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the greatest scientists. In some districts of the United States, courts have almost always held patents invalid, while in other courts the percentage of validity is higher, perhaps half of those tried.

Contrary to popular belief, the patent cases that go to court (where the subject of infringement and validity of the patent are involved) are not based on the strength of the patent. It is simply a matter of economics. Irving Kayton, Professor of Law at George Washington University, has well pointed out many years ago that where the royalties are much greater than the cost of litigation modified by the probability of winning, the patent is challenged. This has very little to do with the strength of weakness of the patent.

There are two items to remember about patents that end up in court. One is that the percentage is very small, only a fraction of one percent; and, secondly, that the question of whether an invention if or isn't obvious, or is or isn't completely new, is basically a subjective matter. Becasue the case is usually decided in court many years after the invention is made, it is not at all difficult to see why the invention looks perfectly obvious when presented to a non-technical court by expert witnessess who point out that the invention is simple and obvious and anyone "well versed in the art” could have done it. The fact of the matter is that the very great inventions are simple and it is true that many others could have made them, but the important thing is that they did not.

I am firmly convinced that all technical matters that concern patents such as infringements, validity, and settlement of interferences should be tried only in the Court of Customs and Patent Appeals and in no other Federal Court except the Supreme Court. Only matters that are non-technical, such as contracts, financial matters, and such others, should be left to the District Courts, This would eliminate one of the greatest injustices of the present system. An inventor may have to defend his patents in many District Courts and while he may win in many, he may have his patent destroyed when held invalid by only a single court. If all of the cases were tried in a single court, it is obvious that the same battle would not be fought many times, as in the present practice.

In the recent past, the patent system of the United States has suffered from attacks on it by some misguided members of the Antitrust Division of the Department of Justice. I am glad to say that the Department of Justice is taking a more rational point of view today. For many years, the Department of Justice felt and stated that patents are monopolies and, as such, their power should be curtailed. I have been told by members of the Department of Justice that there is no reason to have a patent system at all since inventors have so much fun inventing things that they would do it even if they were not paid. I was also told that if I or someone else did not invent a particular device, it would be invented by someone else when it was needed. When I pointed out that my watch regulatory and magnetic particle clutch could have been invented by any competent engineer 100 years before me and that they weren't, their answer was that this was due to pure accidents. Such comments about the "fun" of producing and developing inventions and the automatic inevitability of inventions are not worth discussing.

In my opinion, the conflict between the Antitrust Laws and the Patent Laws should be resolved by Congress and should not be done by case law.

Judge Rifkind has put it well by saying in a speech before the American Patent Law Association several years ago, that it is time to divorce the patent laws from the antitrust laws. As an inventor, I would like to know my rights by a clear statement of law rather than the vague and risky interpretation of a large number of court cases.

When discussing patents, it is important to point out that they have different values to different segments of our society. To a private inventor, such as myself, it is absolutely necessary to have a patent if I am to receive any reward for my efforts. If I have an idea that cannot be protected by patents, I make no effort to develop it, to promote the invention by manufacturing it, or to sell it to anyone else. The value of patents is also great for a small business because a small technical company has nothing to sell but innovation and rapid changes in technologies, something which is not of the same importance to a large corporation.

Patents to a drug firm are very important because the cost of development and proof of performance is very expensive but the cost of manufacturing the drug is relatively small. Without patent protection, anyone can make a drug after another company has developed it and proved its value.

Patents have different values to a chemical company as compared to patents to large corporations that make machinery such as automobiles and computers. A large computer company does not depend on royalties for its profits. It depends on the economics of engineering and production and particularly on distribution and service. This is also true of automobile companies. For such companies, patents are an unmitigated nuisance. They force them to do basic research in new fields so as not to be frozen out of new technologies. The patents cost them large sums of money for attorneys, patent fees and litigation in scores of countries. The officials of these companies frankly admit that if the patent system did not exist they would need to do less R&D, they could manufacture anything they wished and that their success depends on their economic strength, marketing abilities and their worldwide distribution of sales and services.

I believe that the present practice (due to the efforts of the Antitrust Division) that many large corporations must license others at some reasonable rate should be codified into actual legislation, that any corporation that has more than, say, 25 percent of an industry and has a gross income of more than, say, $500,000,000 must issue non-exclusive licenses are reasonable rates.

I wish to emphasize most strongly that patents are a means for increasing competition both by limiting the power of our large corporations and by forcing competitors to improve upon the patents developed by others. Patents are the main means of rewarding the brave soul who is willing to do something different. In a country without patents, power would be completely in the hands of those who have large sums of money and the chance for an innovative small company to become large or strong would be essentially zero.

Innovators suffer today because of the disillusionment of our investors, particularly Wall Street, with R&D. They also suffer because of the high interest rates that money can now earn. When capital can earn 12 or 13 percent essentially without risk, and double itself in some six years, and when a rich investor can double his money without paying taxes in about ten years, why should anyone invest in some new high technology with its attendant risk? Society must recognize that invention and innovation is basically risky and that many new ventures must fail. No intelligent society could or should make use of all new inventions that are produced in a given period. The fact that an improvement exists does not justify the necessary scrapping of an old device or an old process which is still economically viable. Society must pick and choose and the inventor must have hope that he or she will sometimes be chosen. Without that possibility, our economy dies. The United States must produce an ever larger pie to be divided among its people if the standard of living is to rise. It cannot do this by conquering other nations or exploiting them. It does not have enough raw materials to simply sell in exchange for foreign goods. Farming involves only 5 percent of our population and certainly cannot support all of us. The only way we can raise our standard of living is to produce more goods and services for every hour of our work. This means that our technologies must always improve; we must produce ever better products and ever more efficient services, not only for ourselves but to trade with others. Unless we do so, our average standard of living shall fall and we shall become a second-class nation.

Attached is a curve of patents issued to domestic corporations, independent inventors and foreign corporations from 1954 to roughly the present time. Attached is a list of important innovations that were made outside of the laboratories of large corporations.

Thank you.

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Atomic energy
Microwave technology
Inertial guidance
Mechanized wiring (Printed circuits)
Mercury dry cell
OCR (Optical Character Recognition)
Magnetic core memories
Vacuum tube
FM radio
Catalytic cracking of petroleum
Jet engine
Fiber optics
Flotation glass
Magnetic recording
Oxygen steel-making process
Heterodyne radio
Shell molding
Shrink-proof knitted wear
Dacron polyester fiber "Terylene"
Automatic transmission
Continuous hot-strip rolling of steel
Power steering
Color photography
Air conditioning
Polaroid camera
Tungsten carbide
Velcro fasteners
TV tape recording
Continuous casting of metals -
Foam rubber

It is interesting to note that the first ten inventions on the list above were developed under Government sponsorship and many of the others had a considerable amount of Government aid in their development.

Senator SCHMITT. Gentlemen, I must go cast my vote, and I thank you for your testimony. Thank you again. This has been a very useful set of hearings. We anticipate that there may even be some more.

Thank you.
[Whereupon, at 12 noon, the hearing was adjourned.]

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