ance on the conclusions of the administrative office. In addition to providing direct payment of taxes incurred on intellectual property income, I recommend that the application fee for original and reissue patents be raised and that a cost-of-living index be provided allowing the Commissioner to raise certain fees in accordance with inflation changes. The changes in funding should bring a halt to the continued anti-patent trend of case law development. This anti-patent philosophy has been largely, though not entirely, due to lack of judicial confidence in the underfunded Patent and Trademark Office search procedure. While the above system provides sufficient financial support and should prevent the recurrence of new judicially created doctrines that hamper innovation, it is necessary to rectify those doctrines that are presently taking their toll on the system. I therefore recommend that Title 35 of the United States Code, Section 103, be amended to explicitly state that a primary factor in the test of obviousness should be a showing of commercial success. In addition, I recommend, in order to reduce the prohibitive cost of defending title to a patent, a mandatory reissue and reexamination procedure be instituted whereby all patent validity issues will be resolved by recourse to the administrative expert in the PTO, with appeal to the Court of Customs and Patent Appeals (CCPA). An amendment to Title 28 of the United States Code should provide that District Court jurisdiction in patent cases be limited. Jurisdiction should be exercised only after the PTO has been consulted in a reexamination procedure to determine the validity of the patent in light of all assertions against the patent. The PTO reexamination proceeding would have the full participation of both parties as adversaries. Both sides would be allowed discovery. The patent adversary would have the right to cite other prior art as invalidating the patent. However, his evidence should prove invalidity by a recognized standard (for example, beyond a reasonable doubt or clear and cogent evidence), in order to outweigh the PTO's original determination. Once the PTO, within this reexamination proceeding, has determined the validity of the patent, its decision would be reviewable by the CCPA within a specified time. If the patent was determined valid and an appeal was not taken, the issue of validity is resolved and will serve as res judicata for all other judicial determinations. The suit would then be brought in the District Court to determine infringement. I also recommend that appellate jurisdiction from all patents be limited to the CCPA. Disputes involving technical matters such as infringement and interferences would be appealable then only to the "expert" court subject to ultimate appeal to the United States Supreme Court. The channeling of technical cases to an established appellate court with special expertise along with the removal of validity questions for appeal would rid the patent system of the rampant forum shopping and uncertainty which presently pervades its entire body. I have taken the liberty of sending copies of this letter to other parties interested in the actions taken so far by the Senate. I invite each party receiving a copy to comment on my proposals. I suggest that a member of each Congressional staff interested in the subject matter be delegated to work with representatives of the American Patent Law Association and the Patent, Trademark and Copyright Research Foundation (PTC) to review all of the proposals submitted. After reviewing these proposals, I believe that this joint effort of the APLA, the PTC and the various Congressional staffs could then appropriately draft a bill to finally resolve the unfortunate circumstances that have caused innovation to decline in the United States. Sincerely yours, JEROME H. LEMELSON. HON. ADLAI STEVENSON, AMERICAN CHEMICAL SOCIETY, Chairman, Subcommittee on Science, Technology, and Space, Committee on Commerce, Science, and Transportation, U.S. Senate, Washington, D.C. DEAR SENATOR STEVENSON: The American Chemical Society appreciates this opportunity to comment on S. 1215, the "Science and Technology Research and Development Utilization Policy Act." Primarily through its Joint Board-Council Committee on Patent Matters and Related Legislation, the Society monitors legislation and federal agency regulations relating to ownership of inventions and patents as well as policies and procedures pertaining thereto. The comments which follow are forwarded to you with the approval of our Board of Directors. It is the position of the Society that technological innovation underlies and supports modern society. Strong and continuous efforts to enhance and expand technological innovation result in high standards of living as exemplified by the history of the United States. Every effort should be made to encourage and strengthen technological innovation so that these standards are maintained and expanded. Continued innovation must be a national policy if we are to find solutions to ever more complex social, economic, and environmental problems. Any national policy to encourage innovation must make it as easy and attractive as possible to invent, to perform research and development on inventive ideas, to demonstrate the commercial feasibility of these ideas, and to diffuse new products and processes embodying the ideas throughout the marketplace for the benefit of the general public. In the real world, implementation of these steps is hindered by many factors— technological, economic, environmental, and the mere resistance of humans to change, to mention only a few. One important factor which encourages innovation is a strong patent system. In the United States we have been fortunate that our forefathers laid the foundation for such a system in our Constitution. Over the years the U.S. patent system has been a strong positive influence in the economy of the country. Nevertheless, certain good features inherent in the patent system may have become eroded through court actions or been made less effective through the enactment of legislation or by administrative actions within the federal government. An important area where administrative action may have been inhibitory results from a lack of uniformity of patent policy between federal agencies. The Society is pleased to note that S. 1215 recognizes that a uniform policy is necessary for the most effective management and use of the results of federally-assisted research and development. The ACS is pleased that the bill authorizes the Secretary of Commerce to develop, coordinate, and implement this uniform policy through a centralized office. However, the Society recommends that this office should not be a component of an existing government agency, but rather a separate, semi-autonomous organization. Furthermore, such an organization should have a minimum internal staff which would have decision making power, but be primarily a clearinghouse and communication link between all federal contracting agencies and private contractors, This centralized office also should have, when necessary, the flexibility and authority to cut across agency lines; for example, when litigation is required. Having such an organization under the Secretary of Commerce could lead to difficult conflict of interest situations, and to undue inhibition or restriction of the centralized office's flexibility and authority; especially since the Patent and Trademark Office and the National Technical Information Service also come under Commerce's jurisdiction. There are limitations to the activities and efficacy of any centralized government office faced with the very large responsibility of disseminating government technology. The effectiveness of such an office can be enhanced if the office maintains a policy of liberally contracting for services in the private sector. In addition, the office should do all in its power to aid, instruct, and encourage nonprofit research organizations to set up appropriate patent administration activities. Obviously, if the nonprofit organization maintains a patent administration office, the government does not have to become involved in the dissemination of the technology, thereby relieving the central office of some of its responsibilities. It is noted that the authority for this office is to expire 7 years from the effective date of the Act, unless renewed by Congressical action. This time space is too brief to expect definitive and unequivocal results to become apparent. Ten to fifteen years for its initial lifespan would be more realistic. Section 202 of S. 1215, relating to the development and implementation of a technology utilization program, would be impractical, expensive, and not cost-effective. Similar programs currently are being conducted by the National Aeronautics and Space Administration with few really positive results as compared to the number of government inventions available for public use. The Society suggests that this proposed program be dropped at this time. Retention of a nonexclusive, royalty-free license by the contractor in those cases where the Government obtains title to an invention seems inadvisable. Such a license may inhibit the widespread use of the invention, since other companies would be unwilling to undertake development of the invention with a royalty-free license in the hands of a possible competitor. The Society believes a fairer arrangement would be to make the non-exclusive license royalty-bearing, rather than royalty-free. As you are aware, S. 1215 is one of many bills currently addressing government patent policy problems. S. 414, the "University and Small Business Patent Procedures Act," addresses itself to this issue by creating a consistent policy and procedure concerning patentability of inventions made with federal assistance. The Society views S. 414 as a desirable first step in solving some of the problems in this area, and firmly believes that enactment of this legislation will result in increased productivity, and aid in the reassertion of the technological leadership of the United States. A copy of our statement on this matter is attached. However, S. 414, of and by itself, will not be sufficient to reverse the alarming downward trend in the rate of technological innovation and economic growth in this country. Technological innovation itself is an exceedingly complex endeavor. It requires careful nurturing, a favorable climate and as deep an understanding as possible of the real world factors influencing its conduct; to increase the rate of technological innovation requires a conscious and continuing effort to promote it. At the same time undue and unnecessary control of the innovative process must be avoided in order to prevent its hindrance or, when carried too far, its suppression. What is needed is a change in climate at all levels of government-from excessively defensive to helpfully encouraging--involving an integrated approach at the administrative, legislative, and judicial levels. Since the innovation process is extremely complex, a single omnibus law also would be exceedingly complex, difficult to administer, and in the end, might have very little real effect. Several pieces of legislation, each addressing a separate issue, would be preferable, as modifications and changes could be made more easily as the results of their influences on the innovative process become apparent. Extreme care must be taken to assure there is cooperation between sponsors of all such legislation so that it will be uniform in its approach and tenor. A start in this direction already is provided by the introduction of S. 414, addressing government patent policy; S. 1215, providing a consistent policy for the encouragement of the participation of private industry in the further development of federally-assisted research and development results; and, S. 1250 which attempts to foster the development of a favorable climate for the enhancement and improvement of the innovative process. These three bills are companion bills which together set a positive pattern for the future. However, they must be supplemented by other bills which will address additional issues important for influencing the rate of innovation before overall improvement can be perceived. To acquaint you with the American Chemical Society, we are including here some background information on the Society. The American Chemical Society is an individual membership organization made up of approximately 116,000 chemists and chemical engineers, reflecting a broad spectrum of academic, governmental, and industrial professional pursuits. Approximately 60 percent of the membership is employed by industry, 25 percent by academic institutions, and 15 percent by governmental and nonprofit institutions. The Society was founded in 1876 and chartered as a nonprofit, scientific and educational organization by an Act of Congress signed into law on August 25, 1937. Under its National Charter, the Society is charged with the responsibility to encourage in the broadest and most liberal manner the advancement of chemistry and the promotion of research in chemical science and industry "thereby fostering the public welfare and education, aiding the development of our country's industries, and adding to the material prosperity and happiness of our people.” The Charter imposes an obligation on the Society to provide assistance to the government in matters of national concern related to its areas of competence. Since one of the objectives of our Federal Charter is the promotion of research, we have welcomed this opportunity to comment on S. 1215. We hope your Subcommittee will give serious consideration to the thoughts and recommendations of the American Chemical Society during deliberations on this legislation. If we can be of further assistance, we would be happy to cooperate with you. Sincerely yours, GARDNER W. STACY. HON. ADLAI E. STEVENSON, MACHINERY & ALLIED PRODUCTS INSTITUTE, Chairman, Subcommittee on Science, Technology, and Space, Committee on Commerce, Science, and Transportation, U.S. Senate, Washington, D.C. THE PROPOSED "SCIENCE AND TECHNOLOGY RESEARCH AND DEVELOPMENT UTILIZATION POLCY ACT" DEAR MR. CHAIRMAN: In connection with the current consideration by the Subcommittee on Science, Technology and Space of S. 1215, the proposed "Science and Technology Research and Development Utilization Policy Act," we are writing to present our comments and recommendations. As you know, the Machinery and Allied Products Institute represents the capital goods and allied product industries of the United States. These companies, of course, rely heavily upon continuing technological development and excellence for the maintenance of their competitive positions. Hence, they are vitally concerned with the policies of the federal government with respect to patents and technical data in connection with the performance of government contracts, even though these companies, for the most part, are predominantly commercial rather than government oriented in terms of their total sales. This concern with patent and data problems in government contracts has been reflected by the Institute in a number of studies and in testimony before congressional committees and government departments and agencies. S. 1215, which Senator Schmitt introduced, for himself, you, and Senator Cannon on March 22, would establish a uniform policy throughout the government as to the disposition of patents and other rights to inventions occurring during the performance of research and development (R&D) contracts whith the federal government. With the exception of a few specified situations in which the government would generally be required to take title to contractor inventions, contractors under the bill would have the option to take patents on such inventions, subject to the reservation to the government of a nonexclusive, royalty-free license (the so-called "license" policy). The contractor right would also be subject to the excercise of "march in" rights under which the government might compel licensing of other parties if the invention is not brought to practical application within a reasonable period of time or if other specific considerations relating to the public interest are determined to exist. MAPI supports S. 1215. We have long believed, and have so stated on many occasions in the past in public hearings before congressional committees and elsewhere, that there should be a general presumption in favor of the license policy rather than the “title” policy under which the government would normally insist on full rights in inventions under research and development contracts. Although certain technical revisions in the bill might be desirable-such as the deletion of the provision requiring the government to take title in the case of classified work being done under contract-we think that the proposed legislation, with what amounts to a general presumption in favor of the license policy, merits our support and we urge its prompt adoption. THE TITLE POLICY AND RESULTING PROBLEMS At the present time, specific statutes governing the performance of R&D contracts for such federal agencies as the Department of Energy, the Department of Transportation, the Department of Health, Education and Welfare, ÑASA, and others require the use of the title policy which has caused a number of problems. In many instances, although waviers of the government's title are possible in some cases, there have been inordinate delays in finally acting on such contractor waiver applications. The substantial disincentive aspects of this situation, of course, have made it increasingly difficult for agencies to secure firms which have substantial commercial market alternatives to do R&D work for the government. In addition, there has been very substantial lack of progress in securing commercial application and development of the rapidly growing portfolio of government-owned patents, a problem which seems to be getting worse as time goes on. THE HISTORICAL BACKGROUND In the post-World War II period, with the increase in the government's R&D budget, there was growing concern about what should be the government's policy concerning rights to inventions occurring in the performance of R&D work. The Department of Justice urged a title policy, largely on antitrust grounds, while the Department of Defense continued with its traditional license policy. Then, by statute, the Atomic Energy Commission in 1954 and the National Aeronautics and Space Administration in 1958 were required to follow what amounts to a title policy, and, as indicated previously, soon thereafter, beginning in the early 1960's, a number of other statutes were enacted requiring a title policy in connection with new R&D programs and agencies. this situation led to growing concern that frequently whether the contractor had to cope with the title or the license policy depended upon the agency with which he contracted. To bring about some semblance of uniformity in treatment, President Kennedy in October 1963 issued a memorandum and Statement of Government Patent Policy (slightly revised and improved by President Nixon in 1971) which established a uniform policy to be followed by all government departments and agencies in similar contracting situations, expect to the extent that those departments and agencies were subject to contrary direction by specific statutory provisions. Subsequently, the late Senator McClellan, who then chaired the Senate Judiciary Subcommittee on Patents, Trademarks and Copyrights, proposed to establish a statutory policy on this subject. However, there was considerable opposition to such legislation from those in Congress and elsewhere who claimed that anything other than a title policy represented a "giveaway" of the public's rights to inventions. CURRENT STATUS In real sense, the matter has now come to a head as the result of what has happened following the recommendations of the commission on Government procurement (COGP) in December 1972. In brief, with respect to patent policy, the Commission recommended that the Presidential Memorandum and Statement on Government Patent Policy be implemented promptly and uniformly and that, if further experience with the memorandum so indicated, consideration in the alternative be given to a statue establishing a general presumption in favor of the license policy but subject to strong "march in" rights to protect the public interest. A government Interagency Committee on Patent Policy, after evaluating further experience under the Memorandum, accepted the alternative approach and developed a draft legislative proposal embodying that approach in September 1975. There the matter has stood-now for nearly four years-with the Executive branch, apparently because of strong Department of Justice opposition to the legislative proposal, unable to arrive at a position on the matter. Clearly, if anything is going to be done in this area, Congress will have to take the initiative because the Administration seems either unwilling or unable to act. Moreover, the need for a resolution of the problem along the lines suggested now has assumed a greater urgency with the growing concern, particularly in recent months, about the decline of both productivity and technological development in the country and the obvious need for the government to do whatever it can in terms of policy to reverse this trend. CONCLUDING COMMENT Summing up, we support S. 1215 and its resolution of the present controversy concerning government patent policy under R&D contracts. In essence, the bill would help to get the right companies involved in the performance of federal R&D work and it would also provide the proper incentives for the commercial application of resulting inventions. Finally, the public interest would be adequately protected by both the specific government title-taking criteria and by the very strong "march in" rights also reserved to the government. This completes our comments in connection with the proposed "Science and CHARLES W. STEWART, President. HON. ADLAI E. STEVENSON, PHARMACEUTICAL MANUFACTURERS ASSOCIATION, Chairman, Subcommittee on Science, Technology, and Space, Committee on Commerce, Science, and Technology, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: We appreciate the opportunity to present the Pharmaceutical Manufacturers Association's views on S. 1215, the Science and Techr |
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