8. Technical questions that would plague the deliberations of the Courts are not present, or, have already been decided with the expertise of the Patent Office. Finally, many excellent articles, treatises and editorials have been written over a period of years by outstanding minds in the Judiciary and Patent Law profession regarding validity and invalidity involving U.S.C.A. § 103, often referred to as the "obviousness" section, and, a defendant having a better chance of invalidating broad claims of a patent in Court with the prior art kept secret until infringement suit is started. (J.P.O.S. vol. 52, page 433 (1970). The swing of the pendulum has been towards freedom-of-competition which has somehow swayed towards invalidity in close patent cases. It has not been unappreciated that it may be less expensive for a competitor to seek to invalidate an infringed patent by an all-out invalidation effort under Section 103 before taking a license rather than promote progress by a new design or redesign to another construction that avoids infringement. A product in the hand in physical from may be worth two research problems on the design board. However, under it all, there seems to lurk in some decisions a background realization which may well swing from the freedom-of-competition touchstone towards the progress-being-promoted touchstone by the concept being recognized that two competing articles may be greater progress as compared with competitors expensively litigating on one article. A design or redesign to avoid infringement often involves improvements which would also promote progress if an infringer were forced to design and make a different products. The Courts may very well wish to encourage this. A true freedom to compete and progress is encouraged when a new or improved construction comes on the market. The Courts cannot help but see a thread of significance in a copier being forced to redesign because of infringing a validity-rechecked patent and then the infringer complaining when he is copied, thus ultimately there being three competing products for the public instead of lengthy protracted litigation. Progress of Science and the Useful Arts would be better promoted and that is what is is all about. The Courts have shown the way to further promote progress. Extend their estoppel potential. Respectfully submitted Articles containing arguments of interest WATSON D. HARBAUGH, Publication of Pending Applications (R.Y. Peters), J.P.O.S. vol. 48, page 553 (1966). Re-examination System? (Martin Abramson), J.P.O.S. vol. 52, pages 407, 415 (1970). LICENSING EXECUTIVES SOCIETY, INC., U.S. SENATE, Committee on the Judiciary, Trademarks, and Copyrights, GENTLEMEN: We are very grateful to you for your response to our letter of September 11, 1973 informing us that the record would be kept open until September 28th. As you know, our Society is a non-profit, professional organization having some 1500 members throughout the business world actively engaged in the interchange of technology. We, therefore, have the greatest concern for the U.S. patent system, its integrity and operation, and appreciate the opportunity to express our views on the issues of S. 1321 (Hart) which you have been considering in the recent hearings. We shall keep our comments as brief as possible. On the question of providing a Public Counsel in the Patent Office, we recognize this as an attempt to improve the essential reliability of the Patent Office. However, the creation of an office of Public Counsel, and the staff associated with it, would require a substantial investment. Further, there probably would be conflicts and overlaps with "regular" Patent Office employees. We suggest that the funds provided to support this office of Public Counsel would be better spent in increasing the size of the examining corp of the Patent Office. This would provide the Examiners more time to search the art, the result being more reliable patents. With respect to adversary proceedings, we have no basic objection to this provided the proceedings occur after the allowance of the patent application. It would be a mistake to lay open non-allowed applications because of the substantial printing costs and the resultant administrative involvement which, in many cases, would be useless. We would prefer that such "adversary proceedings" be limited to permitting submission of prior art by third parties. With respect to maintenance fees, we would oppose these unless the filing and issue fees were substantially reduced. In such case the "maintenance fee" would, in effect, be deferred fees. In any event, however, we strongly oppose such fees at the level suggested in S. 1321, because experience has taught us that many patent rights do not become valuable in the market place until many years after their issuance. We see no net advantage in the deferred examination system suggested in S. 1321 and feel it creates more trouble than it is worth. We note that European countries which have the most experience in this area has not provided for deferred examination in the new European Patent Convention. We support the idea of making the Patent Office an independent agency. We also support the idea of making the Commissioner of Patents at least an Assistant Secretary of Commerce if the Patent Office is to remain in that Department. It is obvious that substantial changes are necessary to improve the stability of the Patent Office management staff. Changing the Patent Office to an independent agency would accomplish this and therefore, we approve. In addition, we strongly urge that any new patent legislation include specific guidelines specifying what the patent owner can properly do in licensing his patent rights. Indeed, we feel Congress would be derelict in its duty if it did not clarify this area of the law. To leave the validity of any particular licensing practice to the vagaries and expenses of litigation is a distinct disservice to the innovative sector of our Society. We thank you for this opportunity to comment on this vitally important, pending legislation. Very truly yours, C. H. CHAPPELL, President. PATENT LAW ASSOCIATION OF LOS ANGELES, Hon. JOHN L. MCCLELLAN, DEAR SENATOR MCCLELLAN: The Patent Law Association of Los Angeles has been informed by your Chief Counsel, Thomas C. Brennan, Esq., under date of August 7th, that hearings will be held September 11, 13, and 14, 1973, on the Hart bill, S. 1321 (93d Congress, 1st Session). We are informed that it will not be possible to allocate time to representatives of our Association. We have, however, been urged to request our members to furnish to your subcommittee any suggestions regarding the bill's provisions, including those relating to specified issues discussed hereinafter. The comments which follow are an expression of the consensus of our Legislative Committee and of our Board of Governors, including our officers. The patent bar has devoted thousands of man-hours since the report of the Presidential Commission in efforts to assist your subcommittee in modernizing the patent laws. We have traveled across the continent repeatedly to special meetings of our national associations which were devoted to no other purpose. Our deliberations and debates produced successive drafts of proposed legislation culminating in a draft, each and every provision of which had been carefully considered and determined to represent legislation in the public interest. Senator Hart's bill, S. 1321, is not the result of such a deliberate process of open debate participated in by any member of the patent bar wishing to be heard on the subject. This is not to say that it lacks merit. It does, however, provide a basis for our opinion that it would be improvident to enact legislation so different from any previously proposed, without subjecting it to the same deliberation and debate. First, therefore, we urge your subcommittee to refrain from reporting this bill until its very novel provisions have been deliberated upon and debated by those most familiar with the subject matter to which it relates-the members of the patent bar. As to the five subjects designated as being included in the forthcoming hearings we have only the following comments at this time: PUBLIC ADVERSARY HEARINGS We have previously approved provisions for public assistance to patent examiners after the issuance of patents, and revocation of patents, for cause, within a limited period after their issue. We oppose publication of all applications because it would "pollute" the fields of search with large numbers of redundant publications and more than double the expenses of publication incurred by the Patent Office. Further consideration is necessary of the provision for participation by third parties in the prosecution of published applications. It is questionable whether the prospective enhancement of the validity of issued patents so effected would justify the additional costs imposed upon individual applicants by such procedures. PUBLIC COUNSEL Insofar as the contemplated duties of the proposed Public Counsel are no more than those presently discharged by the Solicitor of the Patent Office or members of the examining corps, their mere transfer is unobjectionable. The extremely broad subpoena powers of the proposed Public Counsel which would be conferred by Section 24 of the bill are, however, entirely unprecedented, and such provisions should not be approved, if at all, without full deliberation and open debate by the patent bar. DEFERRED EXAMINATION This proposal has been fully considered and rejected by the organized patent bar after full deliberation and open debate. The experience of foreign countries which have implemented deferred examination practices has since demonstrated that any supposed advantages of deferred examination are more than offset by the "pollution" of the fields of search by redundant publications. Furthermore, the advances made in recent years by our Patent Office in reducing its backlog have entirely removed the originally envisioned need for deferred examination. Therefore, we oppose these provisions. FEE SCHEDULE AND MAINTENANCE FEES We oppose any schedule of fees designed to recover 60 to 75 percent of the costs of operation of the Patent Office for the reason that such a fee schedule inevitably would impose prohibitive financial burdens on individual inventors and small businesses, thereby inhibiting innovation. Also, such a fee schedule would make the Patent Office a profit-making federal operation when it should not have such function. The profit-making aspect of the Patent Office operation would come about because the government not only receives fees from patent applicants, but also obtains taxes which are levied on royalties and transfers of patents. The latter revenue would not be received by the federal government at all if it were not for the operations of the Patent Office, and so should be credited against the cost of operation of the Patent Office before the subject of Patent Office fees is considered. Provisions for maintenance fees have previously been considered and rejected by the patent bar because of the severe penalty such fees would impose upon individual inventors and small businesses. Such fees would tend to stifle invention and encourage secrecy, thereby running counter to the Constitutional goal of promoting the progress of the useful arts. The exculpatory provisions of Sections 41(b) and (c) might lessen such burdens, but would not eliminate them so that the net negative effect would remain. The sections also would substantially increase the work load of the Patent Office. The proposed maintenance fee of at least $1,000 per year potentially would generate enor mous amounts of revenue, entirely disproportionate to the cost of operating the Patent Office. INDEPENDENT AGENCY We unqualifiedly approve the proposal to make the Patent Office an independent agency. Its integration into the Department of Commerce, which resulted from a recommendation of the Hoover Commission, was "an experiment noble in purpose", as Mr. Hoover once characterized the 18th Amendment, but it was no more successful than the latter. It is time to revert the status of the Patent Office to that of an independent agency, and we applaud Senator Hart's proposal to that end. Very truly yours, RICHARD F. CARR, President. MACHINERY AND ALLIED PRODUCTS INSTITUTE, Sen tor JOHN L. MCCLELLAN, DEAR CHAIRMAN MCCLELLAN: The Machinery and Allied Products Institute appreciates the opportunity to offer its views on S. 1321, "For the general reform and revision of the Patent Laws. ." 1 The membership of the Institute is comprised of capital goods and allied industrial product manufacturers. These are high technology industries and, as such, have a very deep interest in the American patent system and in proposals for changing that system. It is our understanding that, although the public hearings on S. 1321, which were recently concluded, were devoted to the consideration of only five ". . . important new issues" raised by this proposal, written statements may consider all aspects of the bill, and accordingly our statement discusses ten of its provisions. However, before considering separately these several sections of S. 1321 we should like to put our specific comments in a broader perspective by commenting briefly on the general thrust and the broader possibilities of this bill. GENERAL COMMENTS The spirit of S. 1321 emerges in Section 1 thereof, "National Patent Policy," by a subtle but substantial alteration of the constitutional provision from which it derives. Article I, Section 8 of the Constitution asserts that the Congress shall have the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (Underscoring supplied.) The constitutional word "right" is changed to "privilege" in Section 1 of S. 1321. By implication an applicant for letters patent who seeks to have secured to him the right to which the disclosure of his discovery entitles him now becomes a supplicant who desires of his government not a declaration of his rights but the award of a special privilege. The author of this proposed change may not have intended the significance which we attach to it but, regardless of intent, it seems to us a precursor of other and unquestionably significant changes in our patent laws which, in our judgment, would tend in the long run greatly to reduce the usefulness of a patent system which has served this country well. We believe that any number of changes, discussed in more specific terms below. would tend to discourage the use of the patent system which is to say that the inventor of new art would decline publicly to disclose such new art but rather would conceal it and attempt to profit from his discovery by maintaining it as a trade secret. Although the Institute would oppose at any time legislation harmful to the patent system-and we think S. 1321 would be harmful-this bill is especially untimely during a period when the United States is losing much of the technological lead which it has for so many years enjoyed. 1 As this letter is filed, the White House has announced the submission to Congress of "The Patent Modernization and Reform Act of 1973." No copy of the bill is yet available and, hence, no comment on it is offered here. SPECIFIC COMMENTS Our specific comments on certain provisions of S. 1321 appear below: Section 3(d), Public Counsel.-This section of the proposal would provide for creation of a "Public Counsel," independent of the Commissioner, who would be empowered to intervene in, participate in, and review virtually all Patent Office proceedings and appeals. Section 24 of the bill would arm him with the power of subpoena. This new office and the extraordinary grant of authority to it are designed, ni the language of the proposed statute, ". . . [to] assure . . . that high quality patents which meet the statutory and constitutional criteria therefor issue from the Patent Office." We oppose this proposal. If the function of "Public Counsel" is to represent the public interest, then this new office would in large measure simply duplicate the function of the patent examiner-and the solicitor-whose responsibility is, and always has been, to represent the public interest. It would seem inevitable that the Office of Public Counsel, in order to discharge its broad mandate, would necessarily require a corps of competent engineer/attorneys to retrace ground already covered by the Patent Office staff. Aside from additional cost thus involved, the actions of the Public Counsel could only serve further to delay action on patent applications and thus to aggravate a condition cited by Senator Hart as one of the reasons for "reforms" proposed in S. 1321. We think the Public Counsel's choices of cases for intervention or reviewout of the 100,000 applications filed and the 70,000 patents granted annually— would have to be a largely, if not wholly, subjective judgment since there appears no logical or objective basis for making such judgments. And the very broad powers to be confided in the Public Counsel, if unreasonably or arbitrarily exercised, could obstruct Patent Office business and tend to be destructive of the patent system. As for "high quality patents" they are the primary responsibility of the Commissioner. Yet this proposal would make the Public Counsel responsible for achievement of the same goal. It seems scarcely necessary to argue the undesirability of splitting such a fundamental responsibility with its almost inevitably divisive effects on the organizational structure of the patent system. Section 41-Patent Office fees In general, this section of the bill calls for a fee structure ". . . designed to effect an overall recovery in the range of 65 to 75 percentum of the costs of operation of the Patent Office. . . ." In seeking attainment of this general standard, and subject to certain fee exemptions"... to benefit and encourage individual investors and small businessmen," this proviso says that "Beginning the fourth year after a patent issues, the maintenance fee thereon shall be no less than $1,000, and shall increase annually by at least 25 percentum each year. . . . If we understand the proposal, the minimum maintenance fees for a single patent with a twelve year life from date of filing would aggregate a little more than $15,000. Minimum maintenance fees under the proposed schedule for one patent with a 17-year life from date of filing would amount to more than $54,000. If the suggestion of a 20-year patent life from date of filing were adopted, and this has been frequently suggested, the minimum maintenance fees for a single patent over that period would amount to almost $110,000. An illustration of minimum annual fees, under the proposed schedule with totals aggregated for each of these three periods, appears in Attachment I to this statement. This fee schedule approaches confiscation. Aside from these exorbitant figures, there is the question of whether or not it is desirable to establish a precise statutory formula for the recovery of patent office costs through maintenance fees. Congress reviews the Patent Office annually and approrpiates funds for its operation. This, it seems to us, is the proper function of Congress and would appear to be much more appropriate than setting the Patent Office up in business for itself. Moreover, the detailed specification of a maintenance fee formula appears to be a radical departure from similar statutory provisions. For example, even the Tennessee Valley Authority, which has a product to sell, is not required to recoup a fixed percentage of its costs of operations. Rather the pertinent statute merely states that power is to be sold in such a way as to assist in liquidating the cost of the project. The payment of exorbitant maintenance fees alters the basic philosophy of the system by requiring the patentee to pay tribute for |