We are, in effect, maintaining in existence an out-of-date, arcane system for determining priority in a miniscule fraction of the total number of patent applications filed each year.

So far as I can determine, from conversations with numerous patent lawyers and from reported votes taken at various patent bar meetings, opinion is almost equally divided between those who would scrap the system in favor of a first-to-file system and those who would retain the present system but seek to streamline it. However, the proposals of those who would seek to streamline it would reduce the opportunities for the second-to-file to gain the evidence necessary to meet its already daunting burden of proof. As a result, the interference system is tending closer and closer to a de facto first-to-file system anyway.

Moreover, interference practice vastly favors the large company, because of its expense and because most interferences are handled by corporate patent departments rather than outside counsel. For an individual inventor or for a small corporation to contest an interference is an extremely costly and difficult undertaking.

For all these reasons, I think it would be a major contribution for Congress to take the initiative itself and abolish interference practice.

S. 1535 (Miscellaneous Unrelated Patent Proposals)

-Proposed Amendment to 35 U.S.C. 271 (e)

See my comments above concerning B.R. 3577.

I think the language of the House bill is preferable because it defines the period in which such conduct shall constitute an infringement as being "during the term of the patent therefor." The Senate bill is sufficiently vague that it would create arguments concerning product produced abroad by a process which was made (a) before the issuance of a patent but imported subsequent to the issuance of a patent and (b) produced abroad during the period of a patent but imported subsequent to expiration of the patent. The House bill, H.R. 3577, is not attended by these defects of the Senate bill.

-Proposed Amendment (f) to 35 U.S.C. 271

I have a number of doubts about the desirability and effectiveness of proposed Section (f). As to the desirability, I think that, on balance, such a provision would strengthen the rights of U. S. patent owners and should be adopted. As to effectiveness, however, the proposed language could easily be evaded.

A

U. S. supplier, intending to evade the statute would, merely produce and export less than all of the elements of the patent claim likely to be infringed and would leave an off-shore assembler to obtain the remaining elements of the claim from an off-shore source and assemble the entire device. Because the statute could be so easily evaded under its present wording, I doubt that it would be a worthwhile addition to the patent laws.

-Proposed Amendment to Sections 2, 3 and 4

of Section 184 of Title 35

These proposed amendments, dealing with obtaining a license to foreign file, are eminently sound and noncontroversial. They should be included in the earliest bill relating to patents that is likely to be passed through Congress.

-Section 5, Proposed Amendment to Section 103

In my view, the amendment proposed by Section 5, to 35 U.S.C. 103, would be ill-advised. I appreciate that support for this proposal exists amongst large corporate patent departments which do have understandable difficulties in deciding who should be named as joint inventor of a patent. However, these difficulties have, to all practical purposes, been overcome by the liberal provisions which now exist in the statute, and under the case law, allowing correction of misjoinder of inventor. Thus, the proposed amendment is not truly necessary to effect the purposes which such proponents seek to achieve.

The negative side of the proposed amendment is that it might tend to weaken the protection provided by the derivation section of the patent statute, 35 U.S.C. 102(f) against the obtaining of patents by those who did not truly make any inventive contribution but merely copied the work of others. In litigation, I have seen instances where patents have been applied for in the name of persons who were not the true inventors but were in a position to know of the work of others "by virtue of his or her employment." I do not believe that this proposed amendment is necessary, in view of these provisions for liberal correction of an innocent error in judgment in naming inventors.

-Section 6, Proposed Revision to 35 U.S.C. 116

This is a very sound proposal which should be noncontroversial and deserving of passing, in my opinion.

-Sections 7-9, Relating to Patent Interferences

If there are to be patent interferences, Sections 79 of S. 135 appear to be thoroughly justified. However, in my

opinion, the most urgent need is for a legislation which would eliminate interferences, as discussed above.

-Section 10, Addition of Proposed

35 U.S.C. 295 Re Licensee Estoppel

This provision is thoroughly necessary to protect the right of patent licensors. The United States Supreme Court decision in Lear v. Adkins which allowed a licensee to challenge the validity of a licensed patent, has accomplished its desired objective of freeing dubious patents to be challenged by those parties having the strongest interest in judicial scrutiny of such patents, namely the licensees. However, as often happens following a Supreme Court decision, the pendulum has swung too far in some of the lower courts which have placed the licensee in the "heads I win - tails you lose" position of being able to challenge a licensed patent by a declaratory judgment action, pay license royalties into an escrow and still hang on to the patent license in the event that the validity of the patent is sustained Precision Shooting Equipment Co. v. Allen, 196 U.S.P.Q. 502 (E.D. Ill. 1977). Such a result places the patent licensor, which may often be an individual or a corporation lacking the resources available to defend the strength of its patent, in an impossible position where its cash flow is cut off and yet it cannot terminate the license and go out and seek an alternative licensee that would provide a cash stream sufficient to enable the patent licensor to adquately contest his side of the lawsuit concerning patent validity. The recent court decisions have, fortunately, perceived that the pendulum has overswung the point of fairness to licensors, Telectronics Pty Ltd. v. Cordis Corp., 217 U.S.P.Q. 1374 (D.Minn. 1982). However, the law is not yet uniform in all Circuits. Congress could stand back and allow the Court of Appeals for the Federal Circuit to rule on this issue which would spare Congress the task of legislation on the point. If, however, there should be a patent bill going through Congress, this would appear to be a suitably noncontroversial, sound proposal to justify its enactment.

Conclusion

I very much appreciate having been invited to express my opinions. Because I live in the Congressional District of one of the other members of your Committee, Carlos Moorhead, I am taking the liberty of copying him on this letter.

Re: HR 3878 : "National Productivity and Innovation Act of 1983" Dear Representative Kastenmeier:

Thank you for your reply of September 29, 1983 to my comments regarding various patent law reform bills. You also sent me a copy of HR 3878 and I would like to convey to you my strong support for this bill.

For over 20 years I have studied and written in the field of the interface between intellectual property rights and antitrust law. I have also over the years taught several seminars for practicing attorneys in this field. Thus, the problems addressed by the bill are intimately familiar to me. As to my basic perspective on these matters, I like to think of myself as a moderate in both fields of intellectual property and antitrust. For example, I am neither unthinkingly protectionistic for patents nor am I an "antitrust zealot who hates all patents à la Justice Douglas. In antitrust matters, my views occupy a middle ground between the extremes of the super-traditionalist populists and the more aggressive adherents of the "Chicago School". I am a co-author with Professors Oppenheim and Weston of "Federal Antitrust Laws" (1981), a casebook which attempts to present a balanced view of the whole spectrum of thought on antitrust matters. I believe that both intellectual property and antitrust policies must coexist in a mix which hopefully will produce the most hospitable environment for technological progress.

I believe that in the past few decades, the balance in the case law has swung slowly, but clearly, in the direction of giving too much weight to rigid antitrust policies and has as a result created a definite chilling effect on the incentive of businesspeople to engage in such activities as joint research and development and licensing of technology. The case law in this area tends to rest primarily upon unthinking repetition of shibboleths of the past. The case law has become ossified into rigid rules condemning as a matter of course certain categories of conduct which most people today would label as competitively neutral. With a few notable exceptions, judges have ceased to analyze and think about the real competitive impact of such things as restrictions in patent licenses. In sum, the interface between intellectual property and antitrust has in practice lost any coherent logical or intellectual underpinnings. Thus, Title

III, $27 would restore the need for judicial analysis by requiring application of the traditional rule of reason. Cases could no longer be argued and decided simply by the incantation of outmoded precedent.

In this connection, I would draw your attention to the word "solely" in Title III, $27 (a). While the limiting word appears in the official print of HR 3878, it does not appear in a reprint in the September 15, 1983 Bureau of National Affairs Patent, Trademark and Copyright Journal. This may indicate that the word "solely" was a last-minute insertion. In my opinion, the bill should not be limited so as to forbid use of the illegal per se rule only to agreements which "solely" convey rights under patents, copyrights, trade secrets, trademarks, know-how or other intellectual property. Many commercial licenses contain other provisions such as the lease of hardware or provisions for services. The addition of such other provisions should not remove a license from the operation of $27 (a). Deletion of "solely" would, I believe, make it clear that the rule of reason must be followed as to those parts of agreements which convey intellectual property rights and that, if appropriate, a per se rule could be invoked as to the other portions of such agreements.

Title IV is also much-needed. I fully agree with Attorney General Baxter's comments to the Subcommittee on September 14, 1983 to the effect that the "misuse" doctrine has drifted far from the traditional moorings of antitrust policy. I have often been asked to render an opinion to a business as to whether a proposed license provision might or might not be found to be "misuse". It is almost impossible to predict, for a realistic reading of the case law reveals that judges rest their finding of "misuse" on nothing more than their personal perceptions of what seems "fair" at the time. The challenger who asserts "misuse" need not have suffered any competitive impact whatever and in fact, the cases make it clear that no finding of any violation of the antitrust laws is necessary. Predictability and coherency of the "law" is almost totally lacking. Since a finding of "misuse" can effectively deprive a patentee from ever enforcing its patent rights again, the impact is sometimes even more devastating than a treble damage judgment under the letter of the antitrust laws.

I have previously indicated to you in my letter of September 6, 1983 my support for a revision of the process patent provisions such as is contained in Title V of the bill.

While I am somewhat less enthusiastic, I do also support Title II of HR 3878 which requires that joint research and development programs be tested by the rule of reason and restricts recovery to only actual damages for successful antitrust prosecution against joint R & D programs notified to the Department of Justice and the FTC. If you have your staff quickly review the November 1980 Antitrust Division "Antitrust Guide Concerning Research Joint Ventures", you will see that it is a reasonably balanced presentation of the current state of the case law. But