GOVERNMENT

Move To Revamp Patent Law, Patent Office Gains Momentum In House

• With floor action on far-reaching legislation now imminent, opponents square off on proposed changes to current practices

Linda Ross Raber C&EN Washington

The House is nearing action on omnibus legislation that will profoundly affect patenting

practice in the U.S. The bill (H.R. 3460) aims to modernize U.S. patent law and to change Patent & Trademark Office (PTO) operations. Over the past sever­al weeks, the efforts of a powerful cor­porate lobby seem to have prevailed in the face of formidable opposition led by Rep. Dana Rohrabacher (R-Calif.).

The legislation, which likely will reach the House floor shortly after the Fourth of July recess, is sponsored by Rep. Carlos J. Moorhead (R-Calif.), chair­man of the House Judiciary Committee's Subcommittee on Courts & Intellectual Property, and ranking minority member Patricia Schroeder (D-Colo.). In addition to reaffirming the current term of a U.S. patent—which runs 20 years from appli­cation—by offering protection to those who could conceivably be hurt by it, Moorhead's patent package would insti­tute a number of other changes. Among them are publication of patent applica­tions 18 months after they are filed and conversion of PTO into a government corporation.

Moorhead's bill is supported by five past PTO commissioners and a number of associations including the American Intellectual Property Law Association, the Electronic Industries Association, the Intellectual Property Owners, the Chemical Manufacturers Association, the National Association of Manufac­turers, and many others.

Many of these associations as well as

industrial giants—for example, Coca-Cola, Air Products & Chemicals, Al-liedSignal, Amoco, DuPont, Eastman Chemical, Hoechst Celanese, IBM, Merck, Phillips Petroleum, Praxair, Procter & Gamble, Rohm and Haas, and Union Carbide—have joined to­gether in a lobbying group called the Coalition To Save Patent Term Reform.

The coalition banded together in op­position to Rohrabacher's attempts to roll back the patent term to 17 years from patent grant—the way it was be­fore legislation implementing the re­cent trade treaty negotiated under the auspices of the General Agreement on Tariffs & Trade became law. Claiming to champion the cause of the American independent inventor in the face of for­eign interests and multinational corpo­rations, Rohrabacher introduced legis­lation last year (H.R. 359) that would turn back the clock. He and Moorhead and their supporters have been trading charges and striving to outmaneuver the other side ever since. However, Rohr­abacher's bill was rejected on a vote of 12 to 2 on May 15—the same day that the patent subcommittee approved Moorhead's bill.

Today, Moorhead's bill has the up-

Rohrabacher: dangerous piece of legislation

per hand. Not only did it win unani­mous approval in the subcommittee, but it also was approved without dis­sent on a June 11 voice vote by the full Judiciary Committee. In crafting this legislation, Moorhead attempted to ad­dress all the concerns put forth by Rohr­abacher and others. Although the bill appears to make every allowance for protecting independent inventors, Rohr­abacher calls H.R. 3460 "a highly dan­gerous piece of legislation . . . that should be called the Steal American Technology Act/'

Michael K. Kirk, executive director of the American Intellectual Property Law Association, believes Moorhead's bill will answer the critics who prompted introduction of H.R. 359. "I really think that it is inconceivable that a patent ap­plicant who is truly interested in get­ting his patent . . . couldn't do it in the requisite period of time," says Kirk, who spent 31 years in PTO, leaving in 1995 after serving as deputy assistant secre­tary of commerce and deputy commis­sioner of patents and trademarks.

For example, under H.R. 3460, whenev­er the patent office fails to act on a patent application within the number of months specified by the "time clock" for a partic­ular stage in processing, the excess time taken by the patent office is automatically added to the 20-year patent term.

There have been a number of occa­sions whereby an inventor, after filing an original application, deliberately filed numerous continuation applica­tions, effectively preventing an examin­er from granting the patent. This was done in order to allow an industry to build up and begin using the technolo­gy claimed in the patent, so that when the patent was eventually granted— sometimes as much as 20, 30, or more years after filing—corporations were already using the technology and owed the patentee a royalty. These are called submarine patents.

Moorhead says the existence of these submarine patents often comes as "a

22 JUNE 24, 1996 C&EN

brutal surprise" to companies that have been using technology claimed in the patent for years. Submarine patents are often, but not exclusively, associat­ed with independent inventor Jerome H. Lemelson. Lemelson, inventor of a bar code reader and the intermittent windshield wiper, has successfully ex­tracted large royalty payments from es­tablished industries by letting his pat­ents surface only after industries ma­tured. In 1994, three of Lemelson's patents issued that had originally been filed in 1954, and two issued that had been filed in 1957. • Herbert C. Wamsley, executive di­rector of the Intellectual Property Own­ers, Washington, D.C., is an enthusias­tic supporter of Moorhead's bill. He says, "The bill completes the renova­tion of the American patent system by bringing in publication at 18 months after application, which couples nicely with the 20-year term." Under current law, all applications for patents in the U.S. are kept in confidence by PTO un­til a patent is granted. Only upon granting are the contents of the appli­cation published. In most countries, patent applications are published 18 months after the earliest effective filing date claimed by the patent applicant. H.R. 3460 "would put U.S. and foreign companies on a level playing field," he says.

"Early information helps us to avoid duplicating research that has already been done," says Norman Balmer, chief patent counsel at Union Carbide. "It supplies U.S. industry with a higher level of certainty than it currently has."

But 18-month publication has been criticized as requiring U.S. inventors to disclose secrets to their competitors— particularly foreign ones. This is irk­some to Rohrabacher, who says, "This law is an open invitation to the thieves of the world to steal American technol­ogy from American business."

"The so-called risk needs to be placed into context," says Kirk. "At least 45% of all U.S. patent applications are of foreign origin and are published in their home countries. Based on sta­tistics published by the World Intellec­tual Property Organization, it is rea­sonable to speculate that at least half of the remaining 55% are also filed abroad and are published. A number of the re­maining 27Vi% are disclosed in publi­cations such as technical journals, espe­cially those from universities.

Kirk: place risk into context

"Further," says Kirk, "based on infor­mation from [PTO], nearly 80% of this remainder should issue as U.S. patents within three years from initial U.S. filing. A large number of the remaining inven­tions will be disclosed through the sale of a product, test-marketing, etcetera. Therefore, only a very small percentage of applications cover inventions, prima­rily those relating to manufacturing pro­cesses, which can be commercially used in secret in one's plant and thus have any potential value as a trade secret. And for these few inventions, the bill contains a provision guaranteeing inde­pendent inventors no publication of their applications until three months af­ter a first action on the merits."

Balmer explains the benefits for the chemical industry: "Say we're going to

Balmer: greater certainty for industry

build a plant in the U.S. with new tech­nology. We do a 'freedom to operate study' and look at all patents that have been issued to determine whether we run afoul of any of them. If we do this in the U.S., we know the search will be incomplete. We do not know what pat­ents are in the pipeline in PTO until af­ter they are issued, which may be years after the patent application is filed. With early publication, we can do an all-purpose search and we'll only have an 18-month information gap. When combined with other provisions of H.R. 3460, we can start substantial preparation for that plant and be as­sured that the plant can operate. So there is more incentive for investing in new technology in the U.S."

H.R. 3460 also would turn PTO into a government corporation, and the time is ripe for it. Vice President Al Gore is focusing on reinventing gov­ernment through the National Perfor­mance Review, and Congress and the Clinton Administration have both af­firmed their desire to streamline gov­ernment and bring it closer to those it serves. One way to do this would be to create a more efficient PTO.

Moorhead's bill attempts to improve efficiency by transforming PTO into a semi-independent governmental organi­zation within the Department of Com­merce that will have greater operating and financial flexibility than regular gov­ernment agencies. Key features include increased operating flexibility in em­ployee compensation, number of em­ployees hired, personnel policy, con­tracting, and management of office space. The bill also provides PTO with borrowing authority that would allow it to issue bonds or other debt instruments to finance capital improvements and cope with fluctuations in fee income.

As with many of the ideas encom­passed by the bill, the concept of a gov­ernment corporation for an agency such as PTO is not new. Almost 50 years ago, President Harry Truman urged Congress to consider the corpo­rate structure for programs that were self-sustaining, "business-type" pro­grams and that had a large number of business-type transactions with the public. Many such programs since have been reincarnated as government corporations—such as the Tennessee Valley Authority, the Federal Housing Administration, Amtrak, and the U.S. Postal Service.

JUNE 24, 1996 C&EN 23

GOVERNMENT

Rohrabacher says, "Under 'corpora-tization/ the patent examiners, on whom all American inventors rely for an honest evaluation, will lose the civil service protection they've enjoyed for more than 100 years. The exposure will undoubtedly lead to attempts to attack and influence this entire process, which until now has been considered a core government function." He also says that the redesigned PTO would "have an open call on the U.S. treasury for any money it wants."

"There are a lot of nice sound bites out there, and the only thing that we can fight sound bites with is facts," says Balmer. "That's what we're do­ing." Under the proposed legislation, patent and trademark examiners will have the same protection against re­moval from their jobs as under existing law, and the bill retains the existing procedure under which the main user fees are set by Congress and annual in­flationary adjustments are made by the commissioner of patents and trade­

marks. In addition, the bill contains other significant controls, including provisions authorizing reviews and au­dits by the General Accounting Office. And borrowing authority would be controlled by the appropriations com­mittees of Congress.

The next action for H.R. 3460 will be a Rules Committee hearing, fol­lowed by a vote on the House floor. A fight on the floor is virtually guaran­teed because Rohrabacher has a com­mitment from House Speaker Newt Gingrich (R-Ga.) to allow a vote on his bill. Rohrabacher likely will move to substitute his bill for some or all of the provisions of H.R. 3460. Both sides are putting on a full-court press in preparation for the vote. Π

Delaney reform at heart of pesticide bill Legislation that would reform the con­troversial 1958 Delaney clause and re­place it with a negligible-risk standard for cancer-causing pesticides on pro­cessed foods is once again moving in Congress. Although several other im­portant pesticide issues need to be re­solved this year, the Delaney clause was the main topic at a June 12 hearing of the Senate Committee on Agricul­ture, Nutrition & Forestry.

The Food Quality Protection Act (S. 1166) establishes a new negligible-risk standard for pesticide residues on food that would amend both the Federal Food, Drug & Cosmetic Act (FFDCA) and the Federal Insecticide, Fungicide & Rodenticide Act (FIFRA) with respect to pesticide residues. The Delaney clause to FFDCA states that no chemical may be added to a food if that chemical causes cancer in humans or animals. Under current enforcement, if a pesticide tests carcinogenic in the laboratory, then resi­dues of that pesticide above certain lev­els in processed foods can be in violation of the Delaney clause.

Under FIFRA, the Environmental Protection Agency sets tolerance levels, or limits, on the amount of a pesticide that can be present on raw food. Thus, if that pesticide concentrates during processing to a level higher than the tolerance, EPA has no choice but to re­move that product from use.

Efforts to modify the Delaney clause have been slowly gaining mo-

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24 JUNE 24, 1996 C&EN CIRCLE 6 ON READER SERVICE