Mr. Cox. Would you say, Mr. Tibbetts, that the expense of patent litigation is one of the blemishes of the present patent law? Mr. TIBBETTS. I can't answer that question, simply because the Packard Co. has been able to keep out of litigation, both aggressively and defensively. We have had but four suits filed against us, and all have been settled or abandoned, so our litigation expense has been nil. Mr. Cox. Do you have any opinion at all as to whether any steps might be taken which would reduce the expense of patent litigation? Mr. TIBBETTS. I don't say that I have. I am not qualified to speak on that. Mr. Cox. Reverting for a moment to the term of the patent, it is true, isn't it, that in the early days of the Republic the term was for 14 years? Do you recall? Mr. TIBBETTS. I think it was. Mr. Cox. The only point I wish to make, and I wanted to see whether you agree with me, is whether the 17-year period isn't merely a historical accident. It is not a reasoned choice, is it? Mr. TIBBETTS. I don't know, but I thought it was a compromise somewhere between the English law, 14 years, which they had then16 now-and a 20-year period somewhere else. I confess I am a little lax in history there. Mr. PATTERSON. I may be able to help there. My colleague the Commissioner of Patents has just told me that when they had the 14-year period there was a provision to renew. With the 17-year period there is not. Mr. TIBBETTS. I have forgotten. Mr. Cox. Of course the 14-year period was carried over from the English law. Mr. TIBBETTS. That is my understanding. Mr. Cox. We understand that that period probably developed out of the English practice of granting a patent on a particular occupation which would last for two periods of apprenticeship, 7 years each. Is that your understanding? Mr. TIBBETTS. That is my understanding, now that you recall it to my mind. Representative REECE. I shall first say that your response to Senator Borah's question that it had worked well for a hundred years, therefore should not be altered may be all right, but it seems to me that conditions have changed a great deal with reference to the utilization of patents and the effect of the introduction of a new patent might have upon more than one industry, or possibly industry generally. A hundred years ago an important patent might have been developed. It would have required at that time an organization of a new business, which would have been the beginning of a new industry in order to utilize that patent. Industry today is so widely developed in all of its phases so that it is difficult to conceive how a new patent might now be developed which could not be utilized by some business or industry that is now in operation, and conversely, it is difficult to conceive how such an important patent could be devised which would not have a more important effect upon industry if other concerns are not able also to take advantage of that patent. That is, as one of the members a while ago indicated in his question, it might destroy business which is already developed in connection with which a great deal of capital has been invested. It would seem to me that those are questions which rise for consideration which might not have obtained a hundred years ago, or when our present patent laws were placed upon the books. What is your thought in that connection, if I may ask? Mr. TIBBETTS. I would say that we are having that every day as a matter of fact; a company comes out with something new and it makes obsolete something that some other company is making or something that that particular company was making itself, so far as that is concerned, and I was going to say why shouldn't that company have the advantage of a few years use of that particular improvement over its competitors. The competitor will come out with something just as good or better. Representative REECE. I agree with you this far, and I am not saying that I disagree in any respect, but I readily recognize that he might have certain advantages, but if granting those advantages should destroy the investments of other people, he then is getting more than an advantage, starting a destruction of investments which would seem to me to give rise to a different question if such a condition should arise. Mr. TIBBETTS. You have stated an answer as well as a question, you might say. I don't know how I could improve upon it. Representative REECE. It was an observation, I will say. The CHAIRMAN. May I interrupt at this point? I think in the interest of expediting the proceeding, it will be a better policy if we permit Mr. Cox to complete his examination in chief before there are any more interruptions. Mr. Oliphant says he would like to ask a question in this connection. Mr. OLIPHANT. I should like to ask if he considers that the disruption of industry, of investments, dislocation of employment by sudden emergence of new patent processes is in contemporary society a trivial matter. Mr. TIBBETTS. Taking the question as you put it, I would say, no; it is a very important matter. Mr. OLIPHANT. It is a serious matter. Mr. TIBBETTS. I would think so. Mr. Cox. Mr. Tibbetts, yesterday Mr. Macauley said that the Packard Co. was frequently threatened with infringement suits by persons holding patents. Have you ever examined any of those instances to determine how many of the threats were made with respect to a paper patent; that is, a patent that had never in fact been put into practical operation? Mr. TIBBETTS. I don't know the relative proportion, but most of them are, you might say. Mr. Cox. It is a fact, then, that in at least your experience paper patents are used for purposes of threats and litigation? Mr. TIBBETTS. Not entirely so. Paper patents have their use. As a matter of fact, many inventions start from paper patents and are followed by the practical application of the invention. It comes on later and other patents are granted on the improvements. 1 Supra, p. 308. Mr. Cox. In other words, then, you think it is difficult to draw a distinction between a patent which is merely a claim on paper and a patent which has actually been put into practical operation? Mr. TIBBETTS. A paper patent may be a paper patent today and may be a very practical and important one tomorrow when somebody begins to manufacture on it. Mr. Cox. The point that I am trying to inquire into is whether any distinction should be made with respect to a man who holds a patent which he has never attempted or tried to put into practical operation, either by licensing someone to manufacture or by attempting to manufacture himself, and a patent which has actually beer. used in one of those ways. Mr. TIBBETTS. I think probably the courts make some distinction in their determination of validity of such patents, but I don't know whether we could do it in a practical way or not. Mr. Cox. You think the distinctions the courts make in that respect are adequate to take care of it? Mr. TIBBETTS. I would think so. Mr. Cox. I think I have finished. The CHAIRMAN. You have finished with your examination of this witness? Mr. Cox. Yes. The CHAIRMAN. If so, Mr. Tibbetts stands excused, and we are very much indebted to you, sir. (The witness was excused.) The CHAIRMAN. Will you call the next witness, Mr. Cox, please? Mr. Cox. Mr. Knudsen. The CHAIRMAN. Mr. Knudsen, do you solemnly swear that the testimony you are about to give in this proceeding will be the truth, the whole truth, and nothing but the truth, so help you God? Mr. KNUDSEN. I do. Mr. Cox. Perhaps we might swear Mr. McEvoy at the same time. The CHAIRMAN. Mr. McEvoy, do you solemnly swear that the testimony you are about to give in this proceeding will be the truth, the whole truth, and nothing but the truth, so help you God? Mr. McEvoy. I do. TESTIMONY OF WILLIAM S. KNUDSEN, PRESIDENT, GENERAL MOTORS CORPORATION, DETROIT, MICH., AND JAMES MCEVOY, DIRECTOR OF PATENT SECTION, GENERAL MOTORS CORPORATION, DETROIT, MICH. The CHAIRMAN. Mr. Cox, may I interrupt the examination long enough now to renew the suggestion which I made at the conclusion of the recent examination. If the members of the committee will permit Mr. Cox to complete his examination before interrupting with questions, I think that we will expedite the hearing very materially and unless there is objection, that will be the rule. Mr. Cox, you may proceed. Mr. Cox. Mr. Knudsen, will you give the reporter your name and address? Mr. KNUDSEN. William S. Knudsen, president of General Motors Corporation, Detroit, Mich. Mr. Cox. Mr. McEvoy, will you do the same thing? Mr. McEvoy. James McEvoy, 1771 Burns Avenue, Detroit, Mich. I am director of the patent section, General Motors Corporation. Mr. Cox. Will you tell us again what your present position with the company is, Mr. Knudsen? Mr. KNUDSEN. I am the president. Mr. Cox. How long have you been connected with General Motors? Mr. KNUDSEN. Seventeen years. Mr. Cox. What was your first work with the company that you started out with? Mr. KNUDSEN. I was operating vice president of the Chevrolet Motor Co. Mr. Cox. How long have you been connected with the motorcar industry? Mr. KNUDSEN. Referring to cars and parts, both? Mr. Cox. Yes. Mr. KNUDSEN. Thirty-one years. Mr. Cox. In what capacity did you first work in the motorcar industry? Mr. KNUDSEN. I worked as a foreman. Mr. Cox. What position in the General Motors Co. did you hold before you became president? Mr. KNUDSEN. I was operating vice president of Chevrolet, and then from 1922 to 1924 I was made general manager and president of the Chevrolet Motor Co., which position I held until 1933, October. I was then made operating vice president of the corporation from October 1933 until May 1937, when I was made president. Mr. Cox. As a result of your experience, Mr. Knudsen, are you familiar with the policy which the General Motors Co. followed with respect to patents? Mr. KNUDSEN. Yes, sir. Mr. Cox. Mr. Knudsen, would you say that the motorcar industry is a highly competitive industry? Mr. KNUDSEN. I think we will admit that. Senator BORAH. How is that? Mr. KNUDSEN. I think we will all admit that. Mr. Cox. Each company, in your opinion, is trying to make the best car it can and sell it to the public at the lowest price possible. Mr. KNUDSEN. Yes, sir. Mr. Cox. And that is true of General Motors, certainly, you would say? Mr. KNUDSEN. Yes, sir. Mr. Cox. What competitive use does General Motors make of its patents? I will withdraw that question. Mr. KNUDSEN. I put something down here. Maybe I can answer it. Mr. Cox. I will withdraw that question, and we will take it up a step at a time. Does the General Motors Co. apply for and take out patents on inventions? Mr. KNUDSEN. Yes, sir. Mr. Cox. For what purpose does it take out patents? Mr. KNUDSEN. To use in the manufacture of motorcars and parts. Mr. Cox. You use the device that the patent covers, isn't that correct? Mr. KNUDSEN. I don't know that we have used all of them; we might have found a better one after we proceeded. Mr. Cox. What I am trying to inquire into is why you take out the patent itself, why don't you just use the invention that you make without taking out the patent? Mr. KNUDSEN. Sometimes we have to take out patents for protective purposes. Mr. Cox. That is, you take it out so someone won't sue you for infringing, who develops the same idea later on? Mr. KNUDSEN. Yes, sir. Mr. Cox. You use those patents to collect royalties from others? Mr. KNUDSEN. To some extent, yes. Mr. Cox. Does that represent any very considerable part of your company's income? Mr. KNUDSEN. We pay about four times more than we take in. Mr. Cox. You take licenses from others as well as grant licenses to others under your own invention? Mr. KNUDSEN. Yes, sir. Mr. Cox. Do you ever use those patents, your own patents, in an attempt to get a competitive advantage in the industry? Mr. KNUDSEN. I don't understand your question. Mr. Cox. I will withdraw that question and ask another one. Did you ever refuse to grant licenses under your patents to your competitors in the industry? Mr. KNUDSEN. Have we? Mr. McEvoy. No; never. Mr. KNUDSEN. Never have. I don't know of any. Mr. Cox. Suppose the patent system should be abolished tomorrow, Mr. Knudsen, do you have any opinion as to what difference that would make to the competitive position of General Motors in the automobile industry? Mr. KNUDSEN. No; but I think it would be bad for industry generally. Mr. Cox. You think it would be bad for industry generally? Mr. Cox. You think that it would be detrimental to the inventor. Mr. Cox. By the way, are you an inventor, Mr. Knudsen? Have you ever invented anything? Mr. KNUDSEN. I have two patents filed, assigned to the people I was working for; that is all. I am no inventor. Mr. Cox. In making those inventions, were you stimulated by the thought that you or someone was going to get a patent on them? Mr. KNUDSEN. No; I wanted to get out more work. Mr. Cox. You wanted to produce more cars. Mr. KNUDSEN. Yes, sir. Mr. Cox. The patent didn't make much difference to you. Is that right? Mr. KNUDSEN. No. Mr. Cox. I want to make sure you mean it did make a difference or didn't. |