Mr. BRENNAN. You spoke of the hordes of invalid patents that have been pouring out of the Patent Office in recent years.

Is this reflected in a rise in the number of litigated patents which are found to be invalid in the Federal courts?

Mr. IRONS. If you think, at least from the late 1940's until the present time, I would say yes. It depends on the timeframe.

Mr. BRENNAN. Your testimony, I think, was directed primarily to the last 4 or 5 years.

Mr. IRONS. The percentage of patents invalidated in the last 4 or 5 years, I do not know precisely.

Mr. BRENNAN. You have no evidence to support your statement that hordes of invalid patents are pouring out of the Patent Office? Mr. IRONS. I do not have evidence at my fingertips. The statistics, for example, is in the Office of Publications of the Administrative Office of the Federal courts, for example.

Mr. BRENNAN. Would you be willing to supply for the record any evidence that you have that the percentage of invalid patents has appreciably increased in recent years?

Mr. IRONS. I will supply such statistics as there are.

I am interested in your questions. I have not noticed a request for supply of any evidence to support statements such as, if secrecy were abolished there would be less patent applications, or any evidence to support the suggestion that the abandoned patent applications do not disclose anything worthwhile, or any evidence to support the proposition that a great percentage of the fees of the Patent Office are really for the benefit of the public.

Yes. I would be delighted to give you the evidence you ask for, but I think the evidence, the evidentiary matter is at the heart of the problem, in Senator McClellan's bill and this bill. This committee is being rushed in an atmosphere of crisis into legislation without any adequate evidentiary base.

I think your point is very well taken. I would like to call your attention to the fact that there is funded to the tune of several million dollars, somewhere in the area of $2 million or $3 million at least, in the National Science Foundation, studies that are proceeding today that will afford the Congress a factual basis on which to make the decision that it is being asked to make an assumption.

Mr. BRENNAN. Thank you.

No further questions.

Senator HART. Mr. Irons, thank you for your testimony. [The information referred to earlier follows:]

SUPPLEMENTAL STATEMENT OF EDWARD S. IRONS

Submitted herewith as Exhibit 1 for inclusion in the record is a copy of a graph which appeared in the Patent, Trademark and Copyright Journal published by the Bureau of National Affairs on September 13, 1973. This graph not only compares patent costs in several of the world's leading industrial countries but it contrasts the statistics on patents granted as compared to patents applied for in a plurality of countries. The teaching of the graph is, inter alia, that West Germany and Japan, countries many observers believe to be outstripping the United States in productive research and development as well as in the commercial application of new technology, are granting a significantly smaller proportion of patents based on applications filed than is the United States. More specifically, this graph demonstrates that West Germany grants somewhat less than 20,000 patents for

each 65,000 applications filed, while Japan grants in the order of 40,000 patents per 100,000 applications. In other words, both of those countries have a high standard of patentability which is apparently strictly enforced at the Patent Office level. By contrast, the graph shows that the United States Patent Office grants approximately 75,000 to 80,000 patents per 100,000 applications filed. Notably, the Patent Office in West Germany is a strong and independent agency in no sense controlled by any particular executive department of the government. In addition, both countries have viable inter partes opposition proceedings in which public participation is strongly encouraged. These statistics constitute some of the most objective evidence available at this time to demonstrate that a low standard of patentability and a concomitant high rate of issuance of patent applications are (a) unnecessary to stimulate either research per se or investment in research and development and (b) actually act as a brake upon real technological progress. These statistics also seem clearly to indicate that, at least in Japan and West Germany, insistence upon a high standard of patentability has acted as a spur to both invention and investment. It is instructive to note that the article accompanying the graph observes that under the German-Dutch type of patent system "patents are hard to get but hard to challenge, once obtained".

We in the United States, of course, have the reverse situation-i.e., patents are easy to get and easy (albeit expensive) to challenge. The fact that a high proportion of patents litigated are held invalid in our courts has long been recognized. While statistics on patent validity adjudications in our courts vary from one time period to another, the most recent reasonably accurate compilation of statistics known to me appear in Kayton, The Crisis of Law in Patents, Pt. I, p. 5, and Appendix 2, pp. 13 to 14 (Patent Resources Group, Wash., D.C., 1970). Other statistics possibly available to Subcommittee members as of September 11 were published in the Patent, Trademark & Copyright Journal of the Bureau of National Affairs for September 13, 1973 at pages F1 and F2. These latter statistics were assertedly compiled by the Patent Office and cover the years 1968 to 1972, inclusive. They purport to show that only 50% of patents litigated in the federal courts during that time span were held invalid. These Patent Office statistics are subject to severe criticism because they include nonappealed and nonreported judgments of district courts which may in a large proportion of cases yet be appealed and result in validity decisions or which may have resulted in settlement favorable to the opposing party after the district court judgment because the patentee knew, after seeing his opponent's case that the district court would surely be reversed on appeal. Interestingly, these statistics, if properly confined to final decisions of the courts of appeals, are acknowledged by the Journal to demonstrate that approximately 70% of patents litigated in the 1968-1972 period were found invalid and hence to be consistent with the Kayton statistics. A further criticism can validly be made of the Patent Office statistics because of their inclusion of results from the Court of Claims, a court having relatively little incentive to hold patents invalid because the party opposing the patents before it is always the United States Government-and the Government is often understandably reluctant to press vigorously for a holding of invalidity of a patent it duly granted.

It should further be noted that there are no statistics yet available on court adjudications of patents issued within the last five or six years. There is in general a time lag between the issuance of a patent and its adjudication in any court even in instances where litigation is instituted promptly upon the issuance of the patent. In many cases, litigation does not ensue until the patent is several years into its term. The result is that any effort to determine the fate in the courts of patents issued by the Patent Office in the last five years must necessarily be postponed at least another five years and perhaps longer in order for sufficient adjudications to have been made to permit any meaningful statistics. It is fair to say, however, that I have noted in the course of my own work for my own clients that the quality of the Patent Office product is steadily deteriorating and I have found in conversations with patent lawyer colleagues from other places, including

patent lawyers employed by my corporate clients, that many of them, too, have noted a trend toward issuance of an increasingly greater number of invalid patents consequent from an increasingly lowered standard of invention in the Patent Office. It appears, moreover, from the prepared statements of certain of the witnesses before the Subcommittee, including particularly that of Mr. Milton Weissman, a Patent Office Primary Examiner, and those of the corporate counsel who testified, that this general deterioration in Patent Office application of patentability standards is widely recognized both within and without the Patent Office.

SOME MISCONCEPTIONS ABOUT PATENT APPLICATION SECRECY

The prepared statement of Mr. Thomas E. Kauper, Assistant Attorney General, Antitrust Department, Department of Justice, presented September 12, 1973 asserts that "since the first patent statute,... disclosure to the public has occurred only after the Government has issued a patent" (p. 8; emphasis added). The statement then proceeds to question whether the type of opposition proceeding contemplated by S. 1321 which would require an abolition of the secrecy practice should not be modified to a more "balanced" position in which limited secrecy to patent applicants would still be available. In fact, it is not correct that either the first patent statute or any subsequent patent statute prior to 35 U.S.C. 122 of the 1952 Patent Act contained any requirement for secrecy of patent applications at any stage of their prosecution. Quite significantly, Section 12 of the Act of 1836, which for the first time provided for the filing of caveats, decreed that these should be held "in the confidential archives of the Office and preserved in secrecy" but carefully distinguished them from applications as to which no requirement for secrecy was made.1

There is no indication, moreover, either in the Patent Office rules or elsewhere that any practice of maintaining pending patent applications in secret was adopted until approximately 1850-some 60 years subsequent to the first patent statute. All abandoned patent applications were routinely available to the public pursuant to the Patent Office rules and practice until approximately 1879. At that time, based on The Corn Planter Case, 90 U.S. 181 (1874), which held that an abandoned application of earlier date, though prima facie evidence of prior invention and prior inventorship, could be rebutted, the Patent Office ceased to cite abandoned applications as prior art against pending applications and also changed the rule which theretofore had made abandoned applications routinely publicly available.

And even today under 35 U.S.C. 122 disclosure to the public of the subject matter of many patent applications occurs long before the government issues any patent. For example, in many foreign countries the complete text of the United States application upon which a foreign application is based becomes publicly available at or shortly after the date of the foreign filing. Since the United States applicant must file his application in those foreign countries subscribing to the Paris Convention and the Stockholm Revision thereof within one year of the United States application if the benefit of the United States filing date is to be preserved, a very large number of the applications that are filed in the United States Patent Office become public through foreign patent offices within approximately one year of their filing. Certain agencies of the United States Government, e.g., NASA, make their applications publicly available as soon as they are filed, both in the United States and elsewhere. And, of course, the subject matter of United States patent applications is in many cases made publicly available through publication in technical journals and the like or through public use and sale of the subject matter embodied therein. In short, the protestation, though frequently heard, that all pending patent applications are required to be held in secrecy until the issuance of a patent is simply incorrect even

A caveat is essentially a written description of an invention filed with the Patent Office for the purpose of establishing that the inventor was in possession of the idea therein expressed by the date that it bears. Such documents do not, and did not in 1836, have the status of patent applications. Under the 1836 Act, the caveat was held in secret until the filing of the application, but no statutory restraint was placed upon the publication of the application.

today in the face of 35 U.S.C. 122, the first statute to affimatively authorize such secrecy. Indeed, it takes a very agile patent applicant to maintain the subject matter of his patent application a total secret prior to its issuance.

35 U.S.C. 122 when enacted in 1952 was represented to Congress to be a codification of a long standing Patent Office rule. Thus, the Reviser's Note accompanying the statute at the time of its enactment states:

"This section enacts the Patent Office rule of secrecy of applications." Along the same vein, Mr. P. J. Federico's commentary on the 1952 Patent Act says of 35 U.S.C. 122 that

"Section 122 is a new section which enacts as part of the statute the rule of secrecy of patent applications which has been in the Patent Office rules in one form or another for about a hundred years...."

In fact, the purpose of Section 122 was not really to codify an agency practice though this may have been incidentally accomplished-but sub silentio to lend an aura of statutory authority to a false theory that grew up at some indeterminate time between 1870 and 1952.

In his book, "The Supreme Court and the Administrative Agencies", The Free Press, N.Y. (1968), Martin Shapiro has devoted some 84 pages to the subject of "The Supreme Court and the Patent Office". Of particular interest in the context of the present effort to modernize the patent laws are the revealing subsections (pp. 204-213) relating to the Patent Act of 1952 and the manner in which it was formulated and enacted, a copy of which is appended as Exhibit 2. This material demonstrates that the actual drafters of the 1952 Patent Act carefully concealed from the Congress the basic intent underlying many of the provisions written into the statute and in due course adopted by Congress with wholly different intent in view, without knowledge of the drafters' real purpose or the pertinent facts.

35 U.S.C. 122 was unquestionably one of the statutory provisions which Congress was induced to enact without knowledge of the underlying intent of the persons who drafted it or the facts pertinent to why it was desired. Since its enactment. 35 U.S.C. 122 has consistently been utilized as the vehicle for imparting a tinge of federal "property right" to so-called "trade secrets" constituting unpatented and unpatentable subject matter. Proponents of trade secret "property rights" argue that the secrecy provision of 35 U.S.C. 122 is intended to afford to the alleged "property" owner an absolute right of trade secret "property" in the subject matter of all abandoned patent applications, and that each patent applicant has the right after he has had his patent application examined at public expense to decide whether it shall be exploited as a trade secret or as a patent. In short, under this theory patent applicants never lose because if they can't qualify for a patent or are dissatisfied with the claims the Patent Office will allow they can abandon their applications and still have monopolies called "trade secrets". To amplify, it is presently common practice under the state law for the holders of alleged trade secrets to license such trade secrets for running royalty payments to a plurality of competitors. It is not unusual for these running royalty payments to continue in perpetuity or for other arbitrarily selected periods greatly in excess of the statutorily authorized patent term. As will readily be seen, when a so-called "trade secret" is actually shared among all the significant competitors in a field, each of them paying a running "royalty" in exchange for having received a disclosure of the "trade secret" subject matter, the so-called "owner" is in the same position with respect to the enjoyment of a reward extracted from members of the public as if he had obtained a valid patent from the Patent Office. At the same time, he enjoys many advantages that the holder of a valid patent does not in that there is no law of "misuse" of trade secrets and no way in which a trade secret can be invalidated. Moreover, because the trade secret holder chooses the limits of his "trade secret" himself and need not observe the limits of claims granted by the Patent Office, also choose the term of his trade secret himself and hence is not limited by the statutory monopoly term of the patent, and still further chooses those to whom he will "license" the secret, on any basis he wishes without fear of being guilty of patent misuse as a result thereof, he is in effect his own patent office and his

monopoly is in many respects greater than that which the government affords to a legitimate patentee.

That Congress had no such end in view when it enacted 35 U.S.C. 122 is abundantly clear from the legislative history of the 1952 Patent Act including the record of the hearings which preceded the enactment and the Senate and House Reports which accompanied it. Indeed, the entire theory that secrecy in the Patent Office has as its purpose to promote pricate trade secret interests of individual inventors is not only foreign to the spirit and intent of the constitutional patent clause which has a primary public purpose but one which finds no support whatever in any record of any antecedent Congressional deliberation, statute or precedent. Only cetain text writers of relatively latter day origin have purported to subscribe in any manner to this theory and even they provide no cogent support for it-as they could not, since none exists.

Retention in the Administration patent bill which first became available to the public on September 27, 1973 of a provision for maintaining patent applications in secret until a notice of allowability is given is, insofar as the organized patent bar is concerned, retention of the tenuous and at no time consciously or directly statutorily sanctioned by Congress "right of election" between a patent monopoly and a trade secret monopoly after the public has paid for an examination.

RELATION OF SECTIONS 122 AND 301 OF THE ADMINISTRATION BILL

The new Administration bill couples its retention of Section 122, essentially unchanged, with a new Section 301 which would effectively legitimatize the private trade secret monopoly and give trade secret "owners" carte blanche to victimize the public through spurious private monopolies neither constitutionally sanctioned nor permitted by federal patent law. In particular, subsection (b) of Section 301 purporting to prohibit the states from granting "the right to limit the full and free use by the public of ideas in the public domain or in general circulation" is ambiguous. Strictly construed, it would appear to permit the state to grant some form of "petty patent" or "trade secret" right enforceable against others on any subject matter which could be shown to be novel by virtue of the slightest variation from known subject matter or which would be obvious in relation to "ideas in the public domain or in general circulation". The interplay between Section 122 and Section 301 is such. if enacted, that the two sections will be used to revitalize and reinforce one another and will be argued as constituting a congressional approval of the practice of filing a patent application, obtaining an examination at the expense at least in part of the general public, and then, in the light of the narrow scope of coverage available from the Patent Office, deciding that the subject matter shall be held "secret" for exploitation as a monopoly under state law in accordance with Section 301 rather than permitted to issue as a patent-and this notwithstanding the fact that these matters have never been fully and candidly aired before Congress.

The problem with Sections 122 and 301 of the Administration bill is particularly highlighted by the present pendency before the Supreme Court of a petition for writ of certiorari in No. 73-187, Kewanee Oil Co. v. Bicron Corp., et al. The case arises from the Court of Appeals for the Sixth Circuit which held effectively that subject matter which has been exploited by public use and sale for more than one year and hence can no longer qualify for a valid patent may not be protected as a trade secret but must be considered under 35 U.S.C. 102(b) to be within the public domain. The Administration bill as now presented would sub silentio overrule or at least attempt to overrule the Kewanee case regardless of how the Supreme Court may deal with it. The objective is to preempt or overrule any Supreme Court decision on the question of whether, in acordance with the previous decision in Lear v. Adkins, 395 U.S. 653 (1969), the constitutional patent clause and all the patent laws as heretofore enacted by Congress circumscribe

Proponents of this argue that because an independent discoverer of the trade secret can use it freely-i.e., one cannot be sued for infringement of a "trade secret"-the trade secret protection is less. It should be recognized that this single disadvantage is outweighed for many would-be monopolists by the significant advantages detailed in text.