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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 detined 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. deferrud 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 fur. ther 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.

We believe that with proper recognition, enlightened administration, and reasonable policies, the Patent Office can be made a most effective operating unit. We believe this can best be accomplished within the Department of Commerce organizational structure by raising the level and prestige of the Office of Commissioner of Patents to that of an Assistant Secretary of Commerce. As Assistant Secretary of Commerce for Patents, reporting directly to the Secretary of Commerce, the Commissioner should be more effective and responsive in directing the programs, policies, and administration of the Patent Office.

While we have limited our comments to the five specific subjects mentioned in your announcement concerning the patent law revision hearings, there are many other sections of S. 1321 that are of serious concern to the Manufacturing Chemists Association. We respectfully request, therefore, that this Association, as well as other interested parties, be afforded the opportunity to comment on the other provisions of S. 1321 before your Subcommittee completes action on this measure.

In closing, we wish to commend your Subcommittee for its diligence in striving to provide constructive reform of the Patent Law of the United States. We offer you our continuing assistance in seeking the mutual objective of structuring a Patent Law which will ensure a high level of research and development activity, an increased inventive productivity, and appropriate reward for the same. Such results will be of immeasurable benefit to the social and economic position of the United States as we enter a future of increasing world competition in the fields of technology and scientific progress. Sincerely,

W. J. DRIVER.

REPORT FROM THE MICHIGAN STATE BAR

The following is the majority report of the Committee on Anti-Trust and Patent Law of the Patent Law Section of the Michigan State Bar as approved by the Section Council. It does not, in any way, represent the opinion or position of the Michigan State Bar.

It was the unanimous opinion of the Committee that the U.S. Patent System is in fundamental difficulty and that the problems confronting it require basic changes to make it a productive part of the United States Economic System. It was also concluded that the U.S. Patent System today has largely ceased to function as a means of encouraging individual inventors and small companies. However, it was also concluded that S. 1321 does not offer any viable solutions to the problems, rather it would compound them.

The basic concept of patents is to encourage inventors to publicly disclose their ideas in return for a limited period during which they can recover compensation for their contribution. It is a very important objective of the patent system to serve and encourage both the individual inventor and the small company. The present system has already become so expensive and the patent's value so questionable as to discourage individual inventors and many small companies. S. 1321 will materially increase these costs and for all practical purposes make patents the exclusive province of the very large economic enterprise.

While there are numerous features of S. 1321 which are considered to be objectionable because of cost or being unrealistic from a practical point of view, the following points were given particular consideration :

I. OPPOSITION

The principle of introducing an Opposition Proceeding into the U.S. Patent System is considered desirable but the procedures set out in S. 1321 are considered to be too expensive and too complex. To be practical and effective, the Opposition Proceeding should not occur until after the application is allowed, should be limited in .time, conducted without the costly and time consuming discovery procedures used in Federal Court Practice, provide for dissclosure of the name of the Opposer and the evidence produced during the Opposition should be judged by someone, preferably a board, other than the Examiner in charge of the application.

II. PUBLIC COUNSEL This feature of S. 1321 is objected to because it is much too costly and is considered unworkable. In view of the quantity and complexity of present day technology, the Public Counsel could not be effective without a supporting staff at least as great as the present examining corps of the Patent Office. The cost both to the Patent Office and to the Applicant would be enormous.

Further, the introduction of discover procedures and the addition of third party practice to the examination procedure would interfere with orderly examination, consume the Examiner's time with procedural matters and make the examinaation prohibitively expensive for the Applicant. It would make patents a luxury that only the large and wealthy economic enterprise would afford.

It was the consensus of the Committee that the Public Counsel would either become an ineffective office or would so complicate the functions of the patent Office as to bring its operations to a standstill.

III. MAINTENANCE FEES The proposed schedule of Maintenance Fees would effectively deny the benefits of the Patent system to individuals and small companies. Only the large economic enterprise could afford them. The proposed procedures by which individuals and small companies could obtain temporary relief from them are so complicated and costly as to make them economically impractical. The proposed fee schedule would be an additional factor contributing to the growth and economic power concentration of large companies and economic combinations.

IV. COMPULSORY ROYALTY TO INVENTOR BY ASSIGNEE-EMPLOYER Except in the situation in which the patent is licensed to a third party and earns royalties which can be readily identified, this proposal is considered unworkable. It is not believed possible to identify the contribution of most patented inventions where the invention is used by the employer solely within the employer's own operations. The accounting problems are very difficult and, in any case, would be very expensive and subject to controversy. The proposal is considered impractical and likely to discourage adoption of improvements in products and processes. Alternatively, to avoid exposure to complicated accounting problems, it is believed likely that many employers would feel forced to adopt the improvement without patenting anything and, whererer possible, protect it by secrecy. This would defeat the public disclosure purpose of the patent law. The cost and complexity of the proposed patent examination procedure would effectively deny the employee an opportunity to patent the idea at his own expense.

It was the Committee's opinion that the difficulties of the present patent system largely do not arise out of the present patent law but rather out of its implementation. The patent system would be better served by an improved examination system, coupled with an effective oppposition procedure and a revision of the judicial system under which patents are litigated to introduce greater uniformity into the subjective standards by which they are finally adjudicated.

PREPARED MATERIAL SUBMITTED BY THE MILWAUKEE PATENT LAW

ASSOCIATION The Milwaukee Patent Law Association at a regular meeting of its members held on September 11, 1973, after having given due consideration to Senate Bill S.1321, upon recommendations of its Committee on Legislation, passed the following Resolutions and approved the supporting memoranda relating thereto:

RESOLUTION NO. 1

(Modification of patent examination proceedings to provide public adversary

hearings) BE IT RESOLVED: That the Milwaukee Patent Law Association hereby goes on record as opposing the provisions of Senate Bill S.1321 permitting wide range third party adversary participation in patent application examination, interference and appellate procedures, for the reasons that:

(1) They will markedly increase the costs and burdens on applicants in obtaining patents.

(2) They could discourage independent inventors of limited means from using the patent system.

(3) They will afford opportunity for delaying and obstructionist tactics by third parties with selfish interests, and

(4) They will complicate the Patent Office administration, and unduly prolong the issuance of patents.

That the Milwaukee Patent Law Association is not opposed, in principle, to some form of public participation in the patent application examining process to enhance the quality of issued patents. However, it believes that to be practical and workable, it should be limited to:

(a) A definite time period during or after completion of the Patent Office's examination of an applicant's claims, and

(b) The public's right to cite patents, documents, or other tangible evidence that may be relevant to the claimed subject matter as regards the conditions and requirements of Secs. 102 and 103 of Title 35 USC.

RESOLUTION NO. 2

(The creation of the Office of Public Counsel) BE IT RESOLVED: That the Milwaukee Patent Law Association is opposed to the creation of the Office of Public Counsel as envisioned in S.1321 for the reasons that:

(1) The Public Counsel would be required to represent potentially conflicting interests;

(2) The Public Counsel would be an unnecessary intervenor in existing forms of adversary proceedings; and

(3) The establishment of the Office of Public Counsel would lead to the creation of an overlapping bureaucracy in the Patent Office. Supporting memorandum

As defined by S.1321, the Public Counsel would have at least three potentially conflicting responsibilities. First, he would be responsible for prosecuting and defending appeals from any final action of the Patent Office (Sec. 3(d) (2), Sec. 134(a); Sec. 143; Sec. 145). In this role the Public Counsel would function much as the present Solicitor who is charged to act as the Commissioner's lawyer, except that, contrary to present practice, the Public Counsel would represent the Primary Examiner in appeals before the Board of Appeals. In his second role, the Public Counsel is charged to be the advocate of the public interest to assure a high quality patent system, and to represent the public need to analyze or defend an important, new or developing theory of law, or involving an important, new or developing area of technology. (See. 3(a)(i)). The third role is that of investigator and public prosecutor granted by Sec. 3(d) (4) which gives the Public Counsel a roving commission, to participate in all proceedings and conduct investigations or inquiries.

It appears on the face of S.1321 that the roles envisioned for the Public Counsel will require him to represent potentially conflicting interests. In his role as the defender of the final action of the Patent Office, the public counsel must necessarily be representing the examining corpse and the Commissioner to uphold the correctness of their decisions. What, however, of the instance in which the Public Counsel believes that the decision which he is called upon is not in the public interests It is as reasonable to assume that the Public Counsel would decide that the public interest is contrary to the position of the Patent Office as it is to assume that he will decide that the public interest coincides with the position of the Patent Office. If the underlying rationale in S.1321 is that the public interest will always coincide with a Patent Ottico decision, then there is no need for an advocate of the public interest apart from the Commissioner of Patents and the examining corps.

One of the stated purposes for the establishment of the Public Counsel is to insure high quality patents through an adversary process. If an adversary process is more likely to insure high quality patents, there would be no additional benefit to inserting a third party advocate in those proceedings in which adversary interests are already represented, such as in the normal suit for

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