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 tails 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 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 a 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 there are so many "ifs, ands and buts" in the analysis and so many points at which per se illegality may be triggered that legal advice is a very complicated and risky undertaking. This always introduces a considerable degree of uncertainty and hesitation among those who propose the joint venture. In my opinion, Title II is a reasonable compromise among the various proposals introduced to reduce this risk. Sincerely, Dr M'allen J. Thomas McCarthy In your letter of August 22, you solicit my views on various legislative measures that have been introduced in the Congress, or are to be introduced. I am pleased to offer you my comments on these proposals. I H.R. 3285, 3286. Your letter did include a copy of H.R. 3285, but H.R. 3256 was sent instead of H.R. 3286. H.R. 3285 would' be a major contribution to the protection of inventors' rights and should be enacted into law. I have three comments to offer with regard to this bill. First, H.R. 3286, from what I gathered in reading your remarks in the Congressional Record of June 13, would set standards for preemployment assignments of inventions that do not arise directly out of the employment situation. take it that H.R. 3286 would not apply to the employee hired for purposes of research and development. H.R. 3285 would apply to such inventors and would provide an arbitration procedure for determining what the amount of compensation should be for "service inventions. Section 401 of the bill allows the parties to agree that a "free invention" is the exclusive property of the employee. Section 414 (b) (1) allows the parties to agree as to the amount of compensation, "before issuance of the patent on the service invention." Reading Section 414 as a whole, I believe that the courts would construe it as applying to that period of time after the service invention has been developed. I am certain that you would not have the bill apply to those employer-employee contracts that have been entered into prior to the conception of the invention. A prior contract might govern an invention that turns out to have a fair market value far in excess of what either party predicted. Could the employee then demand compensation in excess of that contracted for? An argument of violation of substantive due process could be made. Section 432, especially, may be subject to a substantive due process argument. My point is applicable to |