[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.
____________________