chairman. The administration has decided that the best contribution it can make to the resolution of these important legislative issues is to share with this committee its analysis of the problems and the points of views which express both the interests of patent holders and general objectives. The latter will be provided by the Justice Depart

ment witnesses. The Department of Justice did, in fact, present its own views, through the testimony of its Assistant Attorney General, Antitrust Division, Richard W. McLaren.

In failing to present a unitary position of the administration, the proverbial "buck" was passed to Congress. I submit this was a tactical error, a missed opportunity the Executive Branch had in its grasp to perform the complete job that President Nixon now proposes to do hereafter, namely to focus attention con barriers to technological innovation and on the consequences of adopting alternative federal policies which would reduce or eliminate these barriers."

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