ནག་༑ ཞ་"། ents involving a double patenting problem. We believe that this limitation on the effect of a terminal disclaimer in a possible double patenting situation is wrong and should be opposed. Section 288 provides that an infringement action may be brought on a patent provided the requirements of Section 203 (a) are met. The effect of this is very unclear and could be severely limiting on a patentee's right. It should be compared with the current Section 288 which merely denies the patentee his costs if he fails to disclaim. TERM OF PATENT AND STATUTE OF LIMITATION Section 153 limits the term of a patent to twelve years from the filing date except that the term may be extended by the period of deferment of examination. We are opposed to this provision for two reasons. The period of twelve years from filing is far too short. Many inventions, particularly those frequently referred to as being "ahead of their time", would only then be coming into full commercial use. This provision is also defective in that it leaves in the hands of the applicant or third parties a degree of control over the life of a patent. Patents should be of uniform duration. We are not, however, opposed to the concept of measuring the life of a patent from its filing date, provided the term is long enough to permit development of the invention and adequate remuneration for the patentee. Section 286 shortens the current statute of limitations from six years to two years, illustrating but another unreasonable counter-productive limitation of the patentee's rights. RETROACTIVE LICENSE Section 184 (a) prohibits the grant of a retroactive license regardless of the circumstances. This seems unwarranted particularly in view of the current trend toword liberalization of foreign trade. LICENSING Section 261 changes the current law to eliminate the patentee's express right of territorial licensing. This is another unwarranted diminution of the patentee's rights. EMPLOYEE-INVENTOR RIGHTS Section 263 provides for a minimum of two percent of the profit or savings to the employer as necessary consideration for any assignment from the employee to employer. This minimum appears to be an arbitrary amount unrelated to the status of the employee, the complexity of the invention, or the contribution of the employee to the invention. The determination of such a percentage for a complex system including numerous inventions would present an accounting problem impossible of practicable solution. This is a matter which is better left to private contract. We trust that our comments in connection with the Hart Bill both in this letter and in our previous letter to you of September 11, 1973 will be helpful to your subcommittee in this very important field letter. If we can be of further service to you in this connection, please let me know. Respectfully submitted, JOSEPH J. PREVITO, President. SUPPLEMENTAL STATEMENT OF JOHN J. PEDERSON CONCERNING S. 1321 The following comments supplementing my statement presented Tuesday, September 11, 1973, are in specific response to positions taken and statements made by other witnesses, namely, Messrs. Dann, Schuyler, Irons, Brenner and Hogan, on the subjects included in the hearing agenda. ADVERSARY PROCEEDINGS A. A major objection raised by several witnesses to S.1321 is the requirement for publication prior to detailed ex parte examination proceedings. The belief that, as a matter of fairness if not due process, the inventor is entitled to at least a prima facie determination of patentability before having to make a decision as to whether to publish his invention or to keep it as a trade secret bears reexamination in view of the Subcommittee's questions. Although this proposition has been so widely held in the patent profession as to be considered axiomatic, and although I personally was of that conviction as recently as the time of my principal statement and testimony, I now believe that it is not well-founded. There is nothing inherently inequitable or unfair about making early publication a condition of eligibility for the privilege of receiving a patent grant. Moreover, the choice between accepting a patent and retaining the subject matter as a trade secret is not available, as a practical matter, in the majority of cases, assuming that the inventor or his assignee wishes to realize any profit or other commercial benefit from the invention. In the ordinary case, the innovative advance is ascertainable by analysis of the commercial product in which it is used, and as soon as the proprietor puts such a product on the market the cat is let out of the bag. Accordingly, there is no real choice except in those rare cases, like the formula for Coca-Cola syrup, which defy identification by product analysis. I estimate that the prospect of maintaining a commercially useful innovation as a trade secret for any substantial length of time exists in well under 10% of the cases; outside the chemical field, the trade secret option is practically nonexistent. Although not inequitable or unfair, however, it may be unwise to establish an immediate publication requirement. So long as applications are preserved in secrecy during their pendency, or at least for a substantial period of time such as 18 months after filing, most corporations (who constitute the real parties in interest in more than three out of every four applications filed) can, and many do, file patent applications soon after conception without prematurely revealing development programs or product plans. Improvements will be made the subject of additional applications filed as the improvements are made. However, under a system providing for publication of patent applications promptly after filing, it is to be expected that on the basis of fundamental competitive considerations, many applications would be held back until completion of development and final preparations for commercial use. B. It has been argued that early publication would clutter the library of prior art with some 35,000 applications abandoned each year which contain nothing innovative. This argument is manifestly inconsistent with the asserted need to preserve the inventor's right to choose between accepting the patent or maintain the invention as a trade secret. Not all of the 35,000 abandoned applications each year are abandoned because they contain only subject matter which is old or disclosed elsewhere. Many are abandoned because the scope of those claims held to be allowable by the Patent Office Examiner is thought to be too narrow to justify the payment of issue fees and printing fees. Others are dropped on economic considerations alone, whereas still others must be presumed to have been dropped, despite the allowability of some claims, on the determination that the trade secret option is more attractive. C. In defense of the propriety of the standards of patentability followed by the Patent Office, it has been stated that the percentage of applications filed which proceed to grant has held steady at approximately 70% for many years. This fact is not probative of the adequacy of patentability standards. The quality of issued patents is measured, not by their numbers or by the percentage of applications filed, but by the adequacy of the claims of the patents which do issue to satisfy the statutory criteria for patentability. This crucial factor is not reflected in any statistics. D. Adversary proceedings have been criticized on the basis that they can be used to delay the patent grant and thus deprive the patentee of a substantial portion of the patent term. This objection has been overcome in foreign countries having opposition proceedings by provisions for the assessability of damages for past infringement in cases surviving the opposition practice. DEFERRED EXAMINATION A. It has been stated that publication in advance of an ex parte patentability determination is undesirable. In addition to the responses enumerated to this objection under the caption "Adversary Proceedings" above, it can be pointed out that the provision of a deferred examination option is beneficial to the applicant as well as to the Patent Office and the public, and that there is nothing requiring the applicant to avail himself of the deferred examination option if he does not want the immediate publication that that would entail. B. It is stated that deferred examination practice yields uncertainty over a prolonged period of time as to the scope of ultimately issuing patent claims. This is true, of course, but the monopoly grant only commences with a finding of allowable claims and the delay in reaching any such finding is a benefit to the public in precluding infringement charges for commercial activity of others during the deferral term. Moreover, if this is thought to be a serious concern, it would be a simple matter to provide for intervening rights to protect those who undertake commercial practice of the invention while the application is in a deferred condition. C. It is stated that deferred examination has only been adopted abroad in countries faced with emergency backlogs, as an expedient to permit backlog reduction, and that we do not face such emergency conditions here. This argument is obviously non-responsive. The premise can be conceded without compelling the conclusion. Whatever the motivation for adoption of a deferred examination practice in other countries, it can be used here as a means of eliminating wheel-spinning in the Patent Office, which is an obviously desirable objective. MAINTENANCE FEES A. It has been argued in support of maintenance fees that they can be used to prevent further increases in filing or issue fees while maintaining a recov ery of the desired 65 to 75 percent of Patent Office operating costs. It should be pointed out, however, that the filing and issue fees now, as in the past constitute a small part of an applicant's expense in applying for and securing a patent. At Zenith Radio Corporation, the average cost of obtaining a U.S. patent is some several thousands of dollars, represented primarily by professional staff time and overhead; government fees are a small part of the cost. Even an independent inventor with a simple invention will necessarily be subjected to attorney's fees several, if not many, times greater than the government filing and issue fees; the average billing rate of patent attorneys in accordance with a recent APLA survey is in excess of $40.00 an hour, and even the simplest application will require a day or two of an attorney's time at those rates. Additional attorney's fees are typically incurred in connection with responses to Patent Office objections. Accordingly, filing and issue fees are not a significant determining factor in the decision to file or not to file a patent application, and they can bear substantial and even severalfold increases without becoming such a factor. B. There is a consideration which could possibly be urged to support the institution of maintenance fees. At the present time, among all of the major countries of the world, only the United States and Canada have patent systems in which maintenance fees are not required at some time or times during the life of the patent. This state of affairs places American companies at a competitive disadvantage with foreign companies in the same industry. More particularly, our foreign competitors can acquire and maintain extensive patent portfolios in the United States (our home market) without incurring continuing maintenance fee burdens. U.S. patents are relatively inexpensive in this respect. However, American companies wishing to maintain patent portfolios in the home countries of their foreign competitors find that as a practical matter they must be much more selective in view of the continuing expense represented by maintenance fees. If the imposition of maintenance fees is to become a part of the U.S. system, I believe that this constitutes better justification for that change than any heretofore advanced. PUBLIC COUNSEL The public counsel provisions of S.1321 have been opposed on the basis that the establishment of a Public Counsel's office would be impractical or unduly expensive. It is suggested that it would be better to use the same monetary appropriation or some part of it to strengthen and improve the present ex parte procedure by enlarging the examining corps and by other measures. The simple answer to this position is that the money would not be used, that an ex parte procedure, no matter how strengthened, would still suffer from the shortcomings, developed in my initial statement, and that improved patent quality cannot be expected to come without additional cost. Moreover, institution of the Office of Public Counsel can reasonably be expected to result in an increase in the standards of patentability as established by the Patent Office interpretation of the statutory requirements for unobviousness (Section 103), and after an interim transition period, it is to be expected that the number of trivial or marginal applications which are filed will be greatly diminished, thus reducing the examining burden on the Patent Office. Finally, the added cost burden of the Public Counsel's office will be offset, at least in large measure, by the cost savings effected through deferred examination practice. CONCLUSION In closing, I wish to repeat my initial observation that S.1321 constitutes a bold and imaginative approach to the urgently needed patent reform. Any bill deserving of the name of patent reform will require major changes in the practice, and it will be incumbent upon the patent bar to adapt to such changes. I am confident that, with appropriate revisions, S.1321 will serve the intended purpose of strengthening the patent system to better serve the basic constitutional objective of promoting progress in science and the useful arts. JOHN J. PEDERSON. Hon. JOHN L. MCCLELLAN, PHARMACEUTICAL MANUFACTURERS ASSOCIATION, Subcommittee on Patents, Trademarks and Copyrights, Washington, D.C. DEAR SENATOR MCCLELLAN: The Pharmaceutical Manufacturers Association submits the following comments on S.1321, for the General Reform and Revision of the Patent Laws, introduced zy Senator Hart on March 22, 1973 and referred to the Committee on the Judiciary. The PMA is a voluntary, non-profit membership association composed of 112 companies engaging in the development and production of prescription and ethically promoted over-the-counter drugs. PMA member companies regularly seek protection of the results of their extensive research for new therapeutic agents through the United States patent system and are therefore concerned that it continue to provide adequate incentives to stimulate such research and thereby benefit the public. Our comments are limited to subsections 100 (g), 114 (c), 122(a), 153(b) and section 273 of S.1321. Enactment of these provisions would have a direct and substantial adverse effect on both the type and scope of patent protection for pharmaceutical products and processes. SUBSECTION 100 (g) Subsection 100 (g) would create a statutory definition of the terms “manufacture, composition of matter, and new and useful improvement thereof" so as not to include any known manufacture or composition of matter, any obvious variation thereof, or any conventional formulation or preparation of any of the foregoing or of any material, whether or not the same is adapted for practicing a new use thereof. Subsection 100 (g) apparently is intended to modify current law regarding the patentability of compositions of matter. If subsection 100 (g) is intended simply to codify present law, in our view, the language iss confusing and somewhat contradictory. In any event it is a negative definition which is unnecessary and redundant in view of the present state of the law. Further, if this section is intended as a codification of current law, the legislative history should clearly reflect this fact. Under present law, a patent may be obtained on a new, unobvious and useful machine, manufacture, composition of matter, or new and useful improvement thereof. A patent may not be obtained on a known machine, manufacture or composition of matter, or improvement thereof, even if a new use advantage or property has been discovered. The inventor of a new use for a previously known compound may obtain patent protection for the new use of the known compound. In addition, in accordance with well established and well reasoned case law, a use or advantage or property may be considered in determining whether a new machine, manufacture or composition of matter is non-obvious under section 103 of the patent law. Thus, if a compound, machine or manufacture differs in some way from those of the prior art, one may argue its patentability by pointing to the uses, advantages or properties to which the new compound, machine or manufacture may be applied to demonstrate that his novel contribution is, in fact, a non-obvious one. In our opinion, it is logical that demonstrated "new uses" of an invention, while not solely determinative, are certainly relevant to the question of obviousness. We oppose any change in the law in this regard. Subsection 100 (g), which we view as intending to modify present law, would virtually eliminate product patent protection for new and useful chemical compounds and would limit patent claims to a new method of using. This would result in a severe disincentive to continued chemical and pharmacutical research since that research, even if new, useful and unobvious could not be given product protection. Therefore we strongly urge that new subsection 100 (g) be eliminated from the bill. SUBSECTIONS 114 (C) AND 122 (A) Subsection 114 (c) of S.1321 would require the Commissioner of Food and Drugs, upon request of the Patent Office, to furnish all information of, and available to, the FDA with respect to any drug or subject matter for which therapeutic utility is asserted by the applicant for patent. The FDA Commissioner would be further required, upon request by the Patent Office, to conduct research upon special problems, including evaluation of the utility, safety or efficacy of such drugs, and to detail FDA officers, and employees to the Patent Office as may be necessary. The FDA Commissioner would be required to submit all information of, and available to, the FDA, notwithstanding any other provision of law. The Food, Drug and Cosmetic Act (Title 21) was amended in 1962 by the addition of a new subsection 372(d). This subsection provides that the Secretary of Health, Education and Welfare is authorized and directed, upon request from the Commissioner of Patents, to furnish full and complete information with respect to such questions relating to drugs as the Commissioner may submit concerning any patent application. Subsection 372(d) further provides that the Secretary of Health, Education and Welfare is authorized, upon request, to conduct such research as may be required. The legislative history of subsection 372(d) clearly indicates that the patent Office, at its discretion, and without the prior consent of the patent applicant, may seek the advice of HEW experts on certain scientific issues. The Patent Office remains the arbiter of patentability and in no way abdicates this responsibility. Subsection 372(d) was intended to "help to insure that patents are promptly issued for those developments in the drug field which are true inventions which the patent system is designed to reward. It would not slow the pace of drug research which is so vital to continued improvement in the public health." We understand that the Patent Office has sought the expert advice of HEW approximately 20 times since 1962. The Patent Office has never requested that HEW conduct research. The HEW or FDA written report responding to specific Patent Office inquiries is made a part of the patent application file, is made available to the applicant, and is then available to the public if the patent is granted. However the information supplied by HEW is publicly available only if the Patent Office grants the patent, and no information submitted by the patent applicant, or by any third party, to either HEW or FDA, is disclosed when the patent issues. Subsection 114 (c) confuses the clear distinction between FDA's mandate to require a drug manufacturer to establish the safety and efficacy of a new drug before government marketing approval is obtained, and the Patent Office's mandate to grant patent protection on new and useful advances in the art. Thus, subsection 114(c) which suggests that patentability could somehow be conditioned upon the type and extent of the information available to another Government agency, would discriminate against the patentability of drug |