secure from members of the public an adequate amount of information relevant to the question of whether any given patent should issue.

The administration bill seeks to strike a balance. Applications will continue to be examined by the Office, without public participation, primarily on the basis of information in the Office search files and information submitted by the applicant. Even under current examining procedures and I will briefly describe some improvements in those procedures that the administration bill makes in a momentPatent Office statistics show that this winnowing process results in rejection of some 30 percent of the applications filed and a substantial narrowing of the scope of the claims contained in many others. It seems that there is no need for public participation to challenge claims that will never be allowed or that will be substantially narrowed by the Office. Thus, the administration believes that the optimum time to permit public participation is after the Office has determined-first, that it will issue a patent, and second, what the scope of that patent should be based on all of the information then available to the Office.

A second reason for limiting somewhat the direct participation of the public in the examining process is the concern that in some cases such rights may be abused, particularly by one or more financially powerful and entrenched firms to forestall the issuance to a newcomer of a patent which threatens an established market structure or position. Any opposition proceeding can be misused in this way, and antitrust enforcement officials will have to be particularly vigilant to see that such abuse, insofar as it can be curbed by the rules articulated in such cases as California Motor Transport and Otter Tail, does not occur. But the simple fact is that the longer a competitor has to oppose the application-in S. 1321 virtually from the date it is filed-the greater his opportunity for unjust harassment. Again, it seems to us that the best course is to strike a balance, and that is what the administration proposal for opposition proceedings seeks to do.

Having said all of this, I must recognize that unlike S. 1321, the administration bill would continue the secrecy of most examination proceedings before the Office. The ex parte nature of patent examination creates greater opportunity for abuse by an unscrupulous applicant, and has provoked some critical comment by courts and commentators. However, in addition to the opposition proceeding proposed by the administration, our reform bill would make a number of further changes in Office procedures that will substantially reduce the possibility of abuse of the ex parte nature of examination proceedings. We propose, as does S. 1321, that there be a statutory duty of disclosure upon all persons appearing before the Office. This duty reflects existing law, and is more specific, and we believe more effective, than that articulated in S. 1321. The inventor would file an oath at or near the time of filing; the applicant, whether inventor or owner, would also have to file an appropriate statement, instead of an oath as provided in S. 1321, shortly after the notice of allowance of the patent. Unlike the statement by attorneys found in S. 1321, the administration bill would provide that

the submission of papers to the Office by the responsible patent attorney would be deemed to be an affirmative representation to the Office that there has been compliance with the statutory duty of disclosure. The administration bill would also require submission by the applicant of a patentability memorandum or brief, which would be used by the Office during the examination process. Unlike S. 1321, however, the Commissioner would be given the option, after an appropriate report to Congress in five years, of determining whether or not to continue to require such a brief, or to modify the applicability of the requirements of the bill.

Also, the administration bill would organize examination proceedings more like regular adjudicatory proceedings and provide for the making of a full record of Office actions. The examiner would be specifically empowered to control the examination proceeding. The Administration Bill would further require that assertions of fact be reduced to writing, and that they be supported by empirical data, unless the applicant submits an appropriate showing that there is a reasonable basis on which to draw the conclusion stated. Moreover, if he considers it desirable the examiner would be empowered to request of the applicant further support of any assertions of fact or contentions of law. Many of these provisions are not found in S.

1321.

Although I will discuss this subject in more detail when I move on to the Office of the Public Counsel proposed in S. 1321 it is appropriate to note here that under the administration bill the primary examiner would also be able to request the assistance of an officer within the Office, who then would be able to participate as an adversary to the applicant in the examination proceeding.

Moreover, the administration bill provides that all decisions by the Office shall be in writing and follow the requirements of the Administrative Procedure Act that reasons be given that furnish an adequate basis for Office actions. And, whenever the patentability of a claim is to be decided by the Patent Office, the bill expressly states that the applicant has to meet the Administrative Procedure Act's rule that the proponent of an order has the burden of establishing that the claim is allowable. All final or nonfinal decisions by the Office involving the interpretation of title 35 or regulations promulgated thereunder would hereafter be made public, subject to appropriate safeguards.

We believe that the sum of these procedural changes will be to make Patent Office proceedings more like those of the familiar administrative agencies, to permit the Office to secure from applicants all information within their control which is needed to pass on patentability, and to assure preparation of a complete record of the proceeding. The latter consideration is especially important, since this improved record of Office proceedings will be available both to potential opposers after notice of allowability and to litigants in subsequent court cases concerning issued patents.

I now turn, Mr. Chairman, to the creation of the Office of Public Counsel. S. 1321 would create an Assistant Commissioner of the Patent Office, designated the Public Counsel, and section 3(d) gives this new official a number of responsibilities. He has the full rights

of any third party before the Office. He may intervene in any Office proceeding, or take an appeal therefrom. He is to defend or prosecute appeals from any final action of the Patent Office. He may conduct such investigations as are appropriate to carry out the purposes of title 35. He is specifically made independent of the Commissioner of Patents in the performance of these duties, and may not be removed from office by the Commissioner.

The administration bill does not provide for an independent Public Counsel with responsibilities of this scope. One of the concerns of the administration and the task force has been that the very breadth of the responsibilities conferred upon the Public Counsel by S. 1321 would be likely to impede the effective performance of any one of those functions, particularly when the workload of the Patent Office is presently running at about 115,000 applications filed each

year.

Thus, the administration bill would require the Commissioner to appoint an officer in such organizational structure as he and the Department of Commerce decide. The administration bill also attempts more specifically to define the officer's role, in the belief that such definition will maximize his effectiveness and usefulness. This officer would be empowered (but not obligated) to participate as an adversary in an examination or other proceeding upon the request of a primary examiner, or the Board of Examiners-in-Chief, would be obliged to defend (but could not initiate) appeals to the Board of Examiners-in-Chief and the courts, and would conduct investigations pursuant to authority similar to that proposed in section 24 of S. 1321. Unlike S. 1321, however, this officer would not have independent authority to intervene in examination proceedings, nor would he be able to appeal to the allowance of claims by the Office. He would not be appointed by the President, by and with the advice and consent of the Senate, as provided in S. 1321. However, the Department of Commerce could, and presumably would, make the officer's post one in career civil service.

We believe that two aspects of the officer's role as defined by the administration bill are especially significant. First is the officer's responsibility to defend the rejction of claims by an examiner when the applicant appeals such rejection to the Board of Examiners-inChief. This is an improvement over existing practice, under which the examiners must defend their decisions before the Board-a practice which has generated criticism to the effect that it will bias examiners against rejection and in favor of allowance. Such practice also makes a patent examiner both a judge and, subsequently, an adversary litigant. Second is the provision that a request from a primary examiner serves as the trigger for the officer's participation in the examination proceeding. This should serve to make certain that significant proceedings involving important legal and factual issues occupy the officer's time, since the Office personnel closest to the application process-the examiners-will be free to request assistance from the officer through their primary examiners. Such assistance would, of course, include discovery if necessary.

Now let me turn to deferred examination. Chapter 18 of S. 1321 would create a system of deferred examination of patents. Unless an

applicant requested immediate examination of his application, it would be examined for formal matters and then published. For up to 5 years thereafter, examination would be automatically deferred unless the applicant or any member of the public upon payment of the basic examination fee requested examination. If 5 years pass without any such request for examination, the application would be regarded as abandoned. Presumably as a further inducement to applicants to defer, section 153 (b) of S. 1321 provides that the term of a patent shall be extended by the amount of time examination was deferred.

The basic argument in favor of deferred examination is that the expense and burden of an examination proceeding, both on the applicant and the Patent Office, could be deferred, and perhaps avoided altogether, for alleged inventions whose commercial viability is not apparent at the time of filing. If the claimed subject matter later proves significant, examination can be had on the basis of the applicant's original filing date; if no significance appears, the applicant can let the application go abandoned after 5 years. In short, the applicant can wait to see whether examination is "worth the candle." In cases where he decides it is not, he may avoid the expense and the Office will never have to devote its examiners' time and effort. Theoretically, this permits the Office to devote more time to the examination of those applications of some commercial signifi

cance.

There are, however, costs to such a system, and the administration has decided-after careful study-not to include such a system in its reform bill. The Department of Commerce has already stated that, in its view, such a system would not in fact result in a significant savings of examination time. I cannot shed further light on their assessment of Office statistics, to which I defer here. I would, however, like to express the administration's concern about a system of deferred examination from the standpoint of competition policy.

Under S. 1321, and all other proposals we have seen for deferred examination, applications whose examination is deferred would be published. But current Patent Office experience indicates that only about 70 percent of all applications filed will ultimately issue as patents. Moreover, even those applications which do mature into patents are often amended, during the examination process, to narrow substantially the scope of the monopoly coverage. As a result of publication of deferred applications, however, competitors and potential entrants into a market would face in such applications a number of claims to monopoly power that, upon Office examination, could prove either totally unjustified, or overly broad. These businessmen would not know which claims were legitimate and which were spurious. There is the added danger, too, that applicants, realizing this. would have an incentive to draft claims far broader than those they could reasonably expect to issue from the Office after full examination.

We recognize that section 192 of S. 1321 would permit members of the public-particularly competitors of the applicant-to start the examination process, if they are willing to pay the basic examination fee. It is true that this permits competitors or potential new

entrants to trigger machinery that might eliminate or narrow these unjustified monopoly claims. However, given the delay inherent in any examination proceeding, we do not believe that this safeguard is adequate to obviate the "chilling effect" these deferred applications would have on legitimate research, potential investments, or other desirable competitive activity.

Now, I will deal with the question of maintenance fees. S. 1321 permits the Commissioner to prescribe regulations setting fees to be charged for the examination of patent applications, and other services of the Office. Section 41 (b) requires those fees to effect an overall recovery in the range of 65 to 75 percent of the costs of operation of the Office, with a maximum charge for simple patents of $100. Section 41(b) also permits fee exemptions in order to benefit and encourage individual inventors and small businessmen.

More significantly, however, S. 1321 provides for a system of annual, accelerated maintenance fees, starting at $1,000 per year beginning the fourth year after a patent issues. Section 41 (c) (2) provides that these maintenance fees may be deferred if the patentee establishes either that he has made a good faith effort commercially to work the subject matter patented but was unsuccessful due to circumstances beyond his control, or that he is otherwise unable to pay any such maintenance fee.

The administration agrees with the concept of giving the Commissioner discretion to set his fees so that the Patent Office recovers 65 to 75 percent of the costs of its operation. The Administration Reform Bill would, however, give the Commissioner more discretion to determine the appropriate rate schedule. He would be able to set the initial filing fee low enough as not to discourage applicants from coming to the Office, as long as the final examination and publishing fee he charged for issuing a patent would cover the desired range of cost recovery. Unlike S. 1321, there would be no set maximum fee, nor would the Commissioner be able to prescribe fee exemptions.

The administration bill also proposes a system of maintenance fee payments after a patent issues. Our bill is similar in principle to S. 1321 on this score, but different in form and timing. Our proposal is to require that the patentee, during the life of his patent, file two statements with the Office indicating whether or not he or any person in privity with him is commercializing the subject matter of any claim or claims of his patent, or whether good faith efforts are being directed toward such commercialization. The required statement also must explain and describe the acts and steps which have actually been undertaken in respect of such actual or attempted commercialization. The first of these statements must be filed 10 years after the beginning of the patent term, and the second 15 years from the beginning of the term.

If the subject matter is not being so commercialized by the patentee or a licensee, however, the administration bill provides that the patent shall lapse unless the patentee pays a fee of at least $1,000 and $2,500, respectively, at the 10th and 15th years. The fee is not due every year, as in S. 1321. But unless the patented subject matter was being commercialized in the manner provided by the statute, the patent would lapse if the patentee did not pay the fee, which could not be waived or deferred.