Mr. COE. Yes, sir.

Before I discuss these next charts, I want to caution against the deduction of broad conclusions from the data given on them. They are intended only to be generalizations; they are not to be taken as representing the relative importance of the several categories of large, small, and individual. For example, those charts that we just saw did not show the allocation of so-called key or basic patents. They did not indicate the relative number of patents exploited by the respective groups. Third, included among the patents owned by individuals in this upper group, 42 percent, are many that are exploited by corporations in which the owners occupy high positions in the companies and simply permit the corporations to exploit their own patents. Fourth, in the individual groups are many patents which are owned by individuals but which are exploited by corporations under various license agreements and contracts. I therefore simply want to warn that while the charts do convey certain information as to distribution of patents in the various groups, you cannot predicate too broad conclusions on them.

Here is a tabulation showing the number of patent-holding corporations in each of the classes, large, foreign, and small, grouped by their estimated holdings on June 30, 1938.

(The chart referred to was marked "Exhibit No. 189" and is included in the appendix on p. 1128.)

Mr. COE. In this chart and the subsequent series of charts the holdings of the subsidiaries are not combined with those of the parent corporations. You will see that there is one corporation in the group having between eight and nine thousand patents, of the large corporations; there is one having between five and six, one between four and five, two between three and four thousand, three between two and three thousand, and seven between one and two thousand, and 435 of the large corporations that is those having total assets of more than $50,000,000, have less than one thousand patents. In that group we also find one foreign corporation having between two and three thousand patents, two having between one and two thousand. Of the so-called smaller corporations under $50,000,000, total assets, there are four having between one and two thousand patents, and the vast majority of them having less than one thousand patents.

The next chart is really a break-down of this last line of "Exhibit No. 189" including the corporations owning 1,000 patents or less. (The chart referred to was marked "Exhibit No. 190" and is included in the appendix on p. 1128.)

Mr. COE. I will not go down through this list of ownership because I think the tabulations are self-explanatory, but I will call your attention to the fact that 338 of the so-called large corporations have less than 100 patents; that of the total foreign corporations, 3,233 foreign corporations, 3,213 have less than 100 patents; that of the small corporations, 17,195 of a total of 17,567 have less than 100 patents.

This chart indicates the number of corporations of each class owning a very small number of patents.

(The chart referred to was marked "Exhibit No. 191" and is included in the appendix on p. 1129.)

Mr. COE. It tabulates those taking out an average of not more than one patent a year. This chart was prepared by an actual count.

Of the large corporations, 181 averaged no more than 1 patent a year. Of the small corporations, 14,855 averaged no more than 1 patent a year; that is 85 percent of the total of small corporations averaged less than 1 patent a year, and 40 percent of the total of large corporations averaged less than 1 patent a year. Of the foreign corporations, 92 percent have taken out in the last 7%1⁄2 years less than 1 patent a year.

On the Patent Office is imposed the duty of making the initial decision whether a patent shall issue for any new and useful art, machine, manufacture, or composition of matter, or any new and useful improvement.

Some notion of the organization and procedure involved in the determination of patentability will be afforded by the next set of charts and the explanations I shall offer.

This chart does not require any discussion. It is inserted in the record merely to indicate the general organization of the United States Patent Office.

(The chart referred to was marked "Exbibit No. 192" and is included in the appendix on p. 1129.)

PROCEDURE IN EXAMINATION OF PATENT APPLICATIONS

Mr. COE. Here we have an outline of the procedure in obtaining patents, showing the appellate procedure from 65 examining divisions which make the initial decision as to patentability. From an adverse decision there is an appeal to a Board of Appeals of three judges. If the decision of that Board is not satisfactory to an applicant, he may, as he elects, go either to the Court of Customs and Patent Appeals to have the decision reviewed, or he can go under R. S. 4915 and file a suit against the Commissioner of Patents in the district court, and from that court appeal to the Court of Appeals.

(The chart referred to was marked "Exhibit No. 193" and is included in the appendix on p. 1130.)

Mr. COE. This chart is a diagram illustrating the procedure of an examining division of the Patent Office examining the application and searching the prior art preliminary to the initial decision as to the granting of a patent.

(The chart referred to was marked "Exhibit No. 194" and is included in the appendix on p. 1130.)

Mr. COE. Let us assume, for example, that an application is filed in the Patent Office on an electric light in which the applicant describes in the claim chandelier, bowl support, and reflecting bulb of the character shown at the left. That application would be assigned to one of these 65 divisions, Division 30, which has the subject of illumination. In that division there are a primary examiner and nine assistant examiners, and to each of the assistant examiners are assigned certain of the subclasses in the illumination art. So that to search this invention, the application would first go into Division 30 in the general class of illumination.

The examiner would search the light support, chandelier, and electrical subclasses, 78, 76, and 52. He would come down to subclass 128 which contained a shade or bowl support, because obviously this invention has support for the bowl. So far he hasn't found whether there is anything new or any novelty in the frosted bulb tip,

and that isn't in his division because that is not under the general subject of illumination. He has to go into the class of electric lamps, so he continues his search into Division 54 and class 176 which has many different subclasses, and he finally finds himself in a subclass that is incandescent lamps with reflectors or refractors, and there he would find whether this frosted tip was new or old.

Here is a graphic illustration of the prosecution steps leading to the granting of a patent.

(The chart referred to was marked "Exhibit No. 195" and is included in the appendix on p. 1131.)

Mr. COE. An inventor has invented this lamp you see in the upper left-hand corner. He goes into the Patent Office, as all inventors do, claiming much more than he is entitled to. In this case he claims that he should have a patent on these elements: socket, bulb, reflector, reflector close to the tip of bulb; and a shade. The examiner makes a search on that, in the process I have indicated in "Exhibit No. 194", and he finds a prior patent that has those elements, namely, a socket, a bulb, a reflector, a reflector close to the tip, and a shade (e). So he refuses to grant the patent on the ground that the invention does not disclose any novelty, whereupon the applicant amends his case for the first time to include a spaced screen (f) which he had originally shown but had not yet claimed because that was a little more specific than the protection he wanted to get when he started.

So he amends his case and comes back to the Patent Office and asks for reconsideration in that amended form. The examiner repeats the search I have indicated. He finds that there is no such shade, and he grants the patent then, including in addition to the five elements originally claimed, also the spaced screen (f), and that he did not make a mistake in granting that patent is indicated by the fact that the patent was in suit and has been held valid by the courts. Senator KING. May I interrupt. He didn't get a patent for the socket, bulb, or reflector?

Mr. COE. No; he did not. In other words, what he got his patent on was all of these in combination, including that, so this was entirely free to the prior art to be used. [Referring to figure in lower lefthand corner of "Exhibit No. 195".] In other words, he wanted to get a patent that would permit him to stop the use of this [referring to figure in lower right-hand corner of exhibit No. 195], but that was old and the Patent Office does not permit to be removed from the public domain something held by it, an illustration of my point that the patent system operates to retain in the hands of the public rights once acquired by it.

Here is a chart indicating the sequence and possible duration of events relating to an invention from conception of the invention to the expiration of the patent, and the extension or duration of the application stage by continuing applications.

(The chart referred to was marked "Exhibit No. 196" and is included in the appendix on p. 1132.)

Mr. COE. Each of these blocks in the upper chart indicates a period of 1 year. The conception takes place at this point. A year after conception the inventor has reduced the invention to practice, that is taken it out of his mind and put it into some form, not a commercially usable form, but he has demonstrated by making a machine that it can be reduced to practice.

Now it takes him a year, we will say, from that time of his first reduction to practice in the development of the commercial form, to where it can be actually put on the market and sold and be of some benefit to the public. The present statutes then give him 2 full years in which to publicly use the invention before the application is filed, and so we have here 4 years that have now elapsed before the application is even brought into the Patent Office.

The next 3 years are taken up in the prosecution of the application. Three years have been generally regarded as a rather liberal period for the prosecution of most patent applications. The prosecution having been concluded and the patent issued at this point, then the patent life runs for 17 years and expires at the right-hand end of the chart.

I just mention at this point that there you see what is a reasonable, orderly procedure, nothing exciting about it, it is a very common occurrence, but there has been a lapse of 24 years between conception and the expiration of the patent monopoly, and I want to emphasize that point here because in the minds of many men, including myself, from the standpoint of the public this is the most important date in the patent grant, namely the expiration date, because that is the time when the public is invited in to partake of the feast, and up to that time the public has been excluded.

Now the lower half of this chart indicates what may happen to this 3-year reasonable prosecution period arising out of what is known as the filing of divisional applications. Instead of filing at this point in the upper chart (the left end of line) an application on one single invention, the applicant now files an application covering four inventions grouped together in that application. The Patent Office, since it refuses to grant a patent covering more than one invention, requires the applicant to divide out of his original case all of the inventions except one. So he retains in the one patent A, the one invention, and that patent issues at this point, but he has previously filed an application containing inventions B, C, and D. The B patent issues 3 years from that point and he has an application now on inventions C and D. At this stage, 3 years later, the C patent issues and the divisional application on invention D is presented and 3 years later the patent on invention D comes up. That indicates how in the normal procedure of the prosecution of each patent, 3 years having been consumed in each case, by the time D is issued a total of 12 years has elapsed; that is, the enlargement of this period from 3 years to 12, and when the D patent issues, with all the time it was in the Patent Office it had the benefit of this original filing date.

I am not exaggerating the point when I say that this 3 years is frequently exceeded in the prosecution of cases, as is indicated in the next chart which shows that at the present time there are 1,924 applications in the Patent Office more than 5 years old, there are 5,994 cases in the Patent Office 3 to 5 years old, a total of about 8,000 cases today that are more than 3 years old.

(The chart referred to was marked "Exhibit No. 197" and is included in the appendix on p. 1133.)

Senator KING. May I ask one question, please, in violation of the rule? What objection can there be to granting four patents if they are germane or relate one to the other? If one perfects or rounds out the original, then you have B, C, D, and E all relating to A, connected with it and perfecting it. Why can't you consider the four applications and grant four patents simultaneously?

Mr. COE. We do that, Senator, when these other inventions are species of the first invention, but I am speaking now of a case where they are separate and distinct inventions.

Senator KING. No relation to each other.

Mr. COE. They have to stand as separate inventions. They are not simply a species of the broad invention.

The CHAIRMAN. The same question occurred to my mind, and I don't think it is yet answered. Assuming that applications A, B, C, and D, illustrated on "Exhibit No. 196" are all independent devices; is there any reason why you can't issue them contemporaneously to the same person?

Mr. COE. Senator, there are a great many technical and classification difficulties in the way of that.

The CHAIRMAN. But the chart which you have presented to us would carry the inference that if an applicant presented at one time applications for four different patents, he could get only one at a time, and according to your chart the issuance would be spaced over 3-year periods.

Mr. CoE. That is only when he comes in and files those inventions in a single application. You see, if he comes in separately, they would all issue probably about the same time.

The CHAIRMAN. Assume that the applicant joins all four separate devices in one application, is there any reason why the Patent Office shouldn't divide them into four separate applications at one and the same time and have them handled contemporaneously and all issued at the end of, say, 3 years?

Mr. COE. There are many reasons why the Patent Office can't do that, Senator. For example, he may not be having claims on all his inventions in there and the Patent Office can't prepare his claims for him. All he has done is shown these various inventions at the time, and therefore he gets the benefit of the filing date. If it were easy for the Patent Office, assuming that it had congressional authority to break down this current application, that might be done, but the applicant has to have the right of claiming his invention and defining the terms in which he asserts his inventorship.

Senator KING. Recurring again, with the permission of the chairman, to the question which I raised, and which the chairman raised, may I invite your attention to "Exhibit No. 195". You alluded to that and mentioned the fact that an application was made for B, though prior to that time the claim had been made for the socket, the bulb, the reflector, the reflector close to the tip of the bulb, the shade, and so forth. Suppose that a person came in and made an application for all of those specific requirements or parts of a finished product, could you not treat that as one application and grant a patent?

Mr. COE. Yes. In other words, that is what was automatically done, Senator. He got his patent on all of those things, but we didn't consider one of those a distinctive invention. You can see how remote some inventions are. Take the automobile. In the same application you could have a method of making a rubber tire, a battery, a horn, all wholly distinct and unrelated inventions that were scattered through the various arts and the various divisions in the Patent Office.

Mr. DAVIS. Commissioner Coe, is it not a fact that a division of an application for patent is frequently required because the different features contained in the application are considered and handled by different divisions in your office?