that kind of role, you always argue that there are plenty of people that have those qualities. But then if the notion offends you, then you are always suggesting that that is a very rare breed and you cannot assume you will get that kind.

Even with statutory guidelines there would be a sincere argument made that the odds would be against finding a person of that quality.

Since I would think it would be desirable to have that office, I would argue that you would be very likely to get that kind of fellow.

Mr. Nash.

Mr. NASH. No questions.

Senator HART. Mr. Hogan, thank you so much.

Mr. HOGAN. Thank you very much, Senator. Thank you, counselor. Mr. BRENNAN. Mr. Chairman, the last witness is Mr. John Peder

son.

Senator HART. Before you begin let me thank you for your willingness to change your schedule to accommodate the committee.

Mr. PEDERSON. Senator, I appreciate the opportunity to appear. is the least I can do.

It

Mr. BRENNAN. I assume we will have the statement printed in full at this point?

Senator HART. Yes.

[The prepared statement of John Pederson follows:]

STATEMENT OF JOHN J. PEDERSON CONCERNING S. 1321

Mr. Chairman and Members of the Subcommittee, my name is John J. Pederson. I am General Patent Counsel and Director of Patents for Zenith Radio Corporation, a major producer of radios, television sets and related consumer products.

I am here today because of my firm belief in the wisdom of the constitutional provision for a patent system to promote progress in science and the useful arts and because I recognize the urgent need for patent reform if this basic constitutional purpose is to continue to be served. One need only look to the patent invalidity statistics in Federal court litigation-more than 70% of the litigated patents are held invalid-to know that extensive reform is needed to provide enhanced credibility for patents.

While there are specific provisions in the Patent Reform Act of 1973 (S.1321) which I believe to be unworkable or impracticable as presently drafted and others which in my view are unwise, I believe that as a whole this draft bill constitutes a bold and imaginative effort to provide the reform which is so sorely needed. The bill is designed to enhance the credibility of patents by augmenting the present and traditional ex parte patentability proceedings with adversary proceedings which are better adapted to elicit the relevant prior art and to apply the statutory patentability standards. From my 25 years of practice before the Patent Office, I have come to the firm conviction that the establishment of an adversary system is absolutely essential if the credibility and integrity of U.S. patents is to be restored. In many cases, only the applicant's competitors or other potential users of the invention upon which patent protection is sought are in a position to identify and bring forward the most relevant prior art against which the statutory requirements of novelty and unobviousness are to be measured. Neither the applicant nor the Patent Office Examiners have an effective basis for identifying specific prior art in the category of subject matter in public use or on sale (Section 102b), to say nothing of that embodied in unpublished pending patent applications (Section 102e) or that falling in the category of unpublished prior knowledge or use by others (Section 102a). But a competitor or an industry member who has possession of such unpublished prior knowledge, or who owns the unpublished pending patent application, or who has produced or sold a product

embodying the invention, can identify this relevant prior art with relative ease. The present law makes no provision for using these channels to identify the most relevant prior art in the Patent Office examination proceedings. It is only by permitting competitors and industry members to oppose the patent grant that this can be achieved.

However, it is not enough to provide a vehicle for permitting competitors and industry members to come forward in opposition to the patent grant. The opposer as well as the applicant must be given an equal opportunity for argument and for appeal of erroneous Patent Office decisions, and failure to oppose when proper grounds for opposition exist must carry sufficiently serious consequences to assure proper use of the opposition system. If a competitor or industry member has nothing to lose by standing off, in the sense that he can make the same defense in court later if called upon to do so, many oppositions that should be brought will not be brought, and spurious patents will continue to issue.

On the other hand, safeguards must be provided to protect an applicant against oppressive abuse of the opposition process. An applicant with a good invention should not have to withstand the delay and expense of defending against specious oppositions filed with the purpose of inducing settlement on the basis of a royalty-free or reduced-royalty license, or with the hope of inducing abandonment to avoid heavy defense costs, nor should he be deprived of his "day in court" because he cannot afford such legal expenses.

To satisfy all of these criteria, an ideal opposition system should contain built-in effective sanctions against misuse or abuse of the opposition process, should provide at least some measure of incontestability or increased credibility for the patent which survives, and should contain provisions for financial assistance in connection with legal services in cases of proper need. Failure to satisfy these conditions can so distort the system as to frustrate the constitutional purpose of promoting progress in the useful arts and sciences.

The Patent Reform Act of 1973-S.1321-provides a basis for opposition proceedings from which the opposer as well as the applicant has effective appeal remedies, and it also contains other provisions designed to compel the applicant to identify relevant prior art known to him and to provide the Patent Office with both system and procedure for eliciting a better overall knowledge of the relevant prior art, but it does not provide any specific benefit to the successful patentee or detriment to the unsuccessful opposer, it does not contain effective sanctions against oppressive misuse or abuse of the opposition process, and it fails to provide financial or other assistance to the applicant who cannot afford the burden of defending either a specious or a bona fide opposition. Moreover, there is additional inequity which may deter inventors from using the patent system for its intended purpose. As presently drafted, S.1321 contemplates publication of the application in advance of any preliminary examination or determination of prima facie patentability. Since a patent is a quasi-contract between the inventor and the government-a disclosure in exchange for a limited-term monopoly-any statutory requirement for public disclosure in advance of a prima facie patentability determination would be unfair and even arguably unconstitutional.

There are ways in which the present draft bill can be strengthened to overcome these objections. A prospective opposer may be required to make a prima facie showing sufficient to establish probable cause for instituting the opposition, before the applicant is subjected to the burden of such a proceeding. An unsuccessful opposer may be required to bear the applicant's costs of defending the opposition. A substantial opposition fee may be imposed on the opposer at the time of filing the opposition. All of these measures would reduce the likelihood of specious proceedings designed for harassment or shake-down purposes. On the other hand, unless there is some serious consequence of with holding a bona fide opposition, all of these other provisions would tend to discourage competitors or industry members from coming forward during the examination process. To overcome this negative bias, and to provide for the integrity of issued patents which withstand the opposition process or go to issue without opposition, a really strong presumption of validity must be established. This can be done in various ways but in any event, to be effective, the statute must give more than mere lip service to the presumption of validity. Total incontestability would serve the purpose but would be found by most

to be too harsh if not unconstitutional. However, there would seem to be no good reason why a competitor or an industry member having actual grounds for opposition at the time the application is published should not be estopped from contesting validity on the basis of such grounds if he elects not to bring the opposition. A middle-ground approach, which I have not seen advanced elsewhere, and which has the advantage of being more objective in nature than personal estoppels, might provide for the unavailability of Section 103the unobviousness section-as a defense against patents surviving the opposition process or issuing without opposition; this would leave Section 102-the novelty requirement-as well as other technical defenses open to all. Especially in view of the inclusion of Section 138 (b), a separate section should be incorporated to define the scope of the enhanced presumption of validity and the consequences of failing to oppose or of unsuccessful opposition.

And finally, for the independent inventor or the small business unable to afford the burdensome costs of defending patent oppositions, partial or full subsidization of legal expenses, on the basis of need, might be provided. Incidentally, this might also be made available to a needy opposer as well as a needy applicant.

S.1321 also includes provisions for enhancing the presumption of validity by establishing the Patent Office as an independent governmental agency, by providing Public Counsel in the Patent Office to argue for the public interest, and by providing for greatly improved library and mechanized search facilities. These are laudable measures when provided to augment the availability of inter partes proceedings instituted by competitors or industry members; in my opinion, they would not be sufficient of themselves without also providing for such opposition proceedings.

Section 135 of the draft bill provides for notification proceedings whereby any person, whether or not he may be adversely affected by the grant of a patent, may bring prior art to the attention of the Patent Office in connection with a previously published pending application. The person making the notification may, if he so elects, remain anonymous or he may elect to participate in the examination or re-examination proceeding as a party. I do not believe it appropriate for uninterested persons to serve in the capacity of private attorneys general, as the section would seem to permit, but in other respects I favor the provisions of this section. I do think, however, that if an office of Public Counsel is to be established, at least the anonymous notification proceedings should be routed through the Public Counsel's office, and the Public Counsel should be required to argue the patentability question before the Primary Examiner; otherwise the Primary Examiner's patentability determination may still be strictly ex parte and none of the benefits of adversary proceedings will be realized.

While on this subject, I would like to address the patentability brief requirement (Section 131) and the attorney's oath requirement (Section 115). Much opposition has been voiced against provisions of this sort because they are burdensome and, some say, demeaning to the legal profession. Nevertheless, if such measures will improve the credibility of the patent system, they should certainly be adopted. However, the establishment of an opposition system as well as the Public Counsel provisions and the mechanized search provisions are all addressed to the same purpose and are much better adopted to achieve that purpose than the patentability brief and attorney's oath requirements. As pointed out earlier in this statement, it is literally impossible for an applicant or his attorney to know of all of the relevant prior art in a given case. A patentability brief or an attorney's oath is no better than the knowledge upon which it is based. The cumulative knowledge of competitors and other industry members and their ability to identify relevant prior art is much greater than that of the applicant and his attorney, and the institution of an effective opposition system may be expected to bring to the surface all of the relevant prior art which could reasonably be expected to be identified in any patentabil ity brief or attorney's oath, and more. In other words, I believe that an effective opposition system meeting the criteria set forth in my foregoing comments would obviate the necessity for a patentability brief or attorney's oath, and that elimination of these requirements would serve the constitutional purpose better by reducing the burden and therefore the cost of required legal services in connection with the filing of patent applications.

Another major reform measure under S.1321 would be the institution of deferred examination (Chapter 18). The deferred examination proposal is patterned after those adopted in other countries. The concept is that some substantial percentage of applications relate to subject matter which will ultimately fail to achieve commercial significance, and it is wasteful of the patent examining facility to subject such applications to the same examination procedure as applications directed to commercially significant subject matter. I understand that the expectation is that something in order of 50% or more of the applications filed would never require examination, and that this would make it possible for the examining corps of the Patent Office to do a more thorough job of examining the significant applications. At the same time, deferred examination would also result in a comparable reduction in opposition activity, for the application which is never examined need never be opposed.

I favor institution of the deferred examination procedure, but only if deferral is not accompanied by extension of the patent term. An applicant should not be permitted to prolong the patent monopoly by simply being dilatory. Rather than a term of 12 years from the filing date plus any deferral period as under the draft bill, or 17 years from the issue date as under the present statute, a term of 18 or 20 years from the filing date would seem most appropriate.

S.1321, if enacted, would institute for the first time in the United States a system including the imposition of annual maintenance fees to keep a patent in force. The principal reason advanced in support of the maintenance fee concept is to encourage lapsing of insignificant or commercially unimportant patents. However, the vast majority of patents issuing today are granted to corporations rather than to individual inventors. I believe the overall proportion is something in the order of 80%, and in high technology industries such as the radio/television industry, I am sure the percentage is much higher. Major corporations maintaining substantial patent portfolios will not be deterred from seeking or maintaining such portfolios, or induced to seek fewer patents, by the imposition of maintenance fees unless such fees are so high as to be confiscatory with respect to individuals and small companies; the constitutional purpose of the patent system will not be served by so favoring major corporations. Moreover, even if the maintenance fee system worked ideally as intended, only dead wood would be eliminated, and dead wood has not been a major problem. Lapsed patents, while no longer available for licensing or infringement litigation, could not simply be expunged from the records because they would still constitute a substantial portion of the body of prior art to be examined with respect to new inventions; in other words, the imposition of maintenance fees to encourage the lapsing, of monopoly rights on inventions without commercial significance would constitute a solution looking for a problem.

It is not the purpose of this statement to identify all of the specific provisions that are either well or poorly adapted to the specific purposes of patent reform nor to propose detailed changes to improve workability or effectiveness. There are many individual provisions which will require major changes in the practice and which will draw heavy fire from the patent law profession; my view is that we patent attorneys can effectively adapt to most of them. In this category are discovery practice, universal prior art, public appeals, prohibitions against broadening of claims by reissue, more stringent disclaimer requirements, and others. The bill also contains uncontroversial changes which are clearly desirable, such as assignee filing, easing of technical requirements concerning joinder of inventors, measurement of the patent term from the application filing date, and pre-issuance damages for infringement based on a finding of allowability. Two sections, however, are both unwise and unworkable, in my opinion. These are Section 112 on disclosure requirements and Section 263 on the rights of employee inventors.

Under the present statute, Section 112 sets forth the basic requirements for the disclosure to be made in the patent specification. The first requirement is that of making an enabling disclosure, i.e., a disclosure which is sufficiently complete to enable those skilled in the art to make and use the invention. Secondly, the present Section 112 requires that the disclosure include a description of the best mode known by the inventor of making and using the inven

tion. Over the years there has developed a large body of judicial precedent to assist in interpreting the detailed scope of these requirements.

Section 112 of the draft bill carries forward these requirements but also expands greatly upon them in several respects. The proposed Section 112 requires a listing of specific invention dates for each claim, including reduction to practice dates. It requires a description of all know-how required to use or commercially exploit the invention. It requires a specific definition of the range of equivalents to which any element of the claim shall be entitled to extend. These new requirements are obviously onerous, and in many instances are even impossible of fulfillment as a practical matter. For example, it may seem simple in principle to ascertain an invention date or a date of reduction to practice, but a little library work will readily show that what constitutes an invention date and the rules for determining the same are complex and involved and not without conflict of authorities. One of the rules, for example, is that no conception or reduction to practice can be established without corroborating evidence by some one other than the inventor. Indeed, the determination of invention date in contested cases requires long and involved interference proceedings. Accordingly, any requirement to specify invention dates in the specification is obviously totally unrealistic and unworkable.

The proposal to require inclusion of all know-how relating to the practice of the invention, even if the metes and bounds of such know-how were subject to such definition, would greatly expand the volume of written material in patent specifications with respect to any invention as to which such know-how has been developed. And the requirement for an express definition of the range of equivalents to be accorded to claim elements amounts to requiring omniscience on the part of the inventor with respect to future developments in the art as well as presently available alternatives for such elements. The whole purpose of the doctrine of equivalents is to recognize that an applicant cannot be allknowing about available substitutes for components of his inventive embodiment and that as a matter of basic equity he should be entitled to cover other embodiments, even unvisualized ones, which utilize the inventive teaching upon which his patent is based. A hypothetical example or two may help to clarify this. One element of the claim combination may be a fastener. There may be absolutely nothing new or inventive about the fastener itself and just what type of fastener is employed may be totally immaterial to the realization of the inventive results and benefits. The inventor in his application may show a nut and bolt as the fastener. He may recognize and state in his specification that there are many types of fasteners that may be used instead, and may even give a couple of examples such as a rivet and a weld. But there are many, many types of fasteners known to man. Indeed there are literally thousands of fastener patents, many expired, to say nothing of other publications and commercial products. No purpose would be served by making the inventor list each and every one of them under penalty of making his claim avoidable simply by using an unspecified type of fastener. And no benefit would accure to the public by making him list all known types of fasteners in his description. Indeed such an itemization would serve only to obscure the disclosure of the invention, which is a combination of many elements of which the fastener is only one.

As a second example, an inventor of an electric circuit using vacuum tubes in 1940 could certainly not know in advance that within the next ten years the transistor would be invented as a vacuum tube substitute, and indeed that the technical community would come to recognize that as a general rule any known circuit using a vacuum tube amplifier could be convereted to a transistorized equivalent by following simple recipes which would be developed right on the heels of the basic transistor invention. Consequently this inventor could not possibly specify the transistor as coming in the range of equivalents to be accorded to the vacuum tube amplifier recited in the claim. And yet anyone making, using or selling the transistorized counterpart circuit ten years later would be realizing the full benefit of the invention.

In Section 112(d), there is a provision which would purport to restore the pre-1952 doctrines concerning “aggregation" and "old combination". It was to eliminate great confusion that had sprung up in the application of these very same doctrines that Section 103-the unobviousness section which is carried over in the draft bill-was developed for the patent act of 1952. Here again, we have had 20 years and more of judicial interpretation of the meaning of