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Morton David Goldberg-partner, Schwab & Goldberg, New York, New York

Harlan P. Huebner-partner, Huebner & Worrel, Los Angeles, California William R. Hulbert-partner, Fish & Richardson, Boston, Massachusetts Julius Jancin, Jr.-patent counsel, IBM Corporation, Washington, D.C.

John T. Kelton-partner, Watson, Leavenworth, Kelton & Taggart, New York, New York

Edward F. McKie, Jr.-partner, Schuyler, Birch, Swindler, McKie & Beckett, Washington, D.C.

W. Brown Morton, Jr.-partner, Morton, Bernard, Brown, Roberts & Sutherland, Washington, D.C.

Sidney Neuman-partner, Neuman, Williams, Anderson & Olson, Chicago, Illinois

B. R. Pravel-partner, Pravel, Wilson & Matthews, Houston, Texas

James M. Wetzel-partner, Wetzel, Greenawalt & FitzGibbon, Chicago, Illinois

Arthur R. Whale-manager, Organic Chemicals Section, Patent Department, The Dow Chemical Company, Midland, Michigan

George W. Whitney-partner, Brumbaugh, Graves, Donohue & Raymond, New York, New York

Richard C. Willson, Jr.-patent counsel, Marathon Oil Company, Littleton, Colorado Sincerely,

C. MARSHALL Dann. Copy to: Mr. Thomas C. Brennan, Chief Counsel, Subcommittee of Pa

tents, Trademarks and Copyrights, Senate Judiciary Committee. Senator Hart. Thank you very much. Mr. DANN. Thank you, Senator.

Mr. BRENNAN. Mr. Chairman, the next witness is Mr. William E. Schuyler, Jr., who is appearing on behalf of the American Bar Association.

Senator HART. We welcome you back.
Mr. SCHUYLER. Thank you, Mr. Chairman.
Mr. BRENNAN. Mr. Schuyler, you have a prepared statement.

Do you wish to read it in full or have it printed in the record and summarize it as you proceed?

Mr. SCHUYLER. Mr. Brennan, I would prefer to summarize it, I think, in the interests of saving time.

Mr. BRENNAN. Mr. Chairman, may the statement be printed in full at this point in the record ?

Senator HART. So ordered.
[The prepared statement of Mr. Schuyler follows:]

STATEMENT OF WILLIAM E. SCHUYLER, JR., ON BEHALF OF AMERICAN BAR

ASSOCIATION

Mr. Chairman and members of the subcommittee: My name is William E. Schuyler, Jr. I am a lawyer in private practice in Washington, D.C. and appear today on behalf of the American Bar Association as a former Chairman of its Section of Patent, Trademark and Copyright Law. Currently, I am the delegate representing that Section in the House of Delegates of the American Bar Association.

We appreciate the opportunity to appear before the Subcommittee and supplement testimony at previous hearings on Patent Law Revision. Our Association does not have a position on the creation of an Office of Public Counsel or on administrative restructuring of the Patent Office, so this statement is directed to (A) Public Adversary Proceedings; (B) Deferred Examination; and (C) Patent Office Fees.

A. PUBLIO ADVERSARY PROCEEDINGS For many years the American Bar Association has advocated a change in the system of examining patent applications to permit the Patent Office

to consider patents and publications cited by the public as evidenced by the following resolution adopted in 1967:

Resolved, That the American Bar Association approves in principle consideration by the Patent Office of patents and publications cited by the public within six months after publication of the application, provided that the application has an opportunity to rebut any determination of unpatentability and also has the opportunity to amend the scope of any claim.

As contemplated by the resolution, a patent application would be published, and the public would have a reasonable period of time within which to cite patents and publications for consideration by the Examiner. Then the applicant would have an opportunity to rebut any holding of unpatentability and/or amend his claims.

This would not be an adversary proceeding as contemplated by Section 135(d) of S. 1321, and certainly does not contemplate an anonymous adversary. The public could submit written arguments or briefs with the citation of prior art. Then, with all the evidence before him, we believe the Examiner in the Patent Office will reach a proper conclusion more expeditiously and economically than would be possible in a full-fledged adversary proceeding.

Experience in other countries indicates that full-fledged adversary proceedings unnecessarily prolong the determination of patentability and unnecessarily burden applicants. Such delays and burdens work to the disadvantage of individuals and smaller businesses. Moreover, applicants fees, as provided in Section 41 of S. 1321, would have to be increased (probably multiplied by a substantial factor) to offset the Patent Office expense of administering adversary proceedings.

Timing of the publication of the application and the period for the public to cite prior art is of utmost importance. It is the position of the American Bar Association that an application should be published only after allowance by the Examiner. This position is established by the following resolution, also adopted in 1967 :

Resolved, That the American Bar Association opposes in principle mandatory publication of pending applications without the authority of the applicant before the allowance of the claims thereof, or after the allowance of the claims thereof, without first giving the applicant a reasonable time within which to elect whether or not to abandon the application thereby preventing publication.

From its beginnings, our patent system has preserved the secrecy of an applicant's invention, until the scope of patent protection is determined, i.e., until the claims are allowed. Then the applicant has the option of having the patent published or preserving his secrecy by abandoning the application. Mandatory publication of all applications, as provided in Section 122(c) of S. 1321, forces an inventor to decide before filing whether to seek a patent or preserve his invention in secrecy. This will lead to suppression of some portion of technology now available to the public in published patents, but, of course, will correspondingly reduce the load on the Patent Office.

In most other counties, applications for patent are published about 18 months after filing. Multinational corporations, which file applications in many foreign countries, would be unaffected by early publication in the United States, because the technology will be published somewhere in any event. In some instances, even these large organizations restrict filing to the United States to preserve secrecy; if early publication of U.S. patent applications is mandatory, those organizations will probably not file even in the United States.

Smaller companies and individuals who do not normally file applications in other countries will be adversely affected by early publication of their United States applications. Protection of technology is often essential to the survival of smaller companies. Making that technology available to larger competition could be fatal. In such cases, the giants could even prolong the adversary proceedings of S. 1321 until the technology is obsolete. Faced with such alternatives, the smaller companies and individuals will decide to rely on their ability to keep the invention secret which defeats the major purpose of the patent system.

In an effort to protect the interests of individuals and smaller companies, the U.S. Patent Office has set a goal of issuing patents within 18 months of filing and has made substantial progress toward that goal. Achievement

of that goal is a much better solution than mandatory publication of all applications to the detriment of the less affluent applicants.

Practical considerations affect the timing of the publication of applications and the period for citation of prior art by the public.

Each year some 35,000 patent applications are abandoned. With few exceptions, these abandoned applications do not disclose any worthwhile advance in the art, so there is no justification for the cost of publication, much less the imposition of 75% of that cost on applicants (Section 41).

Of the 80,000 applications allowed each year, the Examiner has probably cited the best art in at least 20,000 (25% valid, based on current court statistics) and at least another 20,000 (25%) would be ignored by the public in view of the scope of the allowed claims. By delaying the public participation until after allowance, the number of potential controversies is reduced from 115,000 to something less than 40,000, and the number of publications from 115,000 to 80,000.

Participation by the public should be more viable if it takes place after the issues are narrowed during prosecution. At that time, members of the public may readily determine from consideration of the allowed claims whether the prospective patent will affect their interests. If so, they may have the incentive to expend the time and money necessary to make a search and oppose grant of the patent. On the other hand, if applications are published before prosecution, the claims are unlikely to describe the novel subject matter with precision, and the public will find it that much harder to determine whether the prospective patent may affect their interests.

Consideration may be given to providing for citation of art by the public and reexamination by the Patent Office after the patent issues. This will avoid duplicate publication of both the application and the patent and afford applicants earlier benefits of the patent where there is no citation. Moreover, an applicant with patent in hand will be better able to raise the money to defend against an opposition than if he has no patent at all. Merits of such a procedure were recognized by this Subcommittee in Chapter 18 of S, 643, 92d Congress (Committee Print, October 20, 1971).

B. DEFERRED EXAMINATION

Implicit in any system of deferred examination is the mandatory publication of all applications before examination. For reasons explained above, the American Bar Association is opposed to such mandatory publication.

Moreover, the American Bar Association has opposed proposals for deferred examination and has even opposed legislation proposing to grant the Commissioner of Patents standby authority to institute a system of deferred examination. This position is based on the assessment that it is unnecessary, would be counter-productive, and would needlessly force industry to evaluate hundreds of thousands of unexamined applications.

Deferred examination was adopted by The Netherlands, Germany and Japan as the only solution to insurmountable backlogs of pending applications with resulting long pendency rates. In 1970 Great Britain rejected the deferred examination approach and the British lead has been followed in the current draft of the proposed European Patent.

In the United States, average pendency of patent applications has been reduced from 36 months to 24 months in the last 10 years, and should reach 18 months by 1976. Backlog and long pendency are not problems in the United States, So' deferred examination would not solve anything.

Chapter 18 of S. 1321 would result in publication of over 100,000 applications every year. If applicants elect to defer examination, this would total 500,000 unexamined applications added to the search file without clues as to what if any new developments are in them. Each year about 35,000 applications would be added (the number now abandoned each year) which do not disclose any significant advance in the art. With the passage of time, these worthless documents would constitute one-third of the search file, increasing the search time and effort of both Examiners and the public, with a resulting decline in efficiency.

Not only is such proliferation of the search file counter-productive and burdensome, but the Examiner will normally be five years behind the state of the art for which he is responsible. Currently, the Examiner studies new

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applications in the order in which they are filed and makes his first action within nine months. By this normal activity he keeps abreast of developments. If examination of most applications is deferred for five years, the Examiner will be able to keep current on developments only by extra effort. When requested to examine a recently filed case, he must update his knowledge of developments disclosed in five years of unexamined applications. Such extra effort, plus the complication of the search file, could easily offset the savings effected by applicants' failing to request examination within the five-year period.

Finally, the burden on industry to evaluate five years of unexamined applications would more than offset any predicted saving by a system of deferred examination. Imperfect as the present system may be, it eliminates 30% of the applications filed and provides patents with claims defining precisely what invention is covered by the patent. Everyone desiring a new product can, with reasonable effort, determine what, if any, infringement risks exist. To reach the same point when confronted with a five-year accumulation of unexamined applications would take many times the same effort, and in some instances may border on the impossible. Ability to assume such burdens varies in proportion to the size of the business—smaller businesses will suffer more.

These are the main reasons why deferred examination was rejected by Great Britain and by the many nations negotiating the European Patent. Concentration of resources to enable the Patent Office to reach the 18-month pendency goal will best serve American interests at this time.

C. PATENT OFFICE FEES From time to time the American Bar Association has recognized the need for moderate increases in Patent Office fees to accommodate increased costs and changes in the value of the dollar. Otherwise, the position of the American Bar Association is expressed in the following resolutions adopted in 1967 :

Resolved, That the American Bar Association opposes in principle the grant to the Commissioner of a right to fix fees to be paid in connection with the filing, examination and issuance of patents, and records relating thereto, designed to effect an overall recovery of a predetermined percentage of the cost of operation of the Patent Office.

Resolved, That the American Bar Association approves in principle that the Patent Office be supported adequately to insure first class staffing, housing and equipment; that the Patent Office should not be self-sustaining; and that any fees charged should be reasonably apportioned in accordance with the cost of providing the particular service.

Many Patent Office operations do not benefit applicants. For example, publishing (printing) applications and patents is of no value to the applicant or the patentee; it benefits the public at large and customers who purchase printed materials. The public search and library facilities benefit the public at large, not applicants.

Examination of patent applications is in the public interest as well as that of individual applicants, so the cost of the examination service should be apportioned equitably between them.

In 1965 the Congress set a schedule of Patent Office fees designed to recover 65%-75% of the cost of operation; that was an approximation of a fair apportionment at that time. Whether fees are set by the Congress or by the Commissioner, patent application fees should be set to cover a portion of the cost fairly attributable to the examination of patent applications and no other costs. All other costs should be paid from public funds or by customers who receive products or services from the Patent Office.

S. 1321 adds some costs which should be financed from public funds, as, for example, the Public Counsel [Sec. 3(d)]; search facilities in various parts of the United States [Sec. 6(d)]; mechanized searching and research and development for classification and retrieval of prior art (Sec. 6(c)]; publication and dissemination of information [Sec. 8(f)]; Advisory Council on Patent System (Sec. 10); publication of all applications [Sec. 122] ; adversary proceedings (Secs. 135(d) and 137]; and administration of rights of employer-inventor (Sec. 263]. To burden the applicant with 65%-75% of these costs would be unfair. Deficits generated by minimizing fees for certain

types of applications (Sec. 41(b) (1)]; forgiving fees for individuals and small business (Sec. 41(b) (2)]; and deferring payment for those unable to pay [Sec. 41(c)(2)) should be financed from public funds and should not increase the burden for applicants who do not qualify for the benefits.

In the past, the American Bar Association has opposed payment of any fee for the maintenance of a patent right for several reasons. Such fees as provided in Section 41(c)(1) of S. 1321 are in effect discriminatory taxes imposed upon the owner of a patent added to the other taxes he pays. Income from maintenance fees is received long after the service is rendered and is difficult, if not impossible, to coordinate with anticipated costs 10 or 15 years in the future. Threatened cancellation of a patent for failure to pay the maintenance fee penalizes the inventor who is ahead of his time.

Larger businesses see advantages in weeding out large numbers of patents which present potential infringement problems. Such larger businesses are better able to evaluate the potential of patents and finance the maintenance fees than are smaller businesses. Forgiving and deferring fees for small business or individual applicants and patentees can be accomplished only after presentation of the case to the Patent Office. This will involve cost of administration by the Patent Office, and attorney's fees and expenses paid by applicants and patentees.

On balance, the American Bar Association has favored reasonable fees for all applicants paid at the time of application and/or issuance rather than imposing maintenance fees on some patent owners in the future.

D. CONCLUSIONS In summary, the American Bar Association recommends that the Patent Office consider patents and publications cited by the public after publication of the application or patent, provided the applicant or patentee has an opportunity to rebut the citation and/or amend claims; that any publication of an application take place only after allowance of the claims; that deferred examination be eliminated from S. 1321 ; and that Patent Office fees be apportioned between applicants and the public in proportion to the benefits accruing to each.

STATEMENT OF WILLIAM E. SCHUYLER, JR., ESQ., ON BEHALF OF

THE AMERICAN BAR ASSOCIATION Mr. SCHUYLER. My name is William Schuyler. I am presently practicing law in Washington, D.C. My appearance today is on behalf of the American Bar Association. I am a former chairman of the Section of Patent, Trademarks and Copyright Law, and at the present time I represent that section in the House of Delegates of the American Bar Association.

The American Bar Association does not have a position on the matter of the administrative structuring of the Patent Office and its relationship to the Department of Commerce, nor do we have a position on the proposal of S. 1321 concerning the Office of Public Counsel. So I will direct my remarks, as our statement does, to the other three points to which these hearings are limited.

Both with respect to public adversary proceedings and with respect to deferred examination, we have the matter of the timing of the publication of the application for the patent. I concur in the points made by Mr. Dann concerning the timing of this publication. I will try not to repeat the same reasons, why we oppose an early publication of a patent application.

Historically, the patent applicant has been able to defer until his application was allowed, his decision whether or not he would accept the protection of the patent or continue the secrecy of his

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