monopoly could hardly be supported as a general matter. But really basic inventions of this sort often wait for the appearance of improvements which render them truly practical. Under such circumstances it seems clear that throwing the situation open to compulsory licensing at reasonable royalties at the time of expiration of the basic patent would in most cases not impede the introduction into use. It is on such matters as this that we need to remember that the main object of the system is to bring innovations into use for the benefit of the public, and to reward the inventor only as a part of the means for attaining this objective. 4. Obviate the possibility of the suppression of inventions One object of the patent system is to bring new devices and processes into public use. Yet it often takes time and effort to prepare inventions for industrial introduction. A patent owner should be given full opportunity to do this properly. He should not be coerced into the giving of licenses during this initial period, as long as he uses diligence, commensurate with his resources and the importance of the invention in question, in developing and utilizing his patent. In the case of an independent and impecunious individual, due diligence may be found merely in the active search for funds with which to proceed. The owner of a patent, however, should either be in the diligent process of developing it, or he should be supplying the public need for the device or process it covers to the extent of his ability and resources. If the patent owner fails in doing this he should be compelled to license those who will carry out the development and fill the public need. It is a proper business practice and consistent with the public interest, however, to make sure that new devices and products are sound before they are thrown upon the market. It is important, therefore, not to crowd an inventor or an industrial unit which is going about its business wisely and diligently commensurate with its resources. It is only when unreasonable delay results in the withholding of something valuable to the public that action should be taken to make the withheld item_available. Whether or not money and time are being spent on the development or introduction is usually a good index of whether there is unreasonable delay in the marketing of a product. It is possible to conceive of a situation in which a company is marketing a patented device, and at the same time holds patents on an improved device which it declines to introduce because of the disruption of its market which might be caused, so that it holds back on the improved device. As pointed out before, however, this is very unlikely in these days of intense technical competition. Although instances are undoubtedly rare where unreasonable delay or suppression has deprived the public of a product which it wanted and which with diligence could have been made available, it is well to legislate in such a way that actual suppressions of inventions would be impossible. Such legislation is especially desirable so as to make it clear that such suppression is not an objective either of the patent system or of the proponents of the patent system. Accordingly, the following suggestion for legislative action is made: Provide by law that, in any suit for infringement of a patent, when it is established (i) that the plaintiff is neither using the inventions covered by the patent in question on a reasonable scale, nor developing them for use to an extent commensurate with their importance, the public need, and his resources, nor licensing others who are prepared to do so; (ii) that the patent has been infringed; and (iii) that the infringement occurred in the field which the plaintiff failed to develop diligently, then the court shall, if the patent is held to be valid and if the plaintiff is otherwise entitled to relief, determine a reasonable royalty for the use of the patent under a nonexclusive license, and shall decree both that the defendant pay damages computed on the basis of such a royalty for the past infringement, and that the defendant may enjoy the patent thereafter, provided he pay for the privilege on the basis of the royalty thus fixed by the court. This remedy should be in lieu of other relief. 5. Determination of reasonable royalties The legislation suggested in this statement calls in several instances for reasonable royalties to be determined by the courts. This is a very difficult determination to make.61 Yet, unless the royalties thus to be fixed are adequately compensatory the remedies herein proposed will fail of their purpose and research important to the public welfare will be retarded, not stimulated. It is desirable, therefore, that certain criteria for determining a reasonable royalty should be specified in the controlling statutes. For example, a reasonable royalty should not only return a fair profit on the investment involved in developing and introducing the particular invention in question; to be reasonable it must yield a much greater return than this, since the investment in a successful invention is usually exceeded substantially by investment in unsuccessful attempts. The successful invention must bear the burden of carrying unsuccessful research. There should be express legislative recognition of that fact. Then, in determining what is a reasonable royalty, a court might well look for guidance to the general ratio of success to failure within a given field of endeavor. And one of the very best indexes of reasonableness would be the royalties usually charged in the industry in question under conditions of wholly free negotiation.62 In addition, if the tribunal suggested above for the determination of facts in connection with patent litigation is established, provision might well be made for that same tribunal to establish reasonable royalties in particular cases, upon reference by a court, since it will be so constituted as to approach this problem with a technical background and a knowledge of industrial practice regarding patents which will seldom be directly and fully comprehended by the court.63 01 On problems connected with the determination of reasonable royalties, see: United States v. Hartford Empire Co., 65 F. Supp. 271, at 274 (N. D. Ohio, 1946). United States v. National Lead Co., 332 U. S. 319 (1947). Standards for a Reasonable Royalty Under the Atomic Energy Compulsory Licensing Program, by Galane, Virginia Law Review, vol. 38, January 1952, pp. 53-68. 02 Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U. S. 641, 648 (1914); Compensation for Compulsory Grant of Patent Licenses, by Krassa, 43 Columbia Law Review, p. 843 (1943); The New Measure of Damages in Patent Cases, by Fink, 29 Journal Patent Office Society, pp. 822, 823 (1947). 63 Compare procedures for determining compensation to patentees under the Atomic Energy Act. See 42 U. S. Code 2181-2190. See also, Galane, footnote 61, supra. See also. Will the Patent Provisions of the Atomic Energy Act of 1954 Promote Progress or Stifle Invention? by Beckett and Merriman, George Washington Law Review, vol. 23. December 1954, pp. 195–213. 6. Other recommendations The revisions of the patent system suggested above should enable the country to cope effectively with the changes in science and industry which have made the present patent system falter. There are other revisions which might also be suggested. Of particular importance is the proposal to terminate the patent grant 20 years after the date of the application. It is not the intention of this statement, however, to duplicate the broad and detailed inquiry which the National Patent Planning Commission and other such bodies have conducted in the past.65 64 66 In 1 or 2 respects it is felt, however, that if the suggestions made above are adopted, several of the proposals of the National Patent Planning Commission may prove to be unnecessary. An example in point is the recommendation of the National Patent Planning Commission in its first report that there should be, in effect, compulsory licensing under all patents to the extent required by the national defense, the public health, or the public safety. It is vitally important, of course, to protect the public interest in these fields, but it is also true that the benefits of the patent system in encouraging pioneering in these fields are equally great. To destroy the stimulus of invention and research in these fields might well result in a detriment. to the public interest which would more than offset the objectives sought to be reached. The broad suggestions made above in this statement should go far to correct the improper use of patents in the field of public health and safety, as well as in other fields. It is believed, therefore, that no legislation need be enacted at this time applying especially to patents in the field of national defense or the public health and safety. Rather it is suggested that the consideration of these special fields be postponed until experience has been obtained under the proposals made herein, or under similar proposals which might be substituted for them after further study. D. CONCLUSION The enabling legislation putting the Federal patent system into effect in this country dates from 1790. There has been substantially no revision or adaptation of the fundamental concepts of that legislation other than by judicial interpretation-since 1836.67 It is evident that, if the original objective and purposes of the patent system are to be fulfilled under modern conditions, some adaptation and modernization of its operation are essential. The suggestions herein 64 Such proposals to limit the period of the patent grant have been repeatedly introduced in the Congress, most recently by Senator O'Mahoney, as S. 3745, on April 26, 1956. For a history of these proposals, see: Proposals for Expediting Procedure in the Patent Office: A legislative history based primarily on congressional hearings, reports, and debates, prepared for the Subcommittee on Patents, Trademarks, and Copyrights of the Senate Committee on the Judiciary, by Margaret M. Conway, Legislative Reference Service, Library of Congress, March 20, 1956. U. S. National Patent Planning Commission, The American Patent System, Report, June 18, 1943 (78th Cong., 1st sess., H. Doc. No. 239), Washington, U. S. Government Printing Office, 1943. 6 U. S. National Patent Planning Commission, The American Patent System, Report, footnote 65, supra, at p. 3. The Patent Act of 1952 was essentially a codification of existing patent law, and involved little substantive revision. made need close study, and undoubtedly need modification and sup plementation, before they could safely and appropriately be made the basis for constructive legislation. It is strongly urged that full study be devoted to the subject by a representative and competent group. Changes of this general nature, if well worked out, would do much to insure a vigorous program of scientific research and a dynamic indus trial society in the days of peace which we hope and trust lie ahead. |