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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 196.5 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 ees 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.


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.


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 invention. He makes this choice at that time, fully informed concerning the scope of the patent which he is to get. The validity may still be in question, but the scope of it has been determined.

If there is an earlier publication as proposed by S. 1321, or some other proposals, the inventor must make that decision at the time that he files his application. He must decide whether his chances on obtaining adequate protection justify his immediate publication of what is his own intellectual body. As I refer to individuals, I am very much aware, of course, that a lot of inventive effort is teamwork in corporations, and it may be the research director who must make this decision. But this decision is nonetheless the same. Does the scope of the protection of the patent as estimated at the time of filing, justify the publication of the technology ?

We know, at least those of us that have engaged in this practice of patent law for some time, that we have clients who sometimes do not file applications in foreign countries because they do not want to make the decision to have them published promptly. They will file in the United States under present law, because the secrecy is preserved. If we change the law of the United States, the decision must be made, whether or not to file based on an estimate which should involve some study of what protection will be available. Those applicants today who decide not to file in foreign countries, will, under S. 1321, likely decide not to file in the United States. It will depend upon the inherent secrecy of their invention, if it is subject to the maintenance of that secrecy. Some are and some are not.

Another reason we oppose this early publication is a rather practical one. Each year the Patent Office has considered some 115,000 patent applications and about 35,000 become abandoned. Most of the abandonments are abandoned because the patent is refused by the Patent Office, presumably because there is no disclosure of an advance in the art. 35,000 patent applications are abandoned, but the secrecy is maintained, if there is anything to be kept secret.

But the more important thing is the public is not burdened with 35,000 disclosures of technical publications that really do not involve any new information.

If you have early publication, there is no way of selecting. All 115,000 or 100,000 plus that are filed each year will be published. Those who try to decide whether or not to engage in the adversary proceedings that are proposed are those who are trying to decide what the patent situation is. They must wade through 35,000 applications, out of 115,000, that do not involve any new technology.

Over a period of time, as we are continuing to publish, 10 to 20 years in the future, we will have approximately one-third of all the published applications in the Patent Office being relatively meaningless to the public at large. The mere cost of publishing 35,000 applications, which do not add particularly to the art, is a pretty staggering figure; and I certainly agree with Mr. Dann that even publication of today's patents is for the benefit of the public and not the applicant, and the fee should be borne by the public and not the applicant. Certainly, if we require publication of all applications, if we pass that cost along to the applicant we are going to discourage him further from filing.

I have applied this matter of early publication and our opposition to it to both the adversary proceeding and deferred examination, and we oppose the present bill in those respects for that reason.

On the matter of adversary proceedings alone, we have recognized for many years in the American Bar Association the desirability of having the public given an opportunity to participate in the determination of the patent protection that is given to an inventor.

We think that the solution evolved by this subcommittee in the last Congress is a very adequate solution to that problem. If, as proposed by S. 1321, the application is published and the public is charged with offering evidence or opposing the issuance of a patent, then we will have difficulty in determining just what the published application will produce in the way of patent protection.

We know that about a third of those applications would not be issued in any event. We have no way of determining which twothirds are viable. Certainly a large portion of all applications would be of little interest to most members of the public. To try to determine by reviewing 100,000 or 115,000 applications a year which ones are likely to interfere with a particular client's business would present me with an almost insurmountable obstacle in trying to represent patent owners and invention users both large and small. The burden would be one which the large organization would better bear than a smaller one.

I think that a decision of whether or not to offer help to the Patent Office is rendered extremely difficult if the public does not know in advance what likely scope of protection will be afforded.

So we would think that the adversary proceedings as proposed by S. 1321, while theoretically would produce patents having a greater percentage of validity, the practical application would certainly be a lawyer's paradise and provide for 100.000 potential lawsuits, in effect, each year.

But that is not why I am here. I am here testifying for inventors and patent owners, and I believe in their best interest and in the interest of the public that a deferral of any public participation until the scope of protection is determined would be preferable.

So we would favor public citation of publications and prior art at a time that the application has been allowed, that the scope of the claims has been determined. This may be considered perhaps an initial screening, but it will make the public effort much more significant and much more to the point.

Finally, the adversary proceedings, when they occur before issuance of the patent, are likely to prolong the time that it takes an applicant to obtain his patent. Where there is an actual contest, as is the case in Germany, for example, we know that these can even be prolonged for the life of the patent where a patent runs from the filing date.

Here again the smaller company is at a disadvantage with respect to the larger one, both in the matter of resources and in the `importance of early issuance of the patent.

Deferred examination was adopted in Germany and the Netherlands because those two countries had insurmountable backlogs. They just had pending applications in such numbers they could not see

any daylight ahead; and the same situation occurred most recently in Japan. The United States does not face that kind of situation.

The Patent Office has for many years been working and gaining on its backlog. Ten years ago it took 3 years to obtain a patent; today it takes less than 2. Indications are that in another 2 or 3 years the Patent Office will be issuing patents within 18 months.

In many other countries and in those countries where we have deferred examination, applications are published in about 18 months. It is our position, in the American way, concentration of resources on giving the inventor his patent within 18 months would not only answer those who want immediate publication of the technology, but also would give the inventor and businesses, both large and small, prompt knowledge of what the scope of the protection will be. We see no need for deferred examination in the United States today.

Now, on the matter of Patent Oflice fees I would agree again with what Mr. Dann said, that the fees fall into three categories. Some are paid for services rendered by the Patent Office to particular customers, and those certainly should be borne 100 percent by the customers receiving the service. There are others which benefit the patent applicant, primarily the portion of the cost of the patent examination. Here again, even the examination is conducted as much for the public benefit as for the benefit of each applicant. So we think some apportionment of the cost of examining patents is in order.

Finally, there are large numbers of functions performed by the Patent Office which are for the benefit of the public. The major one is the printing of patents. This does not benefit the inventor: it's primarily for the benefit of the public, and we believe that that cost should be borne 100 percent from public funds.

In my statement I have indicated a number of new proposals in S. 1321 which likewise are for the public benefit, and we believe should be financed from public funds.

That concludes my effort to summarize my statement, Mr. Chairman.

Senator HART. Thank you very much.

Let me for the record develop with you, as we did with the Patent Bar, the membership that was involved in developing the ABA position. I know that the ABA-well, let me say I know that the general membership does not take a position. We do not get polled. I know there is some procedure that is intended to develop a position based on the opinions of at least some sections of the ABA. You are here explaining that with respect to several of the five topics. The ABA has not taken a position with respect to three. I think it was.

How did that position evolve?

Mr. SCHUYLER. The beginning is in committees of the section of patent, trademark, and copyright law. The ABA-I am not sure I am up to date—but has something on the magnitude of 150.000 members. The patent section, the patent, trademark, and copyright law section has, I believe, 4,300 members. About 1,500 of those 4,300 serve on committees of the section of patent, trademark, and copyright law.

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