Special Message to the Congress Proposing Patent Modernization and Reform Legislation

To the Congress of the United States:

America's dramatic progress from a small agrarian nation to a great technological and industrial leader has been due, in no small degree, to the inventive genius of its people. Names such as Benjamin Franklin, Eli Whitney, Cyrus McCormick, Thomas Edison, Alexander Graham Bell, Samuel Morse, the Wright Brothers and Henry Ford speak volumes about the character of our Nation.

Our creative history, however, has not been a matter of individual inspiration alone. Our Founding Fathers understood the need for innovative thinking and wrote into the Constitution a means of encouraging invention--the patent system-which has enormously stimulated our progress and prosperity.

The national patent system authorized by the Constitution took on form and substance with enactment of special patent acts in 1790, 1793 and 1836. The act of 1836 provided statutory criteria for the issuance of patents and required the Federal Patent Office to examine applications to determine whether they conformed to those criteria. Although this 1836 law has since been amended, no basic change has been made in its general character and it now forms the basis for our present patent system.

While the patent system has changed only slightly since the nineteenth century, the social and economic structure of our Nation has, of course, undergone profound change. The individual inventor, often working alone and unaided, still makes an important contribution, but the lead role in exploring new frontiers of technology is now played by organized research--sophisticated and highly capable teams funded by our Government, industry and universities.

The changing nature of applied research has understandably raised questions about the adequacy of our patent system. Over the past seven years a number of searching studies have been made of that system, including a report by a special Presidential Commission in 1966. Those studies have shown that a successful patent system should meet at least four basic standards. It should:

--provide an incentive for new inventions by offering a meaningful reward to the inventor and to his supporters;

--promote early public disclosures of new discoveries, so that others may also benefit;

--encourage other researchers to explore alternative solutions to crucial technological problems; and

--through the process of discovery and disclosure, widen the opportunity for consumers to choose products of higher quality and lower price.

In recent years, it has become increasingly clear that our current patent system does not measure up to these standards.

The United States Patent Office now examines patent applications in an ex parte fashion--a series of hearings involving only Patent Office personnel and the party applying for a new patent. The very nature of the examination process denies the Patent Office much information relevant to its decision about issuance of a new patent because that information is frequently held by those who may be in commercial competition with the patent applicant. Thus the Patent Office may grant a patent to one inventor without knowing that similar information already exists. As a consequence, legal disputes between a new patentee and his competitors have often arisen after the patent has been issued, and, because the courts can develop a more complete factual record, a large number of patents have been declared invalid. This litigation is often protracted and needlessly expensive, both for the patentees and their competitors. In addition, there have been increasing allegations of fraud and inequitable conduct in the procurement of patents. The net result is that public confidence in the reliability of our patent system has been eroded, and we have reached the point where reform is clearly desirable.

Accordingly, I am today proposing that the Congress enact the Patent Modernization and Reform Act of 1973. This legislation, which will today be transmitted to the Congress by the Commerce and Justice Departments, is designed to rid the patent system of many of its existing problems without sacrificing the indispensable stimulus to invention now afforded by that system. Specifically, this bill has four major objectives:

1. Strengthening public confidence in the validity of issued patents;

2. Accelerating and improving the disclosure of new technology revealed by the patents;

3. Simplifying the procedures for obtaining patents; and

4. Enhancing the value of the patent grant.

STRENGTHENING PUBLIC CONFIDENCE

The single most important objective of reform must be the establishment of examination procedures which ensure that new patents are both sound and reliable. The best way to achieve this objective is to obtain as much information from all sources as is practicable.

To remedy the defects of the present system, I am recommending that we broaden public participation in the review of patent applications, that we strengthen the hand of the patent examiner, and that we require applicants to give greater assistance to the examiner in bringing information to light. If we take these steps, I believe we would not only ensure a more orderly and complete patent examination but also greatly strengthen public confidence in the validity of our patents.

Under the proposed bill, the Patent Office would publish all patent applications that seem worthwhile and would then give the public six months to bring to its attention information relevant to the application. Members of the public would be permitted to present their views to the Patent Office in an adversary proceeding, and new procedures for discovery of information and opportunities for the opposing parties to appeal the decisions of the Patent Office through the courts would be established. The bill also provides for additional manpower for the Patent Office so that opposition proceedings can be conducted effectively.

The patent examiner, a critical figure in the application process, would also be given additional tools to perform his job. These would include, in appropriate cases, authorization to require an adversary examination proceeding and to obtain the assistance from a special patent officer in such a proceeding, as well as access to adequate discovery techniques under the Federal Rules of Civil Procedure.

To further assist the examiner, patent applicants would be required to disclose all pertinent information at the outset of the examination proceeding along with a written memorandum describing why their inventions are patentable. In addition, this legislation spells out in considerable detail the duties of inventors, patent applicants and their attorneys to bring to the attention of the Patent Office all relevant information which comes to their attention during the examination process.

ACCELERATING AND IMPROVING DISCLOSURE

A basic premise of the patent system is that in exchange for commercial protection of his discovery, an applicant will disclose the techniques of his invention so that others may build upon this knowledge. Some critics, however, have suggested that the current patent system is not bringing forth the full and rapid disclosure of technology that it should.

The legislation proposed by the Administration would encourage applicants to expedite the processing of their applications by granting a period of protection 20 ,years from the date the application is filed rather than the present 17-year period from the day a patent is granted. In addition, this legislation would require that patent claims be drafted with greater precision so that others would have a better understanding of how to use the invention.

SIMPLIFYING PROCEDURES

The Administration bill also sets forth several important steps to simplify the procedures for filing and obtaining patents. One reform would permit the owners of an invention, not just the inventor, to file the papers for, and directly obtain, a patent. This step should remove the present procedural hurdles to filing of applications by corporations, universities or other research organizations.

The bill would also simplify troublesome problems of amending applications and would give the Patent Office greater flexibility in examining applications containing more than one invention.

ENHANCING THE VALUE OF PATENTS

The legislation I am recommending would also enhance the value of the patent grant. The procedural reforms described above, which are designed to strengthen confidence in the examination process, would do much to achieve this goal. But other, more specific changes are also needed.

Current law leaves the owners of United States process patents unprotected against importers who sell foreign products that have been manufactured by utilizing processes developed in the United States. This law should be changed so that exclusive sales agents or affiliates of foreign competitors who handle such products will be considered patent infringers.

The proposed legislation would also permit the patent owner to settle disputes over the infringement and validity of his patent without resorting to expensive and time-consuming court litigation. Patent owners and those accused of infringing patents may instead, if mutually agreeable, turn to arbitration for resolution once a dispute arises between them. Where arbitration is not possible, improved disclosure and discovery techniques during the patent application process should reduce the expense and uncertainty of subsequent litigation.

In the event of a dispute over the validity of a patent, the legislation I am recommending would clarify the rights of the patentee or a person who might hold his patent, such as an assignee or licensee. Another provision would ensure that the patent laws not be construed to replace or preempt state laws concerning trade secrets so long as those state laws do not interfere with the free flow of ideas in the public domain. Decisions of the Supreme Court in both of these areas would also be left undisturbed.

PRESERVING THE BEST OF THE PRESENT SYSTEM

The Patent Modernization and Reform Act of 1973 is more than a reform bill. It would preserve and extend some of the best and most important aspects of our current patent system. In preparing this legislation, the Administration considered and analyzed a great many proposals for changing the present law--but our decision was to adopt only those proposals for change that would significantly improve the system.

We were particularly anxious to maintain present standards for the awarding of patents, including the requirement that inventions serve a useful purpose. One of the virtues of the American patent system is its emphasis upon practicality--its demands that ideas be reduced to a tangible form having a known usefulness before the public should grant a monopoly on the concept to the applicant.

My proposal would also preserve the American concept of giving the patent to the person who is first to invent, because he is the individual most deserving of recognition and encouragement. In doing so, we would reject the approach of certain other countries that award the patent to the first applicant to file for a patent.

In addition, the existing state of case law on antitrust standards for patent licensing that have been determined by the courts would not be changed. Some have argued that this case-by-case approach to patent licensing has increasingly eroded the value and reliability of the patent grant. Earlier this year, I requested that various proposals addressed to this issue be carefully studied and reviewed by the Secretary of Commerce, the Attorney General, and my chief advisers on economic policy. After much study, they concluded that there is no clearly demonstrated need or justification for introduction of any patent licensing proposals at this time. They also concluded that the legislation I recommend today will help counter the loss of public confidence by improving the reliability of patents that are issued.

CONCLUSION

Benjamin Franklin, a famous inventor as well as a statesman, reflected once that he wished it his destiny "to be born two or three centuries hence" so that he could not only enjoy the conveniences of modern life but also satisfy his curiosity. So long as the spirit of Franklin remains alive in America, we can be confident that our civilization will flourish.

Our patent system should always work to foster that spirit. Unfortunately, our current system does not always serve that end. With the changes I am recommending today, however, we can combine the best parts of our existing system with the most promising proposals for improving it. In that belief, I ask the Congress to give the proposals contained in the Patent Modernization and Reform Act of 1973 prompt and careful consideration.

RICHARD NIXON

The White House,

September 27, 1973.