announced that a regulation that "denies all economically beneficial or productive use of land" constitutes a per se taking of property under the Fifth Amendment, unless the regulation simply articulates a restrictions that "inhere in the title itself, in the restrictions that background principles of the State's law of property and nuisance already place upon land ownership." 112 S. Ct. at 2893, 2900. Thus deprivation of all economic value what the Court termed a "total taking" -- constitutes one of two categorical tests the Court has applied in Takings litigation."7 - ог At this time, we think it likely that a "total taking" of personal property would not be treated as a per se taking. Lucas was a case about real property, and the majority opinion itself drew a Takings Clause distinction between real and personal property: "[I]n the case of personal property, by reason of the State's traditionally high degree of control over commercial dealings, [the property owner] ought to be aware of the possibility that new regulation might even render his property economically worthless (at least if the property's only economically productive use is sale or manufacture for sale), see Andrus v. Allard, 444 U.S. 51, 66-67 (1979)." Lucas, 112 S. Ct. at 2899-2900. In citing Andrus with approval, the Court referred to a decision sustaining laws that prohibited the sale of parts of protected birds, including the bald eagle, against claims "The other per se Takings Clause violation occurs when government regulation amounts to a "permanent physical occupation" of real property. The Supreme Court has also treated government action that amounts to a complete physical appropriation of property (whether for its own use or a public use) differently from regulatory action that merely limits property owners' use or enjoyment of their property. In Kaiser Aetna and Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982), the Court ruled that the actual appropriation of an interest in real property constituted a per se compensable Takings Clause violation. Kaiser Aetna, 444 U.S. at 178-80 (government's imposition of navigational servitude requiring public access to previously private pond effected a taking): Loretto, 458 U.S. at 426, 435-36 (finding that "permanent physical occupation" of property with cable television boxes and wiring "authorized by government is a taking without regard to the public interests that it may serve"). However, the Court carefully distinguished Kaiser Aetna and Loretto, as cases involving "actual physical invasion" of private property, from the regulatory takings decisions in Penn Central and Andrus. See Kaiser Aetna, 444 U.S. at 180; accord Loretto, 458 U.S. at 426, 432-33. Indeed, the Loretto Court emphatically stated in its conclusion that it did not question the "substantial authority upholding a State's broad power to impose appropriate restrictions upon an owner's use of his property." 458 U.S. at 441 (emphasis in original). There can be no serious argument that draft section 104A would work a physical appropriation or occupation of any reliance party's property. Quite simply, the government is not going to physically appropriate any of the reliance parties' private property (for its own use of for the public at large). See Connolly, 475 U.S. at 225. Just like the owners of protected bird parts in Andrus, no part of the reliance parties' property will be taken and used by someone else and reliance parties could continue to use or enjoy their property themselves without significant restrictions. See Andrus, 444 U.S. at 66 ("In this case, it is crucial that appellees retain the rights to possess and transport their property, and to donate or devise the protected birds"). See also Connolly, 475 U.S. at 225 ("with respect to the nature of the governmental action, we already have noted that, under the Act, the Government does not physically invade or permanently appropriate any of the employer's assets for its own use"). Thus, the per se approach of Loretto will not apply here. brought by traders in Indian artifacts that the effect was to deprive them of their ability to sell certain artifacts that contained such parts, and thus to deprive the owners of substantial commercial value of those artifacts. The Court in Andrus was unable to conclude whether the law denied the traders all commercial value, because the record did not disclose whether they could exhibit the artifacts for an admissions charge, for example. Still, the Andrus Court seemed to treat that inquiry as inconsequential whatever the true facts were, because it stated that "[a]t any rate, loss of future profits -- unaccompanied by any physical property restriction -- provides a slender reed upon which to rest a takings claim." Id. at 66. It characterized the case as one in which the traders retained "the rights to possess and transport their property, and to donate or devise the protected birds," so that the fact that the law destroyed "one 'strand' of the bundle [of property rights]" was not enough to constitute a taking. Id. It is difficult to say whether the draft legislation under review here is more or less restrictive than the statutes at issue in Andrus." In any event, the draft legislation still does leave intact all of the "strands" of property rights noted by the Andrus Court, and a reliance party's major complaint may well be about loss of future profits. Whether or not a reliance party's deprivation is more or less severe than the deprivation in Andrus, Lucas's express refusal to extend its "total takings" logic to personal property suggests that even a more severe deprivation would not be dispositive. In light of our analysis of the other elements of the Court's ad hoc analysis, we conclude there is a substantial likelihood that even a reliance party who could make out a case of "total taking" -- and recall that we are currently unaware of any facts that would support such a claim would still not succeed in establishing a constitutional violation. III. CONCLUSION In summary, the draft legislation you have asked us to review is constitutional on its face. Challenges to its application to particular reliance parties, on the ground that it violates the Takings Clause, will not be ripe for adjudication until the specific facts of individual applications can be marshalled. However, from what we know of the operation of the legislation and the possible reliance parties under the legislation, we know of no set of facts that will produce a successful Takings Clause challenge to the draft legislation. Although a reliance party could not show a colorized movie and charge an admissions fee without a license after the phase-in and grace periods expired, no commercial transaction is ever prohibited absolutely as was the case in Andrus. Mr. HUGHES. Thank you, Mr. Schroeder. Mr. Lehman, why did the administration determine that in complying with the GATT agreement, it would adopt the 20-year term from filing as opposed to the greater of a 20-year term from filing or 17 years from grant? Mr. LEHMAN. Well, Mr. Chairman, the GATT TRIPS agreement is about trying to achieve both uniformity of, and a high level of protection for intellectual property around the world. The 20 years from filing is the international standard agreed upon by the GATT members. Mr. HUGHES. That is the minimum standard. Mr. LEHMAN. Twenty years from filing, that is a term of 20 years from filing is the minimum international standard. There is no country that I am aware of that has a patent term that has a minimum of 20 years. As a minimum standard, you can tack on as many additional years as you would like. Again let me point out, Mr. Chairman, that we have to accept the fact that we are actually extending the terms for most U.S. patents. One group we haven't heard from, which we might hear from if we get a little more ambitious in this, is all the people who have an interest in the public domain. I know that you and every other member of this subcommittee is well aware that those interested in public domain are a very powerful and sizable group of people. There are many people who don't like patents. There are a lot of people who think that patents should be shorter. Mr. HUGHES. We have heard from them. Mr. LEHMAN. Pardon? Mr. HUGHES. We have heard from them. Mr. LEHMAN. So if we adopted a different standard, and then permitted many people to have a lot longer patent term, I think you would have really heard a lot of howls and screams—that is why we agreed to the 20-year minimum standard. I would also like to say that mention was made of hearings, and again, I want to get the facts straight. First of all, I am the first Commissioner of Patents, and the Clinton administration is the first administration to my knowledge, that has ever really opened up the process of decisionmaking in this area to the public. We have had numerous days of public hearings including the very first set of public hearings on the patent harmonization question. Mr. HUGHES. The claim in previous testimony that there has not been an opportunity for public comment is not accurate? Mr. LEHMAN. It is totally inaccurate. In fact, last year during the patent harmonization hearings, where we reversed the Bush administration policy that would have had us abandoning our firstto-invent system, I asked every single witness-about 60 witnesses as I recall about the 20-year term issue. As I recall, of those 60 witnesses, some of whom have now apparently changed their position, only one person indicated that they had a problem with this 20-year term. Mr. HUGHES. Let me follow up on term. Why does the administration proposal then provide for patents in force to be entitled to a term of 17 years from grant or 20 years from application, whichever is greater, and then not apply that prospectively? Mr. LEHMAN. Well, Mr. Chairman, this is a piece of transitional legislation. I think it is appropriate that people who have filed patents in reliance on the old system, have the benefit of the greater term. It is as simple as that. Mr. HUGHES. There have been some concerns raised particularly by the biotech industry, that grants of patents will be delayed because of unreasonable requests from the PTO for human trials which, as you well know, could take years for some biotechnology products to prove utility, a requirement of patentability. Is that a legitimate concern on their part? Mr. LEHMAN. Well, to the extent that that is a legitimate concern, Mr. Chairman, I think that is addressed in the Patents Term Restoration and Drug Price Competition Act that extends patent terms specifically to deal with regulatory delay. Perhaps that act should be adjusted if it is not addressing the concerns of industry. I know I testified before you previously on some private patent bills in that area. I indicated then that there may be a reason for the committee to take a look at such concerns. As I indicated then, however, I don't think we should screw up the whole patent system and bring down the wrath of the public domain community upon us. To imagine what that wrath might be, one only has to think of the legislation needed to deal with this very discrete problem. We have analyzed this, and, again, overwhelmingly, the facts are that we get the patents out the door very quickly. Most patent owners do not want to delay patent processing. Everything I have heard, and I have been around the country and talked to many people about this, indicates that people don't want to spend 5, 6, 7, 8, and 10 years in the Patent and Trademark Office. They want us to issue a patent as soon as we possibly can. So I am a little surprised now to hear that some people want delay in the Patent and Trademark Office. I understand that Congresswoman Bentley stated that she was concerned that we might not be able to process the patents on time. I believe, as I indicated by the figures that I cited, that we are doing a fairly good job. I would invite Mrs. Bentley, who sits on the Appropriations Committee, to work with us. and the chairman to try to get back some of the $18 million of our fee revenue that the Appropriations Committee took away from the inventors who paid those fees to get their patents processed, and have now been diverted to other areas of the Federal Treasury, in effect, as a tax on innovation. I think that is the kind of thing we should focus on, and not spurious problems that really don't exist. Mr. HUGHES. Senator DeConcini wanted to ask the following question of this panel. He had hoped to be here before your testimony concluded. You indicated that patent pendency is about 19 months. Some say this is inaccurate because it is calculated from the last continuation application. Can you calculate pendency from the date of the first effective filing date to issuance? Mr. LEHMAN. Well, Mr. Chairman, I can give you a more detailed explanation of that. One of the allegations that has been made about the 20-year term is that we are going to somehow or other take away rights that certain people have had by using an extraordinarily long patent processing time to keep their patents secret. We have done a little bit of a study of this and we have discovered 627 cases in the Patent and Trademark Office from 1971 to 1993 where the patent pendency has exceeded 20 years. In one case, it was 36 years. Mr. HUGHES. Is that the record? Mr. LEHMAN. Pardon? Mr. HUGHES. Is that the record? Mr. LEHMAN. That is the record. What is interesting about many of those cases is that whereas the pendency of the patent has gone on for that long period of time, some of the claims have been allowed early in the process. So, in fact, those applicants have been able to have the advantage of patent protection on some of their inventions while keeping other claims secret in the Patent and Trademark Office. Then, their claims are patented and emerge like a submarine, and torpedo people in the industry who are relying on what they reasonably thought was in the public domain-when it was not actually in the public domain after all. In fact, we heard a lot of testimony about this problem from the computer software industry where we had extensive hearings in Palo Alto last year. I think when one looks at the problem of filing and claims, you must also look at those statistics of abusive practices as well, and we will provide you with more elaborate details on those practices. [The information follows:] Recently, the Patent and Trademark Office (PTO) held hearings and solicited public input on the use of the patent system to protect software-related inventions. We heard from a wide range of interests, including small and large software companies, independent software developers, patent attorneys and trade associations. Several companies, particularly small software start-up firms from Silicon Valley, expressed concerns over potential liability for patent infringement based on their use of "old" or "well-known" software techniques. These individuals believe that patents have been granted that cover such techniques, in part because the techniques were not documented in patents or printed publications. The proposed prior use defense could address one aspect of the problem these companies have described. It would enable a company that had made the requisite degree of commercial use of the "old" technique under the appropriate circumstances to avoid liability for patent infringement. It would provide this relief without requiring the company to prove that the patent being asserted against them is invalid. Importantly, the type of evidence that could be used to establish a successful prior use defense could encompass forms of evidence that do not fit clearly within our current definitions of prior art. And while we are unsure as to how frequently this scenario may arise, we believe the legislation would address the concerns as they have described. Mr. HUGHES. I have some other questions of both Mr. Shapiro and Mr. Schroeder, which I will save for the next round. The gentleman from California, Mr. Berman. Mr. BERMAN of California. I wanted to ask Mr. Lehman a question concerning the role that you play in the administration regarding information infrastructure issues. The question is this, basically. As technological developments take us beyond the national information infrastructure to a global information infrastructure, what are the consequences for our American copyright industries if we fail to implement Berne article 18 more generously than we have to date? Mr. LEHMAN. I think it would be very negative, Congressman. Mr. BERMAN of California. Thank you. I yield back the balance. Mr. HUGHES. Brevity is the order of the day. |