I shall testify in detail regarding this bill, but let me first step back from those details and give you a summary, as I see it, of the current debate on changing the U.S. Patent System. 

We begin with the recognition that the U.S. Patent System is the best in the world and that it, along with our natural resources, has enabled the great economic miracle which has now brought the United States to be the leading world power.  

Despite the excellence of the U.S. Patent System, there is now a strong effort to degrade it severely, even down to the level of the Japanese Patent System which is one of the worst in the world.

 Three constituencies are involved in this debate:

1. The American constituency, made up of the vast majority of American citizens who have benefited from the economic strength growing out of our Patent System. That is the constituency, I believe, which has elected to office each of the members of this Congress. I speak for that constituency as well when it refers to the ancient maxim: 

1. A second constituency may be referred to as the corporate lobby, representing some misguided elements of corporate America which believe their corporate interests will be best served by skewing the Patent System against the independent inventor. Yet most of those great corporations have been founded on the work of independent inventors. They face the prospect of competition from future new corporations in our expanding economy if the independent inventors of this country continue to be motivated by a strong Patent System to seed new industries through further breakthrough inventions.
2. The third constituency is the Japanese lobby which expresses the objectives of the Government of Japan and the industrial complex associated with that Government which is strongly disadvantaged in the present economic competition. Innovation proceeds at a far higher rate in the U.S. than in Japan because the Japanese Patent System has been dominated by corporate interests from its inception and does not provide real enforceable intellectual property rights to independent inventors in Japan as the U.S. System does. 

There are immense economic values involved here, Mr. Chairman, measured in hundreds of billions of dollars in royalty fees alone payable annually plus other far greater values due to the role of the Patent System in engendering and enabling economic growth.  

If these two hostile lobbies succeed in their current objective of modifying and largely trashing the U.S. Patent System, then two principal results will follow.

The present unfavorable trade balance will worsen steadily and relentlessly over the long term. In the present age we are more and more dependent on exports based on information and innovation rather than on the products of smokestack industries. The proposed changes in the U.S. Patent System will dampen the wellsprings of innovation from individual genius which have supported and enriched us up to the present time.

The resultant enfeebling of the U.S. economy from the proposed evisceration of our Patent System will create a mounting security risk to the United States as a nation. 

For example, our ability to turn back the attack from Japan at Pearl Harbor ultimately depended on the vitality and resilience of our economic system which was the outgrowth of continual dynamic seeding from the Patent System over many decades. 

A difficulty for the Congress in dealing with this vital and complex issue concerning proposed changes in the Patent System is that we do not presently, in my judgment, have a dependable and trustworthy Commissioner of Patents and Trademarks. Commissioner Lehman has consistently mislead the Congress in his testimony and has demonstrated by his actions and his statements that he is not working for the American people but rather in the interests of the two lobbies which would undermine and largely destroy the U.S. Patent System. I return later to the behavior of Commissioner Lehman. 

The items for consideration before this Committee today have to do with changes in Intellectual Property rights granted under the U.S. Patent System. We begin with the recognition that the U.S. Patent System is the best in the world. It is the envy of inventors everywhere outside of the United States. The systems in Europe are substantially inferior and the system in Japan is still worse. The criterion by which I make that judgment is the capability of the Patent System to stimulate innovation--to do what Abraham Lincoln referred to as adding the fuel of economic incentive to the fire of genius. It arises in the Constitutional empowerment to the Congress in Article I Section 8 that inventors shall have exclusive rights to their discoveries for a limited period of time. The U.S. System is superior to those of Europe and Japan because it provides clear and enforceable rights of intellectual property ownership to the individual inventor. Our system is characteristically American in growing out of the insight of Thomas Jefferson, James Madison and others of our Founding Fathers who were sensitive from their recent experience to the ways in which the rights of individuals could be trampled and denied by centers of major financial and political power. Because our Constitution and the patent laws growing out of its empowerment have tended to give unique standing to the inventions of our best and our brightest, the resulting intellectual property has become a leaven that has worked throughout the U.S. economy to yield great growth and power. 

Those inventions which lead to entirely new products and create new industries almost always come from the work of independent inventors working alone or in very small companies rather than from those employed by major corporations. The protection and fostering of individual genius is indeed the genius of the U.S. Patent System.  

Invention comes from individual inventors thinking in original and creative ways. Most of our great corporations have grown out of the work of an individual inventor, as cited in Appendix B. A few examples which quickly come to mind are Herman Hollerith, with the invention of his tabulating machine giving rise to the enterprise that became the International Business Machines Corporation; Alexander Graham Bell with his invention of the telephone giving rise to the American Telephone and Telegraph Company and the regional Bell Companies; Thomas Alva Edison with his light-bulb and many other products leading to the General Electric Company. Inventions are necessary to the successful growth of a major corporation, for the associated patent rights enable the company to protect its profit margin, to build up capital for further research and development in the area of technology that it owns and to have the capital for expansion and growth.

 As the corporation grows, a transformation occurs in which most employees are directed to the established program based on the earlier inventive work. The original founders die or move on and the new employees tend to be those who are more susceptible to direction to an established program and less inclined to be innovative thinkers. 

The consequence is that the vast majority of important inventions which create new products and lead to entirely new industries come from independent inventors working alone or in very small companies. This conclusion is thoroughly documented by Department of Commerce statistics as shown in Appendix D. It is true that most of the R&D expenditures are by the major companies and it is also true that many inventions are made by them and are reflected in many patents issued to them. However, the study of those patents and inventions shows that they are almost entirely improvements on existing products. Very rarely indeed does the breakthrough invention occur in work sponsored by a major corporation. It is those pioneering inventions which arise almost always with individual inventors and which are primarily responsible for the seeding and growth of our economy through the creation of new industries. Those are the inventions which we most value as a product of our Patent System. The capability of our Patent System to foster such inventions is a primary good which is threatened by the proposed changes in the patent law and which must be preserved at all costs.

As the corporation grows, it may develop hostility to invention in its chosen area of technology which originates outside the corporate walls. That hostility arises from two sources: 

By an extension of the same attitude, such corporate management will favor any changes in the Patent System which diminish the effective intellectual property rights of the individual inventor as compared to the intellectual property rights of the corporation. 

While those misguided corporate interests are entitled to express their views through as many well-paid lobbyists and patent lawyers as they may choose to employ, those of us who are concerned with the future welfare of the U.S. economy must assure that they do not succeed in diminishing the effectiveness of the U.S. Patent System as it applies to the individual inventor. We need to protect the rights of the individual inventor because we need the future seeding of the U.S. economy which grows out of the work of such inventors. We need the new corporations which will arise from their work and grow great to compete with those established corporations which may sometimes now try to diminish the role of the individual inventor. We need the continuing turbulence of competition from the growth of new corporations. In this way, we retain the vitality and continuing expansion of the U.S. economy. 

The Japanese Patent System favors corporate interests and suppresses the rights of the independent inventor. Accordingly, the Japanese are at a substantial competitive disadvantage with the United States in long-term economic growth. They understand that well and also understand that for reasons of their culture, linking their major corporations with their Government, they are not able readily to change their system. Therefore, they propose to change ours. For that reason, they entered into two agreements with the United States in 1994 which, if enacted into legislation, will accomplish their objective of severely weakening the U.S. Patent System as it applies to the independent inventor. Objectives set forth in those agreements are included in the matters to which this Committee addresses its attention today. 

The Japanese have been quite forthright in stating their objectives for changing the U.S. Patent System. Analysis of the two 1994 agreements, entered into by Commissioner Bruce Lehman and Commerce Secretary Brown with the Japanese, indicates that the Japanese offer inconsequential and almost trivial concessions in return. It is astonishing that they have found two U.S. officers who would enter into those agreements and who have been enthusiastically promoting their fulfillment to the great potential damage of the U.S. Patent System and consequent damage to the U.S. economy. A clear statement of the Japanese objective is given by Saburo Okita, the major architect of Japan’s economic policies from the end of the war on to recent times. He was also the Japanese Foreign Minister not long before he died in 1993. He was lionized by the Japanese and there is even an entire library in Nara devoted to his works. In one of his books entitled, "Japan’s Challenging Years", he states, "I will actually be happy if rearmament is completely prohibited. An army in uniform is not the only sort of army. Scientific technology and fighting spirit under a business suit will be our underground army. This Japanese-American war can be taken as the khaki losing to the business suits."  

The requirement of HR 400 for a laid-open patent should be rejected. The requirement for publication after 18 months is a basic change in the U.S. patent procedures which currently assure that the applicant will be able to keep his filing secret until the patent is issued. If the filing is abandoned or the patent is otherwise not issued, then the filing remains secret. This proposed change would have a disastrous impact on the rights now enjoyed by those who file in the USPTO. It would be particularly damaging to those who make the most significant innovations, for experience shows that such patents often require many years to issue, ranging from six to ten or more. Such inventions are breaking new ground and, under the empowerment of the U.S. Constitution, represent intellectual property which belongs exclusively to the inventor for a limited period of time. That period under recent law is 17 years from the date of issue of the patent. Under this proposed revision, the secrets of the inventor would be exposed to the public 18 months after filing of an application, even though he might not receive a patent for many years thereafter. Nevertheless, the significance of his discoveries would be open for all to see within 18 months. It has been said that a new idea can propagate with the speed of light, so that rapidly thereafter others could begin to develop applications suggested by the discovery disclosed by the laid-open application. For the independent inventor, the results are calamitous. Not only any major corporation in the United States, but also any other competitive inventor or corporation throughout the world, could begin poaching on territory which presently remains known only to the inventor and to the Patent Office until a patent is issued.  

I believe this provision flies so much against the intent of Article I Section 8 of the Constitution that it is at risk of being Unconstitutional. In any case, it would be erroneous policy to take away from the independent U.S. inventor what is presently one of his most important rights under the U.S. Patent System, namely, the right to keep his invention secret until rights to license and enforce it become available to him. Under the proposed change, any corporation that wished could begin preparing and filing applications in adjacent areas of the newly disclosed technology. If those applications involve limited and sharply defined claims, then when the original pioneering inventor finally receives his patent with appropriately broad claims, he would find that a picket fence by a multitude of minor patents had been erected around his territory so that what could have been and should have been a valuable intellectual property has effectively been taken away from him. 

Another consequence of the laid-open application is that competitors who oppose the grant of the patent can then employ their lawyers to unearth examples of asserted prior art to be submitted to the examiner in opposition to the application. Operating still more insidiously, the competitor could send the asserted prior art to the inventor himself with a statement of its importance to his application. Then, if the inventor concluded that the submitted prior art was insignificant and did not submit it to the Patent Office, the competitor could bring action against him for inequitable conduct after the patent issued, inasmuch as the inventor has an obligation to submit everything to the Patent Office which he thinks may be relevant to the application. By such procedures, a competitor could add heavily to the administrative costs of the inventor-applicant, using its corporate resources to overwhelm the financial means of the inventor during the processing of the patent application before the applicant may enjoy the benefit of a presumption of validity which he will achieve with an issued patent.  

A further possible consequence of this early disclosure of an invention before the patent issues would be that those who would like to destroy the patent right through the reexamination process as soon as the patent is issued would have years of preparation for such reexamination challenges while the original inventor was waiting and struggling to have his initial application successfully find its way through the process of issuance as a granted patent. 

If we wish to destroy for the independent inventor the value of the U.S. Patent System and all that it may contribute to our economic growth in the future, then this one change will largely accomplish that task. The provision of HR 400 mandating publication of the patent application at any time before the patent issues is destructive of the basic intent of the Patent System and must be rejected.  

 He has gone so far in pushing for the passage of the changes agreed to with Japan that his enthusiasm appears to have overwhelmed his integrity.

On the 25^th of October 1995, he testified before the House Subcommittee on International Economic Policy and Trade that there was broad support for his recommendations, citing the fact that all of the witnesses which had testified in PTO hearings were in favor of the changes. Such witnesses were evidently very carefully selected. For all of the organizations known to me and representing independent inventors have registered their adamant opposition to HR1733 and their strong support for HR359 in the 104^th Congress and their strong opposition to HR 400 in the present Congress.

It may be noteworthy that Commissioner Lehman formerly worked in a law firm which spent much of its time lobbying for corporate interests. In an effort to justify the drastic change associated with the patent term running from the date of application rather than from the date of issue, he has testified to the Congress that industry is at risk from "submarine patents" which remain submerged for a long time in the patent issuance process and then ultimately emerge to "torpedo" members of industry. The submarine patent is a myth and Commissioner Lehman's testimony itself has proven it to be so. When challenged by members of Congress to support his assertions, he has submitted data extracted from the Patent office files to show that one out of 7,700 (one thirteen thousandth of one percent) patent applications had been on file for more than 20 years before the patents issued. When the 627 patents which he cited were then examined, it was found that about half of them were subject to secrecy orders and a substantial part of the others were owned by Government and that substantially no patents fit into the description which he had offered as the basis for this drastic amendment to our patent laws.

It is sometimes argued by those in favor of having the patent term run from date of application that when a patent is slow to be issued, it may be due to the inventor engaging in delaying tactics that slow down the issuance. Every instance that I know of and have investigated in which a patent has had an extended period of issuance, has been one in which the ultimate issuance of the patent only occurred because of extraordinary diligence and persistence by the inventor in fighting for its issuance. I know of no instance in which an inventor has deliberately delayed the issuance of his patent nor do I know of any procedure under the patent regulations by which an inventor even has that capability. The obligation remains upon the Patent Office to move the application process forward as rapidly as possible unless it has been countermanded by an explicit secrecy order. 

When we recall that the primary purpose of the U.S. Patent System is to provide enforceable property rights to those who make significant inventions, there is a situation which sometimes arises which Commissioner Lehman should have understood and should have explained to the Congress, instead of building an alarming myth about a "submarine patent". It may sometimes occur that an inventor of exceptional genius may achieve a cluster of significant inventions which are filed in one original disclosure with the Patent Office. If those inventions represent breakthroughs in a new field, it may take the inventor many years to get through the Patent Office procedure to a patent. The applicant must find an examiner who can understand a field of technology that has not previously been before him. For a pioneer patent, the inventor must file broad claims in order to stake out what he has achieved. Such broad claims are frequently contested at length before allowance is given. Appeals to the Board of Patent Appeals and Interferences and then to the Court of Appeals for the Federal Circuit may be required before the matter is resolved. In this fashion, 10, 15, 20 years or more may elapse before the patent is issued. Yet those patents which ultimately issue, as a tribute to the persistence and insight of the inventor, are indeed the pearls of the Patent System. They are precisely the patents that open up new industries and do most to seed our economy. They are the patents which we must promote and protect. Yet, the provision of having the patent term run from the application date of the patent would sharply reduce its value or eliminate it altogether. Similarly, the provision of having the application published 18 months after date of application would destroy most of the value of the patent, as described above.  

Another aspect of patent procedure which could have been and should have been explained by Commissioner Lehman to the Congress, but was not, is the following. When a number of different inventions are comprised in a single disclosure, then regulations in the Patent Office require that each invention be separated and provided for in a separate application. Thus, when a cluster of inventions are described by an exceptionally talented inventor in a single disclosure to the Patent Office, he may subsequently be required to file a series of so-called divisional applications to process each separate invention on its own merits. Thus, in the situation described above, when an inventor has broken ground in a new technology and filed a cluster of inventions in a single disclosure, he may struggle for 10, 15, 20 years or more to have his first patent issued from that disclosure. After he has notice of allowance on his first invention, he may then be required to file a divisional application for another invention and may have a period of some years of struggle with the Patent Office to have that second invention allowed in a patent. The same process may then apply for a second and a third divisional application, each of which may take some time to find its way through the Patent Office. Thus, for the exceptionally brilliant inventor—just the inventor who should be most protected by the Patent Office—the final issuance of all of the patents for the inventions disclosed in the initial cluster disclosure may take many years. That is a consequence of Patent Office regulations. While an inventor is struggling to feed his family and get his first patent issued from an important cluster disclosure, he has neither the energy, the time or the financial resources to process a second or a third divisional application. He may not even know that a divisional application is required until he is so notified by the Patent Office as he approaches allowance on one of his inventions in the cluster disclosure. 

Because income from an issued patent frequently takes years to materialize, the inventor is frequently struggling to survive economically while he is going through the extended process of having a breakthrough invention patented. When there are several divisional applications then subsequently required in series, the inventor must continue his struggle with the Patent Office to obtain a sequence of patents to protect his intellectual property.  

This problem with divisional patents and many inventions arising from a "cluster disclosure" is peculiar to the independent inventor and seldom, if ever, arises for a large corporation for two reasons: 

1. The economic problems of supporting oneself while processing a contested application does not arise for the corporation with its ample financial resources. 
2. The large corporation seldom, if ever, retains in its employ a person of sufficient genius to file a major "cluster disclosure", for the reasons discussed above.  

When we realize that the primary purpose of the Patent System should be to protect and to encourage those inventors who make the most significant inventions that seed the economy with new industries, we then recognize how profoundly misleading Commissioner Lehman’s testimony has been in failing to explain to the Congress the needs of the exceptionally talented inventor and the importance of having the Patent System operate to protect him. Instead, Commissioner Lehman has tried to turn this situation around and use it to build the myth of the submarine patent as the excuse for attempting to destroy the System, difficult though it may be, under which the exceptionally talented inventor has been protected in having the right to process his application to a successful conclusion in patenting major breakthrough inventions, even to the extent of having several major inventions resulting from a single "cluster disclosure". For that reason, I refer to those patents from such inventive disclosure as the pearls of the Patent System which we should protect in every possible way. They are the patents which are most significant in seeding our economy and give the best promise that through innovation, the United States may ultimately become a dominant trading partner and cure the present trade deficit under which it labors. Those are also the class of patents which, through vitalizing our economy, help maintain the position of the United States as the dominant economic power of the world. Commissioner Lehman and his proposed policies to trash the U.S. Patent System serve the short-sighted interests of the corporate lobby and the Japanese lobby but betray his obligation to serve the interests of the American people in his role as an officer of the U.S. Government.

The second step in the Brown/Kuriyama Agreement of 16 August 1994 for the USPTO requires that new reexamination procedures be established to permit unspecified and unlimited third parties to participate in any examiner interviews and to submit written comments on the patent owners response to any action in the patent under reexamination. That represents a drastic departure from current reexamination proceedings in which a third party may initiate a reexamination but the dialogue then continues only between the Patent Office and the patent owner in the same fashion as in an initial patent application. The proposed change would permit an unlimited and crushing burden of administrative proceedings against any owner of an important new patent. It could make the ownership of that patent a burden which the independent inventor would be unable to sustain.

While the patent system is intended to encourage the inventor to obtain intellectual property rights, the proposed revised reexamination procedures in association with the provision for 18 months publication of the application would tend to eliminate the value and the sustainability of those rights for the independent inventor. When we recognize that that independent inventor is the primary source of the new industry and the vibrant economic strength of the U.S. economy, we recognize how ingeniously these proposed changes represent a stiletto thrust from the Keiretsus to the heart of the U.S. independent inventor. 

 The appropriate legislative action, in my judgment, is to reject HR 400 as being destructive of both the near-term and the long-term interests of the United States.  

A constructive response in the international debate on patent rights would be to urge Japan and other overseas countries to cease the process of using laid-open applications at all, in view of their profoundly disruptive effect on the intellectual property rights of the inventor.  

Understanding the superiority of the U.S. Patent System over those of Japan and Europe may provide opportunities for improving those systems such that the right of their inventors may be further enhanced. As the world grows smaller, every nation is enriched when the inventiveness and productivity of other nations is advanced through incentives arising from strong intellectual property rights.

TECHNOLOGICAL INNOVATION:

Its Environment and Management

January 1967

Reprinted, September 1967

U.S. DEPARTMENT OF COMMERCE

John T. Connor, Secretary

10. Herbert Holloman, Assistant Secretary
1. for Science and Technology

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402 - Price $1.25

Fairfield, Connecticut 06430

203-259-7789 

BORN: 11 November 1919, Booneville, Mississippi

MARRIED: 31 December 1950, Mary M. Shadow (deceased 2 January 1992); children: David A., Mary C., Robert L., John F., Cynthia A., Sandra E. and James A.

EDUCATION: California Institute of Technology, Pasadena California

Princeton University, Princeton, New Jersey

POSITIONS: The University of Chicago Metallurgical Laboratory and

Argonne National Laboratory (successor institution) 

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