and effort in research and for the commercialization of inventions so that society can enjoy their benefits, but also to encourage the disclosure of inventive technol ogy. The grant of a Imited exclusionary right by the enabling Federal patent statute in return for the prompt disclosure of newly created technology provides the basis for these incentives. Without these incentives, innovative research and development would not be supported with the degree of enthusiasm and willingness to invest risk capital that has been the American tradition. Moreover, the inventions produced by R&D might otherwise be kept secret to an extent which would inhibit technological progress. The exclusionary right granted under a well-examined patent does not take from the public anything that previously existed; rather, the patent right stimulates the creation, early disclosure, and utilization of new technology thus adding to the store of human knowledge. The exclusionary right often stimulates others to "invent around," resulting in further technical progress. Our patent system has a number of features of significant merit which should be preserved and strengthened: 1. The basic requirements of a patent-novelty, utility, unobviousness, best mode, and enabling disclouse-are reasonably well developed in the statutes and patent jurisprudence. I.R.I. advises against attempts to legislate detailed changes or additions to these requirements or to introduce standards of judgment and disclosure that would be stricter than the American inventor, executive, or patent lawyer can reasonably understand and manage. Such attempts would result in unnecessary and undesirable uncertainty. 2. The U.S. Patent and Trademark Office generally performs well in its examination of patent applications, but there is room for improvement. It is staffed with many competent and dedicated professional employees of high integrity. I.R.I. encourages improvement in funding, training, and management of the examining corps and, especially, their adminstrative support. 3. The examination of patent applications should be as comprehensive and thorough as practicable so that issued patents will be respected by competitors of the patent owner and by the courts. Such respect is an essential part of the patent incentive for industry. This thorough examination need not be exhaustive, but should be reasonably prompt, however. Early issuance of worthwhile patents adds to the certainty of businessmen when considering the investment of risk capital to make the New technology available to the public; they want to know if they can plan on patents of their own and whether patents of others will cause problems. Early disclosure also helps keep the published technologies current with the actual state of advance. The balance between thorough and prompt examination should be weighted in favor of thoroughness. 4. Awarding a patent to the first-to-invent rather than the first-to-file is deemed by the I.R.I. to have continuing justification. It respects the value of the indiviudal in American tradition and avoids inequities which can result from a "race to the Patent Office"; thorough and thoughtful reduction-to-practice of meritorious technology should continue to be encouraged. 5. I.R.I strongly endorses the present one-year grace period between certain events such as first sale or publication and the application filing date. This likewise facilitates thoughtful and thorough refinement of invention; it encourages prompt patent disclosure but with greater completeness than occurs under the abrupt requirements of those foreign countries which require absolute novelty without a grace period. The U.S. patent system, despite its basic soundness and almost 200 years of valued existence, is not without areas where improvement could be made. I.R.I. encourages attention to the following areas, on a tailored basis, point by point, to avoid confused, poorly drafted, or overly detailed patent law revisions. 1. We recognize the generally sound examining skills of the Patent Office and the basic honesty and sincerity of patent applicants, patent owners, and patent lawyers. We also recognize, however, the inability of the Patent Office to examine applications as comprehensively as the public and courts might desire, even with the frequent assistance of the patent applicant in supplying prior art and other information to help the examination process. Without judging the merit of the criticisms, we beliveve that the examination procedure is criticized because it is necessarily conducted in secret to protect the invention before it is deemed patentable. Therefore, the I.R.I. endorses the concept of permitting useful, reasonable, and timely post-issuance participation by the public in the examination of the invention and the propriety of the patent grant. Such participation should occur after the patent has issued to preserve the rights of the inventor. Participation should only be permitted in a manner which strength ens the presumption of validity and adds confidence in the overall examination system; it should not unduly increase the expense and difficulty of getting a patent, and should not detract from the certainty desired by the patent owner for making a commercialization investment. The reissue practice, introduced by former Commissioner Dann, is a sound step toward this public participation, but could be improved by rule changes or legislation which would permit reasonably simple and prompt reexamination of an issued patent by permitting any person to cite prior art and possibly other re-examination considerations.' I.R.I. does not favor re-examination adversary proceedings of the type employed in German oppositions or U.S. patent litigation. Such proceedings would unduly erode the U.S. patent system by favoring those patent applicants with resources and by introducing unacceptable delay and unmanageable uncertainty. 2. The I.R.I. believes that the term of a patent should be changed from the present 17 years from issuance to a term of 20 years from date of the first filing. If examination is expeditious and there is no interference, the current 17 years is satisfactory. However, there continue to be a number of patents, particularly commercially important ones, which have lengthy and complex prosecution of as much as 5 to 10 years because of refilings, appeals, or interferences. This can result in patent terms which expire as long as 22 to 27 years after initial filing. A carefully conditioned term ending 20 years after first filing will provide greater equity and certainty for patent owners and their competitors. 3. Enforceability of a patent is an integral part of the patent system because assertion in litigation is the ultimate test of the basic exclusionary property right of the patent. Many patents are afforded their deserved respect without the necessity of litigation. This respect will be broadened if overall patent quality is improved by better examination. There has, however, historically been a need to litigate patents which involve honest differences of opinion on validity and scope between the patentee and alleged infringer. Unfortunately, such litigation has become complex, lengthy, and expensive, in a large measure because of the scope of discovery; this presents difficulties for both the patent owner and accused infringer. Litigation problems have unduly discouraged patent owners, particularly those with limited financial resources from asserting their patents because a validity determination by a court is expensive and uncertain; and if the patent is upheld, the damages may not be enough to pay for the litigation. This reluctance to assert has encouraged infringement of patents which should otherwise be respected. Litigation expense may intimidate a patent owner into accepting unfavorable settlements. Conversely, a patent owner may intimidate a weak infringer with the expense of litigation. Compounding these problems is the variance in the opinions in the Federal courts regarding patentability standards. Patent owners and infringers jockey to get into courts which favor their own interests. This further adds to the expense and uncertainty of owning patents and making investments in reliance on patents. The I.R.I. supports legislative and judicial efforts to decrease the expense, uncertainty, and inequities experienced by patent owners and those accused infringers having honest differences of opinion on the validity and scope of a patent. We believe that it would be worthwile to give careful consideration to a single court of appeals for patent litigation which would speed up patent litigation and make it more uniform and certain. If such a court could institute discovery reform, litigation expenses could be reduced. This concept of a Patent Appeals Court has been controversial because of a prediction that the patent court would be rigid, technical, inflexible, and unable to handle issues ancillary to patent validity and infringement, such as unfair competition and antitrust issues. Even if this prediction were accurate, we submit that the reduction in expense, time, and uncertainty would significantly offset any shortcomings of the specialized court. 153 percent of the I.R.I. membership were in favor of limiting re-examination to published prior art; 42 percent were not in favor (see Patent Survey Results, attached). A. B. 1. 2. No 6% Patent Survey Results This is a summary of the responses to the questionnaire which accompanied the draft I.R.I. position statement on the U.S. Patent System, distributed in June 1978 to the 245 I.R.I. member companies. There were 127 responses, which provided yes or no answers to the questions. Many extra comments were also made and the numbers of these are tabulated. Do you agree with the basic premises of the first two paragraphs? Yes 100% No 0% 21 extra comments. Regarding the U.S. Patent system features of merit, do you agree that: No Answer 1% 24 extra comments. No 12% No Answer 2% 46 extra comments. Are there any other features of merit which should be emphasized in the paper? No 1% No Answer 4% 25 extra comments. The Patent Office examination should be supplemented by public participation to improve thoroughness and openness of examination: 42 extra comments. 2. 3. 4. Such re-examination should be moderate in procedure and scope: Do you agree that the Courts' and the Department of Justice's concern about the lack of public No 13% No Answer 12% 40 extra comments. 69 extra comments. expensive, and uncertain that the full The term of the patent should be 20 years from filing rather than 17 years from issuance. Variance in the courts on standards of patentability is a part of these problems: No Answer 6% Would such a court, if properly organized, streamline and speed up patent litigation and make it more uniform? Yes 76% No 13% No Answer 11% 48 extra comments. Would such a court tend to be rigid, technical, inflexible, and unable to handle issues ancillary to patents? Do you know of any other legislative or judicial change which should be considered to reduce the burdens of litigation? 84 extra comments. No Answer 55% 43 extra comments." *(but many related to the ambiguity of the question) Are there any other areas for improvement which should be emphasized in the paper? Yes 20% STATEMENT OF THE NATIONAL ASSOCIATION OF MANUFACTURERS The National Association of Manufacturers (NAM) is a voluntary membership organization of more than 12,000 companies and is affiliated with an additional 158,000 businesses through the National Industrial Council encompassing all sizes and classifications of industry in every state. Together these companies produce approximately 80 percent of the goods manufactured in the United States. Among NAM memberships, some 80 percent can be classified as small businesses. This statement is made on behalf of the NAM by its Committee on Science and Technology and Task Force on Intellectual Property Legislation. Most of our members use and rely on patents in one form or another, and the NAM has long had an official written policy on patents, which reads as follows: "The patent laws of the United States have contributed greatly to the high standard of living of our people and to our world leadership in modern technology. The incentives of our American system of patents are vital to our continuing industrial growth as well as to the establishment and success of new ventures. The property represented by a valid patent should stand before the law on a par with other property and should be accorded the same legal protection. In keeping with these principles, and in order to encourage prompt use of worthwhile inventions, the rights of patent owners to license their patents in whole or in part, for specified territories, times, amounts or uses, must be preserved in the public interest, but we are opposed to compulsory licensing as destructive of the 'exclusive right' which is the entire property secured by a patent under the Constitution." Thus, the NAM, as the leading association for manufacturing companies, is unequivocally supportive of patents and their owner(s). In addition, the NAM patent policy reflects the Association's views on patent rights under government research and development contracts, when it says: "The incentives of the American system of patents are vital to our continuing industrial growth and leadership in modern technology. Consequently, it should be the basic policy of the Federal Government as to its contracts for research and development that the contractor should retain the commercial and foreign rights in inventions made in the performance of the contract subject to a royalty-free, non-exclusive license to the Government for governmental purposes; provided that any such license should not convey any right to the Government to manufacture or use any invention for the purpose of providing services or supplies to the general public in competition with the contractor or the contractor's commercial licenses in the licensed fields." As yet, such a policy position has not been reflected in either a generalized federal government patent policy-none exists to date-nor in the patent policies of the various government agencies which support research and development out of which might flow patentable inventions. Agency policies are many, are often complex, duplicative or even at odds. That complexity and insecurity have had a dampening effect on invention and industrial innovation, an effect we are all too well aware of. In considering S. 1215, the Science and Technology Research and Development Utilizatiion Policy Act, we are pleased to note that in contrast with other legislation in the same general area, S. 1215 does not limit its provisions to specific sectors of our economy such as small business, the universities, or non-profit institutions. Although NAM has a majority membership of small businesses, we are concerned about special kinds of legislation that would fragment the private sector into categories. While acknowledging the plight of small businesses today, especially as they are confronted with indiscriminate and burdensome regulations, taxation and antitrust prohibitions, we would favor legislation which addresses problems faced by all of the private sector at one time or another, in one form or another. The nature of government contracting in the research and development area and its attendant patent problems are as much a disincentive for the large manufacturing entity as for the small business. Each, in its way, can become immersed in bureaucratic mire in servicing the contractual needs of government in research and development. * * * In considering the whole area of patents-and cutting through the sometimes intractable legal technicalities that often attend the matter-we are impelled to go back to the 1966 Report of the President's Commission on the Patent System, "To Promote the Progress of Useful Arts-In an Age of Exploding Technology." The phrase "to promote the progress of * * useful arts" is of course derived from the great Constitutional mandate concerning patents. That is undisputed. And we cannot but be even more aware today that if 1966 was "an age of exploding technology", then surely we are now in an era in which that phrase has taken on more force than ever over the past 20 or more years. Yet, as we read that Commission report, then, and again as we read it today, there is one phrase therein that seems to have an almost prescient connotation. On Page 2 of that Commission report, we read: "The members of the Commission unanimously agreed that a patent system today is capable of continuing to provide an incentive to research, development, and innovation." We would draw that conclusion today more emphatically than ever-surely, we are more seriously and urgently faced with a need to stimulate and encourage invention and innovation to meet national and international needs. We are more than ever pressed to improve our productivity from inventions so that we can maintain—let alone improve-the standard of living for everyone, and even more urgently to control and dampen inflation. We have noted that of the 28,000 to 30,000 patents owned by the Federal government, something less than 4 percent (according to some reports) have been licensed to private producers. This represents an unacceptable stagnation of undeveloped technology in a nation in which there is an apparent slowdown in innovation. It is especially serious when there is extensive evidence that U.S. manufacturing industry has proven capability to move quickly and very creatively in successfully innovating. It is worth stating here that innovation does not derive from research and development alone. Innovation requires much more-beginning with the recognition of a potentially marketable product, followed by the decisions to begin the processes of product development, tooling, manufacture, and final marketing. It is the decision to go forward with these processes that requires the commitments of large sums of money, often at considerable risk of failure. Various studies estimate that the money required for development of an invention or discovery is from 10 to 20 times the cost of making that invention. In an article entitled "Improving the Climate for Innovation-What Government and Industry Can Do" (Research Management, September 1976), the Comptroller General of the United States, Elmer B. Staats, took patents as an example of whether Federal funds are being spent wisely in the public interest, such as to stimulate innovation. "Some government officials," Mr. Staats says, "believe that the patient derived from federally funded R&D must be owned and controlled by the Government. However, in most cases, the public interest may best be served when private industrial contractors, with a few provisos, are granted exclusive licenses for commercial development.' The NAM concurs in that conclusion. In the recent Domestic Policy Review of Industrial Innovation instigated by President Carter and conducted by the Department of Commerce, seven issues were addressed as having an impact on innovative processes. Among those seven issues was patent policy. The Draft Report (dated December 20, 1978) of the Advisory Subcommittee on Patent and Information Policy of the Advisory Committee on Industrial Innovation, established as part of the Domestic Policy Review, draws some important conclusions about transfer of commercial rights to governmentsponsored research to the private sector. In proposal V of that document, the following is stated: The idea that what the government pays for belongs to the people is not only appealing, it is true. The question is: What instrumentalities can be brought to bear to maximize the possibilities that people will indeed have available the fruits of their government's expenditures? Nonexclusive licenses to undeveloped inventions, offered by the government or anyone, have few takers, whereas patent ownership or exclusive licenses of sufficient duration are much more likely to attract the money and talent needed to make and market real products to meet consumer needs." (Emphasis in original.) Further, the report stated that: "If the results of federally sponsored R&D do not reach the consumer in the form of tangible benefits, the government has not completed its job and has not been a good steward of the taxpayers' money. The right to exclude others conferred by a patent, or an exclusive license under a patent, may be the only incentive great enough to induce investment needed for development and marketing of products. Such commercial utilization of the results of government-sponsored research would insure that the public would receive its benefits in the way of products and services, more jobs, more income, etc. The cost of government funding will be recovered from the taxes paid by the workers and their companies. (Emphasis added.) Thus, all members of the Advisory Subcommittee on Patent Information Policy "recommended transferring the patent rights on the results of government sponsored research to the private sector for commercialization." We note here that the Advisory Subcommittee makes proposals that very closely parallel many of the provisions of S. 1215. It is not inconsistent with the basic objectives of the NAM |
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