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be granted patent extension should depend upon the merits of each individual case; i. e., whether or not it can be shown that losses were actually suffered due to war conditions or other national emergency. There is literally no place now where an injured patent owner can even plead his cause, and if there were, there would still exist no authority by which an extension could be granted him, however meritorious his case.
United States patents are granted for a term of 17 years and, more often than not, at least one-half of this period is consumed in promotional effort looking toward the commercial acceptance of the inventions. Frequently the investment of a substantial amount of capital is required to defray the expense of the trial period; thus, the return of the investment and such profits as are realized from the commercial use of inventions must be secured during the second half of their statutory life. The promotional period in the steel industry requires a minimum of 7 years, and in the railroad industry 10 to 12 years. These facts considered, the profitable term of a patent is none too long, even though the invention runs its course without any restrictions upon its use, caused by wars, strikes, and other circumstances beyond the control of the patent owner.
The writer's experience, as described below, must be typical of that suffered by other United States citizens, owning patents. The patent in question, granted in 1935, covers a steel composition used mainly in structures for the transportation industries, such as passenger and freight train cars, streetcars, mine cars, truck bodies, trailers, small vessels, tankers, and the like. Promotional work with respect to the invention, entailing a large outlay of captial, was begun in 1934 while the patent was pending, and was prosecuted vigorously during the succeeding years.
In January of 1942, as the remunerative years of the life of the patent were just beginning, the writer and his associates in the ownership of the patent were informed by the licensed steel producers that further production of the patented composition had been prohibited for all purposes except direct war use, owing to restrictions which had been placed upon chromium by order of the Office of Production Management. This element, among others, had been placed upon a list of critical war materials to be released only for structures used in direct war service.
It is a fair assumption (as indicated on the accompanying chart) that had it not been for the determination of the United States Government to assist the British even before our entrance into the war, and the consequent restrictions which were placed upon the domestic use of steel at that time, the output of the patented composition in the year 1941 would have shown the same relative increase over the year 1940 as the latter showed over 1939. Thus, the restrictions of the war upon the use of our invention commenced in the year 1941; effected a drastic curtailment of its use in the years 1942, 1943, and 1944; and ended only after VJ-day in 1945 when production expanded rapidly. Moreover, it is reasonable to assume that had there been no loss of momentum in the snowballing effect common in such developments, the annual production, both during the war years and the remaining years of the patent life, would have been substantially greater. Thus, the estimated loss of tonnage due to the restrictions of the war, and the effect of these restrictions to the end of 1949, amounted to 2,444,469 tons, or 21⁄2 times the production realized.
At the outbreak of the war the subject patent was owned by a partnership comprised of the inventor-metallurgist and the writer, both of whom had been very active in the promotion of the invention from the start and had invested heavily in capital and personal effort to establish it commercially. With the outbreak of the war, however, the reduced income from the invention fell far short of sufficient to meet the company's expenses, and since it had almost no other income, the partnership was forced to dispose of a substantial part of its assets in order to secure the funds needed to carry on. Research and development activities, including a considerable amount of design work, were supported by the proceeds of this sale, first, in the hope that an early termination of the war would remove the rigid restrictions placed upon the use of the invention and justify the large expenditures which were continued despite the substantially curtailed income, and, second, should the war prove of long duration, it was confidently believed that legislation granting extensions to patent owners for time lost during the restricted period would be enacted by Congress.
A patent is essentially a contract between two parties-the Government and the inventor. The term of 17 years during which the inventor is granted protection is the incentive to invention, and the guaranty that for that term of years profits arising from the invention will flow to the inventor and those who, with him, risk their capital in its commercial establishment. The consideration on the part of the Government for granting protection during the life of a patent is, first, to cause a disclosure of the invention and, second, the free use of the invention by the public after the term of the patent has expired. It does not seem equitable or just that one party to such a contract can, in effect, restrict the useful life of an invention without redress to the other party and thereby act in good faith.
It is true that many people, in the disrupted course of events, suffer losses of one kind or another during war periods. But such people are not limited to a term of years during which they can operate their respective businesses, as are patent owners. They may carry on indefinitely. Moreover, it costs the Government nothing to extend a patent. On the contrary, it would benefit from the taxes levied on the additional income of patent owners over the extended period. But aside from this, should not the Government encourage invention by all means possible? There would be no electricity, radio, automobile, or airplane, no railroad, or steamboat, without invention. Ponder the wealth these have contributed to the American economy and the employment they have created. Why then is our patent policy so delinquent that far from lending encouragement and
inspiration to invention as the fulcrum of our standard of living, the Government. through its own restrictions, sometimes takes away from inventors with one hand a substantial part of what it has given them with the other, and provides no court of law where the pleas of the injured may be heard and relief granted. It is an accepted principle of American law and justice that every man is entitled to his day in court. In all fairness, then, such a court should be established and a sound and equitable patent-extension law enacted under which it could function.
Mr. FOOTE. Gentlemen, I have discussed this matter with many important members of the patent bar. I have not had time to see all of them because they are extremely numerous. I have discussed it, however, with some of the most important ones, and I believe it is a fair statement to say that they are now considering this subject as a matter of policy and philosophy for about the first time.
I think the bills that have come up before have been either class bills, like the veterans' bill, or private bills, or similar bills that some Congressman has introduced because of some constituent in whom he may have been interested and who had been hurt.
This time we have attempted to do otherwise, and I have spent a great deal of time discussing this subject with members of the bar.
Mr. ROGERS. On page 7 of your statement, Mr. Foote, you say, "For the lack of such legislation in the United States, I am unable to obtain an extension of the Cor-ten patents in such countries." Have you made a list of those countries?
Mr. FOOTE. Where extensions are based upon reciprocal relationships?
Mr. ROGERS. Yes.
Mr. FOOTE. It is in my statement.
Mr. ROGERS. It is set forth there that it is due to reciprocity?
Mr. FOOTE. Let us turn to Denmark, for one. They have such a bill, but they reciprocate only with Britain, France, and Danish nationals.
There are other countries, for instance, Norway, which extend the patents of nationals whose countries also reciprocate.
Mr. BRYSON. That will all appear in the record?
Mr. FOOTE. Yes.
Mr. ROGERS. Do you know of any instances in your field where the patent may have expired and is being used now by the public, and it would be reinstated besides this particular one-and as a result there would be a hardship on some manufacturer who might have thought that it was public property?
Mr. FOOTE. I know of no such instance. I would like to call attention to the fact-and I think you may be interested in this-I was able to get these data from only two countries at this time. In Australia, since 1943, there have been applications for 130 extensions, of which some 38 have been granted and 4 refused. Other applications have been withdrawn and others have not yet been acted upon.
In great Britain, 3,020 applications have been made-1,678 have been granted to the end of 1950. I recall a statement of a previous witness that in Great Britain it was extremely expensive to have a patent extended. He was referring to those cases where one has a patent and applies for an extension the "long way," so to speak, in order to have it extended for a considerable extra period of time on the grounds that inadequate income was derived and that the patent had great merit.
Mr. CRUMPACKER. I would like to ask this question: Regarding these extension laws in other countries, are extensions granted solely because of the interference of war conditions, or are there other reasons for extending them?
Mr. FOOTE. You will see in the majority of cases it has to do with war conditions, but in the case of Great Britain, Australia, New Zealand, and Brazil, I believe, they may be extended if they are patents of great merit under which the inventor has not derived sufficient compensation.
Mr. CRUMPACKER. I take it then you would favor a broader law actually than the one we have before us now.
Mr. FOOTE. I favor a law that does justice to small inventors if they have been restricted or injured, for whatever reason. I would favor a law that would do them justice. I have not yet discussed this matter with a single attorney in the patent bar, or elsewhere, who has not agreed that every man is entitled to his day in court. But I submit to you gentlemen there is no court to which we can go except Congress, and you are not a court. At least, I do not understand you to be. Therefore, this country, unlike most other countries, provides no place for one to go to say what I am saying to you today with respect to my experience and that of many other patent owners and inventors.
Mr. CRUMPACKER. To phrase my question the other way around, do you think either one of these bills will provide the relief that you think should be provided?
Mr. FOOTE. I plead with the patent bar, and by that I include the patent division of the National Association of Manufacturers as well, those who were opposed to this legislation, not to register their opposition until they had come down here sincerely desiring to debate these issues, and I told them that out of this debate we should draft the kind of bill the country ought to have, be it the Walter bill, Reed bill, or any other bill.
In other words, I suggest that it should be something that will do justice. And by all means, gentlemen, let us consider this subject from the standpoint of whether or not we want to encourage invention in this country-incentive to invention.
Mr. ROGERS. You make a statement on page 2 that this lack of legislation is likely to stifle invention, and then you point out an instance, a little further on, but do you have any specific instances where it has stopped invention, or men proceeding with the work to bring invention about?
Mr. FOOTE. Yes; I have.
Mr. ROGERS. Aside from the instance that you cited in your prepared statement?
Mr. FOOTE. Yes.
Mr. ROGERS. Now, of the patents granted, is it not true that a large portion of them are granted to the large corporations that have these technical laboratories that are out in the field at all times?
Mr. FOOTE. I would presume that a good many patents-and I would be surprised if it were otherwise-are applied for by large corporations who have such magnificent research work upon which, incidentally, a good share of our economy is based, and our so-called standard of living in America.
Mr. ROGERS. Surely.
Mr. FOOTE. Now, I did not understand this was to be my opportunity for rebuttal. I thought that I could come in later, but if you would like to have me do so, I will pass on a few of my thoughts at this moment.
Mr. BRYSON. We want to get all the thoughts we can. want to get views from as many people as possible.
Mr. FOOTE. I understand.
Mr. BRYSON. We do have witnesses here from distant points. Mr. FOOTE. May I say just one or two things more, Mr. Chairman? I have discussed this question of patent extension with a number of people in big industry. They have invariably said with respect to certain of their patents which were restricted during the war that the Government which restricted them for good reasons had also given them all the business their plants could turn out during the war period; therefore, even if such a bill went through they would not apply for extension. I think that they would have no standing if they applied for extension because they could not show that their companies had been hurt too badly.
Now, it also seems to me that we are asking the inventor to take all of the rap in this matter. We have tried to provide in this bill that which would keep the public business from becoming confused. Let me ask if it is not justice that the man who created the invention should first be dealt with justly and have the full 17 years that he was supposed to have had, after usually spending at least half that time, or more, getting money and spending effort to promote his invention?
For instance, I worked with the Chesapeake & Ohio Railroad since 1934 trying to get them to adopt the principles involved in this new development, using high-strength steel. Invariably such a railroadand I speak of all railroads insists upon putting these materials. into service in cars that will ultimately show whether or not the merits of the steel are as we claim them to be.
After 16 years of service on the Chesapeake & Ohio Railroad, we got our first substantial orders for Cor-Ten and the patent runs out next year. It took that railroad 16 years to determine that the steel would last longer; that it was stronger and that in their service it was beneficial. They have now adopted high-strength steel wholly for future coal cars and for the rebuilding of their other cars, but it took us 16 years to do that.
Mr. BRYSON. That was almost the length of the patent?
Mr. FOOTE. Almost the length of the patent.
Mr. BRYSON. We are much obliged to you, Mr. Foote, for the information that you have given the committee.
STATEMENT OF ROBERT W. WAGSTAFF, EXECUTIVE VICE PRESIDENT OF THE VENDO CO., KANSAS CITY, MO.
Mr. WAGSTAFF. My name is Robert W. Wagstaff, and I am executive vice president of the Vendo Co., Kansas City, Mo.
Mr. BRYSON. What do you make or do?
Mr. WAGSTAFF. Our principal product is equipment for the vending of Coca-Cola in bottles.
Mr. BRYSON. That is where you still get a Coca-Cola for a nickel? Mr. WAGSTAFF. That is correct.