-7 minimize the number of cases where applicants would be required to submit the results of human clinical trials. In many instances, especially in the area of AIDS research, the Patent and Trademark Office requirement has become onerous and has resulted in unnecessary delays in patent issuance, in our view. There should also be a Patent and Trademark Office commitment to recruit, train, and retain an adequate number of skilled examiners in complex technologies, such as biotechnology. Finally, the Administration should regularly report to the appropriate Congressional committees the status of patent pendency and patent interferences to guarantee that the vast majority of applications are fully processed within three years. Implementation of these administrative policies will help to ensure that U.S. patent applications are examined within three years without jeopardizing the quality and integrity of the overall examination process. CONCLUSION Developments around the world in the past few years have shown that increasing numbers of countries recognize the importance of intellectual property protection to their economic development. The U.S. Government and these Subcommittees have long understood the vital role of innovative, high-technology industries such as pharmaceuticals to U.S. economic health. Patent pirates abroad are resisting this trend in order to protect entrenched domestic interests which thrive on appropriating others' patented technology. Special 301 actions have been successful in stopping or at least reducing such theft in a number of countries. When it takes effect, the GATT TRIPS accord will provide the legal basis for stopping such theft. In the wake of the Uruguay Round agreement, we must, together, keep up the fight on all fronts and use every available means afforded by U.S. international economic diplomacy to eliminate patent piracy. In conclusion, our industry continues to rely on the strong support both of the Administration and Congress in order to achieve the objective of effective intellectual property protection abroad. I am here in particular to emphasize the help we need in ongoing activities. At this moment, countries such as Argentina, Brazil, and Turkey are engaged in legislative consideration of patent law reforms. Mr. Chairmen, we need the help of these Subcommittees as well as Ambassador Kantor to see that these and other countries do what is right. Mr. Chairmen, that concludes my prepared statement. I will be pleased to respond to any questions that you or other Members of the Subcommittees may have. Mr. HUGHES. Ms. Nelsen, welcome. STATEMENT OF LITA NELSEN, DIRECTOR, TECHNOLOGY LICENSING OFFICE, MASSACHUSETTS INSTITUTE OF TECHNOLOGY, CAMBRIDGE, MA Ms. NELSEN. Thank you. Mr. Chairman, my remarks are in the context of the use of patents to promote technology transfer from university research to industry, and I very much appreciate the opportunity to present this perspective to the committee today. Universities are now filing over 3,000 patents per year in the United States and under the Bayh-Dole Act, granting over close to 2,000 licenses per year to industry. A recent survey of the Association of University Technology Managers estimated that over 200,000 jobs in the United States have been created through university licensing and the consequent industrial development of university technology. MIT alone has had an average of 110 U.S. patents per year issued to it in the last few years, and in the past 5 years, MIT has granted over 350 licenses, including enabling licenses to almost 50 startup companies, if we count only those that have at least a half a million dollars invested in them. The key fact in university technology transfer work is that the technology arising from university research is embryonic. It is early and it is unproven. Commercial development of such technology requires substantial investment and is very risky. It is also a longterm process. Studies have shown that the average university license which does finally yield a product on the market, and many don't, of course, has its first product on the market 8 years after the license is signed. Biotechnology licenses may take even longer. Patents are therefore crucial in the process. A company taking the risk of developing early university technology must be reasonably assured of strong patent protection for a commercially significant period of time in order to recoup its investment in this development. The 20-year-from-filing change proposed in the current bill runs the risk of substantially reducing the patent protection available for companies investing in university technology. Let me explain. Universities are in the knowledge dissemination business. Publications are the lifeblood. It is vital so that other scientists can learn from and build on our discoveries. Because of this, we frequently must file patents in a very early stage, rather than delay publication. Continuations in part filed as the research proceeds are then key to perfecting the patent protection. The additional patent life flowing from these continuations in part under certain circumstances compensates for the time lost by the very early first filing. A change in this procedure would force many universities to withhold publication in order to perfect the patented invention and postpone patent filing until the invention has been fully developed. This would not be to anyone's benefit. Also, university inventions are frequently ahead of their time. I can cite you a number of MIT technologies which have become commercially important only when their patents were near expiration. Any shortening of patent life most seriously impacts the most forward-thinking technologies, which are the very types of tech nologies which universities should specialize in and which we believe will most benefit the country's future technical and economic development. The 20-year-from-initial-filing rule currently being proposed offers a significant danger of shortening the time available for patent protection and therefore may have a detrimental effect on development of university technologies. Although a frequently cited statistic is that the average patent issues 19 months after filing, thereby implying that a 20-year rule after filing rather than 17 years after issuance would effectively lengthen patent life, this statistic is highly misleading. It includes, for example, time from filing of continuation patents and time from filing of divisionals, thus the actual average time for issuance from the initial priority date is much longer than 19 months. Also, leading-edge technology patents, such as those in biotechnology, software and microelectronics usually take significantly longer than the so-called average patent to issue. Therefore, if Congress believes it should proceed with the 20year-from-filing rule, may we respectfully advise the following: One, the Patent Office must be given the resources to examine patents more quickly. Second, the Patent Office must be given the resources and charter to increase the consistency and sophistication of patent examination. Rapid and unthinking final rejections by inexperienced examiners, which currently force many applicants to file continuations, must be eliminated, since these continuations will now eat into patent time. Third, the Patent Office must refrain from overly fine restriction requirements which currently increase fees at the cost of patent prosecution expenses. Universities will simply not be able to support the prosecution of multiple divisionals all at the same time. But the 20-year-from-priority date will force such simultaneous prosecution in order to preserve patent life. Finally, no one should be led to believe that the 20-year-from-filing rule will lengthen effective patent life. Most of the time, for high-technology patents, it will shorten life, and more importantly, will shorten the remaining life of patent protection after the long development period is finally over and products are on the market. And, this I am afraid, will decrease the incentive for industry to invest in commercial development of truly innovative technologies. Thank you for the opportunity to present these views. Mr. HUGHES. Thank you very much, Ms. Nelsen. [The prepared statement of Ms. Nelsen follows:] TESTIMONY CONCERNING DRAFT DIRECTOR, TECHNOLOGY LICENSING OFFICE, BEFORE THE SUBCOMMITTEE ON INTELLECTUAL PROPERTY AND AUGUST 12, 1994 My name is Lita Nelsen. I am Director of the Technology Licensing Office of the Massachusetts Institute of Technology, and am also a past president of the Association of University Technology Managers. My remarks are in the context of the use of patents to promote technology transfer from university research to industry. I very much appreciate the opportunity to present this perspective to the committee today. Universities are filing over 3,000 patents per year in the U.S., and, under the Bayh-Dole Act, granting over 1500 licenses per year to industry. A recent survey by the Association of University Technology Managers estimated that over 200,000 jobs in the U.S. have been created through university licensing and consequent industrial development of university technology. M.I.T. alone has had an average of 110 U.S. patents per year issue to it. In the past 5 years, M.I.T. has granted over 350 licenses, including enabling licenses to almost 50 startup companies. The key fact in our technology transfer work is that the technology arising from university research is embryonic: it is early and unproven. Commercial development of such technology requires substantial investment and is very risky. It is also a long-term process: the average university license which does finally yield a product (and many fail), has its first product on the market eight years after the license is signed. Biotechnology licenses may take even longer. Patents are crucial in this process: A company taking the risk of developing university technology must be reasonably assured of strong patent protection, for a commercially significant period of time in order to recoup its investment in this development. The twenty-years-from-filing change proposed in the current bill runs the risk of substantially reducing the patent protection available for companies investing in university technology. Let me explain: Universities are in the knowledge dissemination business. Prompt publication is vital so that other scientists can learn from and build on our discoveries. Because of this, we frequently must file patents in a very early stage, rather than delay publication. Continuations-in-part, filed as the research proceeds, are then key to perfecting our patent protection. The additional patent life flowing from these continuations-in-part compensates for the time lost by early first filing/. A change in this procedure would force many universities to withhold publication in order to further postpone patent filing until the invention is more mature. This would be to nobody's benefit. Also, university inventions are frequently "ahead of their time." I can cite you a number of M.I.T. technologies which have become commercially important only when their patents were near expiration. Any shortening of patent life most seriously impacts the most forward-thinking technologies--the very type of technologies which universities should specialize in, and which will most benefit the future of the Country's technical and economic development. The twenty-year-from-initial-filing rule currently being proposed offers a significant danger of shortening the time available for patent protection and therefore may have a very detrimental effect on development of university technologies. Although a frequently cited statistic is that the average patent issues 19 months after filing (thereby implying that a 20-year rule would effectively lengthen patent life) this statistic is highly misleading. It includes, for example, time from filing of continuation patents and divisionals; thus the actual average time for issuance from the initial priority date is actually much longer. Also, leading-edge technology patents such as those in biotechnology, software, and microelectronics, usually take significantly longer than the "average" patent to issue. Therefore, if Congress believes it should proceed with the 20-year-from-filing rule, may we respectfully advise the following: 1. The Patent Office must be given the resources to examine patents more 2. The Patent Office must be given the resources and charter to increase the 3. The Patent Office must refrain from overly fine restriction requirements. 4. No one should be led to believe that the 20-year-from-filing rule will lengthen effective patent life. Most of the time, for high technology patents, it will shorten life and, more importantly, will shorten the remaining life of patent protection after the long development period is finally over and products are on the market. This, I am afraid, will decrease the incentive for industry to invest in commercial development of truly innovative technology. |