Without unitary leadership of the Executive Branch the Senate Patents Subcommittee, by a 3 to 2 vote, rejected the Scott Amendments last October. Senator Fong, who voted with the majority, has been understood to declare that if he could be satisfied that those Amendments would not in any way adversely affect the operation of the antitrust laws represented by the Sherman and Clayton Acts and their judicial interpretations, he might change his vote. Satisfying Senator Fong on this point should hardly be an insurmountable obstacle, for the proponents of the Scott Amendments (both those who favored them in their original form and those who favor the modified form advocated by the Department of Commerce) have repeatedly declared that they do not advocate any language or interpretation of legislative terminology which would dilute or negate the antitrust laws. It would have been logical for the Justice Department's antitrust specialists to get together with the Commerce Department's patent specialists and work out the legislative formula to achieve Senator Fong's requirements. Since this has not been done, one group of lawyers experienced in patent and antitrust matters has attempted to resolve the impasse by preparing a suggested "Legislative History" 12 which, in their view,

12 This "Legislative History", it may be observed somewhat curiously was prepared by an assemblage which dubbed itself the "Tuesday III" group. This name resulted from the fact that by sheer chance the group actually met on a Tuesday. The "III" was to differentiate it from the "Tuesday I and II" groups, consisting of other members, who were reputed as having authored the original Scott Amendments. The "History" is as

follows:

"By recommending sections 261 (b), 271 (f) and 271 (g), the Subcommittee does not intend to modify the effect of the antitrust laws as heretofore interpreted by the Courts except as follows:

"1. Section 271 (f) (2) (a) removes the authority for a patent license agreement to require a licensee to maintain a certain price in the sale of licensed products as expressed in U. S. v. General Electric Company, 272 U.S. 476 (1926).

2. Section 271 (g) (1) (a) refers to the right of a licensor and licensee to negotiate a royalty of any amount they agree upon in the tradition of our bargaining system as recognized in Brulotte v. Thys Co., 379 U.S. 29 (1964). Any authoritative effect to the contrary in the 7th Circuit decision in American Photocopy v. Rovico, 359 F.2d 745 (1966) (referring to "exhorbitant and oppressive" royalties) would be removed.

"3. Section 271 (g) (1) (c) makes it clear that a package transfer or license arrange ment which does not segregate the charge for each included patent will not (in the absence of other circumstances, such as coercion) constitute misuse or an illegal extension of the patent monopoly. To the extent that this provision would sanction a package license which does not provide for a dimunition in the royalty upon the expiration of a patent included in the package, it would appear to be inconsistent with the position taken by the majority of the court in Rocform Corporation v. Acitelli Standard Concrete Wall, Inc., 367 F.2d 67 (1966). However, it would be consistent with the view expressed in more cases, such as in Well Surveys, Inc., v. Perfo-Log, 396 F.2d 15 (1968).

4. Section 271 (g) (1) (d) provides that a mere difference in royalty rates between different licenses, without more, would not constitute misuse or illegal extension of patent rights. It therefore accords with the view expressed by the 7th Circuit in Bela Seating Co., Inc., v. Poloron_Products, Inc., 16 USPQ 548 (1971). Any authority to the contrary in LaPeyre v. F. T. C., 366 F.2d 117 (5th Cir. 1966) and Peelers v. Wendt, 260 F. Supp. 193 (W.D. Wash. 1966) would be removed. Those cases apparently condemned a lease rate for patented shrimp peeling machines based on the savings from use of the machines over hand peeling, because the peeling industry in the Northwest derived more savings, and therefore paid more than the Gulf Coast peelers. The difference in royalty rates, being based on the value of the invention to the different users, seems wholly within the patent grant and therefore not properly condemned under the antitrust laws. But 271 (g) (1) (d) would not legitimatize royalty rates when used primarily for the purposes of anticompetitive discriminating between licensees.

"Since the decision of the Supreme Court in Lear v. Adkins, 395 U.S. 653 (1969), numeorus lower court decisions have relied upon the public interest to set aside settle ment agreements, consent judgments, and arbitration decisions where a party subse quently attacks the validity of a patent. Continuance of that trend will drastically reduce the number of settlements by agreement and/or arbitration and correspondingly increase court time devoted to litigation. Since such settlements, like decisions on the merits after a full trial, are binding only upon the parties involved, this Subcommittee believes the added burden on the courts and the unnecessary expense to the parties should he avoided. The Supreme Court has recently had occasion to point out the relatively large amount of expensive trial time taken by patent litigation, as compared with other elvil cases. Blonder-Tongue Laboratories v. University of Illinois Foundation, 28 L.Ed.2d 788 (1971). Accordingly, section 271 (h) is intended to over-rule such decisions as BusİR ÇAR Forms Finishing Service Inc., v. Carson, 452 F.2d 70 (7th Cir. 1971). Section 271 (h) has been retained in modified form to permit settlement of litigation where there has been a settlement with approval of a court or by a bona fide independent arbitrator without collusion.

"By including the word "solely" in sections 271 (f) (1) and 271 (g), the Subcom mittee intends that each course of conduct referred to in those sections be considered separately, and the provisions of those sections need not apply when an agreement or arrangement combines one authorized course of conduct with another authorized course of conduct, or with other conditions, limitations or restrictions which result in misuse or illegal extension of patent rights. For instance, section 271 (g) (1) (e) provides that mere package licensing of several patents is legal but would not legitimatize coercive package licensing, as condemned in American Security v. Shatterproof Glass Corp., 268 F.2d 769 (3rd Cir. 1959)."

would effectively prevent the Scott Amendments, if enacted into law, from ever being capable of acting as a defense to an action based upon our conventional antitrust laws. I submit that if this approach is adopted, when the new Patent Law Revision Bill and the revised Scott Amendments are introduced in the next session of Congress, is should satisfy not only Senator Fong but also the opponents to the Amendments in the Justice Department's Antitrust Division. Of course, a little help or support by the Executive Branch at that time would help, and I look for the White House to do so by asserting the leadership and coordinative effort that President Nixon espoused in his speech which I've quoted from previously.

One might ask why should the Scott Amendments be adopted? Why should the conflicting policies of the Commerce and Justice Departments be resolved in favor of a single policy aimed at maximizing the benefits inherent in both the patent and antitrust laws? There are undoubtedly several very good reasons, but my answer to both questions could be summed up in one word: UTILIZATION! Yes, utilization. Utilization of our limited national resources. Utilization of our limited national assets. Utilization of the products of man's genius, man's brainpower, man's ability to invent, to conceive of new and better ways of improving our way of life, of new and better things that aid in our nation's health and welfare, that aid in our nation's prosperity. All of these products are finite assets and their utilization must be promoted and guarded. for if they are lost or left unused they will be wasted. The licensing provisions of the Scott Amendments will foster utilization of patented inventions to a greater degree than ever before. The Commerce and Justice Departments should not stand leagues apart to debate the point with each concerned only with its own narrow perspectives. The administration charged with the responsibility of all phases of government operation should wring from both a single position which it deems will best utilize the patented inventions which are or could be involved.

President Nixon, in his speech from which I have quoted, further stated "an asset unused is an asset wasted". In doing so he called attention to "a change in the Government patent policy which liberalized the private use of Government-owned patents" which he approved by Executive Order in August 1971.13 He stated further: “I directed that such patents may be made available to private firms through exclusive licenses where needed to encourage commercial application." This was a tremendously progressive step in the direction of increasing the utilization of patented inventions for which I am happy to salute him. This step was a giant stride toward overcoming the divisive forces arrayed within the various government departments and agencies which have been charged with administering rights to patented inventions arising out of research which is at least partially subsidized by federal funds.

I trust you will forgive me for making a personal claim to satisfaction at this point. Just as I did publicly in 1967 for the first time, when I addressed the Licensing Executives Society at its meeting in San Francisco,14 so do I now recall the fact that almost 20 years ago I originated or advanced the concept which President Nixon has now embraced, and later gave to it the name "utilization theory." While others concerned with the disposition of rights to government-subsidized patented inventions advanced the "fairness and equity" concept. I argued that utilization was far more important. Others advocated the importance of deciding, as a matter of fairness and equity, whether the government or its contractors should keep title to inventions made in the performance of contracts for research and development, based on relative contributions made by each party. I advocated that even more important to the nation as a whole was the decision as to how the inventions could best be utilized to promote the progress of the arts and sciences, with the conclusion that this could best be done by leaving a defeasible title with the contractors. If they put the inventions into commercial use within a certain number of years, they would keep the title until the patents expired; if not, title would revert to the government which then could license others under the same conditions.

15 Memorandum and Statement of Government Patent Policy issued by President Nixon on August 23, 1971 (36 Fd. Reg. 166, August 26, 1971). This statement revised and updated the original policy statement issued by President Kennedy on October 10, 1963 (2 Fed. Reg. 200, October 12, 1963).

14 Forman, "Retrospections and Introspections Concerning Patents and Government Patent Policy", 49 J. Pat. Off. Soc'y 678 (September, 1967).

The key object, it will be noted, is to promote utilization of potentially valuable national assets.

This utilization theory has even wider application than I could have imagined when I first wrote about it and in the intervening years when I have promoted the concept through speeches, articles and other means.15 It clearly should not be limited to patented inventions arising out of government-sponsored research and development; it should be applied to all patented inventions. After all, a patented invention is just as much a potential asset to the nation whether it was conceived with federal aid or in the performance of a complete non-governmental projection without federal subsidy. What, then, should be done about the terrible wastes of patented inventions that result when patents are invalidated by the courts? Since the Supreme Court re-defined the legislative standards of patentability in the case of Graham v. John Deer six years ago, over 72% of all patents litigated in the Courts of Appeals across the nation have been held invalid.17 This figure should becompared with the 57.4% of patents invalidated by the courts in the period 1953-63.18 Another interesting statistic is the fact only two patents have been held valid by the Supreme Court in the last 25 years. 19

16

In a rather thought-provoking paper, Robert J. Fay, a Cleveland patent attorney, inquires: "A patent-A Civil Right: Is It Being Discriminated Against?" 20 Fay points out that a patent is a right granted by the Constitution, but, it is a right which is being abridged by judicial fiat. Patentees, he notes, are a minority in our society and their patents are rights which are as sacred to them as are the rights for which other minority groups have sought and obtained protection under our civil rights laws. Further, he suggests, the rights of inventors to the fruits of their creations "are just as sacred as the

15 Following is a list of publications and record of testimony by H. I. Forman before various Congressional committees, all on the subject of Government Patent Policy. In which the "utilization theory" was proposed and has since been developed in some depth: Publications a. "Government Ownership of Patents and the Administration Thereof" (27 Temp. L. Q. 31 (1954)). b. "Patents-Their Ownership and Administration by the U.S. Government (Central Book Co., New York 1957).

c. "Federal Employee Invention Rights-What Kind of Legislation?" (40 J. Pat. Off. Society 468 July 1958)).

d. "Wanted: A Definitive Government Patent Policy," (3 PTC J. Res. & Ed. 399 (Winter, 1959), reprinted in Forman, ed., Patents, Research and Management, 509 (Central Book Co., New York, 1961)). e. "Forgive My Enemies for They Know Not What They Do," (44 J. Pat. Off. Society 274 (1962)). f. "Impact of Government Patent Policies on the Economy and the American Patent System," (Patent Procurement and Exploitation 181 (Bureau of National Affairs, Washington, D. C., 1963)). g. "Government Ownership and Administration of Patents," (Calvert, ed., "The Encyclopaedia of Patent Practice and Management, 360 (Reinhold Publishing Corp., New York, 1964)).

h. "President's Statement of Government Patent Policy: A Springboard for Legislative Action," (25 Fed. B.J. 4 (Winter, 1965)).

1. "Retrospections and Introspections Concerning Patents and Government Patent Policy," (49 J. Pat. Off. Socity 678 (1967)).

j. "Government Patent Policy-Yesterday, Today and Tomorrow," (50 J. Pat. Of. Society 32 (1968)).

k. "How the Chemical-Pharmaceutical Industry Views the Government's Patent Polley." (25 Food, Drug, Cosmetic Law Journal 204 (1970)).

Testimony

1. Hearings before House Subcommittee No. 3 of Committee on the Judiciary on H.J. 454 re "Rights of Government and the Employees in Inventions Made by Such Employees," pp. 2, 3 (March 3, 1958).

m. Hearings before Senate Subcommittee on Patents, Trademarks and Copyrights on S. Res. 55 re "Government Patent Policy," pp. 452 and 580 (May 31, 1961). n. Hearings before Senate Subcommittee on Patents, Trademarks and Copyrights on S. Res. 48 re "Government Patent Policy." p. 470 (July 6, 1965)-republished (with foreword by Francis Boyer, Chairman of Board, Smith, Kline and French Laborato ries) n 45 J. Pat. Off. Society 787, 789 (1965)).

o. Hearings before Commission on Government Procurement Study Group No. 6, Wash., D. C., July 29, 1971.

16 383 U. S. 1 (1966).

17 Gausewitz, R. L., "Brief in Support of Proposed Amendment to Sec. 103, Title 35 Patents U. S. Code," Patent Law Association of Los Angeles, p. 8.

18 Calvert, R., "The Encyclopedia of Patent Practice and Invention Management," p 23, Reinhold Publishing Co. (New York, 1964).

19 The Jones patent in Graver Tank and Mfg. Co., Inc. v. Linde Air Products Co., 339 U. S. 605 (1960), and the Adams patent in United States v. Adams, 383 U. S. 33 (1965). The last patent previously found valid by the Court was in a 1945 decision. 20 Unpublished as of the time the present paper was prepared.

right to equal protection of the law and the right to freedom from discrimination are to the ordinary citizen. The taking of an invention from one by an eroding judicial process, i.e., by discriminating against his invention, is just as much a removal of his constitutional rights and he is discriminated against just as much."

Whether or not one agrees with Fay's premise, the fact remains that each patent a court holds invalid represents one more invention which may not be brought to commercial application or to its fullest possible utilization because its originator, assignee or licensee generally will refrain from investing sizeable sums to develop something that anyone can freely imitate after the development has been completed. As President Nixson said, "an asset unused is an asset wasted." Who is to answer and be held accountable for all these potential assets which the federal courts send down the drain marked "patent invalidity?" The Patent Office has for decades been admonished by the courts, by the Congress, by the Executive Branch, by industry, by inventors, by patent attorneys, by just about everyone, to issue patents which will not be held invalid when subjected to judicial scrutiny. The record of patents in the courts clearly indicates the Patent Office is not succeeding in meeting that goal. That poor record, incidentally, appears destined to become worse each year as the Justice Department's Antitrust Division steps up its efforts to attack patents, even those not accused of being misused in violation of our antitrust laws, but are alleged to be invalid on other grounds.

What are some possible remedies to this unhappy situation? Several have been suggested by Fay and others.21 One solution which I have been vocal in supporting from the time it was first proposed is the "Ex Parte Opposition" provision which constitutes Recommendation XI of the Report of the President's Commission On The Patent System,22 and has been incorporated in Senator McClellan's current Patent Revision Bill.23 This provision calls for a citation period of six months after the Patent Office publishes an application for patent otherwise found to be allowable, before the grant is made final. In that period anyone openly or anonymously, can call to the attention of the Patent Office any reference or fact which could cause claims previously found allowable to be rejected. Once this provision is enacted into law the courts should find it possible to place greater faith in the results of the Patent Office's examining procedures. Thereafter, issued patents will be considered not only to have cleared past the searching scrutiny of trained Patent Office examiners, but also the watchful eyes of the members of the public who are likely to be adversely affected by issuance of patents to others in their fields of interest. Even attorneys in the patent unit of the Justice Department's Antitrust Division may find this an excellent aid in their campaign to prevent invalid patents from being granted and thereby become capable of being used to limit competition.

As a supplement to "Ex Parte Opposition" I have another proposal to make, one which I believe deserves very serious consideration by all concerned with maximizing the utilization of patented inventions and diminishing the waste of potentially important national assets represented in patents which are commercially unexploited because they have been judicially invalidated. This proposal, taking a page out of the Lanham Trade-Mark Act,24 is to make patents incontestable under certain conditions after a prescribed number of years.25 My thought is that the grantee of a patent having the 17-year term of our present patent statutes would have the opportunity to make an election at the end of, say the 5th year following issuance of the patent. By simply making applica

21 Cf. Vojacek. J., "A Survey of the Principal National Pttent Systems," Prentice-Hall (New York 1936); and Fortas, "The Patent System in Distress," 147 IDEA 571 (1971). Report issued on November 17, 1966 responsive to E. O. 11215 which established the Commission on April 8, 1965.

S. 643 (92nd Cong., 1st Sess.) § 191, 1971. 24 P. L. 489 (79th Cong., 2d Sess.) 1946.

The basis for this proposal was derived from a recommendation made by the American Society on Inventors, through their spokesmen Dr. E. Burke Wilford and Albert G. Fonda, in testimony at the Hearings on the Scott Amendments. (Cf. Record of Hearings before Subcommittee on Patents, Trademarks and Copyrights, U. S. Senate, on S. 643, S. 12, and S. 1255, Part 2, p. 444 (May 13, 1971). Their recommendation, which they declared was similar to a provision in the Japanese patent law, was to set a limit of 6 years after patent issuance within which patents could be attacked. In private conversations with them later, they suggested to the present writer that after that time the patents could only be attacked on the grounds of fraud having been committed in the prosecution thereof through the Patent Office.

tion to the Patent Office the patent could be recorded as being incontestable thereafter for any reason other than proof of fraud having been committed in the process of obtaining the patent grant. In exchange for this mantle of incontestability the patentee must agree to having the term of his patent foreshortened to a total, say, of 12 years. If the patentee chooses not to avail himself of this opportunity to make this election, the patent will be eligible to run to its full term of 17 years but will continue to be subject to the same attacks and risks which have contributed to the high invalidity record discussed previously.

To those who may instantly react against the notion of incontestable patents as being undesirable for one reason or another, let me remind them that the provision therefor would be coupled with the public opportunity to attack them in Ex Parte Opposition stage. To those who are loathe to accept the concept of patents being incontestable even though "the perfect reference" to invalidate them is found too late to cite during the opposition period, I would sympathize with their personal loss but I would take solace in the thought that the public-at-large may derive numerous benefits. I submit that, just as been pointed out in the comparison made between the benefits of pollution abatement vs. their costs, the very high costs to our national economy of having "100% valid" patents may exceed the gains which we have heretofore thought were received by safeguarding the public against all "invalid" patents. Inconstestable patents can materially reduce the workload of an already over burdened federal judiciary, for one thing. But even more important is the likelihood that the inventor, the patentee, the assignee all will be in a really secure position for the first time in our history to make important decisions such as whether to invest sizeable sums of money in erecting a plant to produce a patented invention. No longer will they have to worry about the likelihood of their patents being attacked and invalidated. With such assurance development of patented inventions, both technological and commercial, will be able to proceed in an orderly, logical fashion as never before.

Of course, if a patent owner is confident that his patent is invincible or at least is willing to take the risks involved he need not take the shortened term route, and can seek the benefits afforded by the full 17-year patent life time.

Why the option? What's the rationale underlying the shortened term? The term of a patent grant is arbitrary, to begin with, and varies from country to country. Whatever the full term provided by law, the provision of an election of a shorter term can produce certain socially desireable results. Reduction and savings in court time and expenses to all parties concerned in litigation is one such result. Increasing the likelihood of commercial exploitation of pat ented inventions-the avoidance of wasted assets in the form of inventions that no one cares to exploit because they are not protected by patents-is another. A third, of course, is that the shortened term will place the patent in the public domain years earlier than at present, thereby increasing competition but doing so only after the patent owner has had a reasonable lead time to recoup his investment and make a deserved profit.

If our laws are changed to provide for a patent term of, say, 20 years from the date an application is filed 26 (rather than the present 17 years after patent issuance), the proposal for incontestability could be adopted with certain modifications. As a nucleus for discussion I would suggest that the elec tion and application for incontestability could be made by the 8th year following the filing of the patent application, and the patented term then would be foreshortened to 15 years from the application filing date.

Coming back to statements I made earlier, I again call attention to the tremendous wastes in precious manpower, time, financial and other national resources, first in the patenting process and then in the courts, not to mention the discouraging wastes in time and money spent for research and development leading to products and processes that never become properly commer cialized for lack of sound patent protection.

I call attention again to the need for better utilization of the great national resources potentially represented by inventions that require the shelter of patent protection in order to promote their development. I again echo Presi dent Nixon's words that "an asset unused is an asset wasted." I will add that un-utilized inventions may be among our country's most wasted assets, and

26 S. 643 (92nd Cong., 1st Sess.) § 154 (b), 1971, calls for just such a provision.