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Tech Law Journal |
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| News, records, and analysis of legislation, litigation, and regulation affecting the computer, internet, communications and information technology sectors | |
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Summary Statement of Committee Print -- "American Inventors Protection Act" The Administration supports Title One. It would help reduce the number of instances in which inventors are cheated out of their hard-earned money and robbed of their dreams by fraudulent invention promoters. The Committee Print's mandatory contract disclosures, reporting procedures and penalty provisions would go a long way toward addressing this serious problem. With regard to Title Two, the Administration has previously supported the concept of a defense to infringement based on "first to invent" and also appreciates, however, that the proposal has been the source of substantial concerns. The Administration looks forward to working with the Subcommittee to craft provisions that would appropriately address those concerns and hopefully create a defense that is fair to all interested parties. The Administration also wants to work with the Committee to clarify that the Government would be able to avail itself of the defense. While the Administrtion understands and appreciates the concerns which prompted the drafting of the "Patent Term Guarantee" Title, it has some concern that it may turn what used to be a fairly simple process into an overly complex and burdensome one. What may occur, for example, is a potentially large increase in the number of petitions coming into the Office, resulting in a detrimental impact on the smooth operation of the patent system. The Administration wants to work closely with the Subcommittee to simplify and clarify some of the more technical aspects of these provisions. With respect to Title Four, the Administration has previously supported publication at 18 months of all patent applications, except those that are withdrawn or subject to a secrecy order. Title Four would make a change in a positive direction, enabling the U.S. public to review, in English, those patent applications, pending after 18 months, filed both in the U.S. and a foreign country. American inventors would be able to learn of technological advances more quickly and thereby avoid duplicating the efforts of others, something their foreign counterparts already do. It is important to note that Title Four contains safeguards -- provisional rights -- providing fair royalties for pre-grant commercial use. The Administration supports Title Five, the "Patent Litigation Reduction Act." Our current reexamination procedures provide a low-cost alternative to litigation to confirm the validity of a patent. The improvements in this title will benefit all patentees, especially small entities who often do not possess the resources to engage in costly and time-consuming litigation. However, the Administration wants to work with the Subcommittee to ensure that this Title provides appropriate safeguards against abuse and addresses recent court decisions such as Portola Packaging. With respect to Title VI, the Administration urges the Subcommittee to consider the Administration's approach to helping the PTO operate more efficiently. As indicated in the President's Fiscal Year 2000 budget, the Administration is developing legislation to establish the PTO as a Performance-Based Organization or PBO. The Administration will share that legislation with the Subcommittee and looks forward to working with the Subcommittee to craft language that will produce an efficient, cost-effective organization to carry us into the 21st Century. H.R. 1225 The President's Budget proposal would authorize the PTO to charge and collect additional fees sufficient to cover costs associated with certain retirement benefits of PTO employees. H.R. 1225 would prohibit such additional fees and the Administration opposes H.R. 1225 in its current formulation. The Administration continues to believe that the PTO needs to be a self-sufficient agency and will, of course, work with the Subcommittee on the issue as the appropriations process continues. Statement of Mr. Chairman and Members of the Committee: Thank you for providing me with this opportunity to present the preliminary views of the Administration on the Committee Print of March 18, 1999, the "American Inventors Protection Act," and H.R. 1225, the "United States Patent and Trademark Office Reauthorization Act, Fiscal Year 2000," as introduced on March 23, 1999. The Administration is reviewing these recent drafts and may have further comments on them. We appreciate your support of this important legislation and your calling this hearing. Proposals to reform patent law and the Patent and Trademark Office's (PTO) operational authority were the subject of substantial consideration in the last two Congresses and were debated under unprecedented scrutiny. Thanks to your leadership, omnibus legislation passed the House. Unfortunately for the process, a consensus leading to enactment could not be reached on the Senate side. We at the PTO want to work with the Subcommittee to build a consensus and improve what we believe is the strongest and most efficient patent system in the world. To that end, this past January the PTO sponsored a round table discussion on possible legislative initiatives to modify the patent system, in particular those which were addressed in the previous Congresses. Attendees included Congressional staff and representatives from PTO's many diverse constituencies including independent inventors, intellectual property trade associations, universities and large and small business interests. The group was carefully balanced between supporters and opponents of the previous legislation. The purpose of the full-day round table discussion was not to reach any particular consensus, but to provide a forum for an open and frank discussion on the important issues before us. That is exactly what happened. The session was widely regarded as exceeding expectations as the discussions revealed agreement on certain issues and avenues for agreement on other issues where any agreement seemed unlikely. I hope that discussions among all the interested parties will continue toward a positive result. And in this regard, I certainly want to acknowledge the valuable contribution made by Congressman Rohrabacher and his staff to this constructive process. I firmly believe that, working together, you and other interested Members of Congress, the Administration and parties representing our user groups, both large and small, can craft a bill that will reach the President's desk during the 106th Congress. Holding this hearing, Mr. Chairman, serves as an excellent starting point. I would now like to discuss the provisions of the bills and, where appropriate, suggest improvements that the Administration believes would achieve our common goals of increasing productivity and cost effectiveness and delivering the best quality service to our customers. Committee Print Title I One of the greatest threats to the integrity of our process is the proliferation of so-called invention promotion or marketing organizations. There can be little doubt that the scandalous invention marketing schemes are among the greatest problems faced by the independent inventor and very small business concerns. Raking in more that $200,000,000 each year -- most often from those who can least afford it -- these fraudulent firms do more than simply take the inventors' money; they rob them of their hopes and dreams. The damage to America wrought by these firms goes to the heart of our free enterprise system, and serves to depress and discourage one of our most unique sources of new ideas. Far worse, because of limitations on our authority, the PTO and even the FTC have been less effective than we would like and remain under-equipped to address this problem, which grows every year. Title I of the Committee Print, the "Inventors' Rights Act," would give us additional tools to help ensure that inventors have a cause of action against unscrupulous invention promoters who collect a good deal of money up front from their inventor clients but deliver little in the way of service. Title I would require all invention promoters to provide clear written contracts stating plainly what invention promotion services are to be provided and at what cost. Mr. Chairman, the Administration strongly supports your efforts to craft provisions to help reduce the number of instances in which inventors are cheated out of their hard-earned money and robbed of their dreams by fraudulent invention promoters. Agents in other fields, literary agents for example, generally collect their money after they have performed services for their clients. Their fees often comprise a certain percentage of the earnings their activities generate for the client, and they report regularly to the clients on activities undertaken on their behalf. This title would hold invention promoters to similar standards. As in other areas known to have problems with consumer fraud, clients of invention promoters would be given a cooling-off period of five business days during which they could cancel the contract by letter. Invention promoters would have to inform customers of the right of cancellation in the contract and in a conspicuous cover sheet to the contract in clearly legible, bold-face type. The cover sheet also would have to provide facts about the number of inventions evaluated by the company, the number of positive and negative evaluations given, the number of contracting customers in the previous five years and the number of those customers who had earned more than the fees paid as a result of the work performed by the company. Finally, invention promoters would be required to report to their clients regularly regarding work done to promote the client's invention and the results of that work. Failure to fulfill these conditions could form the basis of a civil suit, if the customer later learned that he or she had been paying for services that were not provided. The Administration supports the concept of providing inventors with sufficient information to enable them to make an informed decision as to whether to retain an invention promoter. We also are considering the concept of a cause of action against those who fail to provide mandated information or commit fraud. We have some suggestions regarding this title as proposed, and look forward to working with you and the Subcommittee to craft provisions that will help inventors protect themselves from unscrupulous opportunists who are interested only in the inventors' money, not in developing their inventions. Title II The Administration has previously supported the concept of a defense to infringement based on "first to invent" and we understand and appreciate that the proposal has been the source of substantial concern. While we think there are significant, legitimate and often troublesome concerns which need to be addressed, we look forward to working with you to craft provisions that would appropriately address those concerns and hopefully create a defense that is fair to all interested parties. If enacted, title II, the "First to Invent Defense Act," would provide a defense against charges of patent infringement for a party who had, in good faith, actually reduced the subject matter to practice at least one year before the effective filing date of the patent, and commercially used the subject matter before the effective filing date. "Effective filing date" would mean the filing date of the earliest filed application relied upon in the application which resulted in the patent. The "first to invent" defense would be available so long as the party asserting it did not derive the subject matter he or she was exploiting commercially from the patentee or anyone in privity with the patentee. The defense would apply only to the subject matter in dispute and would not give the party a general license to use all of the technology claimed in the patent. The defense, if upheld, also would not in itself cause a patent to be deemed invalid either under the bars to patentability of section 102 of the patent law or as non-obvious under section 103. Finally, we wish to work with the Committee to incorporate the requisite technical amendments to clarify that the Government also would be able to avail itself of the defense. Title III The Administration continues to review the provision of title III, the "Patent Term Guarantee Act." This title would extend the term of patents to compensate for certain processing delays specified in an amended paragraph (b)(1)(A) of section 154, and for delays in the prosecution of applications pending more than three years. In addition, extensions will be available for delays in issuance of a patent due to interference proceedings, secrecy orders, and appellate review. Extensions for delays listed in paragraph (b)(1)(A) and for appellate review would be limited to ten years. All other extensions would be calculated on a day-for-day basis without limitation. This is an undesirable departure from current law, which provides a maximum five-year extension for delays in issuance due to secrecy orders and appellate review. We would hope that any provisions under this title would be crafted in such a manner as to minimize administrative burdens on the PTO and provide sufficient lead-time for implementation. We are currently reviewing the potential impact on our operations if we were to implement this title as proposed, and will share our findings with you in the near future. While we understand and appreciate the concerns which prompted the drafting of this Title, we have some concern that it may take what used to be a fairly simple process, calculating patent term, and possibly render it into an overly complex and burdensome one. From the PTO's perspective, what may occur is a potentially large increase in the number of petitions coming into the Office, placing significant administrative burdens on the PTO, and resulting in a detrimental impact on the smooth operation of the patent system. We believe that it would be advantageous for the PTO to work closely with this subcommittee to simplify and clarify some of the more technical aspects of these provisions. We also would note that the Administration cannot support an unlimited extension resulting from delays in grant as a result of interference proceedings. We should instead strive to streamline the interference process to eliminate delays, rather than provide for unlimited extensions of the term to compensate for them. Title IV Mr. Chairman, provisions for the early publication of patent applications have been hotly debated for many years. It is my hope that PTO efforts toward reduced cycle time and other efficiencies will, in the near future, obviate the need for any early publication prior to grant. For example, we are committed to improving our services by hiring 700 new examiners this year as well as in 2000 (in addition to the 720 examiners hired in 1998), providing additional databases to examiners, providing assistance in automated searching and freeing up patent examiners from non-examination duties. We are also working to process all Patent Cooperation Treaty applications electronically; convert to electronic format all incoming U.S. paper patent applications; electronically classifying incoming patent applications to Technology Centers; performing electronic patent "pre-searching;" and electronically accessing patents issued by the European and Japanese Patent Offices. Title IV, the "Publication of Foreign Applications Act," would make important substantive changes to our patent law. It would provide for publication of patent applications 18 months after filing unless the applicant were to certify upon filing that the invention was not and would not be the subject of an application filed in a foreign country. This title also would provide provisional rights to patentees to obtain reasonable royalties if others make, use, sell or import the invention during the period between publication and grant; provide a prior art effect for published patent applications; require a GAO study on applicants filing only in the United States; and authorize fee adjustments to recover the cost of early publication. The Administration has previously supported early publication at 18 months of
all patent applications, except those that are withdrawn or subject to a secrecy
order. As early as 1966, President Johnson's Commission on the Patent System
recommended, among other things, publication of patent applications after 18
months. More recently, President Bush's Secretary of Commerce established a
Commission on Patent Law Reform that recommended, among other things, early
publication of patent applications. In spite of these recommendations over the
past 30 years, the law still requires that patent applications be kept from the
public until a patent issues. If a patent does not issue, the information
contained in the application is never made public unless the applicant chooses
to do so. Title IV would make a change in a positive direction, enabling the U.S. public to review, in English, those patent applications, pending after 18 months, filed both in the U.S. and a foreign country. Since applications from foreign applicants make up approximately 43% of all patent applications received by the PTO, it is worth noting that foreign origin applications would be published in the U.S. 18 months after their foreign filing date, which would generally be 6 months after they are received by the PTO and at the same time they are published abroad. Proponents of early publication have effectively argued that such publication fulfills the Constitutional objective of the patent power: to promote the useful arts. Early publication of patent applications allows people to learn of technological advances more quickly and thereby avoid duplicating the efforts of others. However, in addressing the concerns of opponents of the previous legislation, it is important to note that Title IV contains safeguards to ensure against use of published information by unauthorized parties. It would provide provisional rights following publication of an application. Anyone who used an invention prior to the time the patent was granted would be liable for reasonable royalties for the period from publication until the patent's grant and, of course, would be subject to normal penalties for patent infringement upon grant. The availability of provisional rights would, however, be conditioned upon a claim in the published application being "substantially identical" to a claim in the patent. Since this would be a fairly strict standard to satisfy, the provisional protection accorded may need to be strengthened. Section 405 of title IV would also add to the bars to patentability, contained in section 102 of title 35, United States Code, provisions dealing with published applications. Section 405 would also amend section 102 to expand the prior art effect of granted patents. This expansion of effect has not been widely discussed in the U.S. and we look forward to a full discussion of the matter as the legislative process continues. Title V Title V, the "Patent Litigation Reduction Act," is appropriately named and is strongly supported by the Administration. Our current reexamination procedures provide a low-cost alternative to litigation to confirm the validity of a patent. An improved reexamination system will provide a better, low-cost alternative to litigation. These improvements will inure to the benefit of all patentees, especially small entity patentees who, often, do not possess the resources to engage in costly and time-consuming litigation. This title would expand the role of a third-party requester in reexamination proceedings. Further, the changes proposed would make reexamination a more effective and, therefore, more attractive option for resolving questions of patent validity, many of which are now handled by the courts. Title V would provide limited, yet meaningful, participation by third-party requestors through a reexamination proceeding resulting from their request. The third-party would be served with copies of any papers submitted by the patentee during reexamination proceedings and would have an opportunity to submit written comments within a reasonable time. Third-party requestors also would be given a right of appeal from a final decision of the PTO in favor of the patent owner. To help protect against abuse, however, Title V also would create a statutory estoppel against further litigation of patent validity questions by a third-party, after the party seeks and obtains judicial review of the PTO's determination in their case. The Administration would be pleased to work with the Committee staff to ensure that Title V, in addition to the changes proposed, addresses several recent court decisions, such as Portola Packaging, that have adversely affected the effectiveness of reexamination proceedings. Title VI Title VI, the "Patent and Trademark Office Efficiency Act," would establish the PTO as an independent agency, separate from any department of the U.S. Government, but under the policy direction of the Secretary of Commerce. Mr. Chairman, while we again salute you for your continued leadership on this issue, we urge you and the Subcommittee to consider the Administration's approach to helping the PTO operate more efficiently as a Performance Based Organization (PBO) within the Department of Commerce. As indicated in the President's Fiscal Year 2000 budget, the Administration is developing legislation to establish a number of PBOs including the PTO. Implementation of the PBO concept is intended to help selected Government agencies function more efficiently and effectively and better serve their customer base. The PTO-PBO legislation would encourage PTO executives to bear greater responsibility for the PTO's level of performance. The executives would receive bonuses if they were successful in meeting tough annual performance goals established in performance agreements with the Secretary of Commerce. To aid them in achieving those goals, the executives would be empowered with greater flexibility in hiring, compensation and procurement. The PTO's operations make it a good candidate for conversion to a PBO. PTO functions in a business-like manner and is completely funded by fees paid by the users of our services and products + patent applicants and owners and trademark applicants and owners. In addition, most of the service functions of the PTO are measurable. Standards of quality and quantity can be set and the organization's performance evaluated using those standards as yardsticks. That said, however, I must note that there is a significant difference between the Administration's vision of the structure of the organization and the structure that would be created by the bill. The Administration would like to see the PTO transformed into a PBO, taking into account the particular nature of PTO, as well as the lessons learned from enacted PBOs. In the Administration's vision, the PTO's policy making functions in relation to intellectual property would remain part of the Department of Commerce, under the direction of an Under Secretary for Intellectual Property, who would be appointed by the President with the advice and consent of the Senate. Such an arrangement would help ensure that the inherently governmental policymaking functions of the Under Secretary are placed clearly under the supervision of the appropriate Cabinet Department. It would also help ensure that intellectual property issues are considered as an integral part of each Administration's programs, as the Under Secretary would, through the Secretary, advise the President on both domestic and international intellectual property matters and ensure that these important issues are part of Cabinet deliberations. Finally, the arrangement would help ensure that each Administration's objectives and priorities are reflected in the preparation of any intellectual property legislation and in international negotiations involving intellectual property. We look forward to working with you to craft language that will produce an efficient, cost-effective organization to carry us into the 21st Century. Title VII Title VII contains miscellaneous changes to our patent system. Subject to certain amendments of a technical nature, the Administration generally supports these provisions. We would be pleased to work with the Subcommittee staff to include a number of other items of a miscellaneous or technical nature that would help streamline procedures in the PTO and benefit our customers. H.R. 1225 Mr. Chairman, we are concerned that the PTO Reauthorization bill differs from
the approach taken in the President's FY 2000 Budget proposal. The President's
Budget proposal would authorize the PTO to charge and collect additional fees
sufficient to cover the accruing indirect personnel costs associated with
post-retirement health and life insurance of PTO employees. As H.R. 1225 would
prohibit such additional fees, we would oppose the bill as currently drafted,
but we are willing to work with the Subcommittee to address concerns about
imposing unnecessary costs on our users. We continue to believe that for the PTO
to be a truly self-sufficient agency, it needs the authority proposed in the
President's Budget. We will, of course, work with you on this issue as the
appropriations process continues. | |||||||||
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