be served by the proposed legislation under Title II. The requirement for notification to the Attorney General and Federal Trade Commission should have the effect of keeping the participants honest from the outset. In addition, the limitation of damages, after such a notification, to single damages should have the effect of encouraging notification to reduce liability thereby reducing the incidence of behind-the-scenes joint R & D programs and increasing the scrutiny of those that are entered into. I am a little troubled by Section 204 (c) permitting a request for nondisclosure of information or documentary material submitted as part of such notification not be made public. I appreciate that this requirement is necessary where trade secrets or business confidential information needs to be preserved in confidence. On the other hand, this provision should not become an excuse for the parties to a joint R & D venture to prevent a third party that believes itself to have been injured by a violation of the antitrust laws resulting from the venture from obtaining access to such information. Perhaps it would be advisable to add an additional sentence to Section 204 (c) to the effect that nothing in that section shall prevent a court from ordering discovery of such information or documentary material for good cause subject to an appropriate protective order where justified. Section 301 of H.R. 3878 would restrict actual damages for a violation of the antitrust laws in a license under a patent to single damages, rather than trebled damages. In approaching this question, the starting point to me is to ascertain what utlimate objective is desired at this interface of the patent and antitrust laws. It seems to me that the answer is to try to increase competition and at the same time maximize the reward to the patent owner to stimulate the incentive to invent. Both objectives, I believe, would be achieved by reducing the risk of antitrust damages to single damages in the patent license context. One of the most serious problems with the present application of the antitrust laws to patent licensing is difficulty which businessmen face in trying to find the line that the courts have drawn between acceptable licensing practices and those that might give rise to an antitrust violation. From the point of view of businessmen trying to structure a license, and believing in good faith they have done so in a way that stays on the lawful side of the line, it is an unjustifiably harsh result to be subject to trebeled damages if a court, operating in this often gray area, finds that the line has been crossed. I have, myself, been involved in just such patent litigation where my client was ultimately vindicated but not until after the case had been twice tried and twice appealed to the Ninth Circuit. Such a draconian exposure for what may be a good faith error in judgment as to the best way in which to license patented technologies can end up discouraging any licensing at all. My own view is that licensing should always be encouraged because it promotes competition and increases the number of parties already in the market at the time the patent expires. Thus, I believe reducing antitrust damages to single damages, where the violation arises because of an antitrust violation based on patent licensing, will bring the penalty for an error of judgment down to a level at which the risks involved in granting licenses will be reduced and competition overall will be stimulated. Title IV Patent and Copyright Misuse Section 401 is bound to be highly controversial because most species of patent misuse, within my observation, occur in circumstances where a violation of the antitrust laws could not be proven. The reason that an antitrust violation usually fails, even though the patent misuse exists, is because of the difficulty of showing that the patent that had been misused possesses exclusionary power in the relevant market. In most cases, there are nonpatented substitutes available for the patented product which the patent owner can rely upon to expand the "relevant market" sufficiently to show that the segment of commerce covered by the patent is such a small fraction that the patent does not possess exclusionary power. Thus, the effect of Section 401 will be to legitimize a number of practices in which the patent owner has been able to use the leverage of the patent to gain monetary renumeration derived from commerce outside the scope of the claims of the patent. The broad question is whether this is good or bad. My own view is that it probably does not make much difference. Under the law as it presently is, a patent owner is entitled to ask for license royalties as high as the traffic will bear. the present time, forbidden to base royalties on ancillary but unpatented goods, the licensor must ask for a maximized royalty on At the narrow base of goods within the patent. I imagine that if this legislation were enacted, a licensor might ask for a lower license royalty rate on the patented goods supplemented by some return based on the ancillary unrelated goods which would bring his total reward back up to about the same figure as at present. Because the burden borne by the licensee is likely to be about the same under either circumstance, because the amount a licensee is willing to pay for use of an invention is not going to change merely because of the manner in which it is licensed, I cannot see any particular evil. About the only harm I can see is that, in a tying situation, for example, third party suppliers of an unpatented product to the licensee will be shut out if the licensee is required to buy its supplies from the licensor. If such sales are less than an amount to trigger an antitrust violation, as must be the case for this section to apply, I do not see any particular harm to the public good. Certainly, the licensee is probably paying more for the unpatented supplies but this should be offset by the circumstance that he is probably paying less under the principal license royalty. The third party supplier is deprived of a sale but there is no absolute right to make sales merely because your price is lower. There are many nonprice reasons that already exist why sellers lose sales, e.g., delivery, quality, friendship and so forth. Adding the existence of the patent license relationship to these reasons does not trouble me too much. Overall, I would favor this because it will remove a great deal of essentially victimless defenses from the patent law. It should reduce the cost of patent litigation and increase the opportunity for patent owners to license their patents without risk of rendering them unenforceable under the vagaries of the present confused patent misuse case law. My views on this are expressed in my previous letter to you of September 16, 1983 at pp. 1-2. Yours sincerely, aurence Hirling линии Laurence H. Pretty CC: Dean Susan Prager, UCLA Law School THE INSTITUTE OF ELECTRICAL AND ELECTRONICS ENGINEERS, INC. 1111 19th STREET, N.W. WASHINGTON, DC 20036, U.S.A. TELEPHONE (202) 785-0017 June 7, 1984 Honorable Robert Kastenmeier Chairman, Subcommittee on Courts, Civil Liberties & the Administration of Justice Committee on the Judiciary U.S. House of Representatives Washington, D.C. 20515 Re: H.R. 3286" A Bill to Set Federal Standards for Dear Mr. Chairman: The Institute of Electrical and Electronics Engineers Inc., (IEEE), celebrating its Centennial Anniversary in 1984, is the world's largest professional, technical society. Our membership has increased to approximately 250,000 members world-wide, with over 200,000 residing in the United States. Historically, the IEEE has concerned itself with technical issues of interest to the membership; but, responding to a mandate from the U.S. members, a United States Activities Board (USAB) was established in 1973 to convey the professional, economic, and socio-technical concerns of the membership to the Government of the United States. IEEE/USAB's Intellectual Property Committee is the entity of IEEE which addresses itself to the broad range of issues relating to patents and copyrights. In this regard, the Intellectual Property Committee is concerned that many of our members, as a condition of employment, have been required to enter into assignment agreements which are neither fair nor equitable. In order to establish national standards that would be equitable for both the employee and the employer, we have supported enactment of HR 3286 (and its predecessor, HR 4732), and have submitted supportive testimony before your Subcommittee (July, 1982 hearings on HR 4732). The issues of equity are inherently a part of the need for stimulation of the inventive/innovative spirit in the United States. Our country must foster an employment environment in which the nation's most valuable technical resources, its engineers and scientists, are encouraged to become more innovative and productive; indeed, the elimination of barriers to individual creativity should be a priority issue. We feel that establishing fair and equitable national standards for preinvention assignment agreements would eliminate one significant barrier. In recent months, your Judiciary Subcommittee has held hearings on a variety of legislative proposals pending before your Subcommittee. In several instances, witnesses took the opportunity to comment on HR 3286, and in one specific case, a revised version of HR 3286 was submitted for consideration. We feel that, because of our long-standing interest in the issues embodied in HR 3286, our perspectives would be useful to the Chairman and the Subcommittee members. Core Issue Disincentives for Innovation and Creativity The IEEE Intellectual Property Committee considers it self-evident that the United States cannot afford to allow its technological leadership role to be further eroded; instead, the U.S. ought to be taking all possible steps to eliminate those disincentives to creativity which impact on the innovative spirit of our engineers and scientists - who, more than any other component, constitute our technical resource base. A dampened creative spirit will not consistently produce the major technological advances needed to remain at the leading edge of technology vis-a-vis our international trading partners. As mentioned in the opening paragraph, the IEEE membership in the United States alone consists of over 200,000 of the professionals comprising this technical resource base. When asked in a 1983 member opinion survey whether preinvention assignment agreements inhibit innovation, 56% of those IEEE members responding to the survey indicated that preinvention assignment agreements do Inhibit innovation; in fact, over 30% of these respondents indicated that such agreements either moderately or greatly inhibit innovation. When we asked those who were actually covered by preinvention assignment agreements (62%), how many of these agreements require assignment of all patents to the employer, including those outside of the technical areas in which they work, 40% responded affirmatively. The percentages of those working under such agreements varied markedly with the nature of the employer 70% of those in private industry are covered whereas only 16% of those who are self-employed are covered. (IEEE U.S. Member Opinion Survey 1983). From this survey of the IEEE membership, it is apparent that a majority feel that preinvention assignment agreements do inhibit innovation. Because the agreements have this effect, there is little incentive for an engineer to expend his own time and money on inventions which, if successful, would only belong to his employer. In the esoteric areas of innovation and creativity, the perception by an engineer that his preinvention assignment agreement limits his ability to profit from inventions made outside his work place can lead the engineer to only one conclusion that his/her free time is better spent in ways other than inventing. |