proper and necessary. However, under certain conditions-under certain guidelines-there are times when it will be proper to give waivers. I think what you want to do, under your bill, and what I want to do under my bill is to set up guidelines which will be fair to all and which will not be subject to abuse either by the Government or by private parties under research and development contracts. Senator MCCLELLAN. Where you set up the guidelines with respect to granting a waiver right in the beginning or you set up guidelines with respect to granting an exclusive license after the patent title has been taken by the Government you have to vest discretion in an administrative official. In either instance, I don't see how you can avoid the human possibility of some abuses. But I think it would be just as present in one instance as in the other. Senator SALTONSTALL. I think that is true, we are all human but I think if you have as good and as sound guidelines as you can and the conditions under which these things can be done, that is what we should do. Senator MCCLELLAN. That is what we are seeking to do. We undertake to do that in each instance. Senator SALTONSTALL. That is right. Senator MCCLELLAN. There is no question about that, everybody wants to do that. There is no objection to setting up the guidelines as well as we can. But if there can be abuse in one it seems to me there can be abuse in the other and it is just as likely to occur in one as the other. I don't think there is any way to avoid the possibility of some abuse. Senator SALTONSTALL. No; I don't think you can avoid the possibility of some abuse. But if our guidelines are well set up and the Secretary of Commerce establishes rules so that the 20 departments or agencies are working under the same rules the potential for abuse can be reduced. Senator MCCLELLAN. That is right. I think we agree that the same general policy and procedure should apply to all agencies. Senator SALTONSTALL. That is right. Senator MCCLELLAN. Unless the law does make an exception where an exception is warranted. What I was thinking about, I have some hesitancy in just making the broad provision here that an administrator may, in his discretion, grant a waiver in the beginning at the time of contracting. Certainly we want to set up as many safeguards, guidelines as possible. The argument against doing it is that it will be abused. You are giving undue power to an administrator, discretion that he can easily abuse. But, it seems to me that the same abuse can occur and just as readily so, if the Government takes title and then the administrator under certain guidelines has the discretion to grant an exclusive license to someone. Senator SALTONSTALL. I think it works both ways. Senator MCCLELLAN. I think it does. That is the point I am making. Senator SALTONSTALL. Yes. Senator MCCLELLAN. So, if we are going to argue abuse may occur it may occur in the other instance as well as where the waiver is granted. I thank the Senator. Senator Hart, anything? Senator HART. Thank you, Senator, very much. Senator SALTON STALL. Thank you, I appreciate having had the opportunity to testify on this very difficult and complex subject. Senator MCCLELLAN. Call the next witness. Mr. BRENNAN. Mr. Tom Arnold, American Bar Association. Senator MCCLELLAN. All right, Mr. Arnold. Do you have a prepared statement? STATEMENT OF TOM ARNOLD, CHAIRMAN, SECTION ON PATENT, TRADEMARK, AND COPYRIGHT LAW, THE AMERICAN BAR ASSOCIATION; ACCOMPANIED BY AUZVILLE JACKSON, JR., CHAIRMAN, ABA COMMITTEE ON GOVERNMENT PATENT POLICY Mr. ARNOLD. Yes, sir; I have a prepared statement. I would like to edit it markedly in these remarks and add a few other thoughts by way of answering the questions of Senators Burdick and Hart and yourself if I may. Senator MCCLELLAN. You have a statement here of some length, 28 or 30 pages. Did you wish to read it or just have it printed in the record? Mr. ARNOLD. I would like to have that printed in the record, if I may. Senator MCCLELLAN. Your statement may be received and printed in the record in full. If you wish to highlight it and supplement or implement it some with other remarks, you may. Mr. ARNOLD. Yes, sir. Senator MCCLELLAN. Very well. Mr. ARNOLD. I am Tom Arnold. I am chairman of the patent section of the American Bar Association. With me is Mr. Auzville Jackson, who is the chairman of the section's Committee on Government Patent Policy. We appear on behalf of the American Bar Association. The position of the American Bar Association with respect to the three bills, S. 789, 1809, and 1889, has been stated in quite a number of consistent resolutions over the years, all of which are variations upon the same central theme, and these resolutions, set forth in full in my prepared statement already on file, include these concepts: First, the association opposes the policy of normally requiring the vesting in the Government of title to patents covering inventions made under Government research and development contracts, and I will explain that shortly. Secondly, the association opposes any policy which contemplates the Government depriving any citizens of the free and unencumbered use of the patent, title to which has been vested in the Government. Thirdly, it is the conviction of the association that the commercial use of inventions by which the public is enabled to enjoy the benefits of the invention, is most effectively promoted by the incentives for commercial exploitation which are afforded by the limited time and limited scope exclusivity of the patent. Fourthly, the association approves compulsory licensing of inventions made under Government research and development contracts when, and only when, the owner fails reasonably to offer the benefits of the invention to the public, and another party shows himself desirous and able to do so. In a moment I will show how that brings us back to answering part of your questions about abuse, Senator. Finally, the association favors legislation consistent with these pur poses. In order that I may put meaningful meat on the skeleton of the resolutions, let me first focus attention on a couple of fundamental premises, the understanding of which at times appears to be clear, but like Alice's cat seems to disappear and escape us now and again. First, while patents are in the nature of property, unlike other property patents change character markedly when you take them out of the diverse hands of multiple private parties and place them in Government hands. Second, a patent grants no right to use anything, no right to practice an invention. The Government needs title to no patent in order to secure its right to use any invention that is developed in a research and development contract. The Government's right to use an invention is developed by obtaining a license under patents issued to others, or by preventing the issuance of a patent to anybody. But patent ownership does not materially aid the Government's right to use the results of research and development contracts. Hence, the Government need for the use of an invention is no justification for a Government policy of taking title to patents. What then does the patent grant? It grants the right to preclude others from using an invention for a limited time. In private hands the limited right issued others has a social and economic merit, as I will explain in a moment. In Government hands this same right to preclude others is socially undesirable; it is outside the constitutional purpose of the patent law; it is a license for the Government to use judicial process as a tool of extortion and to meddle in the private business affairs of the Nation's citizens. If a given patent covers, let's say, an electric induction furnace as used to manufacture diamond drill bits, this patent grants the right for a limited time to prevent others from using that electric induction furnace in that particular operation, and hence indirectly it grants the right to make other manufacturers use electric resistance furnaces or gas-fired furnaces or coal-fired furnaces, but there remain people in the competition using furnaces to make such bits. The patent owner does not himself get by his patent the right to use that electric induction furnace that was covered by the patent, and often though he owns the patent he may still not practice his own. invention. If a patent covers fluorescent lights, the patent forces others to make incondescent lights or mercury vapor lights but it leaves competition in the lighting field. In almost all cases-and by almost all I mean 99 percent of all of the patents that issue from the U.S. Patent Officethe patent is so narrow in scope that it does not give a noncompetitive 54-400-65-pt. 1——18 position. It gives a position where there is still competition as, for example, Kodak is still in competition with Polaroid. Kodak now competes by providing better color. Bell & Howell now competes by providing zoom lenses. Argus now competes by providing better projectors but they are all still in competition with Polaroid as Polaroid knows very well, in spite of the instant snapshots that Polaroid has monopolized. Unless you amass tremendous numbers of patents in one legal entity there is always, with the rarest exception in our history, there is always a continuance of competition. No one legal entity has such a mass of patents unless it be and it is the U.S. Government. But if the Government does not need patents for its own right-touse purposes, then why should the Government acquire the right to title to patents at all? I find that question very difficult to answer. Let me direct your attention a minute to the constituional purpose. The constitutional focus is not on the right of an inventor. It focuses not on any private individual right but rather it focuses on the public welfare. It says: Congress shall have the power to promote the progress of science and the useful arts. The device by which that progress is promoted is "by securing to inventors for limited times." Now, how does that promote the progress of the useful arts? It is by providing incentive to private capital. Providing incentive to private capital is the only way that the constitutional patent system does promote progress. Whether that capital is the inventor's own personal time, supplemented by his hammer and his saw and his garage, or whether that capital is provided by a corporation paying research directors and engineers to operate expensive centrifuges and microscopes in the corporation laboratory, it is still the incentive to capital that is the primary function of the patent system inciting advancements of the useful arts. If we provide an incentive to private capital, private capital will find a way to provide an incentive to the inventor. Certainly none of us will say that private capital is spending its money wisely if it does not give the greatest incentive that it can to the inventor's efforts, and so private capital is always looking for diverse ways to incite the inventor: Give him a new job title; give him a salary raise; give him a participation in one of the major inventions he has made; give him a participation in all of them. Every corporation has a different approach as to how to incite the inventor but they are all trying because it is in their interest to do all they can to incite the inventor to produce. And there is conclusive evidence that privately financed research by corporations which generally take title to inventions of their employees relating to the company business, is many times more productive of invention than the Government's own research, thus proving the efficiency of private capital's finding ways to incite inventors. While not so in every product line or in every market type, in a major portion of the private sector of our economy the only promise of a return on the investment of research and development dollars is from the limited-time protection which the patent affords, though most always without giving a competition-free monopoly position. Over 30 companies are making office duplicating machines in competition with Xerox, although xerography is one of the great patented inventions of our time. So in the private sector of our economy patents incite the commitments of research and development capital. But when you take those same patents and put them in Government hands, how do they incite the investment of research and development capital? They do not. The Government commits its research and development capital for entirely different reasons, and properly so. It commits them for defense purposes and other such purposes. There is no incentive to the Government to commit R. & D. capital in order to get a return on the investment. It is interesting to consider whether patents in the hands of the Government are constitutional, since they get in Government hands by operation outside the constitutional purpose; that is, the Government-owned patents result from progress of the useful arts but do not themselves incite or promote that progress as required by the Constitution. By what constitutional purpose, is the Government justified in taking taxpayer's money, and with that money granting to itself the patent right to preclude taxpayers from using that which taxpayers paid for? The Government is now spending well over 60 percent of the total research budget of the Nation. Let's assume for the sake of argument, and this is probably not accurate but let's assume, that Government research is only half as efficient as private research. This means that the Government gets 30 percent of all of the patents. And the Government endeavor extends to everything from the sex life of the lamprey eel in the Great Lakes to computers for controlling missiles, in both of which areas there is important commercial endeavor. Owning 30 percent of all patents has nothing whatsoever to do with the Government's need for the right to use inventions; so what can the Government do with all these patents-these patents which are a license to use judicial process as a tool for meddling in the private commercial endeavor of others, these patents which convey only the right to preclude others from pursuing a given endeavor. If the Government so elects, and if patents in Government hands are constitutional and are permitted by the Congress to be enforced, the Government can use the United States patent code, title 35 U.S.C., to do more regulation of all business than has ever been imagined by all of the governmental regulatory agencies in the history of the Nation. And I do not exaggerate a bit. Patent infringement suits cost at a minimum on the order of $50,000, and they go up from there. They go way up from there. Senator MCCLELLAN. What costs $50,000? Mr. ARNOLD. Patent infringement lawsuits, a lawsuit for patent infringement. Senator MCCLELLAN. What do you mean, because it costs that much to defend? Mr. ARNOLD. To defend or prosecute to conclusion. |