[Congressional Record Volume 142, Number 100 (Tuesday, July 9, 1996)]
[House]
[Pages H7137-H7143]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           SAFEGUARD THE PROTECTIONS OF INTELLECTUAL PROPERTY

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from New York [Mr. Forbes] is recognized for 
the balance of the pending hour as the designee of the majority leader.

                              {time}  1600

  Mr. FORBES. Mr. Speaker, I take the floor this afternoon to speak of 
an issue of grave importance to all of us as Americans. If you like the 
North American Free Trade Act [NAFTA] and you like the General 
Agreement of Tariffs and Trades [GATT] you are going to love the 
upcoming reforms to one of the most important tenets of American 
ingenuity, the protection of intellectual property, our ability as a 
nation to protect our ideas, our inventions.
  Ladies and gentlemen, this issue is of paramount importance. I rise 
to alert millions of my fellow Americans about the importance of this 
Nation's patent system. It was so important that our Founding Fathers 
saw fit to include the protections of intellectual property in the U.S. 
Constitution.
  The greatness of America has been defined largely by American 
ingenuity, by people like Henry Ford, Eli Whitney, the host of 
inventors who have made America number one in the world. Our dominance 
throughout the 20th century has largely been because American ideas 
have been protected from foreign intrusion. American inventors, who 
schemed at their kitchen tables or out back in their garage and came up 
with a new invention, those ideas were protected by patent law.
  Mr. Speaker, I rise this evening because we are about to give away 
American ingenuity. This administration, in its move to provide for a 
one-world global economy, is about to forsake the uniqueness that is 
American ideas. The uniqueness that is American ideas. Our patent 
system is about to be changed if Americans do not come to the defense 
of the existing patent system that protects American ideas. We call it 
the Moorhead-Schroeder Steal American Ingenuity Act.
  Mr. Speaker, this is not one of those glamorous subjects that so 
enthralls the public that they sit captivated on every word. But like 
the American Revolution, like the Civil War, like the movement from an 
agrarian society into an industrial society, if we do not step forward 
and protect our right as Americans to have new ideas, to invent the 
kinds of products and services that have made America unique, we will 
move into the 21st century a lesser nation, as Japan and China and 
every other industrial world moves to steal American ideas.
  Specifically, what am I talking about? Mr. Speaker, for over 100 
years that young individual who was out back in the garage working on 
that new idea, and once that idea took root, would send in all of the 
schematics and all of the parts of that idea that made it unique to 
that person and file it in Washington with the U.S. Patent Office. The 
U.S. Patent Office would then have one of its examiners review that 
patent, that unique idea, that notion that was just so individual to 
that individual and their ability to invent a new product that nobody 
else had come up with that idea.
  Well, as the examiner looks to that invention and the uniqueness of 
that intellectual property of that American citizen, the presumption 
has always been that it is owned by that American individual who was 
out back in the garage coming up with a new product.
  As they reviewed the uniqueness of this American idea, prior to 
giving the patent, it was protected. No foreign nation could sneak in 
and grab that idea and copy that idea. No multinational corporation 
with a legal department of 100 lawyers could sneak in there and grab 
that idea, certainly not with the

[[Page H7138]]

complicity of the United States. That small individual's idea, that 
individual's idea that was a small idea to start with was unique and 
protected.
  Now, in this global economy, this administration's move to make it a 
one-world relationship, we are about to hand off the uniqueness of the 
American patent system so that we can lower the standards of American 
ingenuity so that other nations will have benefit of the unique ideas 
that are so American.
  Imagine if Henry Ford, in inventing the model A, had taken those 
ideas and sent them off to Washington, DC to the Patent Office, 
thinking that it was a unique idea of his, that he had this great idea 
for a motor car, a horseless motor car. But imagine if Henry Ford were 
doing that under the new Clinton administration policy that they so 
want to push, where in 18 months, before the patent had even been 
issued, all of those notions about Henry Ford's new model A would be in 
the public domain.
  Here is poor Henry Ford, long before he had become famous. He did not 
have the capability to hire a battery of lawyers to protect himself or 
his idea that was uniquely his. He did not have that protection. But 
along came that multinational corporation, with their legal staff of 
100 lawyers and there was Henry Ford's model A, 18 months out, 
published, for all the world to see, to copy.
  No longer was Henry Ford's model A uniquely American. No, now they 
are going to produce them in Japan and in China and all over the world, 
where governments finance efforts to steal American technology. 
Governments step in and finance it in other parts of the world.

  So here we are, something so uniquely American, where the presumption 
has always been that if Henry Ford had come up with the idea for a 
model A that was uniquely Henry Ford's idea, it was to be protected and 
it said so in the U.S. Constitution. But now we have the Commissioner 
of the United States Patent and Trade Office, who in negotiations said, 
you know what, we have to lower American standards so that we are 
fairer to the Japanese, so that we are fairer to the Chinese, so that 
we are fairer to all the other nations of the world; and no longer will 
Henry Ford's model A be unique to Henry Ford because here is poor Henry 
Ford, he is not a big corporation yet, he is just a private guy working 
in his garage.
  He had a great idea, but along comes that battery of lawyers from 
another nation. In the past, under the patent system, the idea was 
always presumed to be Henry Ford's. No foreign government could steal 
it, no multinational corporation could steal it. It belonged to Henry 
Ford. It was his intellectual property, protected under the U.S. 
Constitution.
  Well, as I said, the Commissioner of the U.S. Patent Office is moving 
this Nation into a new era. And it is a troubling era that I quite 
honestly believe, if it is allowed to stand, if the proposed 
legislation that will be coming to this floor in the next several 
weeks, the Moorhead-Schroeder Steal American Technology Act, if that is 
allowed to come to this floor and it is approved by this body, and 
approved by the other and signed into law, watch American ingenuity 
take a back seat, because it will no longer be protected.
  The genius that has so defined this country in the last 100 years, 
that has been so uniquely American, will now be subject to invasion 
from abroad. No longer will that individual who came up with that great 
idea, once the Patent Office approved that person's application, no 
longer would there be a 17-year protection, because in 18 months, 
whether the patent has been approved or not, it will be published in 
the public domain for all to see, for all to copy, and we will be 
putting American ingenuity in jeopardy, as multinational corporations, 
as foreign governments are able to step forward and rob, and rob, 
Americans of their ideas.
  Mr. Speaker, we have been discussing here the challenges that 
American ingenuity is facing: In 1868 the air brake, an American idea; 
1911, air-conditioning; 1911, the self-starter automobile; 1972, the 
pocket calculator; 1925, the circuit breaker; 1852, the electronic 
brake, and we could go on and on and on about ideas that came about 
because a bright, forward thinking American sat down at their kitchen 
table and put their talent to work and came up with some creative ideas 
to make life easier in America, and those ideas were sold abroad.
  A patent is an official document, Mr. Speaker, and it confers a right 
of privilege, ownership. It protects by a trademark or by a trade name 
so as to establish proprietary rights, private property. Someone's 
ideas belong to that someone. American ideas belong to Americans. The 
importance lies not in its definition but in the right we are 
protecting.
  It is someone's right to own their idea, their invention or their 
innovation. When we think in terms of ownership, we tend to visualize 
land or some kind of durable good defined as property rights. Mr. 
Speaker, someone's idea, their invention, their innovation is also 
property. It belongs to them. It is their intellectual property. 
Perhaps it is our greatest property because the ideas of men and women 
are limitless. Limitless. They are our past, they are our present and 
they are, more importantly, our future.

  The right to intellectual property was recognized, as I have said 
earlier, by the Founding Fathers and they made sure, specifically 
outlined in the U.S. Constitution, that the inventors are the only 
class of people, the only class of people who enjoy protection in the 
Constitution. In article I, section 8, clause 8 it reads as follows:

       To promote the Progress of Science and useful Arts, by 
     securing for limited Times to Authors and Inventors the 
     exclusive Right to their respective Writings and Discoveries.

  This is their intellectual property, Mr. Speaker. This is American 
ideas, American ingenuity. In the middle of the last century Americans 
were given a guaranteed patent term of 17 years. Since that time the 
United States has risen to become the leader in patents throughout the 
world.
  Invention is one of the things that America does best, and we have 
plenty of those examples just in the last several decades alone. By 
offering the strongest patent protection in the world, the United 
States has stimulated more creativity and new industries than anywhere 
else, and an annual $30 billion intellectual property surplus now 
exists. That is right, the United States is the leader in intellectual 
property.
  For my colleagues that do not follow patent issues closely, and 
believe me, at first blush it seems rather dry, the importance of that 
statistic, however, cannot be lost.

                              {time}  1615

  Let me explain. We in the United States have more fundamental patents 
than any other country in the world. Fundamental patents are those 
patents most often cited in works worldwide.
  In 1991, the United States had over 100,000 fundamental patents, 
basic patents. The 14 other industrialized countries combined barely 
matched that 100,000. Fundamental patents are used in measuring a 
nation's prosperity, because it is those patents that will continue to 
bring in income and those patents that will continue to generate new 
jobs for a nation.
  This is no secret to the world. Foreign interests know that the 
United States has and will continue to have cutting-edge technology 
that adds to our Nation's economic power. They desperately want a piece 
of that action. They want our property for their prosperity.
  Japan, for instance, acquired much of its base of technology, much of 
it American, perfectly legally through licensing, careful study of 
scientific papers and patents. But when the United States was not 
willing to share, some Japanese companies simply copied with little 
regard for our American patents and other intellectual property rights. 
IBM versus Fujitsu. Honeywell versus Minolta. Corning Glass versus 
Sumitomo Electric. These are just the latest complaints that Japan has 
stolen American technology.
  I would be remiss if I did not talk about something that is even 
closer to home for this Member from New York State, privileged to 
represent Long Island in this House of Representatives.
  About 25 years ago or so there was a university professor who came up 
with a technology. We know it commonly today as the MRI. Dr. Raymond 
Demadian, a man of very modest means who was a teacher, an educator, 
came up with this technology, and

[[Page H7139]]

working with his graduate students he perfected the technology called 
the MRI.
  Because of commercial espionage, that MRI technology ended up in 
other hands. Dr. Demadian, for well over two decades, has been involved 
in a legal struggle to protect the rights of his own idea, the MRI. But 
he is a man, as I said, of modest means. He does not have the legal 
departments that multinational corporations had that went in there and 
stole his idea. He does not have the support of a whole government 
apparatus that foreign nations offered some of their own people when 
stealing the MRI technology.
  So today, in what would be admittedly a several billion dollar 
industry, American exports have been stolen, and Dr. Demadian struggles 
to protect this intellectual property rights. It is a tragedy. It is a 
tragedy that this man who, like Henry Ford or Eli Whitney or so many of 
the other great Americans who sat down with a good idea and put it 
together, but because they did not have deep pockets to fund aggressive 
legal actions, because they were individuals of very modest means, some 
would say poor individuals, they were susceptible to the invasion by 
outsiders, multinational corporations that saw the promise of that 
American idea for their own companies, for their own nations, and they 
went in and they stole it.
  What is going to happen with the Moorhead-Schroeder ``Steal American 
Technology Act'' is that no longer are we going to be able to protect 
American ideas. No longer.
  If this legislation is allowed to become law, we are going to take 
American leadership in the world on the level of greatness, 
technological innovation, new and unique ideas, and we are going to 
hand it off to foreign nations that will fund the kind of espionage, 
the kind of stealing of American ideas that has been going on. We will 
be complicit in making it even easier for them to come in here and, 
after 18 months of an application being on file, we will publish for 
the whole world to see the wonderful ideas of Americans of modest means 
who came up with a good idea.

  Within 20 years of having filed that application, even if it took 10 
years of exhaustive examination on some of the more difficult patents, 
if it takes 10 years to examine that patent application and finally 
give that patent out, that inventor will only have 10 years of 
protection before the whole world can come in and steal American ideas.
  In the war for global economic dominance the fiercest battles today 
are over intellectual property. Where nations once fought for control 
of trade routes and raw materials, they now fight for exclusive rights 
to ideas, innovations, and inventions. Economic power is what it is all 
about in today's world.
  We are worried about the creation of jobs, about growing the American 
economic, about providing for a stable work environment, and about 
ingenuity and growing this Nation into the future. If we do not protect 
the sanctity of American ideas, of the ability of unknown individuals 
of modest means to go out in their garage or down in their basement and 
put together a unique concept that they can market, if we do not 
provide that kind of protection to American citizens, we will be moving 
into the 21st century and the United States will lose its place as the 
greatest Nation on the face of the Earth because we will have handed 
off the technology that is uniquely American, that has made us the 
leader in the world for over a century. We will be handing off this 
kind of technology to Third World nations that fund the kind of 
commercial espionage that Dr. Demadian and his Fonar company were 
subjected to when they invented the MRI. We will be handing that off 
for others.
  Let us talk a minute about small business and those who create 
opportunity for America. They are the inventors. They are the small 
business people, the entrepreneurs who leave that salaried job and they 
say, ``You know what, I've got a great idea, and I'm going to invent 
something,'' and they go out and put it together.
  They have to find something somebody who is going to market it for 
them and somebody who is going to produce it for them, and they need 
time. But time will not be with them if the Moorhead-Schroeder steal-
American-technology legislation is allowed to become law, because that 
time will not be available to that inventor. No, it will not, Mr. 
Speaker, because in 18 months it will be published for the whole 
international community to look at, to coy, to steal.
  I might add, Mr. Speaker, and there is so much we could say about 
this unfortunate move to water down American ingenuity and American 
technology, and it is troubling, but let me just say this:
  In addition to forcing publication for all the world to see, we are 
also going to weaken the protections, because under the current system, 
if Henry Ford gets that patent, his idea is protected. The only basis 
on which anybody could go back in and reexamine the issuance of that 
patent, find out if Henry Ford was really entitled to it, is if it 
comes about published in some kind of periodical somewhere that 
somebody else had the idea before he did. It has to be some kind of 
empirical evidence that was published and that idea predated Henry 
Ford. That is the only way you could go in there, under the current 
system and reexamine that patent. So the onus is on others to prove 
that that was not there, that that patent, that good idea, did not 
exist in the marketplace before.
  Under the changes of the Moorhead-Schroeder ``Steal American 
Technology Act,'' the lawyers are going to have a field day because no 
longer will the presumption be that the one who came up with the good 
idea, the Henry Ford of today, no longer will the presumption be that 
is his property; that is her property; that the American ingenuity that 
brought about that idea is protected. No longer. The onus now will be 
on the inventor to prove in all kinds of courts of law that they in 
fact have a right to that idea.
  So when the multinationals step in and they say, ``Oh, no, we are 
working on that back in our laboratory, and we have got a team of 100 
lawyers here who will prove to you that Henry Ford did not invent the 
Model A. No, no, no, no, we were doing it out back. We just did not 
tell anybody,''.
  Henry Ford, with no money, no big corporation, just a little inventor 
back in his garage, he is going to have to fight the legal department 
of XYZ multinational corporation. Or he is going to have to fight the 
Japanese Government or the Chinese or whomever else has been able, 
within that very short time frame, within the 18 months when we publish 
it for all the world to see, the inventor is going to have to prove 
that it really was his or her idea.
  Now, I ask you, Mr. Speaker, does that not put American ingenuity 
into jeopardy? I suggest it does, and I suggest it will be a full 
employment act for the legal community like we have never seen.
  One other aspect of the Schroeder-Moorhead ``Steal American 
Technology Act'' that is most troubling is the notion of privatizing 
the Patent Office. No longer will the patent examiners have civil 
service protections so that they are insulated from the influences of 
corporate America, multinational corporations, the pressures of 
lawyers. No longer.
  We are going to privatize the Patent Office, privatize it, if ever 
there was a wrong-headed way to go about protecting American ingenuity. 
We should not be privatizing the Patent Office. We should not be taking 
dedicated public servants and making them subject to the marketplace 
and the pressures of the marketplace.
  Mr. Speaker, this is a matter of troubling consequences for all of 
us. I understand that the subject is not the most glamorous. It is 
rather dry.
  But if we are to protect American ingenuity, if we are to provide for 
an American climate that allows future Henry Fords and Eli Whitneys and 
all the other great inventors who have made America great, we must 
ensure that the current patent law is not compromised, that we do not 
move into this global, one-world atmosphere in which American ingenuity 
takes a back seat, in which multinational corporations are able to 
benefit at the expense of budding entrepreneurs, small business people, 
that mom or dad or young person who is sitting at a kitchen table with 
a great idea or out back in the garage working at their table trying to 
come up with a great idea

[[Page H7140]]

that some day will create tens of thousands of jobs, grow the American 
economy, and continue the United States of America's rightful place as 
the most technologically proficient, highly educated and sophisticated 
Nation in the world, where new ideas are our currency. New ideas are 
what makes America great. New ideas will protect our freedoms and our 
democracy.
  If we allow the Moorhead-Schroeder ``Steal American Technology Act'' 
to be passed into law, the United States will relinquish its first 
place status as we move into the 21st century, and we can look forward 
to a very troubling, troubling time in American history.
  Mr. Speaker, I rise tonight to alert millions of my fellow Americans 
about the importance of our country's patent system. I realize that it 
is not one of those glamorous, sexy issues like military operations or 
missing FBI files. And that as I speak, millions of people may be 
grabbing for their remote controls, searching for something--anything 
else to watch. However, it is vital to the public that they are aware 
there is a movement in Congress to destroy our Nation's patent system 
as we know it. It comes in the form of a bill, H.R. 3460--the Moorhead/
Schroeder Patent Reform Act. Before I go into the devastating effects 
this legislation will have on our economy, I want to take a moment to 
illustrate the significance of our patent system and what it means to 
the United States economic stability.
  It is U.S. discoveries and U.S. inventions that dominate the cultures 
of every country in the world. The pocket calculator, the mini-
computer, frozen food, motion pictures and, the telephone are just a 
few of the patents granted for inventions that have made us smarter, 
our work easier and improved the quality of our lives. Who are the U.S. 
innovators that have created these modern miracles? The majority of the 
innovations are created by small independent inventors. People like you 
and me, who turned an idea into a product that we all can use and 
enjoy.
  Examples of great U.S. inventions: 1868--the air brake; 1911--air 
conditioning; 1911--self-starter automobile; 1972--the pocket 
calculator; 1925--the circuit breaker; 1852--the electric brake; 1911--
the gyrocompass; 1982--the artificial heart; 1928--the iron lung; 
1937--nylon; 1868--the refrigerator rail car; and 1927--the television.
  But, before I go any further, let me explain what a patent is. By 
definition, a patent is an official document, conferring a right or 
privilege. Ownership. It protects by a trademark or a trade name so as 
to establish proprietary rights--private property. The importance lies 
not in its definition but in the right we are protecting. It is 
someone's right to own their idea, invention or innovation. When we 
think in terms of ownership we tend to visualize land or some kind of 
durable good, defined as property rights. But someone's idea, 
invention or innovation is also property--it's called intellectual 
property. Perhaps it is our greatest property because the ideas of men 
are limitless. They are our past, our present, and more important, our 
future.

  The right to intellectual property was recognized by our country's 
founders and specifically written into the Constitution. In fact, 
inventors are the only class of people who enjoy protection in the 
Constitution. It's found in article 1, section 8, clause 8 and reads as 
follows: ``to promote the progress of science and useful arts, by 
securing for limited times to authors and inventors the exclusive right 
to their respective writings and discoveries.''
  In the middle of the 20th century, Americans were given a guaranteed 
patent term of 17 years. Since that time, the United States has risen 
to become the leader in patents in the world. Invention is one of the 
things America does best. By offering the strongest patent protection 
in the world, the United States has stimulated more creativity and new 
industries than anywhere else--and an annual $30-billion intellectual-
property trade surplus. That's right, the United States is the leader 
in intellectual property. For my colleagues that do not follow patent 
issues closely, the importance of that statistic will be lost. Let me 
explain.
  We, the United States, have more fundamental patents than any other 
country in the world. Fundamental patents are those patents most often 
cited in other works worldwide. In 1991, the United States had over 
100,000 fundamental patents. The other 14 industrialized countries, 
combined, had only 127,000. Fundamental patents are used in measuring a 
nation's prosperity because it is those patents that will continue to 
bring in income and generate jobs for a nation.
  This is no secret to the world. Foreign interests know that the 
United States has and will continue to develop cutting edge technology 
that add to a nation's economic power. They want a piece of the action. 
They want our property for their prosperity.
  Japan, for instance, acquired much of its base of western technology, 
most of it American, perfectly legally through licensing, careful study 
of scientific papers and patents. But when the United States was not 
willing to share, some Japanese companies simply copied with little 
regard for patents or other intellectual property rights. IBM versus 
Fujitsu, Honeywell versus Minolta, and Corning Glass versus Sumitomo 
Electric--these are only the latest, best-publicized complaints that 
Japan has stolen American technology. A series of studies financed by 
the United State Government since 1984 warn that Japan has caught up 
with the United States or passed it in the development of integrated 
circuits, fiber optics, and computer hardware engineering.

  Technology has been at the root of a number of recent diplomatic 
flaps between the United States and Japan: sanctions against Japanese 
electronic products in response to microchip dumping.
  The Japanese buy patents rather than develop their own technology, 
which requires enormous investment. They buy the patent, perfect it, 
synthesize it, sell it, and reinvest the money in another patent. The 
numbers are there to prove it. The United States maintains a healthy 
and growing surplus with Japan in license fees and royalties. In 1986, 
Japanese companies paid $697 million to United States firms, up from 
$549 million in 1984.
  Small wonder that foreign companies, particularly Japan and Europe 
dream of weakening patent laws and obtaining breakthrough technologies 
without rewarding American inventors. More alarming is the fact that 
many of my colleagues here in the House want to make it easier for 
foreign interests to get hold of U.S. technology. That's exactly what 
the Moorhead-Schroeder bill does.
  Make no mistake, the American patent system is very different from 
the European and Japanese systems. In Japan and in countries covered by 
the European patent convention, inventors receive patents good for 20 
years from the date that the patent application is filed. American 
patents are kept confidential during the application process and cannot 
be contested until after issuance.
  I quote ``in the war for global economic dominance, the fiercest 
battles today are over intellectual property. Where nations once fought 
for control of trade routes and raw materials, they now fight for 
exclusive rights to ideas, innovations, and inventions.'' And, economic 
power is what it is all about in today's world.
  America is under widespread economic attack from foreign predators. 
Technological espionage and patent infringement are serious problems.
  Let me tell you about one of the most tragic stories of patent 
infringement--the MRI story. Dr. Raymond Damadian, president and 
chairman of the Fonar Corp. holds the first patent for the MRI scanning 
machine that was filed in 1972. He and his students built the first 
scanner and performed the first scan in 1977. However, Dr. Damadian's 
patent was not enforced and he was the victim of industrial espionage.
  A gypsy company servicing medical equipment hired Fonar service 
engineers, thereby acquiring a full set of Fonar's top secret 
engineering drawings and multiple copiers of Fonar's copyrighted 
software. Fonar obtained a temporary restraining order from a Federal 
judge ordering this group not to use Fonar's schematics or software in 
the service of scanners. The judge's orders were ignored. Through a 
modem connection, Fonar secured hard proof that the gypsy service 
company was loading Fonar's diagnostic software onto a scanner, in 
clear violation of the judge's orders.
  The judge cited the gypsy company for contempt of court. Fonar 
complained there were no sanctions beyond the citation. The judge said, 
``What do you expect me to do, put them in jail?'' The irony is, if it 
had been someone's automobile instead of millions of dollars of 
technology, incarceration would have been automatic.
  In another instance, a Japanese company reversed a sales contract for 
a Fonar scanner on which Fonar had already received a downpayment. The 
company site in Brooklyn was next to a large train track and they 
lacked the technology to cope with the trains. The passing trains were 
destroying the images. Fonar began receiving phone calls asking how 
Fonar coped with train interference. After about a year, the phone 
calls stopped and Fonar learned the customer's train problem was 
solved. Subsequently, a Fonar engineer visited the company site and 
found a copy of Fonar's train compensating apparatus installed on a 
Japanese scanner.

  Altogether the conditions I have described do not portray a happy 
circumstance for the American inventor who must fend off gigantic 
foreign competitors engaged in a feeding frenzy on America's 
technology. In 1992 the United States suffered a medical equipment 
trade deficit with Japan of $320 million. If Fonar's MRI patents had 
been enforced, this would have been a trade surplus instead of a 
deficit.
  The MRI is an American invention with an American patent. Today MRI 
is a multibillion dollar industry. Because Fonar's patent was

[[Page H7141]]

not enforced, of the eight companies engaged in MRI technology, there 
are only two left that are American, Fonar and GE. All the rest are 
foreign.
  Modern inventors, like Dr. Raymond Damadian, are now finding their 
constitutional right to patent protection threatened.
  Our Founding Fathers would be rolling over in their graves if they 
knew that an inventor's rights were being violated. By enacting the 
Moorhead-Schroeder bill we will make this already bad situation worse.
  That's why I can't understand why anyone would support this 
legislation. Before this horrendous bill comes to the floor for a vote, 
it is imperative that all of my colleagues, from both sides of the 
aisle, understand just how damaging it is. Essentially, all U.S. 
inventors and great American ingenuity will be penalized, if not 
completely stifled.
  The Moorhead-Schroeder bill will grant foreign interests unrestricted 
access to the patent secrets of American inventors. It will give away 
our most sacred property--our ideas.
  Put simply, the Moorhead-Schroeder bill will do the following:
  First, it turns the Patent Office into a corporation where it is no 
longer subjected to congressional oversight. It removes patent 
examiners from civil service protection. This will rock the integrity 
of the entire U.S. patent system. Patent examiners should have civil 
service protection for the same reason that Federal judges have 
lifetime tenure. Their missions are quasi-judicial in nature, making 
them targets for pressure and influence.
  Second, it destroys the confidential patent-pending relationship 
between the inventor and the Patent Office, exposing inventors' trade 
secrets to competitors before a patent is granted. Many companies keep 
an eye out for new ideas and new technology and then either steal it or 
design around it. Why should pending patent applications be one of the 
few areas where company confidential information must be published?
  Third, it calls for publishing unissued patent applications at 18 
months from filing. This is not in the U.S. interest. When the U.S. 
Patent System is a major reason that the United States is the most 
innovative country in the world, why would we want to expose our 
patents for the world to steal?
  The Moorhead-Schroeder bill is so damaging to American technology, it 
begs the question, Why is Congress even considering it? The answer lies 
with the Patent Office Commissioner Lehman. In a 1994 agreement known 
as the Lehman-Asou Accord, Commissioner Lehman told the Japanese 
Ambassador that we would change our patent system to resemble the 
Japanese and European systems. Under the Constitution, Commissioner 
Lehman has no authority to make that promise. Now the Moorhead-
Schroeder bill has been offered to clean up his mess. Never has the 
cliche ``two wrongs don't make a right,'' been more appropriate.

  The Moorhead-Schroeder bill contains several other provisions that 
discredit inventors and favor copiers and thieves.
  Writing in Electronic Design in October 1995, patent columnist John 
Trudel made the following observation after speaking with an official 
from the U.S. Patent Office regarding the 1994 Lehman-Asou agreement 
``The administration promised the Japanese that we will make U.S. 
patent findings public information after 18 months. If that sticks, all 
your competitors can copy your idea before you are even granted a 
patent. The worst news is hidden. Embedded in the middle of the 
official's talks was the phrase ``reexamination rights.'' Alarm bells 
went off in my head. Did that mean that any U.S. firms fortunate enough 
to have patents will be subject to endlessly defending them against 
reexamination by the Japanese Keiretsus? Guarded in public, the 
official admitted that his worst fears were valid when he spoke 
privately with a patent official. He likened the event to Japan's World 
War II surrender on the USS Missouri. Some were gleefully calling Tokyo 
on their cellular phones to report, ``The United States has given us 
its patent system.'' He was referring to 1994 agreement Lehman signed 
with the Japanese. It says that is all right there folks. We are giving 
away our Patent System. We who serve in Congress have an obligation to 
stop ill-conceived international agreements entered into by political 
appointees. Mr. Lehman had no right, under the law, to give away our 
property rights. Is it not enough that we have a $40 billion trade 
deficit that he sees a need to give away any hope of future prosperity?

  Three of Moorhead-Schroeder bill changes, when taken in combination, 
establish a disastrous scenario that illustrates why the Japanese are 
insisting that America adopt them.
  The Moorhead-Schroeder bill weakens our Patent System by mandating 
that first, a patent term will be measured from the filing date--agreed 
to in the GATT Agreement. It scraps our 17-year patent protection in 
favor of a 20-year term extending from the day an application is filed. 
Under this arrangement, a patent that takes 15 years to grant--and many 
highly technical patents require an extensive review process--would be 
entitled to only 5 years of protection.
  Second, patents--granted or not--will be made public within 18 
months. Publishing patents 18 months after filing will allow companies, 
worldwide, to copy and to develop the breakthrough technology while the 
patent applications are still pending in the United States.
  Third, three-party reexamination--the most egregious provision of the 
Moorhead-Schroeder bill may very well be this broadened reexamination 
proposal.
  The broadened reexamination changes proposed in this legislation have 
the potential of being the most malignant of all the provisions. Let me 
explain the hidden consequences of changing the reexamination process.
  Generally, the broadened powers of reexamination that the Moorhead-
Schroeder bill grants now opens every patent holder to a full-scale 
litigation attack by lawyers anywhere in the world. H.R. 3460 says 
``Any person, at any time, may file a request for reexamination.'' 
Under present law litigation can only be initiated by a patent holder 
as part of his enforcement against an infringer. An infringer may not 
initiate litigation. Under the proposed changes of Moorhead-Schroeder 
bill, a series of attacks by several foreign corporations, in rapid 
succession, can be used to cause most American inventors to succumb and 
abandon their patents for lack of financial resources to defend 
themselves.
  The United States has a 200-year-old policy of protecting the 
American inventor. Patent reexamination was only granted under very 
restricted conditions. The Patent Office conducted the review on its 
own and the third party challenger was not involved in the review.
  The Moorhead-Schroeder bill expands the reexamination process to 
question every component of the patent. At its best, the Moorhead-
Schroeder bill invites all the world, and all of its lawyers, to repeat 
the process a second time and attempt to invalidate all U.S.-approved 
patents.
  Furthermore, under the Moorhead-Schroeder bill foreign corporations 
are now given the right to appeal any decision they don't like. The 
international challengers and their attorneys are invited to enter the 
process and continue to the very end. This is the scenario the 
Moorhead-Schroeder bill creates. The challenger submits his patent 
challenge, which may be a several-hundred-page legal brief. There is no 
restriction. The patent applicant/holder then submits a written 
response. The challenger in turn submits a final response. The 
challenger can tactically reserve his most severe challengers for his 
final written response which the patentee cannot respond to. The 
reexamination process has become full blown litigation complete with 
attorneys. The Moorhead/Schroeder bill will make the re-examination 
process so difficult that no independent inventors will have the means 
or time to fight for his idea. The incentive to create will be lost the 
right of ownership will go to the highest bidder.

  You've got to worry about American technology when everyone seems to 
tell you there's less of it everyday. What can be done to stop the 
invasion on our patents? Some people advocate altering our Patent 
System, arguing that we should do it to harmonize with the new world 
order. Those people support the Moorhead/Schroeder bill. Others, 
including myself, insist that the United States Government should work 
to identify and support critical technologies. We support the 
alternative piece of legislation to the Moorhead/Schroeder bill--we 
support H.R. 359.
  H.R. 359, also known as the Rohrabacher substitute, has wide 
bipartisan support with over 200 cosponsors. The Moorhead/Schroeder 
bill has only 18 cosponsors.
  Through the Rohrabacher bill we have the change to strengthen the 
U.S. patent term to 17 years from grant or to 20 years from filing, 
whichever is longer. All patentee's inventions will be published 60 
months after initial application is filed. The Moorhead/Schroeder bill 
would publish it 18 months after the initial application is filed.
  The Rohrabacher substitute maintains current law is regard to the 
term of the Commissioner. The Commissioner will continue to serve at 
the pleasure of the President. The Patent and Trademark Office will 
continue to be located in Washington, DC. This is the system that has 
worked for over a century. In that time, we have grown to become the 
leader in fundamental patents. The system obviously works. Why change 
it? If H.R. 3460 is passed, the Patent and Trademark Office could be 
established anywhere, even in Japan or China.
  As I see it, all the evidence points to the Rohrabacher substitute 
being the better bill. It is in compliance with the GATT Treaty. 
Furthermore, Mickey Kantor in a letter to Senator Dole has pledged not 
to oppose it.
  A piece of silicon may cost just a few dollars, but the knowledge of 
how to design and make complex integrated circuits is worth hundreds of 
millions. Fighting theft of intellectual

[[Page H7142]]

property is difficult, but the payoff can be incalculable.
  If the Moorhead/Schroeder bill passes, it will signal an open 
invitation for foreign corporations to come and take our property. That 
is why I implore my colleagues to vote down the Moorhead/Schroeder bill 
and support the Rohrabacher substitute measure, H.R. 359.
  One who believed in the necessity of private property was Abraham 
Lincoln, who said: ``Property is the fruit of labor; property is 
desirable; it is a positive good in the world. That some should be rich 
shows that others may become rich and hence is just encouragement to 
industry and enterprise.''
  Giving away the property of our inventors is nothing short of killing 
the creative spirit that has made us the greatest country in the world. 
If you doubt this, ask yourself why foreign governments are now 
pressuring us to abandon our tried-and-true American Patent System?
  Mr. Speaker, I submit the following for the Record:


                                            Fonar Corporation,

                                       Melville, NY, May 22, 1996.
     The Honorable Michael P. Forbes,
     House of Representatives, Cannon House Office Building, 
         Washington, DC.
       Mike, Moorhead's Intellectual Property Committee is marking 
     up an extremely MALIGNANT omnibus anti-patent bill, H.R. 
     3460, for immediate introduction to the floor. It contains:
       A: Forced publication to the world of all patentee patent 
     applications before their patents are granted and whether or 
     not they are ever granted (formerly Moorhead's HR 1733).
       B: Broadened reexamination (formerly HR 1732) to broaden 
     the powers of foreign entities to challenge (incognito) all 
     existing patents in the hope of invalidating them. The new 
     power now expands the power to challenge inventions and get 
     them removed even before they become patents while they are 
     in the application process. Eighteen month publication 
     ``cocks the trigger'' for HR 1732 by advertising to all 
     foreign entities what America's new patent applications are.
       C: Privitize the patent office (formerly HR 1659) putting 
     Corporate America in charge of the PTO and removing the 
     government's traditional protection of America's inventors 
     and their applications from Corporate mistreatment.
       Please stop the bill.
       Please talk to your friends in Judiciary to stop it.
       Please talk to your fellow Congressmen on the Hill to stop 
     it.
       The bill is extremely dangerous to America's inventors and 
     the American system of free enterprise.
           Sincerely yours,
                                                 Raymond Damadian,
     President and Chairman.
                                                                    ____


  Testimony of Raymond Damadian, M.D., President and Chairman, Fonar 
              Corp., Before the House Judiciary Committee

       Mr. Chairman, by way of introduction, I am the President of 
     Fonar Corporation, a Long Island company that employs 300 and 
     manufacturers MRI machines.
       I hold the first patent for the MR scanning machine which 
     was filed in 1972, and my students and I built the first 
     scanner and performed the first scan in 1977.
       The path has not always been easy, Mr. Chairman. My patent 
     was not enforced. That, coupled with severe losses of the 
     rest of our proprietary technology by industrial espionage, 
     has made it impossible for us to build a prospering 
     manufacturing company. Our experience has taught us that 
     America's current industrial environment is not supportive of 
     new companies trying to bring new inventions to market. 
     Patent enforcement and freedom from espionage, the 
     fundamental ingredients of such ventures, are all but non-
     existent.
       A few examples from our company's experience make the point 
     best.
       A gypsy service company servicing medical equipment hired 
     Fonar service engineers, thereby acquiring a full set of our 
     top secret engineering drawings and multiple copies of our 
     copyrighted software. We obtained a temporary restraining 
     order from a federal judge ordering this group not to use 
     Fonar's schematics or software in the service of scanners. 
     They ignored the judge's order. Through a modem connection, 
     we secured hard proof of them loading our diagnostic software 
     on our scanner, in violation of the judge's order. The judge 
     cited them for contempt of court. When we complained there 
     were no sanctions beyond the citation, the judge said ``What 
     do you expect me to do, put them in jail?'' The irony is, if 
     it had been someone's automobile instead of millions of 
     dollars of technology, incarceration would have been 
     automatic.
       In another instance, a Japanese manufacturer of MRI and a 
     direct competitor of Fonar's hired one of our service 
     engineers. We reminded the employee that he had signed a non-
     compete at the time of employment, in return for his 
     training. He ignored his commitment and joined the Japanese 
     company. When we brought an action to enforce our contract, 
     we learned that the Japanese company had indemnified him and 
     was paying all his legal bills.
       In another case, we learned how we lost valuable technology 
     to a German Company. To protect the technology of our 
     magnets, which was precious to the company, we required that 
     all of our magnet installations take place behind locked 
     doors. An executive of the company proudly told me that that 
     precaution was easily overcome. He reported that he took the 
     technician out to dinner, filled him with alcoholic beverages 
     and thereby secured an invitation to enter the room and 
     inspect the scanner for as long as he wished, which he did.
       In another case, a Japanese company reversed a sales 
     contract on a scanner on which we had already received a 
     downpayment. The Brooklyn scanner site was next to a large 
     train track and the Japanese company lacked the technology to 
     cope with trains. Our company began receiving phone calls 
     asking how Fonar coped with trains. We learned the customer 
     was angry that the passing trains were destroying his images. 
     After about a year, the phone calls stopped and we learned 
     the customer's train problem was solved. One of our engineers 
     visited the site. He found a copy of our train compensating 
     apparatus installed on the Japanese scanner.
       Altogether the conditions described do not portray a happy 
     circumstance for the American manufacturer who must fend off 
     gigantic foreign competitors engaged in a feeding frenzy on 
     America's internal markets. The combined effects of these 
     adverse circumstances can be seen on the chart I have 
     attached. In 1992 the U.S. suffered a medical equipment trade 
     deficit with Japan of $320,000,000. If my MRI patents had 
     been enforced, this would have been a trade surplus instead 
     of a deficit. Destructive espionage tilts the scales even 
     more sharply against us.
       The MRI is an American invention with an American patent. 
     Today MRI is a multi-billion dollar industry. Because Fonar's 
     patent was not enforced, of the eight companies taking sales 
     out of the American market today, there are only two left are 
     American, Fonar and GE. All the rest are foreign. They are 
     Hitachi, Tosiba, Shimadzu, Siemens, Philips and Picker.
       Our experience as a company has been that civil remedies 
     are wholly inadequate in dealing with industrial espionage.
       The proposed legislation for effective criminal sanctions 
     appears to be the only means by which these noxious practices 
     and the enormous economic destruction they bring upon America 
     each year can be deterred.
       Finally, Mr. Chairman, I wanted fervently in the 
     development of the MRI to use my invention to build a great 
     new multi-billion dollar manufacturing enterprise for America 
     in the same way the Edison and Bell did. I have found that 
     even though I have now labored diligently for more than a 
     quarter of a century, the tools for doing what Edison, Bell, 
     Eastman and others did, no longer exist. Indeed we have had 
     the disheartening experience that no amount of toil at 
     creating new innovations could reverse the process, but that 
     by a combination of willful patent infringements and 
     industrial espionage our innovations were stripped from us as 
     fast as we could create them. Moreover, I believe you will 
     not find my experience unique. Indeed I believe you will find 
     it universal. I have sadly concluded, Mr. Chairman, that 
     unless America quickly restores to its innovators the basic 
     tools they need to build businesses, such as patent 
     enforcement and protection from espionage, America will soon 
     cease to exist as a manufacturing nation.
       The economic cratering and threat to our national security 
     that the loss of our manufacturing base to foreign nations 
     will create, will be dire enough. The social upheaval that 
     can be expected to follow in he wake of such a manufacturing 
     demise can be expected to jeopardize the very republic on 
     which we stand.
       I have come to Washington not to regale Congress with this 
     sad message on the unfortunate outcome of MRI, but to 
     persuade Congress and the American people of the urgency of 
     the matter and of the urgent need to restore the tools of 
     patent enforcement and protection from espionage that our 
     nation's manufacturers must have to compete.
       A great host of foreign nations are helping themselves to 
     the inventions of American innovators by means of industrial 
     espionage and willful patent infringement. Through their use, 
     they are devouring our internal markets and leaving us 
     unemployed. America must rise up to protect her property. If 
     she does not, it will be natural for foreign interests to 
     construe that American puts little material value on these 
     properties and that she can be counted on to look the other 
     way as her properties are illegally devoured.

                                        DIAGNOSTIC IMAGING AND THERAPY SYSTEMS--TRADE BALANCE--CALENDAR YEAR 1992                                       
                                                                    [In U.S. dollars]                                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Percent                               Percent                           
                      Country                                Exports             share             Imports             share             Balance        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Germany............................................              301,638,699        14.95              578,026,441        32.55            (276,387,742)

[[Page H7143]]

                                                                                                                                                        
Japan..............................................              264,670,735        13.12              585,495,403        32.97            (320,824,668)
Canada.............................................              167,714,703         8.31               22,832,903         1.29             144,881,800 
Netherlands........................................              143,067,845         7.09              168,253,096         9.47             (25,185,251)
France.............................................              139,053,469         6.89              123,562,901         6.96              15,490,568 
United Kingdom.....................................              112,547,658         5.58               75,174,628         4.23              37,373,030 
Italy..............................................               90,432,792         4.48               25,967,958         1.46              84,484,834 
Australia..........................................               68,713,260         3.41                3,955,211         0.22              64,758,049 
China..............................................               65,697,608         3.26                  230,093         0.01              65,467,515 
Brazil.............................................               59,351,337         2.94                    6,928         0.00              59,344,409 
Mexico.............................................               58,427,919         2.90                3,873,607         0.22              54,554,312 
South Korea........................................               52,492,524         2.60                3,653,817         0.21              48,838,707 
Hong Kong..........................................               38,993,025         1.93               12,000,784         0.68              26,992,241 
Belgium............................................               35,464,619         1.76               22,388,550         1.26              13,076,069 
Switzerland........................................               34,039,311         1.69               15,763,755         0.89              18,275,556 
Taiwan.............................................               29,607,240         1.47                2,268,816         0.13              27,338,424 
Spain..............................................               29,148,523         1.45                9,970,803         0.56              19,177,720 
Sweden.............................................               26,178,428         1.50               23,025,472         1.30               5,152,968 
Argentina..........................................               24,046,114         1.19                   10,100         0.00              24,036,014 
Austria............................................               20,289,187         1.01                7,862,878         0.44              12,426,309 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data Source: U.S. Department of Commerce, Bureau of the Census.                                                                                         



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