In the fourth suit, over in the second circuit, the patent was held valid and infringed by the district court; was held invalid on appeal. Certiorari was denied there by the Supreme Court.

Suits 5 and 6 were filed in Ohio, dismissed at plaintiff's request; and suit 7, now out here in the tenth circuit, was filed and claims were held invalid at the trial. I defy anyone to tell the exact status of that patent in the United States today.

The next chart breaks down numerically the number of suits filed and the number of patents involved in both the district and courts of appeal in the fiscal years indicated at the bottom of the chart.

(The chart referred to was marked "Exhibit No. 204" and is included in the appendix on p. 1137.)

PURPOSE OF PATENTS THE ENLISTMENT OF CAPITAL AND LABOR IN

NEW ENTERPRISE

Mr. COE. It is not the principal purpose of the patent laws of our own country or of any nation to reward an individual. The purpose is much deeper and the effect much wider than individual gain. It is the promotion of science and the advancement of the arts looking to the general welfare of the Nation that the patent laws hope to accomplish. The individual reward is only the lure to bring about this much broader objective. Every patent granted benefits society by adding to the sum total of human knowledge, but that is not enough, and that alone will not achieve the ultimate goal of the patent system. An inventor will not be rewarded and society will not be benefited until the invention passes into commercial channels. And it is just at this point that patent protection plays its most essential role, that of transforming the invention from the idea into a commercial enterprise. Unfortunately, this step involves the expenditure of money, and a very peculiar kind of money at that. It is not only necessary that capital be available but that speculative capital shall be available, capital that does not respond to risks and ventures unless there is promise of more than the ordinary Government-bond reward. Dr. Thorp, for example, has pointed out the risks of business and the hazardous character of both new and old enterprises. Capital knew this long before Dr. Thorp called it to our attention. It will know it until the end of time. As Dr. Thorp has indicated, there is nothing quite so risky as a new enterprise and yet it is in just such things that the capital that goes into the commercialization of new inventions must be invested.

Speculative capital must be encouraged to fall in behind a new enterprise and this is true whether the enterprise is wholly new or represents merely an expansion of an established organization. Some testimony has been offered to this committee by representatives of large corporations that they would continue to invent, and invent, and invent, and research, research, and research whether or not they were rewarded by the patent grant, but, if you will investigate, I believe you will find that whenever these large corporations, themselves firmly established, undertake a new development, that development is likely to be founded upon patent protection. Whatever opinions have been expressed to this committee or may hereafter be expressed as to whether or not the inventor will continue to invent

1 Testimony of Dr. Willard Thorp is included in Hearings, Part I.

without the patent system, I think I can present to you indisputable evidence that speculative capital will not back new inventions without the patent protection. And in the final analysis this is the crux and the most important thing in the whole patent question.

About 8 years ago, the Patent Office started a practice of making applications for patent "special" as a means of inducing the investment of capital and the employment of labor in the commercialization of an invention sought to be patented. In order that the application shall be accorded this special status and thus be expedited, the applicant is required to make oath as to his willingness and ability to comply with three conditions.

He must make oath that

First. He has sufficient available capital and facilities to manufacture the invention in quantity.

Second. That he will not undertake manufacture unless certain that the patent will issue.

Third. That he obligates himself to manufacture the invention in quantity immediately upon the allowance of claims which will protect the invention.

Under this practice we have during the period from July 1, 1933, to June 30, 1938, made 457 applications special. After the patents have been granted under these circumstances and to determine the good faith of the patentee, it is our practice to call upon him to report under oath at the end of 3 months from the grant of the patent as to the exact amount of capital that has been invested and the increased employment of men resulting. Recently we have caused an analysis to be made of these reports and I think you will find the results interesting. Remember that the figures which I shall cite are only for the first 3 months of the patent life. Obviously, if these reports were continued throughout the full term of the patents, that is 17 years, the showing would be very much more impressive.

I have prepared but will not now repeat a detailed tabulation of the statistics respecting these applications. I shall supply it to the stenographer for inclusion in the record. In the meantime I shall give you only a summary.

Here are the facts as to the 457 cases given special status:

Money expended or men employed, or both.......

Negative report.

No report

Total

Applications abandoned or forfeited..

Applications pending Aug. 25, 1938..

Total made special

The reports filed indicate the following results:

Patents

247

36

62

344

61

52

457

The 247 patents prompted a total new investment of $8,998,014, or an average of $36,429 per patent. They also conduced to the employment of 14,413 additional persons, an average of 86 per patent. That was done during the first 3 months of the life of those patents.

Mr. Leon Henderson, on his appearance before this committee,' visioned what, to me, was a very dismal prospect for the future of our country. This noted economist testified that in 1929 the business index was 120. At the present the business index is 102. He went on to point out that, in order to attain the same status of unemployment we had in 1929 we should need to go about 140 in the index of production maintained by the Federal Reserve Board, because since 1929 the number of those eligible for employment has increased by millions. Is this to be attained? I suppose this is the fundamental question with which this committee is to concern itself and as to which there will be much difference of opinion. There are no new areas in this country available for expanding markets and for development by our people. It is my very firm conviction that among the most promising means of coping with the disturbing conditions described by Mr. Henderson are invention and science, the creation of new industries, and the expansion of our manufacturing facilities. Therefore, those who believe, as I do, that by these means we shall progress and prosper, feel we should spare no effort in encouraging their future development.

The patent system of the United States, more than any other in the world, offers hope, encouragement, opportunity and recompense to an individual or a company of small resources. It is as democratic as the Constitution which begot it. Most foreign patent systems impose discouraging burdens upon the individual. This striking contrast between our patent system and others and a proof of the advantage which is assured to the American inventor or company of limited means will be pictured in the chart you are now to see.

(The chart referred to was marked "Exhibit No. 205" and is included in the appendix on p. 1137.)

Mr. COE. The diagram in the upper left illustrates the total cost of Government fees for obtaining and retaining a patent throughout its entire life in the United States as compared to France, Great Britain, Italy, and Germany. You will observe that in the United States it costs an inventor $60 in Government fees to obtain and to maintain his patent rights, that is to keep his patent. Going to the other extreme, in Germany, to obtain and to maintain the patent rights for a period of 18 years it costs the individual inventor $1,965. The chart in the lower right illustrates the scale of the fees required in foreign countries to retain ownership of the patents. It starts with the German example in the third year and continues increasingly until the eighteenth year, $340 approximately.

Remembering that very seldom can an invention be commercialized through one invention and that probably in most cases at least 10 inventions are utilized, you can see that if a small company or an individual attempted to commercialize a product in the United States it would cost him $600, whereas in Germany it would be $20,000.

I See Hearings, Part I, p. 157, et seq.

SUGGESTIONS FOR CORRECTION OF ABUSES IN PATENT SYSTEM

Mr. COE. Mr. Chairman, I take it for granted that your committee is interested in learning whether in my studies of the patent system and observation of its performance I have detected any abuses or weaknesses requiring correction. My answer is in the affirmative, and I shall briefly outline them to you and offer suggestions for their correction.

You will recall the difficulties faced by an inventor or patent owner in the enforcement of his patent rights as indicated in exhibits Nos. 202 to 204. With these problems and hardships in view, I recommend for your consideration as a major improvement in the patent laws the creation of a single court of patent appeals.

Such a court, having jurisdiction of patent appeals coextensive with the United States and its territories, would operate to reduce the time and cost of litigating questions of ownership, validity, and infringement of patents and obviate conflict of decisions between appellate tribunals. It would, in my judgment, assure to patentees, industry and the users of patented inventions a remedy for some of the most serious evils in the present patent system.

Exhibits Nos. 196, 197, 198, and 199 have illustrated the abuses of the patent monopoly chargeable to long delays in the prosecution of applications in the Patent Office. Any procedure which permits a lapse of 44 years between the filing of an application and the expiration of the resultant patent cannot be tolerated. To correct the abuse of long pendency and to force the early beginning of the monopoly and its correspondingly prompt expiration, I recommend the adoption of the so-called 20-year proposal. This proposal does not increase the present period of the monopoly, which will remain, as now, 17 years. Its purpose is to fix a definite time, calculated from the date of filing, beyond which the monopoly or any of its ramifications cannot continue. Regardless of the length of time consumed in the prosecution of the application, the monopoly must end 20 years after the date of filing.

Three years has generally been regarded as a very liberal allowance of time for prosecuting a patent application. If a law such as that recommended were enacted, a patentee who diligently prosecuted his application and obtained his patent in 3 years would enjoy the full 17-year monopoly. If, however, he delays the prosecution or attempts to keep his case in the Patent Office he will be positively penalized by the shortening of the monopoly. In other words, if he consumes 5 years in the prosecution his monopoly will expire in 15 years after the grant of his patent. If he takes 10 years his monopoly will be reduced to 10 years. Had this limitation been effective at the time of filing the Steimer application, to which reference is made in exhibit No. 199, the patent granted upon it would have expired 22 years earlier than it now will.

It will, of course, be contended that in some cases an applicant will be penalized and have his monopoly reduced by reason of ill-advised actions of the Patent Office and because of delays for which he is in no wise responsible. Admitting this to be a possibility in some cases, I nevertheless feel that the permanent public interest is paramount to the occasional inconvenience of the individual. Accordingly, the 20-year proposal prefers the public interest to the individual interest.

Not all of the delays in the Patent Office are the fault of the applicant and indeed some cannot be avoided. This is especially true when his application becomes involved in an interference instituted for the purpose of determining priority between him and another applicant. There is no question that the interference procedure has been greatly abused and that in some instances it has been invoked for unworthy purposes, as, for example, to delay a competitor's application in the Patent Office. The 20-year proposal could not be applied equitably and fairly along with the present interference practice. It is therefore evident that concurrently with the enactment of the 20-year proposal there must be a radical change in interference procedure. While it is the unanimous opinion of the officials of the Patent Office and virtually the consensus of the patent bar and the public that the interference practice should be reformed, there are many and diverse views as to the best way to accomplish the purpose. Some, for example, would go to the extreme of abolishing interferences entirely and award the patent to the earliest applicant. This would be a harmful practice in my judgment, because it would result in a race of inventors to the Patent Office, bring in a flood of improperly prepared applications, and conduce to fraud.

The CHAIRMAN. Mr. Commissioner, may I interrupt you? For the benefit of the public, which may read the report of your testimony, I suggest that you define here briefly what an interference is. It is a technical word, of course, the meaning of which is well understood to those who practice patent law, but may not be generally understood. Mr. CoE. An interference proceeding is a name given to a proceeding in the Patent Office which is instituted for the purpose of determining as between two or more inventors claiming the same invention, which of those contestants was in fact the first inventor.'

Senator KING. Calling for an interpretation by the Patent Office. Mr. CoE. Yes, sir. The Patent Office is required, as between these rival claimants for a patent, to determine which one actually made the invention first in point of time, and that man is awarded the patent.

The CHAIRMAN. An interference may be filed only in the Patent Office?

Mr. CoE. An interference can be had only in the Patent Office. It is a proceeding which the Patent Office itself initiates. It is sometimes sought when an applicant is aware of the fact that someone else is in the Patent Office with a similar application, and he files an application and demands that it be put into interference with the other party, but on the Patent Office is the final, sole responsibility of declaring that interference.

The CHAIRMAN. Do you wish us to understand that interferences are sometimes filed for the express purpose of delay?

Mr. COE. Yes, there is no question about that.

After years of study, during which I have considered literally thousands of suggestions, the recommendations I am about to propose impress me as the most satisfactory, although I concede that this particular proposal, like many others, will provoke dissent.

At the present time the first decision in an interference proceeding is rendered by a single interference examiner. From his decision an appeal may be taken to the Board of Appeals, and from that tribunal

1 See also "Exhibits Nos. 200 and 201," appendix, pp. 1134-1135.

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