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continuance of the limited monopoly right-now to be deemed a "privilege" — which a patent confers.
It is, of course, not a novel proposal and is apparently patterned on graduated systems of maintenance fees common to foreign patent systems. This has been a source of irritation to Americans holding foreign patents and the proposal to equalize this burden on foreigners holding U.S. patents is appealing in that respect. One must also acknowledge that the proposal is at least plausible insofar as it would encourage the "working' of patents and permitting useless ones to lapse. But there are better ways to achieve that end. However, frankly, we doubt if recoupment of the operating costs of the Patent Office is the real intent of this proposal. Rather, we think, its purpose may be to "encourage discouragement"—that is, to persuade patentees to discontinue maintenance of patents already in existence. Maintenance fee costs of the proportions suggested above are very likely to produce that result-and, in our opinion, to the serious long term detriment of the United States notwithstanding those merits of the proposal acknowledged above. In part, this is because it takes time to exploit a patent, an exploitation that is more important to society than to the inventor since his success depends upon the usefulness and the broad public acceptance of the thing he has created.
The more significant and the more dangerous aspect of this proposal's adoption would be unseen. Almost surely it would tend to reduce—and probably drastically—the flow of patent applications. New technology, including scientific and engineering advances of basic character, would be concealed from public view in the form of trade secrets rather than being disclosed to the world as the grant of a patent right requires. We should not lose sight of the fact that at least two great public interests are served by the grant of letters patent. In addition to the public benefits deriving from exploitation of the exclusive right of practice provided by the patent, the products of the requirement of disclosure are both a source of instruction and finite developments which permit others to further refine, develop and build upon them. To sum up, the imposition of maintenance fees at the level contemplated by S. 1321 will not only serve greatly to diminish the incentive to patent but will tend seriously to choke off the very useful public disclosure of new technology which our patent system is designed to produce.
A lesser--but nonetheless important-adverse result of the proposed maintenance fee schedule is the likelihood that companies will not even undertake development programs on items which, although promising in the longer run, offer no expectation of early commercialization. At the best, the new technology involved will be delayed; at the worst, it will be lost and perhaps to for. eign competitors. Section 101–Subject matter patentable
As in the case of substituting a "privilege" for a “right" in Section 1, noted above this section of S. 1321 would substitute for the present statutory affirmation that “A person shall be entitled to a patent unless . . ." the negative declaration that “A person shall not be entitled to a patent if . (Underscoring supplied.) This change may mean little or much but at least it would seem to place the burden of all persuasion on the applicant and replace language well settled by custom and usage by language that may constitute an invitation to extend the long continued judicial assault on the patent system. We strongly recommend against this sort of unexplained change in language; if some change of substance is intended the Committee's intent should be clarified in the legislative record.
Further significant changes in language are sprinkled through the several subsections of Section 101. By setting up new bars to the grant of a patent based on foreign knowledge or use, public use and sale as well as “other tangible form” provisions would tend very substantially to increase the amount of prior act to be searched, found and considered. Expense would be correspondingly increased in significant amount. Section 112-Specification
Subsection (a) of this provision of s. 1321 proposes adoption of a require. ment for an enormously expanded disclosure requirement. The cost of preparing patent applications would of course be commensurately increased. We shall comment on only one aspect of this expansion—the requirement for disclosure of "... all know-how known to the inventor and applicant necessary or commercially requisite to make, use, and work the same."
This requirement evidently contemplates full disclosure of knowhow constituting valuable trade secrets. We have no doubt that many, if not most, applicants who confronted this costly—and perhaps competitively disastrous, possibility would choose secrecy rather than exposure. That is to say the patentable invention would not be patented but treated as a trade secret with a further restriction on use of the patent system and, of course, a corresponding reduction in public disclosure of new technology. Adoption of the requirements of this section, in conjunction with certain other provisions of S. 1321 with which this statement is concerned, would tend, in our judgment, substantially to destroy the patent system as we have known it. We strongly oppose any such disclosure requirement. Section 115—Oath of invention
Statutory language relating to the oath of invention would be substantially enlarged by s. 1321. We are concerned particularly by the language of subsection (a) (2) which prescribes the oath to be executed by the applicant, who is not an inventor, but is "a corporation or other business entity.” To begin with, this oath, to be executed “after notice of allowance," is purely supplemental and would seem to add little to the oath required of the inventor at the time of filing. That aside, a more important question is raised as to the metes and bounds of this expanded requirement. If the oath finally prescribed merely recites that the affiant believes himself to be the most knowledgeable in the applicant organization concerning the facts to be set forth in the oath and that he does not speak for each and every employee or agent of the organization but makes the oath solely upon his personal knowledge, then there would seem to be no great difficulty. If, on the other hand, the affiant is expected to speak through his oath for each individual employee or agent of the entity, then the provision would be unrealistic and unadministrable and made more so by the size of corporations required to so affirm and by the mobility of personnel involved in research and development activities. Section 315—Examination or reexamination and Section 137—Participation
of parties Our discussion here engages two sections of S. 1321 inasmuch as both are directly concerned with the bill's intent of providing for public adversary proceedings and, taken together, authorize the initiation of opposition by anyone between the period of public availability (Section 122) and allowances. Such opposition may be either ex parte or inter partes at the opposer's election (Section 135(d) and 137) and he may, if he chooses, remain anonymous (Section 137(d)).
We acknowledge that such opposition may, in some cases, strengthen the presumption of a patent's validity. But at what cost? Assuming the vigorous exercise of rights of opposition contemplated by these two sections—and this, we think is a reasonable assumption—there could not fail to be substantial and costly delays in patent issuance, the avoidance of which is one of the express purposes of S. 1321.
In addition to the question of cost there is a manifest potential for frivolous, meddlesome and harrassing opposition. There is also the potential for opponents to significantly delay the issuance of a patent with complete impunity, and whether successful or not, to reduce the applicant's period of protection. Indeed, we are told that this is fairly common practice in some foreign jurisdictions. To the extent that this occurs, S. 1321 will have introduced one more disincentive to use of the patent system and with all of those detrimental consequences of that result already described.
Probably the most serious objection to these provisions of S. 1321—when considered with the public availability requirement of Section 122—is its fundamental unfairness the applicant. Under present law, even though an application for a patent is filed, the applicant may at any time prior to allowance elect not to go forward with the application and still maintain the secrecy of the invention as a trade secret. Publication to the world under Section 122-an essential first step in the process of public adversary proceedings here sought--would destroy this right. Again, the disinclination to file for a patent is strengthened.
If it is the judgment of the Subcommittee that some provision for adversary procnedings is necessary to strengthen the presumption of validity, then we believe the relevant sections of S. 1321 should be changed to provide :
1. There should be no publication of applications prior to allowance.
2. Opposition should be permitted after allowance only as an inter partes proceeding, or the opposer should be permitted to appeal (with provision for a hearing) from a finding by the Patent Examiner of patentability notwithstanding the material submitted by the opposer.
3. The opposer shall not be permitted to remain anonymous. Section 153—Contents and term of patent
This section of S. 1321 provides that: “The term of a patent shall expire twelve years from the actual filing date in the United States or, if a prior filing date under Section 119 of this title has been claimed, twelve years from such date. .." with the further proviso that the term may be extended by any period of time consumed by deferred examination under Chapter 18 of the bill. This is to be contrasted with provisions of present law which call for a term of seventeen years from date of issue-not the date of filing.
It is the opinion of experienced corporate patent counsel that, generally speaking, twelve years is too short a period of time in which to allow for recovery of research and development expenses and to earn a reasonable return on the total investment involved. In fact, seventeen years may be too short a period in some cases to commercialize inventions which may require extensive adaptation in order to achieve public acceptance.
As in the case of other provisions already discussed, the reduction of the patent term to twelve years from date of application could not fail, in our judgment, to weaken the patent system and destroy its benefits by causing inventors to withhold their discoveries from the public and profit on them, if at all, as trade secrets.
We observe that dating a patent's term from the date of filing makes the applicant dependent on expeditious governmental processing and indeed punishes him for delays over which he has no control. Moreover, as we have noted, certain provisions of S. 1321 would tend to increase such delays. However, if Congress considers it necessary to accept the date of filing concept, we suggest that the term be made not less than twenty years. Section 263—Rights of employee-inventors guaranteed By the terms of S. 1321
Subject to other provisions of Federal law, no direct or indirect assignment by an inventor to his employer, or to a person designated thereby, of the subject matter of an application for patent or patent, developed in the course of his employment, shall be valid unless the employer agrees to pay the employee, in addition to his regular salary or compensation for serv. ices, a minimum of 2 per centum of the profit or savings to the employer,
attributable to such subject matter. From any of at least three angles from which this provision should be conisidered-employment policy, national patent policy and practicality of administration—this is a very bad provision and should be rejected. Let us consider briefly each of the three aspects of the matter identified above.
Employment policy.- To begin with, one may assume that the corporation which hires employee-inventors must compete for their services with compensation and benefits at least equal to what is demanded by the very lively market in which such talents are traded. Moreover, substantially all such employees are hired to invent and make no contribution beyond what they are paid forthe employer provides the environment for inventor, materials and equipment, all costs and bears the risks of development and commercial exploitation. Yet this is but a small part of the employment policy issues raised by this proposal.
Clearly, this requirement would discriminate against employees who make significant contributions to a patented invention but which contributions are not of the character acquired to entitle the contributor to the status of coinventor and thus to share in the rewards. It would also discriminate against those who make indispensable innovative contributions in reducing a patented invention to commercial practice and in market development. And, of course, it discriminates against all those other employees whose work although essential, is not connected with the process of invention and patenting. The inevitable product of such discrimination would be employee dissatisfaction, jealousy, a loss of cooperation where cooperation is essential to success, and controversy between employees and between employee and employer. In pointing to these obvious discriminations that would result from the 2 percent proposal we do not mean to suggest, either directly or by implication, that we favor the concept-indeed we strongly oppose it—or that its reach should be extended to take in other classes of employees.
In addition, this proposal raises a potential conflict of interest for the employee-inventor who is in a position to control or influence the design of a product. Usually, there are several alternatives in design available to the engineer or designer. If one such alternative is covered by a patent held by the employee-inventor, he may be induced to choose or recommend adoption of that alternative even though another would produce a superior product. The potentialities of this conflict of interest extend beyond the employment relationship to the marketplace. The economic incentive for the employee-inventor to choose his patented alternative may result in the consumer receiving a less desirable product and less value for his dollar. This aspect of the proposal is clearly contrary to the public interest.
Vational patent policy.—The employment effects of this proposal alone-jealousy, controversy, the disruption of research and development team efforts, to name a few-would cause many employers to discontinue their present use of the patent system. Obviously, it would increase the ultimate cost of production and because of the manufacturer's uncertainty as to the market's acceptance of a higher price there is still a further disinclination to patent. To the extent, of course, that additional costs resulting from this policy could be passed on to consumers in the form of higher prices they would be—and should be.
One obvious effect of such a policy-in some cases at least--would be to give imports a 2 percent advantage over domestically manufactured products based on patents.
Except where the 2 percent override-however figured-can be passed on to government as a contract cost (and one fails to see how government could hold such costs to be unallowable), the adoption of this policy would almost certainly result in a lesser number of patent applications. (One result could be a lessening of company-sponsored R&D and an increase in independent development and design companies with patent rights passing under contracts between them and the companies who employee them.) From the standpoint of national policy a reduction in patent applications and a corresponding increase in trade secrets--and the trade-off here could be very significant-would be most unfortunate. To repeat again, the point cannot be emphasized too strongly, a policy which tends to reduce disclosure and promote secrecy would be most harmful to the national interest.
Administration.-For reasons already suggested, we think the policy embodied in this provision is most unwise and should be abandoned. Even if that were not true, the provision as presently drafted is unworkable. In brief, it says in effect that the employee-inventor is to receive, “... in addition to his regular salary or compensation for services, a minimum of 2 percentum of the profit or savings to the employer, attributable to such subject matter."
Let us consider only a few of the possibilities presented. Suppose the product is unprofitable. There being no profit base to which the statutory percentage can be applied, one assumes that no payment would be required. But assume that there is a profit as determined in accordance with "generally accepted accounting principles," there would arise immediately the question of which of the whole range of such principles now available were employed in calculation of the profit and one foresees unending controversy over the correctness of cost allocations, overhead calculations and so on.
But let us assume that these preliminary hurdles can be overcome and go to the really difficult problems. “The Commissioner shall by regulation establish procedures and methods, including accounting procedures, for carrying out the provisions of this section." Suppose that the invention is a joint invention and that letters patent identify not one but two or more co-inventors. Is each coinventor entitled to “... 2 percentum of the profit or savings to the employer"? Or, if not, how is the payment to be divided-equally, or in accordance with the relative merits of the contributions of the several co-inventors?
Most troublesome of all, we think, would be the invention which relates to a small part of a larger product or process and which may embody in its construction or operation a number of patents. How is the manufacturer to go about attributing profit to each of the patented inventions involved in order to arrive at the several bases to which the 2 percent figure is to be applied? Where the invention relates, for example, to one step in a manufacturing process incorporating a variety of patented know-how, the calculation of savings attributable to this one part of the process would be equally difficult.
To sum up, we think that proposal to “guarantee" the rights of employeeinventors is unjustified, unwise and unworkable.
In introducing S. 1321, Senator Hart declared “. the evidence is strong that our system tends to frustrate invention and tie up technology so the public cannot benefit from it.” 2 Without accepting the accuracy of this statement—and we don't--one may accept it as a general conclusion underlying the introduction of the bill. It seems fair to inquire if the adoption of S. 1321 would provide new incentives for invention and free technology for the benefit of the public?
We believe, for all the reasons set out above, that enactment of S. 1321 would have exactly the opposite result. In our judgment, it would substantially —perhaps drastically-reduce the volume of applications for patent and thus “tie up” new technology by causing it to die stillborn or to be concealed in the form of trade secrets. With the disclosure of new technology thus reducedand disclosure is the stick to the patent incentive carrot-the great bubbling ferment of technological experimentation and advance, which has depended so much upon disclosure required by the patent system and which has been so great an element of national strength, will take on a placid and a sterile aspect.
This concludes our statement of S. 1321 and again we desire to express our appreciation for the opportunity of presenting our views on this most impor. tant measure. If the Subcommittee or its staff should have any questions concerning our statement or require additional information on those matters dealt with herein, please do not hesitate to call upon us. Respectfully,
CHARLES W. STEWART, President.
ATTACHMENT I.- Minimum Maintenance Fees for a Patent Under Section 41 of
S. 1321 for a 12-Year Term, a 17-Year Term and a 20-Year Term Assume January 5, 1973 is date of filing application with maintenance fees calculated from that date; the maintenance fees on an annual basis and on a total basis for 12-year, 17-year, and 20-year terms would be as follows: 1973) 1974} Average period of patent pendency-no fees. 1975 19761
$100.00 1977) 1978.
1, 000.00 1979.
1, 250.00 1980.
1, 562. 50 1981.
1, 953. 13 1982.
2, 441. 41 1983.
3, 051. 76 1984.
3, 814. 70