the great increase in research, in universities, industry, and Government, has been one of the factors, and a very important one, causing a sharp rise in our industrial productivity and an increase in our standard of living. Some of this research is held secret, in connection with military matters. But the great bulk of it is published and interchanged freely, even when it is conducted in industrial laboratories. The pace is so fast that, if one group does not publish promptly, another group is likely to do so on the same accomplishment. There is no doubt that the patent system facilitates this process, for it allows publication to be made broadly as soon as the patentable ideas which appear are covered by application.2 25 The patent system is thus potentially beneficial in at least three ways, and its influence has been on the whole salutary throughout our industrial history. B. CURRENT PROBLEMS OF THE PATENT SYSTEM Yet the system is not now working with maximum effectiveness. The principal reason is that science, industry, and the country generally have altered greatly while the patent system has not. There is genuine need to modernize it.26 Still, great care must be taken lest, in the effort to modernize the patent system, we destroy it and thus decrease the distinguishing vigor it has brought to us as an industrial nation. This caution is not an idle one. Extravagantly uncritical attacks on the patent system have frequently been made, and in the guise of correcting the abuses of the patent system, many well-meaning critics have instead proposed remedies which would do injury to the patent system. The difficulties and maladjustments within the patent system must be eradicated, not only so that the abuses to which they give rise may be cured, but also so that abuses to the patent system may no longer be committed in their name. In this way only can the patent system continue to serve the country in the coming years as fully and as well as it has in the past. The soundest approach is to examine what the changes in science and industry have been, to determine where they have created maladjustments in the patent system, thus to study why the system falters, and then to seek the most promising remedies. 1. Modern invention archaic patent system The patent system was designed primarily for the recognition of an individual inventor who, seizing upon a brilliant idea, could make a model of it or give it a demonstration which could readily be grasped by any practical man. This type of individual has not disappeared; there is still the opportunity for the highly ingenious to see the short cut or the practical embodiment that would otherwise be overlooked. But invention is also a matter of persistence and hard mental labor. Moreover, as science and its applications have become more complex, creative effort by the single inventor has become more and more super 25 The rapid rise of trade associations and industrial research laboratories in the past few decades has greatly facilitated this interchange of information. 20 In its Review of the American Patent System, dated January 30, 1956 (84th Cong., 2d sess., S. Rept. No. 1464), the Subcommittee on Patents, Trademarks, and Copyrights of the Senate Committee on the Judiciary stated as its first preliminary conclusion: "The present patent system should be adjusted to modern conditions," pp. 1-4. See also The Prediction of Technical Change, by Gilfillan, Review of Economics and atistics, vol. 34, November 1952, pp. 368-385. seded by group collaboration. Witness the growth of large research facilities, both in nonprofit institutions and in commercial organizations. The act of invention now often comes as the culmination of a long-continued scientific collaboration, since individual inventors do not have the technical ability, the equipment, or the money necessary to work out further developments on the basic inventions which have meant so much to modern industrial society.27 I have given an example above of a brilliant invention made by an individual. Let me illustrate the other kind of invention, which is more typical of important inventions of today. The thermionic tube is the device which has been mainly responsible for our present radios, radar, television, and a whole range of electronic devices in industry. It is a matter of glass envelopes, vacuum, heated cathodes, and delicate metallic parts. Now it appears that it will soon be superseded, for many if not all of its uses, by the transistor, which is simply a little block of solid material with a few fine wires connected to it. Did this idea spring full blown from the mind of some genius? Not at all. Before it could be produced at all there were years of study on the chemistry and physics of the solid state, and some rather abstruse mathematics concerning the progress of electrons and "holes" through a crystal. One could hardly have happened upon it by accident, for it required that to a pure material there be added an exceedingly minute amount of a special impurity, and keen analysis and experimentation was necessary before one could intelligently prepare the pure material, and find out how to insert just the right amount of the right impurities. Thus the transistor emerged from a long period of intensive group research, principally at the Bell Laboratories. If I had to pick out one inventor to give credit to in this connection I would select William Shockley. But he would be the first to insist that to pick out one individual would be a fallacy, for the act of invention was only one part of a well-ordered research in which many very able scientists and engineers participated.28 It is fully as necessary that this collaborative type of creative effort should be stimulated, and that the way be paved for its creations to come into practical use for the benefit of the public as it is to stimulate the individual inventor who works in his own laboratory. Consideration of the best form for the patent system requires keen attention to this modern form of invention.29 If one thinks merely of a lone inventor, to be rewarded if he contributes a useful idea for our benefit, the matter seems very simple. The equitable and wise handling of the problem of the great industrial organization, with thousands of patents obtained from its employees and others, appears in quite a different light. There is still another facet to the situation. It should be remembered that the patent system was set up, not just to reward an inventor or a group of coinventors-that was incidental-but also to facilitate Charles F. Kettering, testifying before the TNEC in 1940, noted that we were passing through "the transition period from the individual as an inventor to the group as an inventor group invention rather than individual invention" (hearings, pt. 30, p. 16293). See also, Is the Rate of Invention Declining? by Stafford, American Journal of Sociology, vol. 57, May 1952, pp. 541, 542. And compare Potts v. Coe, 145 F. 2d 27 (Ct. App. D. C. 1944). The Transistor as an Industrial Research Episode, by Bown, Scientific Monthly, vol. 80, January 1955, pp. 40-46. See footnote 26, supra; also, The Inventor in Eclipse, by Van Deusen, Fortune, vol. 50, December 1954, pp. 132–133, 197–198, 200, 202. the advent into use of new devices which would satisfy public needs and desires, and give useful employment. When the system can accomplish this, it is well worth vigorous support. When it tends in the other direction it needs modification. The modern scene is vastly different from that of the early days of the Republic in regard to what is involved in bringing a new device into practice.30 When one of our forebears invented a new candlestick, he or his friends could make them in an attic and, if they were really an improvement they could be sold in small quantities and thus create a very small but going business. When Benjamin Franklin produced a new sort of stove, stove manufacturers could readily alter the pattern in their foundries and produce it. Suppose today someone invented a new type of razor, and let us assume it is genuinely different from either the blade or the motorized type, and superior in performance to both. I don't think this is likely to happen, for this field has been well plowed, but it might. It certainly could not be produced and sold in small quantities on a profitable basis in competition with wellentrenched types, for one reason because costs would be too high except under conditions of mass manufacture. It would probably take half a million dollars to put it into production and several millions to impress it sufficiently on the public consciousness to establish its position as a real competitor. I hope that, if someone does invent a really superior razor it will become available and I can buy one. But this can hardly happen unless the patent system is in good order and in tune with modern times and problems. The increased complexities and costs that attend the introduction of new products into the market have their counterparts in the administrative and judicial processes that attend the securing of patents and their enforcement. The great advances in science since the patent system began to operate in this country are reflected in the fact that many inventions today are highly technical. They cannot be grasped in a moment by a layman. They can be understood, in their trends and implications, only by men of long experience in science and technology. The system in practice has not been able to cope adequately with this situation. The burden on patent examiners has become severe. We expect them to be skilled in many arts, and to understand and critically evaluate arguments which may be decidedly mathematical or couched in highly scientific language.31 This is one aspect of the sad fact that the Patent Office has not been supported on a scale commensurate with its importance to our economic progress, on which I shall have more to present later in this statement. In addition we have relied upon courts not specially trained in science for the implementation of our patent system.32 As a result, there is danger that judicial decisions in 30 See footnotes 13 and 19, supra. 31 See The United States Patent Office, What It Is, How It Functions, What It Needs, issued by the U. S. Patent Office, October 3, 1955, in U. S. Congress, Subcommittee on Patents, Trademarks, and Copyrights, of the Senate Committee on the Judiciary. American Patent System, hearings, pursuant to S. Res. 92, October 10-12, 1955, pp. 202-203; and testimony by Allen V. Astin, Director, National Bureau of Standards, in U. S. Congress, Subcommittee on Economic Stabilization, Automation and Technological Change, Joint Committee on the Economic Report, Hearings, October 14-28, 1955, pp. 577-578. 82 For recommendations for more technically trained personnel attached to courts dealing with patents, see: Science Advisory Board, Second Report, September 1, 1934, to August 31, 1935, Appendix 6, Report of the Committee on the Relation of the Patent System to the Stimulation of New Industries, Vannevar Bush, chairman, pp. 331-333. TNEC hearings, pt. 3, January 16-20, 1939. Testimony of Vannevar Bush, pp. 892, 1139-1148. (The latter pages are a reprint of the committee report referred to in the previous reference.) U. S. Congress, Subcommittee on Patents, Trademarks, and Copyrights of the Senate 33 patent matters may be based on misconception or superficial grasp. There is also the very serious result that the cost of presenting and rebutting evidence on technical points in patent litigation, conducted before tribunals lacking the necessary special training in advanced science, has become unduly burdensome and expensive. This inequity is further compounded by the fact that suits on the same patent are frequently brought in several of the ten Federal judicial circuits.35 A patent owner may, therefore, be put to his proof, at great cost, in several different courts with the risk that different, and frequently conflicting, decisions will result. This is especially serious for the individual, or the small and struggling industrial unit, for whom it is most important in the public interest that the full protection of the patent system be secured. The value of patents is often scoffed at among businessmen today. It is common to characterize them as merely an invitation for expensive litigation. And, unfortunately, there has been increasing basis for this cynical point of view. When a small company, relying entirely upon its patents for the maintenance of its precarious position as a newcomer in the field, with no more resources than would be needed for covering the cost of development and introduction of its new product, is faced by what it believes to be infringement by a strong competitor, it knows that a suit for infringement may stretch out over years, and cost several hundred thousand dollars. It may be inclined to abandon what it believes to be its rights, or to throw in the sponge and sell out, which is not the outcome that is conducive to a desirable increase in the number of small industrial units among us.35 From my own industrial experience with small companies I have seen little of this in extreme form, where a small company was actually threatened with suits which would exhaust it, but I have seen instances where fear of this sort of sandbagging made it difficult to raise capital, and took the heart out of the young men attempting to pioneer. Of course this problem of unreasonable costs of litigation is far broader than the problem of rendering the patent system fully effective under modern conditions, but it is especially acute in this connection because of the scientific nature of the subject matter. Some of the responsibility for present conditions lies at the door of the Committee on the Judiciary, American Patent System, hearings, October 10-12, 1955, A Special Court for Patent Litigation? The Danger of a Specialized Judiciary, by Rifkind, American Bar Association Journal, vol. 37, June 1951, pp. 425-426. 33 As Judge Schnackenberg stated in Aghnides v. Holden, 226 F. 2d 949 (7th Cir. 1955), "Aghnides may litigate and relitigate again and again the question of validity of his patent as long as he selects a different defendant in each of the infringement suits which he files, thus avoiding the wholesome doctrine of res adjudicata. This queer result is one which we are unable to avoid. It is a situation which is particularly abhorrent when considered against the backlog of untried cases which clogs our Federal courts. The latter are cases where the litigant asks only for his day in court, not a plurality of days in court as Aghnides is entitled to under existing law. The remedies lie not in our hands. The Congress could by legislation grant relief." See also Pierce v. Allen B. Du Mont Laboratories, Inc., 138 F. Supp. 959 (Del. 1956). 34 See Van Deusen, op. cit., footnote 29, supra. 35 See U. S. Senate Special Committee To Study Problem of American Small Business. Future of Independent Business. Progress report, January 2, 1947 (Senate Committee 72-80. Print No. 16); Enterprise, by Hamilton, TNEC Monograph No. 31, Washington, U. S. Patents and Government Printing Office, 1941, p. 129. U. S. Congress, Subcommittee on Patents, Trademarks, and Copyrights of the Senate Committee on the Judiciary, American Patent System, hearings, October 10-12, 1955, especially testimony of Thurman Arnold, pp. 220-226. 82282-57-3 courts themselves without doubt, some with the patent bar, some with the Patent Office, and some with the Congress for failing to provide adequate support for the administration of the patent system. A solution is by no means easy, but I will have some tentative suggestions to present below. 2. Economic concentration and monopoly through patents The increase in the technical complexity of science and the inventive process has had another result of even greater challenge to the patent system. The patent system functions best when unique devices or processes are independently protected by a single patent. The system does not provide adequately for the appropriate handling of complex developments involving devices covered by many patents. As a result, undesirable situations have arisen. For example, through the interchange and retention by the interchanging group of exclusive operating rights under patents, a strong group of industrial units is able to dominate a whole field of manufacture, not merely for the statutory term of a patent grant, but in perpetuity by absorbing in one way or another improvements wherever they appear. The licensing of patents and the exchange of patent rights among patent owners is fundamentally in the public interest when it facilitates manufacture, but it should not be allowed to extend to the point of creating a permanent monopoly over a field of commerce. A permanent monopoly is inconsistent with the whole philosophy of the patent system. When such a monopoly is created through the interchange of licenses, however, the remedy which best serves the public interest is not the curtailment of the licensing or the destruction of the patents, but rather the expansion of the group under license. In this way the public will be assured of the product in question in adequate quantities and at reasonable prices. But the remedy of expanding the group under license is not now often utilized by the courts, and it is not inherently beneficial unless wisely provided for. There are beneficial patent pools, and those which are quite the reverse. It would enable business to proceed with more assurance, and far more effectively, if there were defined in the law the conditions under which cross licensing of patents is in the public interest.36 37 I realize full well that this aspect of the problem, that of patent pooling, is a difficult and intricate matter. Certainly, I would not attempt to present and defend a solution in a brief statement. Rather it calls for a thorough and objective study by a fully representative group, including men with experience in patent litigation, at the bar and on the bench, but including also those who understand the trends of science and its applications, and those who have struggled with the vicissitudes of infant industrial units. I believe it would be very help 36 For one proposal to this end, see A New System for Encouraging Invention, by Gilfillans, Journal of the Patent Office Society, vol. 17, December 1935, pp. 966-970. 37 The literature on patent pooling is, of course, extensive. See, for example: Patent Pools and Cross-Licenses, by Toulmin, Virginia Law Review, vol. 22, December 1935, pp. 119–152. U. S. Congress, House Committee on Patents, Pooling of Patents, hearings on HR. 4523, February 11-December 12, 1935, Washington, U. S. Government Printing Office, 1936. The United States Patent System, by Vaughan, Norman, University of Oklahoma Press, 1956, ch. 2, Patent Pools, pp. 39-68. Compare also my testimony on patent pools before the Temporary National Economic Committee on January 17, 1939, in TNEC hearings, pt. 3, January 16-20, 1939, pp. 887-890. |