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Washington, D.C. The committee met, pursuant to recess, at 9:10 a.m., in room 1114, Dirksen Senate Office Building, Senator Philip A. Hart presiding.

Present: Senator Hart (presiding).

Also present: Thomas C. Brennan, chief counsel; and Dennis Unkovic, assistant counsel, Subcommittee on Patents, Trademarks and Copyrights; Bernard Nash, assistant counsel, Anti-Trust Subcommittee.

Senator HART. The committee will be in order.

Mr. BRENNAN. Mr. Chairman, the first witnesses this morning appear on behalf of the American Chemical Society. Senator Hart. President Nixon, would you identify yourself?



Dr. Nixon. My name is Alan C. Nixon. I am president of the American Chemical Society for 1973, and with the authorization of its board of directors, I appear before you today to present the Society's statement. Accompanying me today are Dr. Robert W. Cairns, executive director; Dr. John T. Maynard, chairman of the Society's Committee on Patent Matters and Related Legislation; and Dr. Stephen T. Quigley, director of the Department of Chemistry and Public Affairs.

We appreciate being given this opportunity to comment on certain features of The Patent Reform Act of 1973, S. 1321. The issues addressed by this legislation are both fundamental to the formulation of national science policy and of vital significance with respect to the ability of our nation to resolve many of the problems which confront it. These issues have been under discussion for some time now by the committee on patent matters and related legislation of the board of directors and Council of the American Chemical Society, and a consensus on them has been under development. The viewpoint which we attempt to express is that of the chemical scientific and technological community, as represented by the American Chemical Society.

The American Chemical Society was founded in 1876 and chartered by an act of Congress in 1937 as a nonprofit, scientific and educational organization. Our current membership numbers approsimately 109,000 individual chemists and chemical engineers. This membership reflects a broad spectrum of engagement in academic, governmental, and industrial professional pursuits. About 70 percent of our members are employed by industry, about 20 percent employed by academic institutions, and 10 percent by Government and nonprofit institutions. Under its national charter the society is charged with the responsibility to work for the advancement, in the broadest and most liberal manner, of chemistry, "thereby fostering the public welfare and education, aiding the development of our country's industries, and adding to the material prosperity and happiness of our people.” Also, the charter imposes an obligation on the society to provide assistance to the Government in matters of national concern related to its area of competence. Its Federal incorporation replaced a New York State charter which had been effective since November 9, 1877. We are now almost 100 years old. As a matter of fact, we will celebrate our centennial as the country celebrates the bicentennial.

One of the principal objects of the society, as set forth in its charter, is the dissemination of chemical knowledge through its publications program. That program now includes 20 journals, largely scholarly journals that contain reports of original research in the many specialized aspects of the practice of chemistry, as well as a weekly newsmagazine designed to keep chemists and chemical engi. neers abreast of the latest developments affecting their science and related industries. In addition, the society is the publisher of Chemical Abstracts, one of the world's most comprehensive abstracting and indexing services.

As is indicated by the objectives of the American Chemical Society, we believe that the effective dissemination of scientific and technical information is critical to the development, not only of the society and economy of the United States but also of modern society worldwide. In addition to the journal literature, patents are an important instrument for the dissemination of scientific and technical information. Unlike the chemical field with its many extensive journals program, there are many technical fields in which the pubIished patent is the only source, or almost the only source, of technical information. And even in the field of chemistry, technical information in certain areas of major commercial importance is available only in the patent art for the first several years after the initial discoveries are made. As our technology continues to become more complex, we believe, that a strong patent system is a vital source of technical information and a major stimulus to creativity and invention. The incentives to enter the patent system need to be sustained

and strengthened if the technological preeminence of the United States is to be maintained.

We are here today to discuss the position of the American Chemical Society on certain major changes in the patent laws of the United States that are embodied in S. 1321. Senator McClellan has asked for comment on five aspects of S. 1321; (a) Provision of adversary hearings in the examination process; (b) creation of the Office of Public Counsel; (c) a system of deferred examination of patent applications; (d) a maintenance fee system; and (e) the establishment of the Patent Office as an independent agency.

We agree that these are important aspects of S. 1321, and we plan to restrict our specific discussion today to these matters.

We recognize, however, that there are many other controversial aspects of S. 1321, some of which we would favor and some of which we would oppose. For reasons which will become clear from our comments, we hope that the implementation of the major revisions of our patent statutes under consideration today will not be delayed indefinitely by indecision over the other points of S. 1321. Six years have elapsed since the report of the President's Commission on the Patent System, and we believe it is urgent that these matters be resolved if confidence in our patent system is to be maintained. The American Chemical Society stands ready to advise the Congress on any aspects of S. 1321 beyond those being considered at these hearings, or on other legislative initiatives related to the patent system that would affect the practice of chemistry.

The American Chemical Society shares the concern that has been expressed by many participants in our patent system over the high proportion of patents that are held invalid when litigated in the courts. A frequently mentioned proportion of litigated patents held invalid is 70 to 80 percent. It is obvious that many patents of doubtful merit are being granted by the U.S. Patent Office. We take note, however, of the finding by Professor Irving Kayton of the George Washington University National Law Center that, when the courts consider no prior art other than that known to the Patent Office during examination of the patent application, 75 percent of litigated patents are upheld. While different conclusions may be drawn from this striking fact, we prefer to take it at face value. If the Patent Office had the manpower and resources to bring the totality of existing art into consideration during examination, we would expect that the great majority of issued patents could withstand challenge in the courts, and confidence in the patent system would be improved immeasurably.

Recognizing these facts, the American Chemical Society believes that certain of the changes in our patent statutes proposed in S. 1321 have merit, and I would like to discuss in some detail our position on the major points suggested for consideration by Senator McClellan. Our position in some respects represents a change from that presented to this committee in February 1968 when Dr. Cairns commented on the report of the President's Commission on the Patent System and on the legislative proposals under consideration at that time. These changes in viewpoint have been influenced both by the problems with the issuance of U.S. patents already mentioned

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and by 5 years' further experience with new approaches that hare been introduced in the patent systems of some of the other major countries of the world. We think it is time to give serious thought to modifying our patent procedures.

First, let me discuss the proposal to adopt a deferred examination system. Such a procedure is now used by several important countries, including the Netherlands, Germany, and Japan. In spite of early trepidation and predictions of disaster for this procedure, we think it is fair to say that the results of deferred examination have been good. As anticipated weak patent applications and those of minor commercial merit have been abandoned without the cost or effort of examination. The fund of public knowledge has thus been increased, and most importantly, the examining corps of the countries involved have been able to expand their efforts on careful scrutiny of those applications for which examination is requested.

We favor a deferred examination system, but hasten to add that we have reservations about certain details of the proposals of S. 1321 in this regard. S. 1321 proposes at paragraph 122 (a) that patent applications be laid open to public inspection at an early, unspecified time "before the date of first examination.” In the case of applications for which examination has not been requested, that is, those deferred, we recommend strongly that they be published 18 months after the priority date assigned the application but with the proviso that the applicant have the right to withdraw his application from the Patent Office up to that time if he wishes. This proces dure is used by other countries with deferred examination systems and seems eminently reasonable and fair to us. The applicant has a limited option of foregoing patent protection if circumstances change from the time he files his application, and he has 18 montlis to do the development and market research necessary to define the true scope and value of his invention. Chemical technology is a complex and time consuming art, and we regard 18 months as a minimum reasonable time for evaluating a new discovery.

Turning now to the broader question of whether some form of adversary proceeding should be incorporated in the patent examining process, the American Chemical Society believes that in principle this would be a desirable change from the present ex parte examination. We favor the adoption of new procedures that would have the effect of insuring as nearly as possible that all known prior art is considered by the Patent Office before a patent is granted, for the reasons given above. However, we have serious reservations about the specific provisions of S. 1321 for achieving this result. We believe the powers given in paragraph 3(d) to an Assistant Commissioner to be known as the "Public Counsel" are so sweeping that more mischief than good might be expected from such an officer. We believe that the same result could be achieved more economically and with greater assurance of success by some form of opposition proceedling based on information submitted to the Patent Office by interested third parties. We do not favor the exact procedure in S. 1321 insofar as it provides that the third party may participate in the reexamination process as defined in paragraph 135(d). The reason we have this reservation is our experience with the frequent

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use in other countries of the world of such opposition procedures to harass applicants and delay issuance of patents. I think that would be particularly true in the case of single inventors and so forth. However, we do favor the provisions of paragraph 135 (a-c) which provide for the submission by third parties of prior art not cited by the examiner as the result of his search, followed by examination of the application by the Patent Office on the basis of this art. We are satisfied that this procedure without additional provisions would go far to insure the issuance of C.S. patents that would stand up in the courts.

In Senator McClellan's announcement of these hearings, he also asked for comment on the proposal in S. 1321 that a system of maintenance fees be established for U.S. patents. We believe that this would be desirable, both to provide a measure of financial support for the operations of the Patent Office and to accelerate the process of moving technology into the public domain. However, the specific sums mentioned in S. 1321, that is, $1,000 per annum with a 25 percent escalation each year, seem exorbitant to the point of being confiscatory, and we urge that a more modest scale be adopted. We are favorably impressed by the provision that maintenance fees may be de ferred or waived in the case of individual inventors or small companies and would hope that equitable procedures can be accepted along these lines.

Lastly, comment was requested on the proposal to give the Patent Office the status of an independent agency. The American Chemical Society maintains its long-standing conviction that a strong patent system has been a major factor in encouraging the outstanding success we as a Nation have achieved in science and technology. The stability of the Patent Office appears to have been weakened to some degree in recent years by frequent changes in its leadership and by apparent disagreements between departments of the administration on patent policies. We believe that a strong Patent Office dedicated to firm, impartial implementation of the patent statutes is of vital importance to the health of our technologically based economy. We favor the proposal to make the Patent Office an independent agency to give it freedom from any undue political considerations. This should enhance the respect we all have for this excellent and important organization.

To summarize, the American Chemical Society favors changes in the patent statutes that can be expected to strengthen our patent system and lead to the issuance of carefully examined patents capable of standing up in the courts and earning the respect of all. As the leading scientific and technological Nation in the world, our patent system deserves no less.

Thank you.

Senator Hart. Mr. Nixon, thank you very much. I hope you would express to the society the feeling of the subcommittee that the balance and fairness of this testimony is noteworthy. I recall the position the society took in 1968.

Dr. Nixon. 1968 ?

Senator Hart. And the changes that are reflected in your position now. I think you identified as principal reasons for the change the

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