The added requirement of "clear and convincing evidence" in Section 282 has an objective essentially the same as that of Section 103, namely to establish as much uniformity as possible in the standards applied in the different judicial circuits. As to Section 271(b), the requirement that it be limited to processes "which cannot be patented in the foreign country of origin" would put a wholly unrealistic burden on the party charging infringement, which is further complicated by the fact that it would require proof of a negative. Nor can we see any equity in limiting the scope of patent protection in the United States by reference either to what can be patented in the country of origin or to what has or has not been patented in that foreign country. Momentary contemplation of typical fict situations arising under the Department of Justice's suggestion should completely dispose of it. As to Section 131(c), we agree that it is important, but we also submit that the Department of Commerce is in a far better position to make recommendations for regulations which will be practical from the standpoint of the Patent Office. In this respect, we prefer the modified Section 131 (c) suggested in the above noted letter to Senator Eastland. Finally as to Section 24 relating to the applicability of the Federal Ru'es of Civil Procedure, the Department of Justice is apparently not aware of the complexities which can develop in interference practice. The Commissioner of Patents is in a vastly better position to judge what is fair and practicable. We strongly favor the retention by the Commissioner of control over discovery in contested cases in the Patent Office. AMERICAN PATENT LAW ASSOCIATION REPORT OF AD HOC COMMITTEE ON COST OF PATENT OFFICE FUNCTIONS TO FEES COLLECTED Pursuant to request of the President and memorandum from the Executive Director, dated May 19, 1971, the committee has made a study of Patent Office operations from the standpoint of the relation of the various functions of that operation, the beneficiaries thereof, the relative amount of the costs which should be charged against each and the amount of recovery of such costs by way of fees charged. In this study the committee has had the benefit of an extensive study and report made by a committee of the National Council of Patent Law Associations under the chairmanship of Donald R. Dunner in 1969 and additional statistics and estimates obtained from the Patent Office through courtesy of Assistant Commissioner R. D. Tegtmeyer. The committee feels that the time is long past to question the philosop hy as to whether fees charged by the Patent Office should recover any significant portion of the costs of the operation and that the practical approach to the problem is to make as factual an appraisal as possible of the beneficiaries of the various phases of the operation and attempt to reach an equitable and reasonable conclusion as to the portions of costs to be recovered by fees charges in an optimum situation. In seeking a solution along these lines the committee has attempted to classify the various services and functions and to identify the beneficiaries thereof as between the applicants for patents, and trademark registrations. the public and the users of services. 1. A first and primary function of the Patent Office is the examination and grant of patents, called the Patent Examining Operation, which includes the various examining Groups, the Board of Appeals, Board of Patent Interferences, Application and Issue Branches and other support functions. Since the examination system, as distinguished from a registration system benefits the public by preventing the improvident issue of patents on known things in the public domain or things which would be obvious under our law, and the cost of operation of an examination system, above the formal review which otherwise would be required to issue a patent, is no real benefit to the inventor, the Committee believes that a fair and equitable division of costs of examination would be that the public and applicants share the same equally. This view is consistent with the views of the Senate Committee at the time of institution of the examination system in 1836 as evidenced by the following passages from Report of the Investigation of the United States Patent Office made by the President's Commission on Economy and Efficiency, December, 1912, Appendix A, pages 223-225: "A senate committee was appointed which reported with a bill on April 28, 1836. Senator Ruggles made the report and in it he points out specifically where the law of 1793 was at fault. According to the practical construction given the act, the Secretary of State had no power to refuse a patent for want of either novelty or usefulness. The only question which he could raise was in regard to compliance with the prescribed terms and forms. The term 'useful' was interpreted as 'not harmful'. The result of this policy of indiscriminate grant brought a train of evils which had grown steadily in number and intricacy until Congress was compelled to act. Hitherto its attitude toward patents had been that the subject was not of sufficient importance to demand legislation. Through Senator Ruggle's insistence, he forced it to see that a great portion of the patents issued are worthless, conflicting or infringing on the rights of others, or upon public rights not subject to patent privileges; that this flood of monopolies embarrassed the real patentee and the public as well with its inclusion of methods or articles in general use; that the startling accumulation of cases in the courts was onerous to the judiciary, ruinous to the patentee, and injurious to society; that the system was an open door to fraud and extortion.. "To the minds of those who framed the new bill the prime requisites for the efficient working of the patent system were proper examination and investigation in the first decision." 2. A second function of the Patent Office is maintenance of search files, including the Scientific Library, Search Room, Documentation Operation, Data Base Division, including basic printing of patents.' These are library-like functions of benefit to the general public and should be funded entirely from public funds. 3. A third function of the Patent Office, is rendering services to the public, such as patent copy sales, furnishing copies of records and documents, recording assignments, and drafting services. These functions are in the nature of business services and the fees charged therefor should bear a direct relation to the costs and should afford full recovery. 4. The fourth function of the Patent Office is the registration of trademarks. This operation is primarily for the benefit of trade mark owners and probably should be self sustaining. If the suggested general breakdown of Patent Office functions as well as the proposed rate of recovery from fees were adopted, there would be no need for an increase in patent fees or charges at this time since, as shown in Table I. th estimated cost of the Examining Operation for 1972 is $34,867,000 and the estimated revenue from filing, appeal and issue fees is $21,225,000 or 61%, well over the 50% proposed rate of recovery for category 1. The actual corresponding figures for 1970, the last year on which complete returns are available, are cost of Patent Examining Operation $32,335,000 and receipts from filing, appeal and issue fees, $18,440,000 or 57%, also well over the proposed rate of recovery for category 1. Complete information is not currently available to this committee with respect to the expected percent return for the items in category 3 above, but if these fall below the 100% return suggested, the Commissioner has or should be given authority to set these to accomplish the desired purpose. If the suggested general breakdown were adopted, there would be a need for an increase in Trademark (category 4) fees or charges at this time since. as shown in Table 1, the estimated cost of the Trademark Examining Operation for 1972 is $2,235,000 and the estimated revenue from fees is $1,474,000, or 66%, which is below the 100% proposed rate of recovery for category 4. Appended hereto is Table (I) showing estimated rate of recovery will present fees applied against estimated cost of the Patent Examining Operation and the Trademark Examining Operation for 1972. It is suggested that at least the items in category 3 above be included in a revolving (trust) fund arrangement under which the fee income from this category would be deposited in a special account in the Treasury from which the Patent Office could draw to support the services offered. Under this arrangement. Congressional appropriations would not be required for these functions although Congress would have certain control over the individual operations under the fund. 1 Original printing of issue, including library and exchange copies. No other recommendation is made with respect to the APLA position on S. 1255 since that is not a function of this Ad Hoc Committee. Senator BURDICK. Mr. B. R. Pravel, chairman of the National Council of Patent Law Associations. STATEMENT OF B, R. PRAVEL, CHAIRMAN, NATIONAL COUNCIL OF PATENT LAW ASSOCIATIONS Mr. PRAVEL. Mr. Chairman, Senator Burdick, I have submitted a written statement which I would ask to be printed in the record. The comments which I have now are somewhat extemporaneous. Senator BURDICK. Without objection, your full statement will be made a part of the record and the comment is very much appreciated. Mr. PRAVEL. My name, for the record, is B. R. Pravel. I appear here as chairman of the National Council of Patent Law Associations. I represent those whom have given me specific written authorization to appear because this is the way our council is constituted. Brifely. I will read quickly the names of those whom I have been authorized to represent. The Patent Law Associations of Connecticut, Michigan, Louisiana, Cincinnati, Rochester, Toledo, Houston, central New York, eastern New York, Milwaukee, Minnesota, San Francisco, Los Angeles, Oregon, Cleveland, also the patent trademark and copyright sections of the State bars of the following States, New Jersey, Indiana, Texas, and also St. Louis. And the American Patent Law Association, which has just testified is also a member of this council but, of course, they have testified and presented their own testimony and likewise that is true with respect to the Philadelphia Patent Law Association. In private life I am in private practice as a patent attorney and I have been for approximately 20 years in Houston. The presentation which I make today is, of course, the result of my experience individually but I speak principally as chairman of the National Council of Patent Law Associations in favor of the Scott amendments. The associations that have given me permission to testify are not wedded to the particular language which is presently in the Scott amendments. They recognize that some language changes may be appropriate. However, the principles which are presented by the Scott amendments are believed to be sound and we believe that this legislation is timely and is necessary for the patent system. It has been suggested to some extent that patent lawyers approach this type of patent legislation in a self-interest or with a self-interest. In this connection I should point out that I believe that the principal purpose of the Scott amendments would be to minimize or reduce litigation because of the certainty that will be introduced into the law by the legislation. It seems to me that this in itself is an indication of the lack of self-interest on the part of litigating patent attorneys. Now, as we see it, the principal purpose of the Scott amendments is to minimize and hopefully, to eliminate much of the uncertainty that exists today in the licensing field with respect to patents, trademarks, copyrights, not copyrights but patents, unfair competition, and trade secrets. The reason for the uncertainty is really a rather recent development in terms of years. The Lear vs. Atkins case, which this committee has heard a considerable amount of testimony about, is, of course, a fairly recent decision in 1969 by the Supreme Court. The antitrust section of the Justice Department has been specifically vocal in recent years in their positions with respect to patent licensing. All of these together have created a climate of uncertainty for those who are in the patent profession as well as those who are in industry and who rely upon patent licensing for the value that they get out of patents. It might be looked at this way, that the patent is in effect the tree and to some extent the licensing is the fruit. If the fruit is gradually taken away from the tree the patent becomes a rather naked thing in terms of value. It appears that those who would attack the patent system recognize they cannot destroy it because of the constitutional basis for the patent system. They would have to amend the Constitution to remove. the patent system but by gradually picking off the fruit they remove the value and limit the value of the patent system. One of the areas that is of particular concern today is the field of use and, of course, this is in the Scott amendments. Section 261 specifically provides for the field of use, field of use licensing more specifically. This has been the law and has been recognized since 1938 when the U.S. Supreme Court handed down the decision in the General Talking Picture case but recent expressions from the antitrust section of the Justice Department lead us to believe that this area is now subject to attack and that there will be test cases instituted and that they are deligently looking for such test cases. As a result of this most of the patent attorneys and those in industry who have field of use licenses are either reluctant to enter into them or they just naturally refuse to do it for fear they will be brought before the courts by the Justice Department. Senator BURDICK. What is the name of the case you referred to back in 1938? Mr. PRAVEL. That is the General Talking Picture case. Mr. PRAVEL. 304 U.S. 175. Senator BURDICK. When was that decided? Mr. PRAVEL. 1938. Senator BURDICK. Has there been any court that has varied from that decision since 1938? Mr. PRAVEL. Not that I know of, sir. Senator BURDICK. Then, why is there confusion on that point? Mr. PRAVEL. The confusion on that point is because of the announcements and word that we get from the antitrust section of the Justice Department which indicates that they consider that this area of field of use licenses is something that they believe should be declared illegal. Senator BURDICK. The anouncement of an administrator does not have the full force and effect of a court decision, does it? Mr. PRAVEL. No, sir; but it certainly has an effect on industry and those that would enter into this type of license agreement because probably the type of thing that they fear the most is that they will enter into this type of agreement and then be subjected to lengthy litigation which is obviously very expensive and which is instituted by the Government. Senator BURDICK. As far as you know now, there is no conflict among the various circuits or jurisdictions on this point since 1938? Mr. PRAVEL. I do not know of any. Senator BURDICK. Thank you. Mr. PRAVEL. Now, from the standpoint of the field of use license, a patent might be looked upon as something comparable to a piece of property, maybe even a piece of land. Since I am from more or less. an agriculture State of Texas, I think in terms sometimes of these patents as related to property such as land. If a land owner did not know whether he could license or use his land and lease it to others for the farming of two different products, say cotton on one section and corn on another, his reluctance would most likely lead him to farm it all himself, maybe very uneconomically, or maybe to plant only one crop which might be excessive on the market. But in any event it would lead him to this uncertainty and we find ourselves in this situation in the patent field in the area of field of use and probably in a more complex way. I know from my personal experience that there was a patent that I obtained on a nozzle which had utility in two different fields. One was a drill bit for drilling oil wells, the other was a mud gun which was used at the surface of an oil well. This particular nozzle was invented by an individual who had no manufacturing facilities and he himself could not have produced it for either industry, but because of the licensing that he granted to the two different fields he was able to get the product on the market and into the hands of the utility consumer in both of these industries. With respect to the Lear case, there is a section 301 which I believe is the most important one under the Lear case, at least as far as correcting what appears to be the misunderstanding in the dissent of that case. There is also another provision in the Scott amendments, section 261, that deals with the licensee's obligations in the event the patent is challenged. Senator BURDICK. Was the court divided in the Lear case? Mr. PRAVEL. Yes, sir. |