« PreviousContinue »
Mr. HOXIE. The special feature of that bill is that while it provides for the extension of patents, it does so only on the basis of circumstances created during the past war. It fixes dates in 1941 and 1945 which embrace the period that would be operative under the bill and it says, in effect, that if anyone owning a patent or other interest in a patent did not realize a normal economic return, because of material shortages during that period, then he may apply to the Patent Office for an extension of his patent and present his evidence, and the Patent Office may hear opposing evidence, and on that evidence if the Commissioner of Patents is satisfied he may extend the patent for a term commensurate with the extent to which normal economic return from the patent was prevented, impaired, or delayed by those material shortages during the war.
The first ground of our opposition is that it seems to us that the bill assumes something about the nature of a patent grant that is not really a part of the right created by a patent.
Mr. BRYSON. Is there any precedent for legislation of this kind? Mr. HOXIE. I understand that in the previous century there was for a short time a statute that permitted the extension of patents. It did not last very long, and there was very little experience under it, but it is true with that minor exception to say that it never has been a part of our system of patent law to provide for extending the term of a patent, other than as Congress in respect to individual patents may provide bills extending the term of a particular patent, and there is also, of course, the Veterans' Act.
Mr. BRYSON. Yes.
Mr. HOXIE. We think it rather significant that when that Veteran's Act was submitted in the Senate, Senator Wiley said this:
Representations were made and were seriously considered by the House committee that the benefits of such legislation should inure to all patcntees who suffered losses by reason of being unable through shortages of materials or other reasons during the war to prosecute and exploit their patent rights. That committee, however, felt that to provide relief for all such persons who suffered losses in this manner would be to overlook the many thousands of persons in other walks of life who suffered grievous and irreplaceable losses in their fortunes because of the circumstances of war. For most of such persons no governmental relief has been or could reasonably be afforded, for such conditions cannot reasonably be considered by thinking persons the responsibility of the Government to restore.
As to veterans of World War II, however, the committee could perceive a reasonable and logical distinction, for in these cases the circumstances of the removal of the patentees from the scenes of their livelihoods and occupations, and the involuntary (in most cases) nature of their having military or naval duties thrust upon them, effectively deprived them of their freedom to exploit their patent rights even if materials, and so forth, had been available.
In other words, the Senate committee at that time considered the subject of the present bill, and decided it was not the appropriate thing to do, and they recognized, as we did that there was properly a distinction in the case of veterans.
Mr. BRYSON. They differentiated between military duty and these other circumstances?
Mr. HOXIE. Yes, indeed.
Our first point, which is, perhaps, legalistic, but I think one that would appeal to a group of lawyers who were approaching this not as advocates of clients, but as a group on a bar committee, trying to see what the law should be, is that these bills assume more about a patent than there is in a patent.
A patent gives the patent owner a very limited right, and in the whole atmosphere now surrounding patents we thought it rather important not to have any legislation which assumes that the patent is more than it is, because, to many people, that would mean worse
than it is.
A patent gives the patent owner the right to exclude others from making or using or selling the same thing, the thing he has patented. In terms of economic value it gives the patent owner protection against just one hazard of economic life, and that is imitative competition.
It does not undertake to protect the patent owner against competition generally, and, in fact, one of the best features of the patent system is competition between patents, that is, competition in research and development to accomplish results in different ways, to get around each other's patent situations. All of the other winds of fortura and vicissitudes of economic life are untouched by the patent system. A patent owner, when he engages in business, takes his chances along with everyone else in the business world.
If he is unwise in his management, or not properly staffed or supplied with money and plant and salesmanship, there is nothing about a patent on his product that assures him that he is going to be successful. He has to take his chance along with everyone else, and the patent simply gives him a right to say "No one shall compete with ne in the sale of this thing that I have patented, or in the use of this process that I have patented, or this machine."
Mr. BRYSON. A great many patents never mean any money return to the patentee.
Mr. HOXIE. And probably more return nothing and never bring any money return to the patent owner than otherwise.
Of course, the other form of exploitation of a patent is to take advantage of the fact that since you can exclude others from making that particular thing, you can get them to pay you a royalty in order not to be excluded. In other words, license them to practice the invention. You can make some money by licensing others to use it, and many do that. That is true whether the patent owner is in business himself, or simply sits there and licenses others. He can get his return either way from his invention. So that the economic return from a patent comes from the fact that the man either can be protected in that one single respect in his own business, that is, protected against imitation by competitors, or, since he can exclude competitors from the patented thing he can collect a royalty from them in exchange for letting them in on it, where otherwise he could keep them
Now, it seemed to us that the impact of wartime shortages was not on the patent right, or any aspect of it, but solely on the business venture itself. It is just like a lack of money on the part of some companies, or any one of a multitude of things that make a business venture prosper or fail. It strikes at it because you have got to have materials or you cannot get manufacturing done; or if you are licensing it, your licensee cannot manufacture, and therefore you get less royalty.
There is no doubt at all that some patent owners who were conducting business or even licensing programs were adversely affected by material shortage during the war, and it is equally true that a great
many businesses which were not tied in with patents were affected in exactly the same way. This bill would, therefore, single out a particular group of people and assure them some compensation for one of the unhappy sides of the war, and leave the others uncompensated, and that is an aspect of it, I think, that moved the committees of both the House and the Senate before not to expand the right of extension beyond the veterans who were regarded very properly as standing in a different situation.
It seemed to us that if Congress were going to undertake to compensate people who were injured during the war in their business by material shortages, it would be much more appropriate to treat them all alike and to compensate them with a cash award or some other thing of economic value.
Mr. ROGERS. Adopt the Brannan plan.
Mr. HOXIE. Yes. There are various ways of subsidizing and helping them out, so why use their patents to do it, because not all have patents, and it seems to me illogical to make it depend upon the fact of their having patents. It struck us as an unwarranted thing.
Of course, there are some businesses where the patent is the foundation of the business, where a person has a new thing, and the business is solely concerned with exploiting that, and the owner of such business feels the relationship to the patent much more closely; but if you look over the whole business scene you will find all gradations of it. There are businesses which certainly involve patented inventions, such as the typewriter, the automobile, or anything that is familiar to us, where there are patented inventions involved and in all degrees, sometimes affecting only very minor parts and sometimes major parts. Then you come to the situation where the whole subject of the business is a patented invention. But the proposed law would apply to all, and you would have everybody coming in seeking an extension of a patent on something that may have been only 2 percent of the product. What we say is, why extend his patent just because of lack of material he cannot make his whole machine. There is no logical connection between the redress of this particular injury and the operation of the patent system.
These wartime material shortages by their nature could not impair the single right that a patent undertakes to grant, which is protection against imitative competition. The only way that right can be impaired is the way many of us think it is being impaired, which is that when you go to court to enforce your patent the court tells you you did not make an invention. You then do not get the protection against the imitative competition that the patent purports to give you. But if you cannot carry on your business because you cannot get steel, that does not mean that your right to exclude others has been impaired. There is no connection between the two things.
The second major point is one I have referred to, to some extent, and that is the discriminatory aspect.
Why should patent owners whose businesses were adversely affected. during the war be compensated in any way when others are not? We thought of a number of situations which are quite familiar. You start with your local gas station owner, whose business certainly was affected during the war by the shortage of gasoline. He had to put up with it. Nobody has proposed to bail him out of that situation.
87811-51-ser. 10- 2
Then, of course, you think of the man who has just started in business, or the doctor who, in his mature years was told to come into the Army and drop his practice, where they said, "We will make you a colonel, and, of course, you can live on that," when it was perhaps one-quarter of what he had been earning in his practice. I have had friends in that situation, and they really suffered and their families suffered genuine hardships because of that situation, but there was no complaint, and no request to equalize or to supplement their incomes.
Mr. BRYSON. And a few lawyers were in that category too.
Mr. HOXIE. One of my very close friends gave up a lifetime accumulation and spent the entire period during the war running a board down here and he suffered a great economic loss because of that.
Mr. ROGERS. May I ask you for what period this would extend the patent? Is it left to the discretion of the Patent Office?
Mr. HOXIE. Yes; it says commensurate. I do not want to go into the particular wording of the bill, but it says commensurate with the extent to which the normal economic return was prevented, impaired, or delayed. Commensurate means equal in measure. If a man was short of materials for 2 years during the war, it is conceivable that they would give him 2 years' extension of his patent. I think the intent was to give the patent owner an extension which in terms of the money reward he would get during the extended term, would offset the loss which he incurred during the war because of the material shortage.
Mr. WILLIS. In any event, the period of extension could not be beyond, I suppose, the time between May 27, 1941, and November 4, 1945, that would be the limit?
Mr. HOXIE. I think it unlikely under the present wording that the Commissioner would ever give an extension for a longer period than the shortage.
Mr. WILLIS. I think the plan is plain enough on that.
Mr. HOXIE. It might not necessarily mean that in all cases he would get an equal extension.
Mr. ROGERS. Have you any information on patents that may have expired between the 27th day of May 1941 and today?
Mr. HOXIE. That is a very important aspect of it.
Mr. ROGERS. Wherein after a patent has expired others have taken it up and are now manufacturing under it?
Mr. HOXIE. I know of such situations, and it is a chronic situation. Mr. ROGERS. That is a chronic situation?
Mr. HOXIE. Yes.
Mr. ROGERS. And if this act were passed then the Commissioner could extend the patent, and then those who have been using it since it expired would either have to pay royalties or go out of business?
Mr. HOXIE. Yes. There are two aspects of that. I think that ought to be talked about as a revival of the patent rather than an extension. Mr. ROGERS. Well, whatever it is.
Mr. HOXIE. Because I think that goes a little beyond the aspect that you mentioned.
Mr. ROGERS. Can you give this committee any information as to what extent industry may be affected or particular industries may be affected by this?
Mr. HOXIE. We have made no survey of that as yet. I could cite some of them, but they would be situations of individual clients, and I do not think I came down here to speak in that capacity, and I would rather not do it. I do know of one or two in the radio world, in which I am interested, but if I speak about it it ought to be understood that I am speaking in a personal way.
Mr. ROGERS. You mean if you speak in opposition to this bill and the bill should pass, why, then, your client would be benefited?
Mr. HOXIE. No; my client would be hurt.
Mr. ROGERS. Your client would be hurt?
Mr. HOXIE. Yes.
Mr. ROGERS. I think it would be the other way around.
Mr. HOXIE. No, my client is being sued. The patents expired last December. If they were revived for a period of 3 or 4 years my client would be subject to a greater jeopardy. There are numerous situations of that kind-in fact it is almost inherent. Extension of a patent can matter only when the invention matters; no one is going to be seeking an extension unless the subject of the patent is something actually used to some real extent. That means, therefore, that everybody who is engaged in a business affected by such a patent is looking forward to the normal expiration of the patent to get into the business, which is the public's way of coming into its own on a patent. A patent is a contract; it is a contract between the public and the inventor in which the public says to the inventor, "We will give you the exclusive right to this for 17 years in return for our perpetual freedom to use it at the end of that limited term."
Mr. WILLIS. Is there any provision in the bill that would exempt from the bill an accounting in equity for that period when they picked up on the termination date which would dovetail with the extension? Mr. HoXIE. The exemption in the bill exempts things made during the interval in which there was no patent prior to its revival.
Mr. WILLIS. Suppose the patent as granted would have expired on November 4, 1945.
Mr. HOXIE. Yes.
Mr. WILLIS. I hold that patent. Then it having terminated, you went into business.
Mr. HOXIE. Yes, so that I have been in the business 6 years since 1945.
Mr. WILLIS. Yes; you have been in the business 6 years. Then as owner of the patent I am granted an extension of that patent for the limit, say, 4 years under the bill until 1949, could I then sue you for an accounting for those first 4 years of those 6 years under this bill?
Mr. HOXIE. You could not sue me for anything I did between 1945 and 1951, but the extension would revive the patent for 4 years beginning in 1951, and if I continued in that business to try to get back my investment, which I have not yet gotten back in 6 years, you could
Mr. WILLIS. There is immunity from suit up to the date of enactment of the bill?
Mr. HOXIE. Yes; the extended patent is not made effective retroactively.
Mr. WILLIS. There is immunity up to the effective date of the act? Mr. HOXIE. Yes.