Page images



Patent Survey Results This is a summary of the responses to the questionnaire which accompanied the draft I.R.L. position state. ment on the U.S. Patent System, distributed in June 1978 to the 245 1.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. A. Do you agree with the basic premises of the first two paragraphs? Yes 100% No 0%

21 extra comments.
B. Regarding the U.S. Paient system features of merit, do you agree that:
1. The basic requirements are well defined and should not be changed?
Yes 93%
No 6%
No Answer 1%

24 extra comments.
The Patent Office performs generally well:
Yes 86%
No 12%
No Answer 2%

46 extra comments.
Thorough examination is important:
Yes 97%
No 1%
No Answer 2%

34 extra comments.
It should be balanced with reasonably prompt examination:
Yes 97%
No 1%
No Answer 2%

27 extra comments.
The patent should go to the first-to-invent:
Yes 89%
No 7%
No Answer 4%

43 extra comments.
5. The one-year grace period should be retained:
Yes 94%
No 5%
No Answer 1%

31 extra comments.
Are there any other features of merit which should be emphasized in the paper?
Yes 32%
No 50%

42 extra comments.
Regarding areas for improvement, do you agree that:
The I.R.I. should take a positive approach and some initiative?
Yes 95%
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:
No 13%
No Answer 2%

53 extra comments.
Such re-examination should be after issuance:
Yes 75%
No 17%
No Answer 8%

41 extra comments.
Such re-examination should be limited to published prior art:
Yes 53%
No 42%
No Answer 5%

54 extra comments.
Such re-examination should be moderate in procedure and scope:
Yes 78%
No 13% . No Answer 9%

43 extra comments.
Do you agree that the Courts' and the Department of Justice's concern about the lack of public
participation in the examination process will continue even if Congress loses interest in Patent
Law Revision?
Yes 75%
No 13%
No Answer 12%

40 extra comments.
The term of the patent should be 20 years from filing rather than 17 years from issuance.
Yes 70%
No 27%
No Answer 3%

69 extra comments.
Enforceability of a patent in court is so complex, lengthy, expensive, and uncertain that the full
value of the patent incentive is being eroded:
Yes 84%
No 10%
No Answer 6%

35 extra comments.
Variance in the courts on standards of patentability is a part of these problems:
Yes 84%
No 11%
No Answer 5%

35 extra comments.
Some legislative and judicial efforts to decrease these problems should be made:
Yes 86%
No 7%
No Answer 7%

32 extra comments.
A single court of Appeals for patent litigation should be considered:
Yes 72%
No 26%
No Answer 2%

52 extra comments.
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? Yes 21% No 64% No Answer 15%

69 extra comments. If such a court did have these probiems, would the improvement advantages outweigh them for the principal industrial users of the patent incentive? Yes 59% No 29% No Answer 12%

26 extra comments.
Do you know of any other legislative or judicial change which should be considered to reduce
the burdens of litigation?
Yes 59%
No 11%
No Answer 30%

84 extra comments.
Should this be used instead of, or in addition to, a single patent appeals court?
Yes 36%
No 9%
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%
No 47%
No Answer 33%

46 extra comments.

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 Utilization 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 inuch 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

policy on this score. Thus we concur strongly with Sec. 101 "Findings" of S. 1215. and particularly with Sec. 101(3), namely: "(3) Scientific and technological develop ments and discoveries resulting from work performed with Government contracts constitute a valuable national resource which should be developed in a manner consistent with the public interest and the equities of the respective parties."

We would contend that the Federal Government has not administered its contracts in scientific and technological areas as “valuable national resources[s", nor has it developed the results of those contracts in “a manner consistent with the public interest" or the "equities of the respective parties." To the contrary, it seems that the Federal Government has followed the practice of simply doling out money in the expectation of developing “valuable national resource(s)” without any concomitant effort to promote those resources on behalf of the public interest. The proof of that inadequacy, surely, is in the failure of the various federal agency technology transfer programs, and in the thousands of government patents that are as yet uncommercialized.

And we would concur in Sec. 101(6) that “There is a need for the establishment of a flexible Government-wide policy for the management and utilization of the results of federally funded research and development.” We would like to comment on some of the specific provisions of the bill:

In Sec. 201, “Responsibilities," we are of the view that giving the responsibility to a single agency to coordinate, direct and review the implementation and administration of the Federal policy set forth in S. 1215 with respect to the ownership of inventions resulting from federally sponsored research and development could result in an additional layer of bureaucracy. Both those responsibilities and the promotion of efficient and effective utilization of the results of federally sponsored research and development could be left to each individual agency which best knows and understands the programs of its sponsorship of research and development and can best evaluate where utilization of the results of such programs might be most efficient and effective.

For example, concerning Sec. 201(cX4), we would ask, what will qualify the Commerce Department “to identify those inventions with the greatest commercial potential and to promote the development of inventions so identified”? Although we might suspect that even the individual agencies might encounter some difficulties in fulfilling this responsibility, the agencies are much better qualified to make such identifications and promote them for their commercial potential than is the Secretary of Commerce.

In the same area of responsibilities, we would also ask, in Sec. 201(cX7), how will the Department of Commerce “demonstrate the practicability of the inventions for the purpose of enhancing their marketability“? We can't for a moment comprehend how the individual agencies, let alone the Department of Commerce would have such capabilities. Surely the demonstration of marketability of an invention is best left to those with the experience of the market. The Government is not in marketing. This is a responsibility that only the private sector can carry out, and the private sector will assiduously carry out this responsibility if it determines there is commercial practicability of an invention and there is a market for it. We would say about the entire Sec. 201 (c), that all of its provisions would create an unnecessary additional bureaucracy that we cannot see as being as effective as leaving such responsibilities to the individual agencies working under the umbrella of a government-wide, unified patent policy.

Sec. 201 (e) most exemplifies what we are concerned about in this respect. Estab lishing interagency committees as are necessary to assist in the review and formulation of rules, regulations, and procedures implementing provisions of this Act, makes for more layers of complexity, bureaucratic delay, and regulation. We believe that if a clear unified patent policy were to be enacted, there would be no need for such interagency committees on such a formal basis. If there needs to be some coordination among particular agencies in implementing patent policy, then it can be instituted as needed, and dispersed on completion of the task.

In Sec. 202 “Agency Technology Utilization Program,” we take a cautious view of expanding the federal bureaucracy through the establishment of technology utilization programs in those federal agencies supporting research and development activities. For example, the Federal Laboratory Consortium for Technology Transfer today numbers in its membership some 200 federal research and development laboratories and centers. Yet, we are not aware, in the five years of the Consortium's existence, of a substantial increase in the transfer of the fruits of research and development in the federal laboratories to innovations beneficial to society.

We believe that the key point here is not an expansion of agency technology transfer or utilization programs, but rather a formula by which industry and the

private sector can be brought to the inventions so as to evaluate them for their commercial potential. What Sec. 202 provides for is a “push” mechanism for government agencies. Such a mechanism is beset with problems unless there are incentives to bring the “pull” of the innovative industrial community to the inventions.

In the matter of “Allocation of Rights” (Sec. 301), we would support the provisions of the “Rights of Government." Similarly, the bill would have our support on "Rights of the Contractor" [Sec. 302]. However, we foresee some problems with some of the provisions of Sec. 303 Waiver. We generally applaud the provisions in this section since it is our view that, in prinicple, this is the way that waiver should work. Nonetheless, we sense that Sec. 303(4) might be rather inappropriate since it seems to us to be beyond the capability of agencies supporting research and development to deal with "situations inconsistent with the antitrust laws."

In Sec. 304 "March-in-Rights,” in subsection (b), we believe that there is no need for prior approval of the Secretary of Commerce concerning the exercise of marchin-rights by a Federal agency as described in Sec. 304(a). Again, we would prefer that the particular agency be left to determine the exercise of march-in-rights whenever a situation arises in which they are to be invoked.

Finally, we would especially applaud Sec. 306 “Background Rights.” Such a provision is at the very core of a successful government-wide patent policy and the involvement of the private sector in its implementation. Without such protection, the likelihood of private sector involvement would be poor indeed.

SUMMARY In summary, the NAM looks upon S. 1215 with favor and, in general would support passage of this legislation. In some of the specific provisions, we are concerned for those that would create a bureaucratic superstructure to implement a government-wide patent policy or complicate the role of individual government agencies in fulfilling the positive thrust of the bill.


Arlington, Va., May 31, 1979. Senator HARRISON SCHMITT, Senator HOWARD CANNON, Senator ADLAI STEVENSON, Senate Office Building, Washington, D.C.

GENTLEMEN: By coincidence the Board of Managers of the American Patent Law Association had a meeting May 25, immediately after the May 22 introduction of S. 1215. It would be an overstatement to imply that the members of the Board have had a chance properly to study the entire bill. On the other hand, they had theretofore been studying comparable subject matter in the Bayh bill and were in a unique position for instant appreciation of the values in S. 1215.

Feeling that you might be interested in the views of the APLA Board promptly, the Board considered and unanimously adopted the following resolution:

Resolved, That the American Patent Law Association approves the general intent and principal objective of the Schmitt/Stevenson Bill, S. 1215, 96th Congress of May 22, 1979, to use the patent system to promote commercialization of inventions resulting from work sponsored by the government. APLA believes that the fundamental principle of the Schmitt/Stevenson Bill of retention by government contractors of principal rights to patents based on government-sponsored research (except where exceptional government needs must govern) should be uniformly applied to all government contractors. APLA therefore endorses and supports enactment of the Schmitt/Stevenson Bill.

Please let me know if there is anything that APLA can do by way of helping your advocacy of this bill. Yours truly,



Fairfield, Conn., July 2, 1979. Hon. ADLAI STEVENSON, U.S. Senate, Washington, D.C.

DEAR MR. STEVENSON: This letter is to record the support of General Electric Company for the “Science and Technology Research and Development Utilization

« PreviousContinue »