stage of the Patent Office proceeding, potential opposers would have no firm basis for determining their interest in narrowing or defeating the claims in an application. Considering the time and money it would take an opposer to investigate whether the claims of a published application impinge on his commercial activities, and the time and expense to determine whether any grounds existed for opposing the application, it is unlikely that many members of the public would elect to oppose an application until the Patent Office had completed its investigation.

While there would be little benefit in opening patent applications to the public before the Patent Office investigation was completed, such a procedure would impinge upon the legitimate interests of inventors in being given some indication of the likelihood of receiving patent protection before having their inventions disclosed to the public. The fundamental notion of our patent system involves a contract theory under which an inventor is induced to disclose his invention in return for an exclusive right to practice that invention. If this principle were modified to require inventors to publicly disclose their inventions before the Patent Office made any investigation, some inventors might be deterred from filing patent applications, and elect to protect their inventions as trade secrets.

The very broad provisions of S. 1321 relating to reexamination present a possibility for harrassment of patent applicants by their competitors. The opportunity both to participate in the examination procedure and to obtain reexamination thereafter, and the opportunity to obtain broad discovery, could invite competitors of the patent applicant to abuse opposition proceedings. We believe that the objectives of section 135 of S. 1321 can be achieved with the somewhat more limited provision of the bill that will be recommended by the Administration.

Finally, the adversary procedure contained in S. 1321 would result in a significant addition of essentially worthless and duplicative literature to the Patent Office search file, thus increasing the time it would take for patent examiners and the public to review the files. Since all applications would be made public under S. 1321 within six months of filing, the disclosures of these applications would be added to the examiner's search file. However, over 30 per cent (34 per cent in 1972) of all patent applications filed do not result in patents, usually because the inventions disclosed and claimed are not new, or only represent obvious modifications of work done by others. Examiners would be forced to sift through this duplicative material in conducting their searches. Since between 25 per cent and 50 per cent of an examiner's time is given to searching the files of prior patents and publications, the increase in search time that would result from adding published, unpatentable patent applications to the files would be most disfunctional.

The Administration bill is directed toward the same goal as S. 1321, but seeks to strike a balance between the interest of the inventor in not disclosing his invention until he is given some indication of the scope of coverage he might receive, and the interest of the public in the issuance of strong and reliable patents. The proposal that will be made by the Administration would retain the essence of existing law by providing that applications would initially be examined in secrecy. When an examiner determined that the claims in an application were allowable, the application would be published prior to the actual granting of a patient, to permit the public to assist the Patent Office through an opposition procedure.

Following publication, members of the public would have one of two routes available to them. First, within three months after publication of the application, a member of the public could cite patents, publications or other documentary evidence relating to the application, together with a written explanation of their pertinency to the patentability of the application. Based on this submission, the Commissioner would direct further examination of the application. Under the second route, members of the public would be permitted to participate in an opposition proceeding before the Board of Examiners-in-Chief. Under this option, both the applicant and the opposing member of the public would be entitled to submit written briefs, present oral argument, take depositions, discovery or testimony, and present oral testimony and cross-examine witnesses in the proceeding before the Board. However, in proceedings in which the issuance of a patent was only on the basis of prior patents, publications or other documentary evidence, parties would be permitted to take depo

sitions, discovery or testimony and present oral testimony and cross-examine witnesses only upon a showing of good cause.

Applicants whose applications are subjected to this opposition procedure would have interim rights available for the unauthorized use of their inventions prior to the time a patent issued.

We believe the Administration bill would provide a more efficient and orderly process than S. 1321 by requiring that only those applications be published which have been found allowable by the Patent Office examiner. Since the 30 per cent of applications not allowed by the examiner would not have to be considered for opposition, the time and expense both for interested members of the public and for the Patent Office would be reduced. With a clear definition of the subject matter before them, interested members of the public could readily determine whether the subject matter was such as to justify the expenditure of time and effort to find additional prior art not cited by the Patent Office examiner.

Since patent applicants would not be required to disclose their inventions to the public until after they received an indication from the Patent Office that their applications contained patentable subject matter, they would not be encouraged to opt for trade secret protection to avoid the risk of disclosing their inventions without obtaining a patent.

In addition, while opposers would be given adequate procedures to fully contest patentability of an application during an opposition proceeding, the Administration proposal includes limitations which are believed to reduce the possibility of harrassment. These limitations include the good cause requirement for obtaining discovery and the like when the opposition is based only on documentary evidence relating to the state of the art, and the fact that the public cannot participate during the initial examination before the Patent Office examiner. The Administration proposal would also avoid increasing the size of the search files through publication of the 30,000 applications per year that are denied by the Patent Office.

Accordingly, it is believed that the Administration bill will achieve the goal of S. 1321 of strengthening the basis for the presumption of validity of issued patents by affording the public an opportunity to participate in an adversary proceeding, but will avoid the accompanying undesirable side effects of section 135 of S. 1321.

CREATION OF THE OFFICE OF PUBLIC COUNSEL

A strong public interest exists, of course, in the issuance of patents on inventions which satisfy the statutory criteria. Problems are wrought upon society both by the issuance of invalid patents and by the refusal to issue patents on deserving inventions which in fact satisfy the statutory criteria.

S. 1321 recognizes the public interest in the examination and issuance of patents with the creation in section 3(d) of an Assistant Commissioner for Appeals, Litigation and Public Counsel, referred to in the bill as the Public Counsel. The Public Counsel would carry out a number of functions, many of which do not exist under present law. He would be charged with the duty of assuring as an advocate through the adversary process, that high quality patents are issued by the Patent Office. To accomplish this goal, he would be empowered to intervene and participate at any time in any Patent Office proceeding or any appeal from a Patent Office proceeding when, in his judgment, it was in the public interest. In addition, the Public Counsel would be charged with defending appeals from a primary examiner before the Board of Examiners-in-Chief and appeals from the Board before the Court. Under S. 1321 the Public Counsel is also given broad power to issue subpoenas or orders in connection with matters under investigation by him.

While sympathizing with the objectives underlying the proposal for a Public Counsel, the Department of Commerce questions the effectiveness of a Public Counsel as proposed in S. 1321. As a practical matter, the Public Counsel could not intervene and participate in any significant number of the 115,000 patent applications examined by the Patent Office each year nor could he oppose a very substantial number of the 75,000 patents issued annually. He would have no rational basis on which to select those cases in which intervention or opposition would be most desirable. The value of a patent is determined by the marketplace and is generally difficult to judge from reading the application. The importance of an individual case does not depend upon the resources of

the patent applicant or the field of subject matter involved. Therefore, the Public Counsel's decision on the cases in which he would participate would likely be no more than a random selection.

Members of the public in a particular industry who are able to determine that a particular invention is significant and wish to oppose it would be permitted to do so under both the Administration bill and S. 1321. If the opposer has a real interest in the subject matter, it is likely that he would want to present his case directly, and not through a Public Counsel. Accordingly, the Department of Commerce questions the value of the Public Counsel in this facet of his role as ombudsman.

We believe, however, that certain of the functions proposed for the Public Counsel would be practical and would strengthen the tools of the examiner and improve the examination procedure. Accordingly, the Administration bill will contain provisions to ensure the performance of these functions.

Under section 3 of the Administration bill, the Commissioner of Patents would be required to designate an officer of the Patent Office to perform certain limited functions to aid examiners and reinforce the ex parte examination proceeding. The bill would empower a primary examiner to request assistance from the officer with respect to the examination of a particular application when the examiner believed it desirable to transform the proceeding into an adversary one. The officer would interevene and participate in the examination proceeding if he considered it in the public interest to do so. The officer would have the right to seek discovery of an applicant and would have other rights and powers of a party in Patent Office proceedings. While it is expected that such intervention would occur only in a few situations, it is believed that this additional resource afforded the examiner would strengthen the examination process.

In addition, the Administration bill would provide that all appeals from decisions of examiners to the Board of Examiners-in-Chief would be defended by the officer established under section 3 of the bill rather than by the examiner. This would improve the adversary proceeding before the Board by having the examiner's position presented by another person.

Finally, the Administration bill would codify the existing authority of the Patent Office to investigate the conduct of patent applicants, attorneys and those engaging in unauthorized practice before the Office. The existing authority to investigate such matters would be strengthened by providing the officer established by section 3 of the bill with subpoena power with regard to such investigations. While fraud on the Patent Office or improper conduct on the part of an attorney or agent registered to practice before the Office is, insofar as we know, a rare occurrence, the added authority in the Administration bill should go far to dispel any questions of imporper behavior in such situations.

ESTABLISHMENT OF A SYSTEM FOR DEFERRED EXAMINATION OF PATENT

APPLICATIONS

Deferred examination of patent applications has been suggested periodically at least since the early 1960's as a means for overcoming the backlogs faced by patent offices around the world. The Netherlands, in 1964, became the first country to adopt a deferred examination system. Since that time, deferred examination was adopted in West Germany, Japan, Hungary and Australia.

The rationale for deferred examination is that since not all applications for patents are of the same value, it is not good economic practice for a patent office to devote substantial efforts to applications having little value when it could rely upon the selection of the more important applications by an applicant and his competitors who are in the best position to make such selections. Such a system reduces the number of applications requiring examination be cause some applicants who chose to defer the examination of their applications later conclude that their inventions do not warrant examination and permit them to become abandoned. On the assumption that the deferred applications which are later abandoned involve inventions of lesser value, a deferred examination system permits a patent office to concentrate its resources on the more valuable inventions. Of course, if the examination of an application is merely deferred, no savings are realized.

S. 1321 provides for a deferred examination system. Under this system, examination of an application will be deferred unless the applicant requests

examination. At any time before the expiration of five years from the earliest effective filing date of the application, anyone could request examination. Members of the public would be required to pay the basic examination fee and the applicant would be required to pay all other fees associated with the application.

When examination of a deferred application is requested, the Commissioner would be empowered under S. 1321 to require the applicant to request examination of any of his other deferred applications which relate to the deferred application. If no examination is requested or the applicant fails to request an examination called for by the Commissioner of any of his related deferred applications, such applications become abandoned. There would be a tolling of the term of a deferred application for the period during which the examination of such application was deferred.

The bill which the Administration will submit contains no provision for deferred examination. We believe that a deferred examination system would not be appropriate for the United States since the disadvantages associated with such systems clearly outweigh their asserted benefits.

Serious consideration of a deferred examination system for the United States began with the Report of the President's Commission on the Patent System in 1966. The Commission recommended giving the Commissioner discretionary authority to institute deferred examination. This recommendation was founded in part upon an estimate by the Patent Office in 1964 that the then existing backlog of 220,000 applications and pendency period of four years would gradually increase until, by 1975, there would be a backlog of 535,000 patent applications with a pendency period of 10 years. Of course, this projection has not come to pass. At the present time, there is a backlog in the Patent Office of less than 200,000 applications and a pendency period of 23 months.

Accordingly, the principal reason for the adoption of deferred examination in the Netherlands, West Germany and Japan-that of a steadily increasing and unmanageable backlog of applications-does not exist in the United States. For this reason, adoption of a deferred examination system in the United States cannot be based on increasing backlog.

Another, more speculative, benefit has been suggested by some proponents of deferred examination systems. Their rationale is that, with deferred examination, patent office examiners would be required to examine fewer applications and would thereby be able to spend more time on the applications they did examine, resulting in an increase in the strength and reliability of issuing patents. These proponents point to the experience of the Netherlands Patent Office in which only 40 to 45 percent of the applications filed are subjected to full examination. Upon closer analysis, however, it is not believed that the adoption of a deferred examination system can be based on this rationale either.

Initially, it should be noted that the Dutch and other foreign systems for deferred examination differ from the deferred examination proposal contained in S. 1321. Under the Dutch system, the examination process is broken into two stages-search and examination. The Dutch experience has been that a search is requested for approximately 65 percent of all patent applications filed and that subsequent examination is requested for only 40 to 45 percent of the applications filed. Accordingly, the Dutch deferred examination system saves searching time for examiners in only 35 percent of the applications filed. If the Dutch experience could be translated to the United States, it would still mean that possibly 65 percent of the applications filed would be examined since S. 1321 does not separate the search and examination functions.

It is not believed, however, that the Dutch experience can be translated to the United States. In the Netherlands, approximately 85 percent of the patent applications filed are of foreign origin, compared with approximately 30 percent for the United States. This substantially different mix of home and foreign origin applications is significant. For most applicants, their home market is the most important and they are more likely to seek the issuance of a patent in their home country before they seek a patent in a foreign country. Statistics from Japan, where the percentage of home origin applications is more like that of the United States, tend to confirm this. During 1971, the first year of operation of the deferred system in Japan, the rate of requests for examination was more than 50 percent greater for applications filed by Japanese nationals than for applications filed by foreigners.

This is not surprising, however, since filing in foreign countries presents a different picture than filing in a home country. The Paris Convention for the Protection of Industrial Property contains a provision entitling a patent appli cant to obtain the benefit of the filing date of his first filed application for all subsequent applications filed within one year. Once an application is on file in a foreign country having a deferred examination system, the applicant can then do nothing for a period of from five to seven years while awaiting a decision as to the scope of protection he will receive in his home country. The applicant can also use this period to determine, based on the protection he is given in his home country and the market conditions in the foreign country, whether it is economically feasible for him to utilize the patent in that particular market. Thus, after an applicant has secured a filing date in a foreign country to preserve his option to later obtain a patent, he has many reasons to defer examination.

In view of the foregoing considerations, it is believed that no correlation or estimate of what the United States experience would be with a deferred examination system can be based on the Dutch experience.

Notwithstanding the questionable benefits which the United States would realize with a deferred examination system, there have been recent indications both in Great Britian and in connection with the drafting of the European Patent Convention that the disadvantages of deferred examination systems outweigh their alleged benefits. The principal disadvantage which has been recognized by those countries having experience with deferred examination systems is that such systems transfer to members of the public the obligation to examine all deferred applications which might possibly issue later and have impact upon their manufacturing or retailing activities.

The effect of this transfer is the creation of uncertainty among the competitors of a patent applicant over whether the subject matter disclosed in a deferred patent application will ultimately be patented. Without knowing whether a patent will be granted, competitors cannot afford to risk investment in entering a market. This uncertainty has a paralyzing effect on industry with respect to efforts to produce new products potentially covered by published and deferred patent applications.

It is not an answer that competitors of a patent applicant may request examination of the deferred application themselves by paying a fee to the Patent Office. The expense of requesting examination in a large number of applications in a given technical field can be prohibitive. Moreover, it is difficult for a competitor to ascertain when he should request examination of a deferred application, since the claims contained in an application when filed could be broadened or changed in scope during subsequent examination so that patent protection might be granted on a broader basis or with a different scope than a competitor might anticipate. Therefore, to protect his interests, a competitor must scrutinize the entire disclosure of an application, and not just the claimed subject matter. If broadening or changes in the scope of claims is not permitted, the claims in the application as initially submitted will be so broad as to prevent a good analysis by third parties.

In addition, deferred examination systems also have other adverse consequences. In one respect, such systems are largely self-defeating. Since deferred applications, including those which later become abandoned, would be published, at least 30,000 search documents of dubious value would be added to the examiners' search files each year, thereby increasing the time it would take for examiners to perform their searches. Thus, the limited savings in examiners' time which might be realized from a deferred examination system by virtue of having to search fewer applications would be largely offset by the fact that the examiners would have to search additional, duplicative material on the applications that were examined.

It should also be noted that deferred examination systems are not without adverse cost implications, especially if one assumes that the examining manpower will not be reduced, but merely spread over fewer applications. This could have serious cost consequences for patent applicants and patentes. In fact, the greater the number of applications abandoned under a deferred examination system, the greater the fees that would have to be charged for those applications which were examined.

In summary, the Administration has not included a deferred examination system in its proposal because it is convinced that the reduction in the number