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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 153Contents 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 considered-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.

23-932—7440

To sum up, we think that proposal to “guarantee" the rights of employee inventors 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 reduced and 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 important 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) 1976 1977)

$100.00 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

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MANUFACTURING CHEMISTS ASSOCIATION,

Washington, D.C., September 26, 1973. Hon. John L. MCCLELLAN, Chairman, Subcommittee on Patents, Trademarks and Copyrights, Committee

on the Judiciary U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN : In the Congressional Record of July 31, 1973, you announced that the Subcommittee on Patents, Trademarks, and Copyrights of the Senate Judiciary Committee had decided to reopen the hearings on the general revision of the patent law for the purpose of receiving testimony on various important new issues, such as are contained in S. 1321. Your announcement indicated that the hearings were to be scheduled on September 11, 13, and 14 and invited parties interested in testifying at these hearings to contact the Subcommittee office. Your office further indicated that the hearings would include coverage of five specific subjects.

The Manufacturing Chemists Association is a non-profit trade association of 170 United States company members representing more than 90% of the production capacity of basic industrial chemicals within this country. The members of this Association recognize the importance of a viable patent system to our industry and the economy of the United States and wish to lend their best efforts to produce changes which, they believe, will provide the United States with a more effective patent system. In view of the importance to the chemical industry of the issues to be considered by your Subcommittee at these hearings, this Association would, under normal circumstances, actively welcome and request an opportunity to be heard. We understand, however, that the demands for time to testify on the part of those interested already exceed the allowed scheduled time. To avoid overburdening your Subcommittee and, at the same time, assist the Subcommittee in moving to a prompt consideration of the proposed changes, we waive the opportunity to testify orally at the hearings and submit herewith, instead, our comments in writing, which we request be included in the record of hearings.

The following comments are directed to the specific subjects mentioned in your announcement, as it is our understanding that your Subcommittee intends to limit its consideration to these subjects at this time.

MODIFICATION OF PATENT EXAMINATION PROCEEDINGS TO PROVIDE PUBLIC

ADVERSARY HEARINGS

MCA Position.MCA favors adversary proceedings which would be available to the public only after allowance of a pending patent application, provided the adversary proceeding does not impair the effective and enforceable life of the patent.

The proposal to provide public adversary proceedings within the patent system is believed to make available means by which patent quality can be substantially improved. Many patent systems of the world now provide for adversary proceedings. The experience of our members with such systems has been mixed. However, we believe the concept meritorious in that it will assist the Patent Office in its examination burden and should, hopefully, strengthen the presumption of validity insofar as “novelty" requirements are concerned. Having on hand the benefit of prior art supplied by third persons should also make the Patent Office "103 determination" more complete insofar as “the skill of the art" is concerned.

THE CREATION OF THE OFFICE OF PUBLIC COUNSEL

MCA Position—MCA opposes creation of an Office of Public Counsel as defined in Sections 3(d) and 24 of S. 1321. The proposed adversary procedures will ensure higher quality patents, thus making the Office of Public Counsel unnecessary. Moreover, the concept as proposed would introduce substantial problems in Patent Office operations.

The proposal in S. 1321 (Sections 3(d) and 24) to establish the Office of Public Counsel was apprently triggered by the desire to have within the patent system a means to ensure "high quality patents which meet the statutory and constitutional criteria. . ." It is the view of MCA that an "adversary procdure" effectively structured will ensure quality patents issuing in the normal course. If this occurs, it would obviate the necessity for the Office of Public Counsel.

The latter, as currently defined in Section 3(d), duplicates in part the current function of the Office of the Solicitor. Perhaps of more concern, however, is the apparent creation within the Patent Office of a "second" Patent Office. There seems to be no limit on the responsibilities of the "Public Counsel" with respect to prosecution and the unlimited actions left to his initiative under Section 3(d) (4). We believe that the creation of the Office of Public Counsel would be disruptive of the normal administrative functioning of the Patent Office and would be without redeeming virtue.

ESTABLISHMENT OF A SYSTEM FOR DEFERRED EXAMINATION OF PATENT

APPLICATIONS

MCA Position.—MCA favors establishment of a system of deferred examination, provided that there is no publication of pending patent applications until at least 18 months after filing, and then publication of only those pending applications for which no examination has been requested. Where examination is requested by an application, publication should follow allowance.

MCA is aware of worldwide trends toward deferred examination systems. We understand that the experience and success of other nations with such systems has been mixed. Nevertheless, we are in favor of the establishment of such a system if the examination burden of the Patent Office can be reduced and the net savings in time, effort, and money applied elsewhere in the system to meet the desired objective of the issuance of more valid, enforceable patents.

We believe, however, that there should be no publication of pending patent applications until at least 18 months after filing so that premature disclosure of research work does not occur. The public policies of many foreign patent systems are hinged to the 18th month after first filing. A U.S. deferred examination system, operating on an 18 month publication after filing, would be consistent with other systems and allow a period of time for an inventor to further develop his invention without untimely disclosure to competitors. Moreover, we believe that if an applicant has requested examination, publication of his pending application should be withheld until allowance.

In this regard, therefore, MCA would be opposed to the publication provisions as now set forth in Section 122 of S. 1321.

REVISION OF THE PATENT FEE SCHEDULE, INCLUDING THE ESTABLISHMENT OF

MAINTENANCE FEES

MCA Position.-MCA has no objection to the establishment of maintenance fees which, together with other Patent Office income, are sufficient to support the Patent Office examining operation, provided that such fees are maintained at reasonable and non-discriminatory levels, do not discourage patent application filings and are not confiscatory of patent property. MCA opposes Section 41 of S. 1321 as not meeting these criteria.

The subject of patent maintenance fees is one which has arisen many times in past consideration of Patent Law revision and should be thought of in the broader context as to what is the purpose of the "fee program". If it is the intent of Congress that the fee schedule should provide over-all recovery of the cost of the operation of the Patent Office—and MCA does not view this as desirable—maintenance fee levels, together with other proposed fees, will neeessarily toll the demise of the independent inventor. Surely, this is not the objective of any Patent Law revision. Before an effective level of fees can be established, it would appear to us that basic consideration has to be given to what costs of operation of the Patent Office are to be recovered from the fee structure. Any structure of fees, including maintenance fees, should, thereafter be set so as not to discourage patent application filings or be confiscatory of patent property.

ADMINISTRATIVE RESTRUCTURING OF THE PATENT OFFICE, INCLUDING THE PROPOSED

ESTABLISHMENT OF THE PATENT OFFICE AS AN INDEPENDENT AGENCY MCA Position.—MCA does not favor making the Patent Office an independent agency, but does favor making the Commissioner of Patents an Assistant Secretary of Commerce, reporting directly to the Secretary of Commerce.

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