"compulsory licensing" where the public interest was involved. See City of Milwaukee v. Activated Sludge, Inc. 69F 2nd 577; Vitamin Technologists Inc. v. Wisconsin Aluminum Research Corp. 146 F. 2d 941; and other cases as well.

Careful consideration of the compulsory licensing provisions of the Clean Air Act of 1970 reveals that they are reasonable and equitable, providing adequate compensation to a patentee.

There is no need for the proposed legislation repealing § 308 of the Clean Air Act and a dangerous precedent may be set if the repeal is enacted, thereby imposing great burdens upon both business and the public. Respectfully submitted.

SUPPLEMENTAL STATEMENT OF STANLEY M. CLARK

This supplemental statement expressing my personal views is respectfully submitted in accordance with the invitation of Senator McClellan at the close of my oral testimony.

In this statement I would like to revert to several points and questions which were discussed during my oral testimony and to comment brifly upon several additional items.

First, I would repeat again that there is no strong sentiment on the part of businessmen for passage of the Scott Amendments. The fact is that very few businessmen know anything at all about the Scott Amendments and these few do not understand the Amendments' full import. Even if they did, it is unlikely that these few businessmen would favor the Amendments. Why should they? Business based upon technological innovation has flourished without the Scott Amendments. The legal environment has not been oppressive; and, accordingly, there is simply no need for the Scott Amendments. The net effect of passage of the Amendments may be to work great mischief upon legitimate businesses.

The Scott Amendments find their support almost entirely within the patent bar and those who have been proselyted by the patent bar to come forward in support of the Amendments. Moreover, there is not unanimity in the patent bar itself. A minority within the bar has devoted itself to drumming up support for the Amendments by letters of which the following is a sample: (I have omitted the letterhead and the author of the letter but I have given the date and he body of the letter verbatim.)

"MAY 21, 1971.

"To: National Councilmen and Patent Law Association Presidents "Jan Jancin's Letters Nos. 13-15 have given us an excellent summary of hearings on the Scott Amendments. There was considerable testimony marshalled against the amendments, and we have until June 1, 1971 to file additional statements that may be made part of the record. Statements by patent attorneys are of little value, but statements by industry will carry substantial weight, if they set forth a need for legislation to clarify present law without intent to make a material change in existing law.

"Could you please ask members of your association to solicit statements of this nature. Help is needed now."

Such letters are evidence that businessmen not only feel no pressing need for the proposed Scott Amendments, but quite apparently require "prodding" if they are to support the Amendments at all. I submit that if there is a real need for legislation such prodding would be unnecessary.

Further, the need for the Amendments seems to be negated by the rationale of such letters. Note that the letter quoted above admits that there is no "intent to make a material change in existing law." Where, then, is the need for legislation?

The Chairman of this Subcommittee summed up the issue very well in asking the question, "Is the over-all patent law-so complex that we simply can't have a clear-interpretation of what the law is and what it should be?"

I submit that the field of patent law is of such complexity that it cannot be dealt with in detail by legislation but rather should be dealt with by the courts on a case-by-case basis, as the courts have done in the past and as they should be free to do in the future. The patent law is "complex"; and there is some uncertainty. But uncertainty is a natural part of any viable system of law and cannot be solved by rigid legislation. Justice is best arrived at by giving the

courts sufficient flexibility to deal with particular circumstances and with future circumstances which cannot now be envisaged. We cannot tell now "what the law should be" under future circumstances not now foreseeable.

As to the uncertainty which presently exists, it is not so great that a patent lawyer is unable to advise his client. The patent bar is certainly in a position to make much more than a guess as to what the law is. The ground rules and principles have been established. Legislation in this field would not clarify the state of the law; it would merely create additional confusion therein.

Earlier in my oral testimony I urged that not only the inventor who files a patent application be required to make an oath, as is the present practice, but also that the patent lawyer representing such inventor before the Patent Office be required to make an oath that he also had disclosed to the Patent Office such personal information as he had relating to the patentability of the application. Such oaths should be initially filed with the patent application and should set out, either in the body of the oath, or by reference to another document, a complete statement of the prior art of which each affiant is then aware. There should be a continuing duty on the part of both the inventor and his attorney to keep the Patent Office informed throughout the prosecution of the patent application of any facts having a hearing upon the patentability of the invention in question. This should be done by supplemental statements as required under the circumstances. In any event, the prosecution of the patent application should not be closed and a patent issued without final supplemental oaths from both the inventor and the attorney that no prior art has been knowingly withheld from the Patent Office.

On another point, the proposed patent bill should also provide that a patent should not have any presumption of validity over prior art not considered by the Patent Office. This is clearly the law today; and there should be no doubt that it is the intent of Congress to leave the law unchanged in this respect. There is no reason why a patentee should have a lesser burden in the courts than he has in the Patent Office. An applicant has the burden in the Patent Office of overcoming prior art relied upon by the Examiner. He should not be allowed to escape a similar burden in the courts with respect to prior art not considered by the Patent Office in the Prosecution of the application.

I also mentioned earlier in my oral testimony that there seemed to be considerable common ground between the proponents and opponents of the Scott Amendments. Let me state what I perceive to be the common ground in general terms.

First of all, as I have listened to the oral testimony and read such written statements as have been made available to me, I conclude that neither side wants to exempt patents and patent transactions from the antitrust laws, but that the language of the Amendments possibly raises some doubts on this point.

The proponents of the Scott Amendments have stated that they did not desire such antitrust immunity; they urge that the doctrine of patent misuse should remain in its present state; and that the penalty for misusing a patent, absent other circumstances, should be limited to preventing a patent owner from enforcing his patent until all of the consequences of such misuse are purged and that mere patent misuse should not incur criminal sanctions and penalties. I agree with this.

In spite of the proponents' disavowals of driving for antitrust immunity for patent transactions, some of the opponents fear that the Scott Amendments, nevertheless, represent a disguised attempt to remove patent transactions, at least in part, from the scope of the antitrust laws. I suggest that this particular situation might be resolved by incorporating in the proposed Patent Bill the following:

"Nothing herein contained is to be construed as granting transactions involving patents immunity, either in whole or in part, from the antitrust laws. The mere misuse of a patent, absent other circumstances which would bring the transaction involving such misuse within the antitrust laws, shall not render the persons actively participating in such patent misuse to criminal sanctions." The above, of course, is not intended to represent legislative language which I recognize must be drafted by those skilled in such matters, but I submit that insofar as this particular area is concerned such language would compose the differences between the contending forces in this area.

The two groups, 1.e., the proponents and opponents of the Scott Amendments, are also largely in agreement as to the desirability of retaining the existing case law on patent misuse, with but three or four exceptions.

First of all, the codification of the present law would retain intact the doctrine of the G.E. case which, generally speaking, enables a patent owner to fix the resale prices of the licensed products. The Justice Department has stated publicly that it does not approve this doctrine and I think there is much merit in the position of the Justice Department on this point. In all practical respects, however, the point is moot because licensors for many years have not resorted to price fixing restrictions in patent licenses. If the G.E. case were overruled by legislation, or by some future decision of the courts, it would have virtually no impact upon present day commercial practices. I see no economic justification for a licensor to exert power over resale prices and, accordingly, suggest that the G.E. case not be "frozen" into the law by legislation. If there is to be any legislation on this point at all, I would strongly urge that the legislation be in such terms as to overrule specifically the G.E. case. This would codify "present practice" even though it would change the present case law.

Another point in dispute is whether a patent owner should be given the right to limit his licensees to specific limited geographical areas within the United States. I strongly urge that legislation be passed to make such geographical limitations, a per se, patent misuse. The strength of our economy depends upon national markets and I can see little excuse for subdividing a national market into a multiplicity of smaller ones. Such a situation could lend itself to much abuse and could discriminate against certain sections of the country.

For example, if 50 licenses were granted, respectively, one to each of the states and if a royalty were imposed on a sliding (i.e. a diminishing) scale based upon use of the invention (as is common practice in many license agreements); then a state such as Arkansas, having a market very much smaller than a more heavily populated state such as California, would find itself penalized because the royalty rates for the state of Arkansas could never reach the lower royalty rates based upon the sliding scale royalty provision as would be available to the consumers in California. Also, if the right of territorial restriction, plus the right to fix resale prices, were to be embodied in the law, as might very well be the case if the Scott Amendments were enacted, then it would be conceivable that a license limited to the state of Arkansas could carry with it a higher resale price for that state than a similar license granted for the state of California. Such a practice would be unreasonable and unfair, yet it would be possible and would be legalized by the Scott Amendments.

A third point of difference; namely, the granting of licenses as to particular fields of use, does not seem to be a point of difference. The Justice Department has stated that, absent other circumstances, it does not object to such licensing practices. Accordingly, it should be possible to draft a specific section in the Patent Bill dealing with this particular point.

Amendment No. 23 concerns itself with the law of unpatented technological information such as know-how and trade secrets. The proponents have admitted that this legislation arises not from a present need but from a fear that such legislation might be needed in the future. There is no sound reason to suppose that such a need will arise. The case law is not pointing in that direction. If it does develop to the extent feared by the proponents, I would be one of the first to join their ranks and urge remedial legislation. At present there is no need and I am apprehensive that the proposed language will create more uncertainty in the law and act as a curb to business and to business activities.

Lastly, I would like to close by answering two of the comments made by the proponents of the Scott Amendments. One of such comments was that the proponent wanted the Amendments passed in order to "stop the clock." Another stated, very frankly, that he not only wanted to "stop the clock" but "turn the clock back".

The Chairman recognized that patent law is a complex field and that it is diffi cult to have a clear interpretation of "what the law is and what it should be". I think this analysis is correct; that patent law is complex, and because it is so complex it would be a mistake to enact legislation which would "stop the clock" and freeze the law as it is, and thereby prevent it from developing into “what it should be". This is an area in which discretion should be left to the courts to handle each situation as it arises on a case-to-case basis. The present Amendments are drafted to hamstring the courts in dealing with future developments in patent licenses and practices. This is unnecessary and unwise. In this rapidly changing world we must accept some uncertainty in order that the law may grow and develop to meet the shifting problems of the future. It is both unnecessary and

unwise in such a world of change to enact legislation in order to "stop the clock".

Legislation should look to the future, not sanctify the past.

Respectfully submitted.

Senator MCCLELLAN. Thank you very much.

STANLEY M. CLARK.

Mr. ADELMAN. I think we have put your statement in the record.

STATEMENT OF MARTIN ADELMAN, ATTORNEY, BIRMINGHAM, MICH.

Mr. ADELMAN. Right. I don't believe I can add anything to the views of the distinguished speakers who have discussed the question of the need for a legislative clarification in this complex field of patent antitrust law. I want to say that I am not one of those persons who is opposed in principle to such a statutory clarification. Îndeed, in a limited manner I think one could be carried out that would satisfy both the patent community and the antitrust community.

However, I firmly believe that the Scott amendments should not be enacted because, as written, they exempt from antitrust scrutiny a wide variety of anticompetitive activities, and moreover, these amendments are capable of being interpreted in a manner that is not in accord with the goals set by their drafters.

Take, for example, field-of-use licensing. There has been a lot of talk at these hearings about field-of-use licensing, and I believe that I have searched all of the speeches of the Department of Justice and I can find no indication that they believe that field-of-use licensing is per se bad. I don't know of anyplace in the literature where that is even suggested.

However, there is a feeling, whether it is correct or not, on the part of the patent community, that the Department of Justice is out to get field-of-use licenses. All right, I think that can be accepted. But what troubles me, and particularly as a patent lawyer who reads statutory language like a claim-and with patent lawyers language is very important-what matters to me is what is said, not what was intended. When patent lawyers read claims they talk about the words of the claims, not what the invention is, at least as a starting point, and so we have to look precisely at the languge, not what the drafters say they intend this language to mean, because I know with absolute certainty that whatever the intent of the drafters is, the literal meaning of these words is going to be argued in a court, and it may take 15 years and as a litigating attorney I may get very rich in the process before we find out precisely whether it is the intent, or the literal meaning, that will be controlling.

The words field-of-use licensing are not mentioned once in either 261(b) (2) or 271(f) (1), which are the two provisions that I have heard the proponents talk about as justifying field-of-use licensing. You won't find this language there. Instead, what you find, Mr. Chairman, is language that exempts from antitrust proscriptions all limited licenses, and a limited license is defined in section 271(f) (1) as that type of license where you grant some rights under a patent and exclude other rights as long as those rights are also within the scope of the monopoly.

Let me give you some examples of limited licenses, all of which are literally exempted from antitrust.

The first one is price fixing. Here is how it would work, and here is how I know my partners and other patent attorneys will draft such licenses. A licensor grants a licensee the right to make the patented widget at $1. The licensee then has immunity from suit as long as he sells the patented widget at a dollar. If he sells it at a $1.05, he is an infringer. So literally you can achieve price-fixing, and have immunity for all kinds of price-fixing by the literal language of these statutes.

Tying arrangements can be drafted as limited licenses. Such a limited license would be as follows: Licensor grants licensee the right to practice the patented process so long as he uses in the process salts purchased from the licensor. If he uses salt, unpatented salts from any other source, he is an infringer, and has no immunity from suit. Hence this type of license is precisely within the definition of a limited license as defined by 261 (b) (2) and 271 (f) (1).

So regardless of what the drafters say they intended, the literal language is something else again and I think

Senator MCCLELLAN. Is that involved in the antitrust laws, would it be in conflict with the antitrust law?

Mr. ADELMAN. I think it is clearly in conflict with the antitrust law. I don't believe the drafters intended it, but I know it is going to be argued that there are clear exemptions for price fixing, and for tying, both of which are generally considered, except in special cases, per se violations of the antitrust law.

Senator MCCLELLAN. And if this was enacted it would authorize that in effect, it would supersede the existing antitrust laws, would it not?

Mr. ADELMAN. I believe it would and I believe if they were passed and that happened, after awhile the patent community would begin to feel that the public was looking at patents, not as the way in which we encourage invention, which as a patent lawyer I feel is the fundamental goal of this system, but rather as a device for setting up cartels. Pretty soon we would have set in a real antipatent philosophy, and the patent system would be justifiably attacked as authorizing a wide variety of cartel practices.

So I, as a patent attorney, am very disturbed by the possibility that these kinds of practices could be carried out under the color of these. amendments.

Senator MCCLELLAN. If the Scott amendments were so modified as to preclude any such interpretation, would that improve them?

Mr. ADELMAN. That would help. And I have some addition— Senator McCLELLAN. I understand it is not the author's intention to pass a statute here that would conflict with antitrust law.

Mr. ADELMAN. Well, I believe that to be the case although again I am a skeptical sort. I read language

Senator MCCLELLAN. I simply am suggesting if the language is susceptible of the interpretation you place on it, through proper modification that susceptibility might be eliminated.

Mr. ADELMAN. Certainly we can eliminate any possibility that the statute would be interpreted to authorize price fixing and tie-ins.