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The CHAIRMAN. He is a member of the New York Patent Law Association, I think. That is my recollection. He made a suggestion in connection with that, at the time that Judge Patterson was here the other day, for the second time, and it is my recollection that we inquired of him as to whether or not he objected to that language of the proposed amendment and he said that he did not. That was Mr. Byerly.
Senator Thomas, do you desire to ask any questions?
Senator THOMAS of Idaho. No.
The CHAIRMAN. Senator Kilgore?
The CHAIRMAN. Senator Downey?
The CHAIRMAN. We are very much obliged to you.
Senator KILGORE. I do have one more question I would like to ask on this section 2, Mr. Chairman. This section 2 as suggested says that if the Secretary of War, or the Secretary of the Navy shall, upon a written finding, find that such sale or disposition is necessary "to insure production in sufficient quantity of the patented commodity or articles for defense purposes," it may be sold.
Mr. DICKEY. The Government can make a contract to have it produced in whatever quantities it desires without this and without owning the patent.
Senator KILGORE. That is what I am trying to get at. Is there any condition under which it would be necessary in order to get a manufacturer to produce something that it would be necessary to give him a patent on it, or to sell the patent to him?
Mr. DICKEY. No, no; not that I conceive of, with the authority that the Government has at the present time. And, that does not help the situation a bit, you see, because the Secretary of War and the Secretary of the Navy apparently can make that recommendtion and finding without any hearing and just upon their own initiative, so far as that goes. That is of no protection.
Senator KILGORE. In other words, it could be an ex-party summary proceedings, without any evidence of any kind?
Mr. DICKEY. That is right.
The CHAIRMAN. Are there any further questions?
Senator KILGORE. Nothing further. Thank you very much.
STATEMENT OF KARL FENNING, CHAIRMAN OF THE COMMITTEE
The CHAIRMAN. The next witness is Mr. Karl Fenning. Mr. Fenning, I believe that you represent the National Council of Patent Law Associations, with offices in the city of Washington.
Mr. FENNING. That is correct, Mr. Chairman. I am chairman of the committee on patent legislation of the National Council of Patent Law Associations, representing-it is a voluntary organization-representing all of the patent law associations in the country
of which there are upward of a dozen in existence from Boston, across the country to Los Angeles and San Francisco.
The CHAIRMAN. Will you pardon me for just one moment, Mr. Fenning?
Mr. FENNING. Yes, sir.
The CHAIRMAN. In reference to the amendment that was mentioned by the witness, I think I should bring this to the attention of the members of the committee.
The other day when questioned about this proposed amendment, Secretary Patterson said:
What we have in mind particularly here are United States patents owned abroad. They are United States patents controlling the production and manufacture here in this country, but held and controlled or owned by foreigners. We do not plan, of course, any confiscation of those rights. That would be intolerable. They would have to be paid a value just the same as if they were American. Everything we propose here is, of course, to be taken with fair compensation.
And so forth.
That ends the quotation in regard to the proposed amendment.
Mr. FENNING. All of the patent law associations have not notified me of the action they have taken. I want to report to you, however, the Cleveland Patent Law Association's action as follows:
Resolved, That the Cleveland Patent Law Association disapproves, as it disapproved the principle of the property seizure bill, S. 1579, and the equivalent bill, H. R. 4949. Present laws protect the Government's rights to use all patents during an emergency, section 68 of title 35 of the United States Code. That is the statute which has been referred to here as the statute which authorizes the Government to proceed to use anything which it has patented.
In addition to that, the Philadelphia Patent Law Association suggests that the bill be limited to the present emergency.
If the Government can take a license, we see no reason why it should take the patent, excluding the owner from the continued use and from granting further licenses.
I would like to say a word, if I may, to you about the idea of not seizing a patent, but taking the license merely under that patent. You asked here how the Government can use or can persuade someone else to make something for it. The present law says that if the Government wants something from a contractor. he may manufacture that and no injunction can be granted against him. He is not liable for any damages. The Government itself is liable for all damages for patent infringements; but many of the contracts which the Government issues to contractors say that the contractor must hold the Government harmless from patent infringements.
Now, of course, that means that if the contractor infringes a patent, the owner of the patent sues the Government and if he recovers, then the Government sues the contractor and gets the money back. Now, if that clause is not put in the contract, if the Government takes the responsibility, then there is no question but that the contractor can go ahead entirely free. I know if the contractor feels that he has got to take responsibility and wants to be relieved from that, naturally he is going to get a license first.
Now, let me say a word to you about what a patent is: A patent gives no man a right to make anything. The patent gives the man
merely the right to prevent someone else from making. It is a right to exclude others from manufacture. If a manufacturer has taken out a patent and is manufacturing the thing disclosed in that patent, the benefit of the patent to him is not that he can go ahead and make that thing, but that no one else can make that thing and compete with him.
Now, he purpose of the Government under this bill, as Judge Patterson says is, so far as patents are concerned, to have more things produced; have more people produce things.
Naturally, the Government does not need the right to exclude, which is all the patent gives, in order to get more things made. What the Government needs, if anything; what anyone needs is a license under the patent.
Now, if a patent is seized, if the manufacturer owns a patent and is manufacturing under his patent, and the Government seizes his patent, then that manufacturer must immediately stop manufacturing, because the Government has the right to exclude him from manufacturing. Therefore, the seizure of the patent, instead of increasing manufacture is going to stop manufacturing. The Government may ask someone else to make it, but the first man must stop, because he is infringing the patent which the Government has seized from him. Not only is he stopped immediately but he is stopped in the future, after the emergency. The Government still has his patent and his business is entirely gone. He is through.
If, on the other hand, the Government seizes merely a license or takes from him a license, then the owner of the patent, who is manufacturing, may continue his manufacturing, and if the Government takes a license, which is a distinguishable, transferable license, the Government may let anyone else that wants to manufacture, manufacture.
Now, the license, naturally, which is seized, which is given to someone else, should be limited to the emergency. There is no reason for the Government setting up a man in business after the emergency is over.
A license naturally can have the same limit put upon it, and if a license is seized by the Government, that is, if a desirable, transferable license is seized by the Government for the period of the emergency and the Government is limited to the use of that license, the license someone else has to merely manufacture something which is useful for national defense, then the Government has everything which it needs and the patent is, itself, not destroyed. The ownership to the patent itself is not destroyed.
Now, if you are going to seize anything, it seems to me that you certainly should limit it to seizing a license under the patent. It is difficult to see how the Government needs even that much, for most activities. All the Government needs to do at the present time is to go to anyone in the United States and say to him, "Here is a drawing. Here is a model. You make this for me.' And, the contractor can then proceed to manufacture that article. If it is a patented device, the owner of the patent cannot touch the contractor. That was definitely established during the 1918 act, which was passed during the World War, but the owner of the patent can proceed later to go to the Government and get his compensation.
The only way, as I see it, that the Government may be disturbed is in a secondary way. That is so. If the Government wanted to buy a gun, for instance, and the gun is patented-but possibly the Government wants to increase the production of aluminum. Aluminum is produced by a patented process. There are several patented processes, and more than one process is being worked at the present time; but if the Government wanted to increase the aluminum output, and the Government desires to buy that aluminum, the contractor purchases the aluminum and consequently the manufacture of the aluminum is a secondary matter. That is, it is not directly done for the Government and is not a Government infringement. If the Government wants to increase the aluminum output, for instance, then the Government may seize a license under the aluminum process patent and hand it to some one and say, "You proceed to manufacture aluminum and we will have more of it, and you sell it to the people who are going to make it into munitions, or what not."
Now, unfortunately, this bill is so drawn that it does not cover the process patent or the method patent. The bill is limited to munitions and instruments. It does not cover processes at all, and they are very important.
Certainly, if you are going to do anything, you should have permission for the Government to require a license, transferable and divisible, under process patents as well as munitions and machine patents.
Now, in addition, it seems to me that the statute should be very clearly limited to the use which the Government or its transferee is to make of the license.
I have referred to aluminum. There is a reason, from the national defense standpoint, that the Government should go to a man and say, "I want you to make aluminum and make it for delivery only to those people who are making instruments of national defense;" but there is no reason, under cover of national defense that the Government should go to a man and say, "Here, I will set you up in business. You make aluminum and sell it for kitchen utensils, or sell it for road signs, or anything of the sort," and enter into direct competition with the original manufacturer of aluminum in matters which have nothing to do with national defense.
So that I think that the license which the Government takes, if it does take a license, and the license which the Government gives to the manufacturer should be strictly limited to use for national defense.
Now, if the Government seizes the patent, and can seize it, then the Government takes the entire patent for all rights, and while the national-defense phase of the patent may be merely incidental, the Government may under this, set up a man in business and let his business be not merely one of national-defense business, but cover the whole country and compete with those who are already established.
A patent is a peculiar sort of an instrument. It is incorporal. It has no habitat. If you are seizing a table, you can go out and pick up the table and walk off with it, and if the man who owns the table happens to be around and sees you and later on wants to take it, he knows who has taken it and he can follow it up;
but if you seize a patent, the patentee does not know anything about it. You just go ahead and do your work, so far as this statute is concerned, and there is no provision for any particular method of giving notice to the patentee. It just says that the Government shall seize the patent. How it is going to seize it or where, nobody knows. It seems to me there should be something in this statute to implement the seizure activity, and it seems to me that it might be reasonable either for the Government itself to go to the Patent Office and make a search of the Patent Office files and find out who is the owner of record and notify the owner of record and give him an opportunity to be heard, or in the absense of that, especially with respect to some foreigner on whom notice may be difficult to get at the present time, it might be entirely sufficient to notify the Commissioner of Patents and have him spread it on the public records. We have an assignment record in the Patent Office showing title to patents. You could have him spread_the seizure by the Government on that record. That is the procedure which was adopted by the Alien Property Custodian during the last World War.
Then, the statute should provide that the Commissioner of Patents himself should notify, as well as may be the owner of the patent, and give an opportunity for him to come in and then negotiate the price which is to be paid for the patent rights.
Senator KILGORE. Mr. Chairman, may I make an inquiry?
The CHAIRMAN. Certainly.
Senator KILGORE. Under this, your interpretation is that the patent could actually be seized and the owner know nothing of it, which would make useless the clause in here providing for giving him an opportunity to execute a license and other grants.
Mr. FENNING. I think so.
Senator KILGORE. He would, or might have no notice and the statute would run against him?
Mr. FENNING. If it was seized. I do not know how you are going to seize it; but if you succeeded in seizing it, then there is nothing here which requires him to be given notice that would do him any good.
Senator KILGORE. He would have no opportunity to waive his rights?
Mr. FENNING. No.
Senator DowNEY. Mr. Chairman, may I intervene to point out that in this qualifying clause the expression "seize" is not used. It reads as follows: "That if, within 10 days after the requisitioning under this act."
Mr. FENNING. Well, say "requisitioning." I do not know that requisitioning means anything differently. I used the colloquial term. I have not tried to use the technical words here.
I do not know how you are going to requisition a patent. Certainly the bill does not tell you how to requisition a patent.
Senator LODGE. Have you prepared an amendment to this bill? Mr. FENNING. I have not. My purpose in coming here was to try to explain a few principles to you, because I appreciate that the Secretary of War will want to revamp anything which is done any