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Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to speak on behalf of Intellectual Property Owners (IPO). I am the current President of IPO. I am also Chief Intellectual Property Counsel for 3M Company in St. Paul, MN. IPO is a trade association that represents large and small companies, universities, and individuals who own patents, trademarks, copyrights, and trade secrets. IPO members are responsible for a substantial share of the research and development and patenting in the United States. In 1994, 25 organizations represented on our Board of Directors, only a portion of the membership of the association, invested $20 billion in research and development. During 1993, IPO members were granted about 12,000 United States patents, 23 percent of all U.S. patents granted to U.S. nationals.
Our members have a large stake in the effective operation of the U.S. patent system. The patent system is intended to encourage invention and investment in commercialization of new products and services, thereby creating jobs in U.S. industry and strengthening the national economy.
We compliment Chairman Moor head and Representative Schroeder for introducing H.R.1732 and H.R.1733, which would make important improvements in the patent system. We strongly endorse these measures because they will improve the climate for commercializing new technology, create more certainty about the status of patent rights, and reduce costs.
We also want to express our support for another patent bill recently introduced by Chairman Moor head and Representative Schroeder:
H.R.1659, the "Patent and Trademark Office Corporation Act of 1995." We look forward to the opportunity to explain our views on H.R.1659 at the appropriate time. We are not able to endorse H.R.632 at this time.
18-Month Publication of Patent Applications
IPO supports publication of patent applications 18 months after the earliest filing date as proposed by H.R.1733. The current U.S. patent system, which requires that applications be kept confidential until the patent is granted, is causing uncertainty about the status of rights in new technology and is unreasonably delaying dissemination of technological information. The uncertainty and delay, we believe, are weakening the incentives for U.S. innovation and investment in technology that the patent system is supposed to provide, and are weakening our technological competitiveness.
The United States needs to strike a balance between, on the one hand, the interest of U.S. patent applicants in keeping applications confidential, and on the other hand, the interest of the general public in being able to identify potential patent conflicts at an early date and being able to obtain early access to information in patent disclosures.
Technology owners should have a right to rely indefinitely on trade secret protection instead of patents, but once an owner elects to seek patent protection, the public needs to know of the possibility of patent rights within a reasonable time.
Under the 18-month publication system proposed in H R.1733, the U.S. public will benefit from obtaining -- earlier and in English -information that is disclosed in foreign-origin patent applications filed in the U.S. Nearly 45 percent of applications filed in the U.S. are from abroad. Foreign countries already are making patent application information public in their languages. They are also publishing U.S.-origin applications that are filed abroad 18 months after the priority date.
The U.S. examines patent applications and grants patents much more promptly than other countries, but we are slower to publish foreign origin patent disclosures. If a foreign-origin application is granted as a patent 18 months after filing in the United States, for example, the disclosure is not published in the United States today until 30 months after the priority date. By adopting the 18-month publication procedure of H.R.1733, we would move the publication date of foreign origin applications ahead by 12 months, in step with the rest of the world.
We believe every application should be published no later than 18 months after the earliest filing date, and we also support the concept of having the Patent and Trademark Office make an initial determination of patentability before the date of publication, for those who need such a determination.
Proposed paragraph 122(b)(2) of the patent code insures that an application will not be published until 3 months after the Patent and Trademark Office has given the applicant a first notice of whether the invention appears to be patentable. This gives the applicant a reading on patentability while there is time to abandon the application and avoid publication. The bill thereby enables inventors to continue to rely on trade secret protection for some inventions that may have value but do not satisfy the standards for obtaining a patent.
Paragraph (b)(2) correctly limits its benefits to applicants who are not already publicly disclosing the invention and are not relying on a right of priority or an earlier application filing. We suggest that the benefits of paragraph (b)(2) should be available only to applicants who request at the time of filing that their applications not be published until after the first examination. Also, the benefits of paragraph (b)(2) should be available to all patent applicants, not just independent inventors. Large and small companies and universities, as well as independent inventors, may wish to obtain an indication of patentability from the Patent and Trademark Office before allowing their applications to be published.
In addition, paragraph (b)(2) should place an obligation on the Patent and Trademark Office to accelerate applications for which the benefit of paragraph (b)(2) is requested, to ensure that publication of applications will not be delayed beyond the 18-month publication date. The Office already is reaching virtually all cases for first action within 15 months after filing. With careful attention to management of backlogs, the Office should be able to guarantee a first notice of whether the invention appears to be patentable no later than 15 months after the actual filing date.
A key part of H.R.1733 is section 4, on provisional rights. Provisional rights are an essential part of any procedure for publishing applications. After an application is published, the applicant must have a right to compensation from competitors who learn of the publication and begin commercializing the invention, assuming the applicant ultimately is granted a patent. Otherwise the applicant could be damaged
Eighteen-month publication with provisional rights complements the 20-year patent term measured from the earliest filing date that was enacted as a part of the Uruguay Round Agreements Act, which, coincidentally, takes effect today. In addition to the right under section 8 to extensions of the 20-year term to compensate for unusual delays in the Patent and Trademark Office, provisional rights under section 4 serve as an insurance policy to prevent adverse effects from unusual delays.
We offer two suggestions for section 4. First, a patent applicant should be required to give actual notice of the published patent application to the alleged "infringer" as a prerequisite to obtaining a reasonable royalty, and the notice should identify the infringing activities. If only knowledge of the published application is required, the door will be opened to litigation over whether the alleged infringer knew or should have known of the published patent application. Second, the requirement that a claim in the patent and a claim in the published application must be "identical" should be changed to include claims that are "substantially identical." This would be consistent with the interpretation given to the term "identical" in the patent reissue statute.
We also would like to offer some suggestions on the manner in which the Patent and Trademark Office should implement 18-month publication of patent applications.
1. The entire patent application should be published. Copies of published applications should be placed in the Office's search files so that members of the public and patent examiners can search the published disclosure and claims. Publication of only a drawing and claim or abstract is not adequate to enable members of the public to search the technology and identify potential liability through a provisional right to a reasonable royalty. The PTO should develop a plan for publishing the entire application that will keep costs as low as possible. While money can be saved by printing only amended claims and corrections to the specification when the patent is issued, we would prefer to have a full patent document printed when the patent is granted, in addition to publication of the entire application at 18 months.
2. Public access to the contents of the application file should extend to all materials added to the file after publication. The public needs access not only to technological information disclosed in the specification, but also to correspondence with the Office, new and amended claims, prior art citations, and other information that may be added to the file. Access to such information is needed in order to be able to determine the likely scope of patent protection at an early date. The earlier a manufacturer can determine the scope of coverage of a patent, the better the manufacturer can plan its investments in manufacturing facilities and R&D.
3. Third party submissions of prior art information to the Office should be strictly controlled, in order to avoid the kind of "opposition" proceedings that competitors of patent owners use to delay grant of the patent under some foreign patent systems.
In summary, we strongly endorse publication of patent applications at 18 months as proposed in H.R.1733 because such publication will result in more effective dissemination of technological information -including information in foreign-origin applications that are not available in the U.S. in the English language now at an early date -and will result in earlier availability of information about the status of patent rights in new technology. The earlier dissemination of technology and the greater certainty about patent rights will spur more invention and investment in this country.
Extension of 20-Year Patent Term
IPO also supports section 8 of H.R 1733, which is an important expansion of the authority of the Commissioner of Patents and Trademarks to extend the 20-year patent term measured from the filing of the first application. In a statement in the record of the joint hearing held by this Subcommittee and the Senate Subcommittee on August 12, 1994, IPO vigorously supported the 20-year patent term. We believed and continue to believe that the 20-year term is a fundamental reform in the U.S. patent system. It will eliminate abuses of the patent system that have been harming U.S. industry and the consuming public.
Certain foreign and U.S. companies and inventors have been delaying their patent applications in the U.S. Patent and Trademark Office in order to extend the expiration dates of their patents. This has become a growing problem. After decades in the Office, patents have been granted in mature industries where manufacturers already have invested in product commercialization. The long delays have caused uncertainty for manufacturers who do not know the status of patent rights in new technologies for many years after the patent normally should be granted. Under the old system, the American public also has been deprived of new products and manufacturing jobs because the owners of unreasonably delayed patents have not had an incentive to commercialize their inventions within a limited time.
The 20-year term measured from filing of the first application removes the incentive for delay by applicants and creates incentives for patent owners to commercialize inventions promptly. Some delays in the Patent and Trademark Office, however, are beyond the control of the applicant. The Uruguay Round Agreements Act provided for extensions of the 20-year term of up to 5 years when the grant of the patent is delayed due to an interference proceeding, a secrecy order, or an appellate review, but did not provide for an extension of the 20-year term in every situation where substantial delay may occur through no fault of the applicant
We support the provision in section 8 of H.R.1733 which extends the 20-year term in the case of any unusual administrative delay in the Patent and Trademark Office that is not caused by the applicant. We also favor the increase in the total duration of all extensions of a patent available under that section from 5 years to 10 years.
Only a small number of patents will need to be extended under section 8, but the authority is important to insure an equitable result in the few cases where patent owners otherwise would receive fewer years of patent protection than under the old system. By retaining the basic principle of measuring the patent term from the earliest filing date, section 8 retains the incentives for patent applicants to avoid delay and to commercialize their inventions within a limited time. U.S. industry receives the benefits of greater certainty about which technologies are protected, and the U.S. avoids losing manufacturing jobs to countries that do not permit unreasonably extended patents. U.S. consumers benefit from lower prices and more new products.
We would be pleased to work with the Subcommittee and the Patent and Trademark Office on plans for implementing the patent term extension authority of section 8. We urge that the Office develop a plan for reforming (1) the practice under which the Office makes the second rejection of patent claims "final" and (2) the practice under which the Office requires patent applications to be separated into large numbers of divisional applications. Reform of these practices will speed up the patent examining process. The changes that are needed may be similar to those required by the transitional provisions of the Uruguay Round Agreements Act for certain applications on file on the effective date of the new legislation. If the Office needs additional legislative authority, the authority should be included in H.R.1733.
We also support section 9 of H.R.1733. This section makes a technical correction to avoid inadvertent loss of rights when the last day for filing a regular patent application that follows a provisional application is a Saturday, Sunday, or Federal holiday within the District of Columbia.
Patent Reexamination
IPO urges early passage of H.R.1732, which refines and improves the patent reexamination law that was passed by Congress in 1980. We want to compliment Chairman Moor head and Representative Schroeder and the Patent and Trademark Office for a proposal that will benefit all of the users of the patent system.
H.R.1732, like H.R.1733, will increase certainty about the status of legal rights in technology. The greater certainty will improve the climate for inventing and for investing in commercialization of new products. I am pleased personally to see that the bill implements most of the recommendations made to the Secretary of Commerce in 1992 by the Advisory Commission on Patent Law Reform, since I had the opportunity to serve as an alternate member of that Commission.
The 1980 patent reexamination law was intended as a quick and inexpensive alternative to court litigation on issues of patentability involving earlier patents or printed publications. The Advisory Commission on Patent Law Reform concluded, however, that the law is failing "to provide an expert forum as a faster, less expensive alternative to litigation of patent validity" because many third parties are reluctant to use reexamination.
H.R.1732 will encourage greater participation in patent reexamination proceedings by third parties. Section 305(b)(3) of the patent code as amended by the bill gives third party requesters a right to file one written comment on each response filed by the patent owner. This is a significant change that will help level the reexamination playing field and encourage use by third parties.
Code section 306 makes a major change by giving third party requesters a right of appeal for the first time. Third party requesters will be able to appeal to the Board of Patent Appeals and Interferences and to the Court of Appeals for the Federal Circuit. We agree with the approach taken by the bill of giving both the patent owner and the third party a right to appeal to the Federal Circuit and giving neither of them a right to de novo review of a reexamination proceeding in the U.S. District Court for the District of Columbia. The right of appeal should induce more third parties to use reexamination.
We also support the other improvements in reexamination made by H.R.1732, including (1) expanding the issues that can be reexamined by including issues under section 112 of the patent code except for the "best mode" and (2) consolidating the order for reexamination and the first Office action.
H.R.1732 seeks to avoid duplicate litigation in reexamination and in court. Code section 306(c) stops third party requesters from participating in a reexamination appeal to the Federal Circuit and later asserting patent invalidity in another forum on a ground that the party raised or could have raised in the reexamination. Similarly, code section 308(b) requires that once a final decision has been entered in court against a party who is asserting patent invalidity, then that party may not request reexamination on issues that the party raised or could have raised in court.
We support this effort to avoid duplicate litigation, but suggest clarifying the meaning of '~could have raised." If this term is given a broad interpretation, it may discourage some parties from using quick and inexpensive reexamination proceedings.
H.R.1732 is an important proposal for improving reexamination of patents on the types of issues that are routinely considered by the Patent and Trademark Office during the initial examination of patent applications. Some IPO members have suggested more limited changes; others have suggested much greater changes that would establish a post-grant "opposition" proceeding in which all issues of patent invalidity could be raised, including issues such as prior use and sale. By increasing third party participation while retaining the existing reexamination framework, H.R.1732 takes a middle ground. We believe this bill has widespread support in the patent community, and we hope it can be enacted promptly.
Amendment to 28 USC S 1498
Our limited review of H.R. 632 causes us to question whether the bill should be enacted, at least in its current form. The bill amends 28 U.S.C. 1498 to mandate payment of reasonable costs including expert witness and attorney fees when a patent used by the United States is owned by an independent inventor, nonprofit organization, or small business. We do not know why the rule for payment of attorney fees and costs in patent suits against the government should be different from the rule for payment in suits between private parties. Neither do we know why the rule for payment to independent inventors and small organizations should be different from the rule for payment to large organizations.
We appreciate the opportunity to present these views. I will be glad to answer any questions.