[Congressional Record Volume 143, Number 2 (Thursday, January 9, 1997)]
[Extensions of Remarks]
[Pages E76-E78]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         THE TWENTY-FIRST CENTURY PATENT SYSTEM IMPROVEMENT ACT

                                 ______
                                 

                           HON. HOWARD COBLE

                           of north carolina

                    in the house of representatives

                       Thursday, January 9, 1997

  Mr. COBLE. Mr. Speaker, today I am pleased to introduce an updated 
version of legislation originally drafted in the last Congress by two 
former members of the Judiciary Committee who have since retired, 
Carlos Moorhead and Pat Schroeder. Many of us were cosponsors in the 
104th Congress, including our distinguished chairman, Mr. Hyde, and 
ranking member, Mr. Conyers. Original cosponsors of this bill include 
Mr. Goodlatte, a senior member of the Subcommittee on courts and 
Intellectual Property, Mr. Conyers, and Ms. Lofgren, also a member of 
the subcommittee.
  This legislation is necessary to allow American businesses to compete 
effectively in markets today and into the 21st century. The United 
States is by far the world's largest producer of intellectual property. 
This success is of course due to the great creativity of our citizens, 
but this success is also the direct result of a rational and sound 
policy of protecting intellectual property--a system that encourages 
the development of new inventions and processes. However, America does 
not have a monopoly on creativity. Many other nations have learned from 
our success--America no longer stands alone in its commitment to a 
strong system of patent protection for its inventors, small businesses 
and industries. Consequently, it is more important now than ever that 
we adopt certain reforms that will ensure that America maintains its 
position as the world leader in the production of intellectual 
property.
  Under current law, foreign companies enjoy certain benefits in 
America that American companies do not enjoy in their countries, like 
the advantages of publication and prior user rights; the changes 
proposed today are especially useful for small businesses--many of 
which simply will not survive if foreign competitors continue to 
operate on a tilted playing field in America.
  This legislation will benefit American inventors and innovators and 
society at large. First, by providing more efficient and effective 
operation of the Patent and Trademark Office; second, by furthering the 
constitutional incentive to disseminate information regarding new 
technologies more rapidly; third, by guaranteeing that patent 
applicants will not lose patent term due to delays that are not their 
fault;

[[Page E77]]

fourth, by improving the procedures for reviewing the work product of 
patent examiners; fifth, by protecting earlier domestic commercial 
users of patented technologies; and sixth, by deterring invention 
promoters from defrauding unsuspecting inventors.
  As I mentioned, this legislation is the successor to a bill developed 
by the Judiciary Subcommittee on Courts and Intellectual Property in 
the last Congress and reported by unanimous vote by the Judiciary 
Committee late in the second session. The version of the bill that I am 
introducing today is nearly identical to last year's bill, and includes 
the contents of a manager's amendment that was developed with the 
Senate, the administration and the House Government Reform and 
Oversight Committee and which would have been offered if the bill had 
been scheduled for a vote in the House. This legislation was the 
subject of several days of hearings in the last Congress.
  I would like to place in the Record a letter written by the Secretary 
of Commerce on September 12, 1996, that expressed the strong support of 
the Clinton administration for last year's bill, including the proposed 
manager's amendment.

                                    The Secretary of Commerce,

                               Washington, DC, September 12, 1996.
     Hon. Carlos J. Moorhead,
     Chairman, Subcommittee on Courts and Intelligence Property, 
         Committee on the Judiciary, House of Representatives, 
         Washington, DC.
       Dear Mr. Chairman: Thank you for your letter regarding 
     Title I of H.R. 3460. The Department of Commerce is pleased 
     that we have been able to work together in a truly bipartisan 
     effort to ``reinvent'' the Patent and Trademark Office. We 
     appreciate your staff's and Ranking Member Schroeder's 
     staff's work to address the Administration's concerns with 
     Title I. The Administration believes that the changes that we 
     have crafted together in the en banc floor manager's 
     amendment will create an organization consistent with the 
     essential principles of the Vice President's vision for a 
     Performance Based Organization, to further our mutual goal of 
     creating a more efficient and effective patent and trademark 
     office. In light of these changes, the Administration 
     strongly supports House passage of H.R. 3460 with the en banc 
     manager's amendment.
       It is our joint vision to have a more business-like patent 
     and trademark organization that can better serve the public 
     and the innovators whose ideas are the engine of growth for 
     our economy. By granting the new organization operational 
     flexibility in exchange for greater accountability for 
     achieving measurable goals, delineated in an annual 
     performance agreement between the Secretary of Commerce and 
     the Commissioner, the bill makes that vision a reality.
       It is also our joint view that the Executive Branch must, 
     as you put it, ``be able to establish an integrated policy on 
     commercial and technology issues.'' By making clear that the 
     bill does not alter the Secretary of Commerce's statutory 
     responsibility for directing patent and trademark policy with 
     respect to the duties of the Patent and Trademark Office, we 
     have ensured the continuity of appropriate policy direction 
     and oversight.
       We also believe that other changes you have added to 
     address Administration concerns, such as ensuring that there 
     is independent Inspector General oversight and adequate 
     personnel safeguards, will strengthen accountability 
     mechanisms that we all endorse. The Administration is also 
     pleased that the en banc manager's amendment addresses the 
     central Constitutional and policy concerns of the Department 
     of Justice with Title I.
       We are committed to continuing to work together this year 
     and in the future to perfect this bipartisan effort to invent 
     anew the Patent and Trademark Office so that it will remain 
     one of the Nation's most important resources for protecting 
     and encouraging the preeminence of American innovation. We 
     believe, for example, that there is still further work that 
     we must do to address our concerns in the area of 
     procurement, where we believe that the exemptions are broader 
     than necessary to provide the flexibilities required.
       H.R. 3460 contains five other titles that we believe will 
     substantially improve the level of patent protection provided 
     in the United States. These patent reforms are supported by 
     the Administration and are of great importance to the 
     Nation's economic competitiveness. We hope that they can be 
     enacted in legislation this session.
       Title II provides for the publication of patent 
     applications eighteen months after the date on which they are 
     filed or from the date on which the earliest referenced 
     application was filed. This publication will help prevent 
     economic disruption by those who now delay the grant of 
     patents to extend their period of protection unfairly. It 
     will also promote patent law harmonization that in the longer 
     term will make it easier and cheaper for our small businesses 
     and individual inventors to obtain protection abroad, as well 
     as discouraging duplicative research. As a safeguard for 
     those whose applications are published, it establishes a 
     provisional patent right that allows a patent owner to obtain 
     a reasonable royalty if, between the date of publication and 
     the date of grant, another party infringes an invention 
     substantially identically claimed in the published 
     application and the patent. Also, it makes some 
     administrative delays a basis for extension of the patent 
     term, to ensure that diligent applicants are fully protected.
       Title III creates a defense to an infringement action for 
     parties that can establish prior use in commerce, including 
     use in the design, testing, or production in the United 
     States of a product or service before the date a patent 
     application was filed in the United States or before the 
     priority filing date. This ensures that inventors, who do not 
     seek patent protection, will not be precluded unfairly from 
     practicing their invention by other inventors who later 
     obtain patent protection for the same invention.
       Title IV is aimed at ensuring that inventors are fully 
     informed prior to entering into a contract for invention 
     development services. It also provides a cause of action if 
     the service provider makes fraudulent claims or neglects to 
     disclose material information to the inventor.
       Title V amends the patent reexamination procedure to allow 
     greater participation of their parties who request 
     reexamination and expands the grounds for examination. 
     Enhanced reexamination procedures will provide a less 
     expensive and more timely alternative to costly patent 
     litigation.
       Lastly, Title VI contains several miscellaneous or 
     ``housekeeping'' amendments, including one to ensure that our 
     law provides priority consistent with our obligations to WTO 
     countries and one to authorize submission of patent 
     applications through electronic media. However, the 
     Department of Justice opposes section 604 and the 
     Administration urges that this provision be deleted. The 
     recovery of attorneys' fees by individuals and small 
     businesses from the Government in cases brought pursuant to 
     28 U.S.C. Sec. 1498(a) is already provided in the Equal 
     Access to Justice Act (EAJA), 28 U.S.C. Sec. 2412(d). By 
     contrast to EAJA, section 604 would provide for attorneys' 
     fees even where the position taken by the Government is 
     substantially justified by the law. This provision would, in 
     fact, place the Government in a worse position than a private 
     defendant in a patent infringement suit, against whom 
     attorney fees can be awarded in ``exceptional'' cases. The 
     provisions would discourage appropriate settlements and 
     engender unnecessary litigation, by allowing private 
     litigants to reject reasonable settlement offers safe in the 
     knowledge that the Government will pay their attorneys' fees 
     even if they are awarded damages less than the settlement 
     offer. For these reasons, the Administration will continue to 
     seek deletion of Section 604 before final Congressional 
     action on this legislation.
       Once again, we thank you for your commitment to working 
     together in the spirit of bipartisan cooperation to craft 
     legislation that provides for important patent reforms to 
     help to ensure our nation's continued economic growth. The 
     Administration strongly supports House passage of H.R. 3460 
     with the en banc manager's amendment.
           Sincerely,
                                                   Michael Kantor.

  My bill is supported by an exceptionally large and diverse coalition 
of small and large companies, independent inventors and associations 
representing every type of U.S. industry and inventor that utilizes the 
patent system. The coalition includes companies that are responsible 
for large numbers of high wage manufacturing jobs in America, such as 
Microsoft Corp., Digital Equipment Corp., IBM Corp., Intel Corp., 
Caterpillar, Inc., Ford Motor Co., General Electric Co., Illinois Tool 
Works, and Procter & Gamble Co. The Biotechnology Industry Organization 
with over 560 members, has expressed its full support for this 
legislation. The White House Conference on Small Business supports this 
legislation. Independent inventors such as the inventor of the quartz 
technology used in watches support this legislation. I can proudly say 
that after many hearings and negotiating sessions, it now has the full 
and unqualified support of an overwhelming number of American 
industries that utilize our patent system.
  Title I modernizes the U.S. Patent and Trademark Office by 
establishing it as a wholly owned government corporation--a government 
agency with operating and financial flexibility that will enable it to 
improve the services it offers to the public. The Office will remain 
under the policy direction of the Secretary of Commerce, but will not 
be subject to micromanagement by Commerce Department bureaucrats.
  Because the Patent and Trademark Office is funded completely by user 
fees, and not by tax dollars, it is one of the few government entities 
recommended by the National Academy for Public Administration to 
operate under structure and oversight commanded in the Government 
Corporation Act, rather than the structure followed by taxpayer-funded 
agencies. The bill has a variety of provisions in title I that will 
free the Patent and Trademark Office from the bureaucratic redtape that 
impedes the Office's efforts to modernize and streamline its 
operations. For example, the bill provides that the Office shall not be 
subject to any administratively or statutorily imposed limitation on 
the number of positions or employees. This will exempt the Office from 
ceilings on the number of full-time equivalent employees, giving the 
Office flexibility to hire the

[[Page E78]]

number of employees it needs, based on its income from applications, to 
process the applications filed by and fully paid for by the users. The 
bill gives the Office greater flexibility with respect to management of 
its office space, procurement, and other matters. The users of the 
Patent and Trademark Office will be represented on a management 
advisory board that will advise the Director of the Patent and 
Trademark Office on the efficiency and effectiveness of the Office's 
operations. Making the Office accountable to its users through 
consultations with them is a significant step in improving its 
operations.
  Title II improves the procedures for examining patent applications. 
It provides for the publication of most U.S.-origin applications 18 
months after the date of application filing, unless a patent already 
has been granted by that time. It also requires publication of foreign-
origin applications in the English language generally within 6 months 
after they are filed in the United States--a full 12 months earlier 
than under current law. Unlike the situation today, the owner of the 
patent application will have a provisional right to a royalty from 
other parties who use the invention after publication and before patent 
grant. Publication of new technologies eliminates duplication of effort 
and accelerates technology licensing. Early publication is accompanied 
by a guarantee that U.S. inventors, especially independent inventors 
and small businesses, can receive an indication of their likelihood of 
obtaining a patent before their application is published. They will 
then be able to make an informed decision regarding whether they should 
withdraw the application before publication. Title II also makes some 
other improvements including the rules for extending the term of a 
patent when delays occur that are not the fault of the applicant.

  Title III creates a defense against infringement charges for parties 
who have independently developed and used technology in the United 
States before a patent application was filed on that technology by 
another party. This will protect the investments of innovative American 
manufacturers who have built plants using technology later patented by 
their foreign competitors.
  Title IV protects inventors from the fraudulent practices of 
invention development firms by requiring disclosure of a firm's track 
record and allowing the inventor to withdraw from a contract with a 
developer within a reasonable time.
  Title V makes improvements in the procedures for reexamining a patent 
in the Patent and Trademark Office after it has been granted by the 
Office. The refined reexamination procedures in the bill will give the 
public a fairer opportunity than is presently allowed to have the 
Office consider information missed by the examiner. The revised 
procedures will better balance the interests of the patentee and the 
public and offer an effective alternative to expensive litigation in 
court.
  Title VI provides a number of other improvements in our patent laws. 
It ensures that U.S. law provides priority consistent with our 
obligations to WTO countries and authorizes submission of patent 
applications through electronic media.
  I look forward to working with all interested parties as we prepare 
to move this important and necessary patent legislation through this 
Congress. The reforms contained in this bill are needed to make the 
patent system best serve the country now and into the next century.

                          ____________________