tend to get overinvolved. I have been hurt so many times by the system that I do get emotional when I discuss this matter. As a result, my advisers have asked that I attempt to closely follow the statement.

Senator SCHMITT. More of our advisers should make us do that. Mr. LEMELSON. I own over 350 patents and have found it necessary to form a corporation to market my inventions. That company is Licensing Management Corp. I am the president and sole owner. We market inventions for individuals, businesses, and the Federal Government.

I therefore tailor my testimony around two focal points: my experiences as an inventor and my experiences in marketing and licensing inventions.

One of the greatest hazards of being an inventor is losing an invention to an infringer. Infringement may occur as the result of independent idea conception or downright thievery.

I was told when I was in college that a patent is an exclusive constitutional right for a limited number of years to manufacture, use, or sell your invention. I soon learned that in practice a patent is a right to sue someone who is benefiting from your invention and often it is the door of opportunity to a potential thief.

Ed Mahler, former chief patent attorney for Olin Mathieson Chemical Co., told me in the early 1960's that many U.S. corporations, as a matter of policy, stall inventors and do whatever is possible to stop the enforcement of patents. Unfortunately, I have found that to be true.

I have four file drawers of literature on products, processes, and manufacturing machinery that infringe my patents, for which I have not been paid 1 cent. I have brought over 20 infringement actions, of which 8 have been concluded—all against my patent rights.

I have a patent action awaiting a trial court decision; one is pending on petition before the U.S. Supreme Court, and two are awaiting trial. I have been accused of being litigious, but I know of no other way to at least attempt the protection of my 350 patents. In one of my cases at trial some years ago in the second circuit, the honorable judge announced that it was then 10:15 a.m. and as the action before him was a patent case and he had better things to do with his time than to try patent cases, the trial must be completed by 3 p.m. that day. During our few hours of trial my counsel objected for one reason or another, and as a part of one objection he stated that Congress had mandated that patents be considered prima facie valid.

The judge responded, "Mr. Fattibene, you know as well as I do that four out of five patents issued by that Patent Office are invalid." Then, at 3 p.m., the honorable judge walked out of the courtroom, leaving my witness on the stand, and the jury still impaneled. A few moments later he returned and said, "Pardon me, ladies and gentlemen, you are dismissed." That ended it.

A second example of what may happen to a patent holder can be shown by my experience with my automatic warehousing patents. A very dynamic individual, Raymond Q. Armington, a pioneer in automatic warehousing with a strong belief in the patent system, licensed 15 of my patents and obtained more than 50 patents for

his company in the automatic warehousing field. He built an entire business, the Triax Co., with massive investments in research and development and outside patents.

Before he could reap the benefits of his investment, his patented product was pirated. We immediately filed suit to defend our rights. After 10 years of litigation, the patents that were not declared invalid were declared "not infringed." The legal expenses of that litigation have used more than half of my royalties, and Triax has been unable to protect their investment.

Now I would like to tell you about my most recent heartbreak. My only invention in the toy field resulting in any substantial royalties was declared invalid on a pretrial motion for summary judgment. Confusing as it seems to me, my counsel tells me that the law in the second, fourth, and seventh circuit courts differs from that in the rest of the country. These three circuit courts apply a judicially created administrative rule that is not followed by the Patent and Trademark Office. As a result, my U.S. patent on the Velcro dart game, a patent that created over 200 direct jobs and untold numbers of indirect jobs and millions of dollars in gross national product, was declared invalid without my getting a day in court to defend it.

In addition, it is our information that since the patent was declared invalid, a substantial number of foreign companies have entered the market with less expensive Velcro dart games and have taken substantial sales away from the U.S. toy industry. I would now like to speak on some of my experience in licensing. I have been in the business of licensing inventions for nearly 30 years. For 20 of those years I went to company after company in the United States attempting to sell my inventions. I borrowed money just to eat in the early days. By far the majority of the large U.S. companies required that I sign a nonconfidential disclosure agreement, which limited their liability to my patent rights and in effect prohibited me from suing the reviewing company. But when you are hungry and have no idea where the rent is going to come from, you tend to ignore the ramifications of such agreements. The procedure then is nearly always the same.

The company representatives look at your invention and keep the drawing in order to fully analyze its potential. If the invention does not meet that particular company's needs, you may get a letter returning everything and saying the company is not interested. If the company likes your invention, you either get a letter saying they are not interested at this time or you don't hear further from them. Then suddenly, you see your invention on the market. You write a letter to the company telling them that they are infringing, and you get the standard legal response: "Your patent is invalid, and we are not infringing."

Then comes your first tough decision: Do you spend the six-figure amount required to sue the infringer? If you signed the nonconfidential disclosure statement limiting the infringer's liability, it is time to move on to another invention. If you have not yet found out that there are countries that honor their patent systems and you therefore have not been successful in licensing your invention, and you cannot afford to bring the suit, then the rights to your invention are finished.

For argument's sake, we will assume that either the Japanese are paying you well on a license or that you are independently wealthy, allowing you to have a limited choice. Either you go into business for yourself and compete with the infringer to try to at least salvage something out of the fact that you created a new product, or you go to court. If your product is successful, the big boys in the marketplace will put you out of business. If you have taken the latter choice to sue for damages, chances are your patent will be declared invalid.

This scenario I have just given you is real. It happens to just about every successful professional inventor. There are company managers at this hearing who have taken me to the point of the legal letter telling me that my patent is invalid and not infringed. I am now deciding whether to start another suit.

Such corporate attitude is to be expected, I suppose. Company managers know that the odds an inventor may be able to afford the costly litigation are less than 1 in 10. Even if a suit is brought by the inventor, the odds are four out of five that the courts will hold the patent invalid. When royalties are expected to exceed legal expenses, it makes good business sense to attack a patent. I think it appropriate to contrast the U.S. antipatent philosophy with my experiences in the world market.

I advertise in a number of trade journals in Europe and Japan. I also annually attend a world_technology_show. Last February in Atlanta at the Tech-Ex show, Licensing Management Corp.'s booth had visitors literally three deep, from opening until closing time. Most of the inquiries were from Europe and Japan.

The licensing procedure is somewhat different in the international marketplace. First and foremost, they come to me as the result of advertising. I am not required to do telephone soliciting. Second, they do not require that I sign a nonconfidential disclosure statement. Quite to the contrary, they will sign my confidential disclosure statement indicating their willingness to keep my disclosure confidential; stipulating a time for a decision of the reviewed technology, and indicating a willingness to pay either under patent rights where they exist, or where no patent rights exist agreeing to pay for the transfer of know-how.

This substantially different attitude is obviously much more congenial to the inventor. This congeniality is further enhanced by the fact that although the majority of my income is derived from foreign licensing, I have never had to enforce a patent against a foreign infringer.

I leave it to you to conclude the reason as to why the attitude of foreign companies is so different. My licensees have told me that they recognize the clear value of invention from an economical point of view. They feel the United States has lived off the fat of its own technology for so long that we do not recognize that the consequence of the legal destruction of patents is a decline in innovation, a situation that is not within any nation's economic interests.

What all this means to the inventor is that he either quits inventing or he licenses foreign. It is not at all surprising that the balance of payments reflects the foreign sales advantage. You don't have to guess who the foreign licensees sell to. For example, how

many millions of dollars were paid overseas as the result of the import of cassette tape recorders?

To give you an idea, assuming that the royalties paid on my cassette recorder patents were one-tenth of 1 percent of wholesale price, they would amount to well into six figures annually. Or, more recently, I received a patent on the drive used in most video cassette recorders. Nearly 600,000 were imported into the United States in 1978 alone, and market projections place annual sales to be over 1 million units. At an average wholesale price of $500, one invention from one inventor could cut-or add, depending on who licensed it-$500 million a year from our gross national product. Gentlemen, I would love to sell in my own country because I believe we need it. I hope you will make every effort to take the steps needed to improve the patent system in the United States so that American companies and investors can take advantage of American know-how and creativity.

Senator SCHMITT. Thank you, sir.

Mr. Burkard.

STATEMENT OF HERBERT G. BURKARD, CORPORATE PATENT COUNSEL, RAYCHEM CORP.

Mr. BURKARD. I would like to apologize for being the only individual who was so ill-mannered as to use 13-inch paper. I hope you will put that down to the fact that we out West are slow to adopt new things.

I would like to address only two things in the course of my testimony, to avoid prolonging it unnecessarily.

By way of background, my corporation is a young corporation. We are 22 years old and in that time we have come from ground zero to well over $300 million. So, my experience is with what I think it is fair to characterize as a fast-growing but presently medium-sized corporation. We like to think of ourselves as innovative and technologically oriented. For example, we spend between 6 and 7 percent of our annual sales dollar on R. & D. effort. We think our success springs largely from our ability to provide novel solutions to existing problems. Certainly, most of Raychem's products are products which, once marketed, could be readily copied. We therefore rely heavily on the patent system, both in the United States and worldwide.

I should point out that over half our sales are outside the United States. We have approximately 200 U.S. patents and approximately 1,000 foreign patents issued, and approximately equivalent numbers pending. Approximately half my patent staff is located overseas, so for whatever it is worth, I have a reasonable familiarity with both foreign as well as U.S. patent systems.

I should also point out that my opinions are not a statement of corporate policy. They are my own thoughts on the matter.

As some of you may be aware, we are located in an area of the United States that is called Silicon Valley. I think that has some relevance to a point raised by one of the other witnesses in connection with S. 1215, although, in general, I am not prepared to comment extensively on this bill. That was the question of what influence the present system, whereby Government-sponsored research requires the granting of Government rights in patents, has.

A large number of companies in Silicon Valley don't even consider doing sponsored research, for precisely this reason: They just simply refuse to get into, if you will, the hassle. It is not a matter of corporate policy on Raychem's part, but I should note parenthetically that we do no sponsored research. I think most of our technology is less likely to be of immediate interest to the Government, but, certainly, in the Silicon Valley area a relatively large percentage of the firms simply do not become involved in it, precisely because of that reason.

I am, I think, less qualified to suggest what changes, if any, would alter this situation, but I think it is the situation, and that it is of some significance.

The other point I would like to comment on is some changes which I feel would be appropriate in the patent system. I recognize that a number of my suggestions are contrary to a number of the suggestions made by previous distinguished witnesses, but I suppose it is for you gentlemen to resolve, what is the choice to be made.

In patents, as in many other areas, a major problem for industry is uncertainty. Businessmen want-and I think it is in the public interest-for the various corporate staff people, including patent lawyers, to be able to give them definitive answers. I feel that the changes I am proposing in the patent law will facilitate the giving of definitive answers to businessmen.

The changes I am proposing I don't think are fundamental changes in the patent system. I think the present system is a good one, and I believe that the proposed changes will enhance the value of the patent system to U.S. industry.

I should note that the changes I propose would, I think, tend to bring the U.S. system more into conformity with the system practiced in most European countries. I think this is incidental. It is not that the foreign patent system is necessarily better, but I think in an international context a greater degree of uniformity is desirable.

The first suggestion I would make is for the provision of an opposition and reexamination system in the United States. Several questions were asked with respect to why patents experience a greater degree of respect and are less litigation-prone in a number of European countries. I think one of the major reasons is, as was indicated, the greater comprehensiveness, if you will, of the examination conducted in the European patent offices.

However, I think another major factor which bears on this is the opposition system which exists in the examples cited-Sweden and Germany, and also in Holland and in Japan for example. The system there is that after the patent office is prepared to allow an application, it is then published, and for 90 days, or 60 days in the case of Japan, essentially anyone can submit arguments to the patent office as to why the claims the patent office has indicated it is willing to allow are in whole or in part invalid or overbroad. In effect, then, the patent applicant and the opposers argue further in an interparties situation before the patent office, and until the patent office is finally prepared to accept or reject a set of claims. The patent which then issues, I would submit, is, just as a