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First, therefore, we urge your subcommittee to refrain from reporting this bill until its very novel provisions have been deliberated upon and debated by those most familiar with the subject matter to which it relates-the members of the patent bar.
As to the five subjects designated as being included in the forthcoming hearings we have only the following comments at this time:
PUBLIC ADVERSARY HEARINGS
We have previously approved provisions for public assistance to patent examiners after the issuance of patents, and revocation of patents, for cause, within a limited period after their issue.
We oppose publication of all applications because it would "pollute" the fields of search with large numbers of redundant publications and more than double the expenses of publication incurred by the Patent Office.
Further consideration is necessary of the provision for participation by third parties in the prosecution of published applications. It is questionable whether the prospective enhancement of the validity of issued patents so effected would justify the additional costs imposed upon individual applicants by such procedures.
Insofar as the contemplated duties of the proposed Public Counsel are no more than those presently discharged by the Solicitor of the Patent Office or members of the examining corps, their mere transfer is unobjectionable.
The extremely broad subpoena powers of the proposed Public Counsel which would be conferred by Section 24 of the bill are, however, entirely unprece dented, and such provisions should not be approved, if at all, without full deliberation and open debate by the patent bar.
This proposal has been fully considered and rejected by the organized patent bar after full deliberation and open debate.
The experience of foreign countries which have implemented deferred examination practices has since demonstrated that any supposed advantages of deferred examination are more than offset by the "pollution" of the fields of search by redundant publications.
Furthermore, the advances made in recent years by our Patent Office in reducing its backlog have entirely removed the originally envisioned need for deferred examination.
Therefore, we oppose these provisions.
FEE SCHEDULE AND MAINTENANCE FEES
We oppose any schedule of fees designed to recover 60 to 75 percent of the costs of operation of the Patent Office for the reason that such a fee schedule inevitably would impose prohibitive financial burdens on individual inventors and small businesses, thereby inhibiting innovation. Also, such a fee schedule would make the Patent Office a profit-making federal operation when it should not have such function. The profit-making aspect of the Patent Office operation would come about because the government not only receives fees from patent applicants, but also obtains taxes which are levied on royalties and transfers of patents. The latter revenue would not be received by the federal government at all if it were not for the operations of the Patent Office, and so should be credited against the cost of operation of the Patent Office before the subject of Patent Office fees is considered.
Provisions for maintenance fees have previously been considered and rejected by the patent bar because of the severe penalty such fees would impose upon individual inventors and small businesses. Such fees would tend to stifle invention and encourage secrecy, thereby running counter to the Constitutional goal of promoting the progress of the useful arts. The exculpatory provisions of Sections 41(b) and (c) might lessen such burdens, but would not eliminate them so that the net negative effect would remain. The sections also would substantially increase the work load of the Patent Office. The proposed maintenance fee of at least $1,000 per year potentially would generate enor
mous amounts of revenue, entirely disproportionate to the cost of operating the Patent Office.
We unqualifiedly approve the proposal to make the Patent Office an independent agency.
Its integration into the Department of Commerce, which resulted from a recommendation of the Hoover Commission, was "an experiment noble in purpose", as Mr. Hoover once characterized the 18th Amendment, but it was no more successful than the latter. It is time to revert the status of the Patent Office to that of an independent agency, and we applaud Senator Hart's proposal to that end.
Very truly yours,
Senator JOHN L. MCCLELLAN,
RICHARD F. CARR, President.
MACHINERY AND ALLIED PRODUCTS INSTITUTE,
Chairman, Subcommittee on Patents, Trademarks, and Copyrights, Committee on The Judiciary, U.S. Senate, Washington, D.C.
DEAR CHAIRMAN MCCLELLAN: The Machinery and Allied Products Institute appreciates the opportunity to offer its views on S. 1321, "For the general reform and revision of the Patent Laws. . . ." ." 1 The membership of the Institute is comprised of capital goods and allied industrial product manufacturers. These are high technology industries and, as such, have a very deep interest in the American patent system and in proposals for changing that system. It is our understanding that, although the public hearings on S. 1321, which were recently concluded, were devoted to the consideration of only five ". . . impor tant new issues" raised by this proposal, written statements may consider all aspects of the bill, and accordingly our statement discusses ten of its provisions. However, before considering separately these several sections of S. 1321 we should like to put our specific comments in a broader perspective by commenting briefly on the general thrust and the broader possibilities of this bill.
The spirit of S. 1321 emerges in Section 1 thereof, "National Patent Policy," by a subtle but substantial alteration of the constitutional provision from which it derives. Article I, Section 8 of the Constitution asserts that the Congress shall have the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (Underscoring supplied.) The constitutional word "right" is changed to "privilege" in Section 1 of S. 1321. By implication an applicant for letters patent who seeks to have secured to him the right to which the disclosure of his discovery entitles him now becomes a supplicant who desires of his government not a declaration of his rights but the award of a special privilege. The author of this proposed change may not have intended the significance which we attach to it but, regardless of intent, it seems to us a precursor of other and unquestionably significant changes in our patent laws which, in our judgment, would tend in the long run greatly to reduce the usefulness of a patent system which has served this country well.
We believe that any number of changes, discussed in more specific terms below, would tend to discourage the use of the patent system which is to say that the inventor of new art would decline publicly to disclose such new art but rather would conceal it and attempt to profit from his discovery by maintaining it as a trade secret. Although the Institute would oppose at any time legislation harmful to the patent system-and we think S. 1321 would be harmful this bill is especially untimely during a period when the United States is losing much of the technological lead which it has for so many years enjoyed.
1 As this letter is filed, the White House has announced the submission to Congress of "The Patent Modernization and Reform Act of 1973." No copy of the bill is yet available and, hence, no comment on it is offered here.
Our specific comments on certain provisions of S. 1321 appear below: Section 3(d), Public Counsel.-This section of the proposal would provide for creation of a "Public Counsel," independent of the Commissioner, who would be empowered to intervene in, participate in, and review virtually all Patent Office proceedings and appeals. Section 24 of the bill would arm him with the power of subpoena. This new office and the extraordinary grant of authority to it are designed, ni the language of the proposed statute, ". . [to] assure... that high quality patents which meet the statutory and constitutional criteria therefor issue from the Patent Office."
We oppose this proposal. If the function of "Public Counsel" is to represent the public interest, then this new office would in large measure simply duplicate the function of the patent examiner-and the solicitor-whose responsibility is, and always has been, to represent the public interest.
It would seem inevitable that the Office of Public Counsel, in order to discharge its broad mandate, would necessarily require a corps of competent engineer/attorneys to retrace ground already covered by the Patent Office staff. Aside from additional cost thus involved, the actions of the Public Counsel could only serve further to delay action on patent applications and thus to aggravate a condition cited by Senator Hart as one of the reasons for "reforms" proposed in S. 1321.
We think the Public Counsel's choices of cases for intervention or reviewout of the 100,000 applications filed and the 70,000 patents granted annuallywould have to be a largely, if not wholly, subjective judgment since there appears no logical or objective basis for making such judgments. And the very broad powers to be confided in the Public Counsel, if unreasonably or arbitrarily exercised, could obstruct Patent Office business and tend to be destructive of the patent system.
As for "high quality patents" they are the primary responsibility of the Commissioner. Yet this proposal would make the Public Counsel responsible for achievement of the same goal. It seems scarcely necessary to argue the undesirability of splitting such a fundamental responsibility with its almost inevitably divisive effects on the organizational structure of the patent system. Section 41-Patent Office fees
In general, this section of the bill calls for a fee structure ". . . designed to effect an overall recovery in the range of 65 to 75 percentum of the costs of operation of the Patent Office. . . ." In seeking attainment of this general standard, and subject to certain fee exemptions ". . . to benefit and encourage individual investors and small businessmen," this proviso says that "Beginning the fourth year after a patent issues, the maintenance fee thereon shall be no less than $1,000, and shall increase annually by at least 25 percentum each year...."
If we understand the proposal, the minimum maintenance fees for a single patent with a twelve year life from date of filing would aggregate a little more than $15,000. Minimum maintenance fees under the proposed schedule for one patent with a 17-year life from date of filing would amount to more than $54,000. If the suggestion of a 20-year patent life from date of filing were adopted, and this has been frequently suggested, the minimum maintenance fees for a single patent over that period would amount to almost $110,000. An illustration of minimum annual fees, under the proposed schedule with totals aggregated for each of these three periods, appears in Attachment I to this statement. This fee schedule approaches confiscation.
Aside from these exorbitant figures, there is the question of whether or not it is desirable to establish a precise statutory formula for the recovery of patent office costs through maintenance fees. Congress reviews the Patent Office annually and approrpiates funds for its operation. This, it seems to us, is the proper function of Congress and would appear to be much more appropriate than setting the Patent Office up in business for itself. Moreover, the detailed specification of a maintenance fee formula appears to be a radical departure from similar statutory provisions. For example, even the Tennessee Valley Authority, which has a product to sell, is not required to recoup a fixed percentage of its costs of operations. Rather the pertinent statute merely states that power is to be sold in such a way as to assist in liquidating the cost of the project. The payment of exorbitant maintenance fees alters the basic philosophy of the system by requiring the patentee to pay tribute for
continuance of the limited monopoly right-now to be deemed a "privilege"— which a patent confers.
It is, of course, not a novel proposal and is apparently patterned on graduated systems of maintenance fees common to foreign patent systems. This has been a source of irritation to Americans holding foreign patents and the proposal to equalize this burden on foreigners holding U.S. patents is appealing in that respect. One must also acknowledge that the proposal is at least plausible insofar as it would encourage the "working" of patents and permitting useless ones to lapse. But there are better ways to achieve that end. However, frankly, we doubt if recoupment of the operating costs of the Patent Office is the real intent of this proposal. Rather, we think, its purpose may be to "encourage discouragement"—that is, to persuade patentees to discontinue maintenance of patents already in existence. Maintenance fee costs of the proportions suggested above are very likely to produce that result-and, in our opinion, to the serious long term detriment of the United States notwithstanding those merits of the proposal acknowledged above. In part, this is because it takes time to exploit a patent, an exploitation that is more important to society than to the inventor since his success depends upon the usefulness and the broad public acceptance of the thing he has created.
The more significant and the more dangerous aspect of this proposal's adoption would be unseen. Almost surely it would tend to reduce and probably drastically-the flow of patent applications. New technology, including scientific and engineering advances of basic character, would be concealed from public view in the form of trade secrets rather than being disclosed to the world as the grant of a patent right requires. We should not lose sight of the fact that at least two great public interests are served by the grant of letters patent. In addition to the public benefits deriving from exploitation of the exclusive right of practice provided by the patent, the products of the requirement of disclosure are both a source of instruction and finite developments which permit others to further refine, develop and build upon them. To sum up, the imposition of maintenance fees at the level contemplated by S. 1321 will not only serve greatly to diminish the incentive to patent but will tend seriously to choke off the very useful public disclosure of new technology which our patent system is designed to produce.
A lesser-but nonetheless important-adverse result of the proposed maintenance fee schedule is the likelihood that companies will not even undertake development programs on items which, although promising in the longer run, offer no expectation of early commercialization. At the best, the new technology involved will be delayed; at the worst, it will be lost and perhaps to foreign competitors.
Section 101-Subject matter patentable
As in the case of substituting a "privilege" for a "right" in Section 1, noted above this section of S. 1321 would substitute for the present statutory affirmation that "A person shall be entitled to a patent unless . . ." the nega tive declaration that "A person shall not be entitled to a patent if . . . (Underscoring supplied.) This change may mean little or much but at least it would seem to place the burden of all persuasion on the applicant and replace language well settled by custom and usage by language that may constitute an invitation to extend the long continued judicial assault on the patent system. We strongly recommend against this sort of unexplained change in language; if some change of substance is intended the Committee's intent should be clarified in the legislative record.
Further significant changes in language are sprinkled through the several subsections of Section 101. By setting up new bars to the grant of a patent based on foreign knowledge or use, public use and sale as well as "other tangible form" provisions would tend very substantially to increase the amount of prior act to be searched, found and considered. Expense would be correspondingly increased in significant amount.
Subsection (a) of this provision of S. 1321 proposes adoption of a require ment for an enormously expanded disclosure requirement. The cost of prepar ing patent applications would of course be commensurately increased. We shall comment on only one aspect of this expansion-the requirement for disclosure of "... all know-how known to the inventor and applicant necessary or com mercially requisite to make, use, and work the same."
This requirement evidently contemplates full disclosure of knowhow constituting valuable trade secrets. We have no doubt that many, if not most, applicants who confronted this costly-and perhaps competitively disastrous— possibility would choose secrecy rather than exposure. That is to say the patentable invention would not be patented but treated as a trade secret with a further restriction on use of the patent system and, of course, a corresponding reduction in public disclosure of new technology. Adoption of the requirements of this section, in conjunction with certain other provisions of S. 1321 with which this statement is concerned, would tend, in our judgment, substantially to destroy the patent system as we have known it. We strongly oppose any such disclosure requirement.
Section 115-Oath of invention
Statutory language relating to the oath of invention would be substantially enlarged by S. 1321. We are concerned particularly by the language of subsection (a) (2) which prescribes the oath to be executed by the applicant, who is not an inventor, but is "a corporation or other business entity." To begin with, this oath, to be executed "after notice of allowance," is purely supplemental and would seem to add little to the oath required of the inventor at the time of filing. That aside, a more important question is raised as to the metes and bounds of this expanded requirement. If the oath finally prescribed merely recites that the affiant believes himself to be the most knowledgeable in the applicant organization concerning the facts to be set forth in the oath and that he does not speak for each and every employee or agent of the organization but makes the oath solely upon his personal knowledge, then there would seem to be no great difficulty. If, on the other hand, the affiant is expected to speak through his oath for each individual employee or agent of the entity, then the provision would be unrealistic and unadministrable and made more so by the size of corporations required to so affirm and by the mobility of personnel involved in research and development activities.
Section 315-Examination or reexamination and Section 137-Participation of parties
Our discussion here engages two sections of S. 1321 inasmuch as both are directly concerned with the bill's intent of providing for public adversary proceedings and, taken together, authorize the initiation of opposition by anyone between the period of public availability (Section 122) and allowances. Such opposition may be either ex parte or inter partes at the opposer's election (Section 135(d) and 137) and he may, if he chooses, remain anonymous (Section 137 (d)).
We acknowledge that such opposition may, in some cases, strengthen the presumption of a patent's validity. But at what cost? Assuming the vigorous exercise of rights of opposition contemplated by these two sections-and this, we think is a reasonable assumption-there could not fail to be substantial and costly delays in patent issuance, the avoidance of which is one of the express purposes of S. 1321.
In addition to the question of cost there is a manifest potential for frivolous, meddlesome and harrassing opposition. There is also the potential for opponents to significantly delay the issuance of a patent with complete impunity, and whether successful or not, to reduce the applicant's period of protection. Indeed, we are told that this is fairly common practice in some foreign jurisdictions. To the extent that this occurs, S. 1321 will have introduced one more disincentive to use of the patent system and with all of those detrimental consequences of that result already described.
Probably the most serious objection to these provisions of S. 1321-when considered with the public availability requirement of Section 122-is its fundamental unfairness to the applicant. Under present law, even though an application for a patent is filed, the applicant may at any time prior to allowance elect not to go forward with the application and still maintain the secrecy of the invention as a trade secret. Publication to the world under Section 122-an essential first step in the process of public adversary proceedings here sought-would destroy this right. Again, the disinclination to file for a patent is strengthened.
If it is the judgment of the Subcommittee that some provision for adversary proceedings is necessary to strengthen the presumption of validity, then we believe the relevant sections of S. 1321 should be changed to provide:
1. There should be no publication of applications prior to allowance.