Hon. CHARLES KRAMER, Chairman, Committee on Patents, DARBY & DARBY, New York City, February 20, 1941. House of Representatives, Washington, D. C. MY DEAR CONGRESSMAN KRAMER: Yesterday I received your letter of the 18th enclosing copies of H. R. 3359 and H. R. 3360, and, at the request of Assistant Attorney General Shea, I flew to Washington in the afternoon and spent several hours with him discussing these bills and other matters relating to patent questions. At the conclusion of this discussion (after 6 p. m.), I tried to contact you by telephone, but was unsuccessful. Because I am engaged in a trial here in New York the remainder of this week, so that it will be impossible for me to be in Washington in the daytime, I thought it might be helpful if I wrote down and forwarded to you my comments on the two bills. First, with respect to H. R. 3359, I consider this amendment to be essential to make the act of July 1, 1940 (Public, No. 700), effective for its intended purpose. I can conceive of no sound basis for opposition thereto. I have no suggestion to make as to its wording. With respect to H. R. 3360, I have much to say, but will endeavor to abbreviate it as much as possible. To form a foundation for my comments I first recite what I understand to be the purpose of the act. This is to enable a manufacturer, at the request of the Government to meet possible future requirements, to increase his plant capacity and dispose of the excess production above Government requirements, immune to injunction and subject only to "reasonable compensation" to the owner of any patent rights successfully alleged to be infringed thereby. The purpose is laudable and should be effected. I doubt, however, if the present bill will do so. In the first place, who is going to determine if the product manufactured, used, or sold is covered by a United States patent, even preliminarily? Certainly the Commissioner of Patents should not be allowed to do so. His decision thereon should not properly be binding on either the manufacturer or the patent owner. Moreover the selection and identification of any particular patent would carry with it at least an implied admission of infringement. In addition, the act, to be effective, should apply to all patents, regardless of the number and of by whom owned, which might be asserted against the manufacturer. This would involve a comprehensive infringement search to determine and identify all patents that might be asserted, with no assurance that any such search or searches would be complete and "fool-proof." Thus a manufacturer would at the outset be subjected to an exceedingly expensive and lengthy task before being justified in proceeding to increase his plant capacity, to insure that the proposed certificate would cover every patent that could be asserted against him or his products. I believe that in the present proposed bill the cart has been put before the horse. As now worded, the bill places a very heavy burden on the manufacturer to ascertain in advance all patents that might be asserted against him before the relief proposed by the bill would be effective. To safeguard himself he must do this before any patent is asserted against him. The delay and expense to which he is thus subjected may have an undesirable deterring effect, and in any event may be wholly unnecessary if no infringement suit is ever brought. Why not eliminate all this? The desired result may be effected in a very simple manner, and I am suggesting one way in which it may be effected by changing the wording of the proposed bill, as indicated below, in which I have placed in quotation marks the language taken bodily from the present bill-in which suggestion, of course, I am concerned more with substance than with form. Any manufacturer "who is or was during the period covered by this act" engaged in the manufacture, use, or sale of any product, or the use of any process or machine "necessary to the national defense or required by the public interest or the public safety," if sued for alleged infringement of any letters patent of the United States by reason thereof, may apply for and immediately obtain from (a designated agency) a certificate that said manufacture, use, or sale was necessary to the national defense or required by the public interest or the public safety, which certificate, or a duly certified copy thereof, shall be admissible in evidence in any such snit without further proof; whereupon, and without affecting the merits of the cause or any defense that may be interposed by the manufacturer, “no injunction based upon any such patent or patents shall issue or be enforced during the continuance of the national emergency declared to exist by the President of the United States on September 8, 1939, and the sole recovery of the patent owner," if successful in any such suit, shall be no more than 10 percent of the manufacturer's net selling price (or compensation for use of a process or machine) "for the infringing acts whether or not injunctive relief is sought." The foregoing suggestion, in far more nebulous form, is what I advanced to Mr. Shea yesterday afternoon. I hope it may warrant your consideration. I would be glad to discuss any phase of this matter with you should you desire to do so. Sincerely and cordially yours, SAMUEL E. DARBY, Jr. NEW YORK, February 24, 1941. Hon. CHARLES KRAMER, Chairman, Committee on Patents, United States Patent Office, Washington, D. C. DEAR MR KRAMER: Thank you for your letter of February 18, 1941, and copies of H. R. 3359 and H. R. 3360. Unfortunately, the letter was sent to my former address and did not reach me until February 20, the date of the hearings. My main objection to both of these bills is a general one, viz, that they follow the direction of taking rights away from inventors and patentees. The value of patents generally has declined considerably during recent years due to the unfriendly attitude taken by the United States Supreme Court, which, of course, was promptly followed by the courts of appeals and the district courts. Aside from these general objections, I think the language of H. R. 3360 should be improved with particular reference to lines 6 and 7 of page 2, which state: "the sole recovery of the patent owner shall be the reasonable compensation for the infringing acts." This would seem to preclude the recovery of damages and profits provided by section 4921 Revised Statutes. I would therefore suggest that the words, "the reasonable compensation for the infringing acts," be canceled and the wording as provided by section 4921 Revised Statutes, United States Code, title 35, section 70, be substituted. Thanking you for your consideration, I remain, A. A. DICKE. BROWN, JACKSON, BOETTCHER & DIENNER, Re H. H. 3360. Hon. CHARLES KRAMER, Congress of the United States, House of Representatives, Washington, D. C. MY DEAR CONGRESSMAN: Yours of February 28, regarding H. R. 3360, is at hand. I shall be unable, in the limited time which remains, to render a report of the committee on patent-law revision of the American Bar Association to the chairman of the patent, trade-mark, and copyright section and have the section act officially. Therefore, I can only express the views of myself and associates as private individuals. In other words, I cannot officially speak for the American Bar Association or any part thereof, but such members of the association with whom I have been in consultation agree that they would like to see three provisions in the bill which are not at present included. They are as follows: 1. That the suspension of injunctive relief for infringement of a patent should not be any wider than the infringement in which the Secretary of War or Secretary of the Navy or Director General of Office of Production Manager is interested. In other words, if there is infringement relating to national defense, or public interest, or public safety, and at the same time infringement having no such significance, injunctive relief as to the latter infringement should not be denied. 2. It is desirable that if infringement is established in a case where injunctive relief should be suspended that the defendant nevertheless be ordered to pay over to the plaintiff reasonable compensation as a condition of suspension of the injunction. It is desirable that reasonable compensation be currently paid, for at the end of the emergency the infringer and the infringing business may be no longer responsible. 3. The bill should leave no doubt that the plaintiff is entitled to proceed in equity, and that the suspension of the injunction is not intended to convert the action into a law case. Thanking you for the opportunity to express my views, I am Yours very truly, JOHN A. DIENNER. BARTLETT, EYRE, KEEL & WEYMOUTH, Re H. R. 3359 and 3360. Hon. CHARLES KRAMER, Chairman, Patents Committee, Washington, D. C. MY DEAR MR. KRAMER: I have your letter of the 18th enclosing copies of the above bills and notifying me of a meeting of the Committee on Patents tomorrow morning. I will be unable to attend that meeting, and am not sure that I could be very useful if I did, in view of the fact that I had known nothing of these bills until this morning. Since their receipt, however, I have studied them carefully and have discussed them with Mr. Lawrence Langner, Mr. Leonard S. Lyon, and Mr. Walter Schmidt of the advisory council to the Committee on Patents in the last Congress, and Mr. Dean Edmonds, who is chairman of the committee on patent law and practice of the New York Patent Law Association. As to H. R. 3359, we all approve this bill in principle, although we think that a suitable amendment should be introduced to the effect that in case a license to file in a foreign country is refused the Commissioner shall withhold the issuance of any corresponding United States patent during the period of emergency. As to H. R. 336), Messrs. Lyon, Schmidt, Edmonds, and myself are united in believing that there is no necessity for this bill. I think Mr. Langner is doubtful on this broad point. All of us believe that the bill is so broadly and generally worded that in its present form it will have very injurious effects. I believe the bill is unnecessary because the matter of the issuance and enforcement of any injunction has always been within the discretion of the court, and no court in this country would enforce an injunction if it were shown that the enforcement of the injunction would be seriously deleterious to the public interest. Every patent lawyer has had experience of cases where courts refused to grant an injunction for this reason. It would only be necessary, under present law, for a defendant by a certificate by some responsible Government officer, or by other evidence, to make it apparent to the court that an injunction would be prejudicial to national defense or to the necessities of the public. We believe the bill, if necessary at all, is dangerously broad because, as worded, any one of a number of Government officers might make a very indefinite statement to the Commissioner of Patents that would enable utterly irresponsible infringers to destroy the rights of patentees, even though the patentees or their licensees were making adequate use of the invention and selling the patented articles at a reasonable price. In the time at hand, I cannot go more into detail or attempt to submit a more satisfactory form of bill. If you would like to have us do this we would be glad to see what we can do. In any event, we urge that approval of H. R. 3360 be withheld until there is better opportunity for more careful analysis and study of the bill. It is possible that Mr. Langner may be able to attend the hearing tomorrow. He was not certain when I last talked with him. Sincerely yours, RICHARD EYRE. PROPOSED AMENDMENTS TO H. R. 3359, SUBMITTED BY KARL FENNING, PATENT ATTORNEY Insert before line 6, page 1: "Amend section 1 by inserting after the first paragraph: ""The Commissioner may from time to time, without lifting the secrecy order, permit the invention to be disclosed to specified parties and such disclosure shall not be a violation of the secrecy order.' "Add to section 2: 'but the Court of Claims shall have jurisdiction of any suit filed within 1 year after the issue of any such patent.' Page 1, line 6, for "person" substitute "citizen or resident of the United States or any corporation directly or indirectly controlled by or beneficially owned by any citizen or citizens or resident or residents of the United States." Page 1, line 9, after "country", insert: "with respect to any invention made in the United States". Page 1, line 11, after "prescribe", insert: "If no secrecy order is issued under section 1 within 60 days of filing the application in the Patent Office, or if the Commissioner takes no action within 60 days on a request made for a license to file an application for patent, and so forth, in a foreign country or countries, applicant may proceed as if the permission to file asked had been issued." Page 2, line 24, before "publishes" insert: "contrary to the provisions of such order or permit". ("Patents and National Defense," Article by Karl Fenning, Patent Attorney, in the December 1940 issue of the Journal of the Patent Office Society, Vol. XXII, No. 12) PATENTS AND NATIONAL DEFENSE (By Karl Fenning*) One indication of the importance of patents and inventions in the defense program can be gleaned from the fact that as a result of the world war activities scores of suits for patent infringement were brought against the Government, the total amounts claimed being several hundred million dollars. Prior to 1910 the Government could not be sued for an ordinary infringement of patent. The patentee had to obtain what relief he could against the manufacturer who made and sold to the Government. The Act of June 25, 1910, allowed a suit to be filed in the Court of Claims against the Government to recover for the Government's use of a patented invention. Of course, no injunction could be granted against the Government's use of the invention. The courts, however, held that this statute did not free a Government contractor and a suit would be brought against the Government contractor and often an injunction issued prohibiting him from furnishing to the Government goods which infringed a patent. The inconvenience and danger to the Government in this situation was perceived and July 1, 1918, as a part of a Navy appropriation bill, the Act of 1910 was amended so that in effect it requires the owner of a patent to sue the Government in the Court of Claims for his entire compensation. This Act has been held to free contractors from liability in furnishing goods to the Government and since this Act was passed the Government contractor cannot be enjoined. These Acts are permanent parts of the law and not war measures. Thus it is possible for the Government at the present time to do anything it wishes and procure anything it wishes for the defense program without being stopped by a patent. Airplanes are taking a very permanent and important part in the defense program. At the time of the World War the airplane industry had not made very great advances, although there were a number of different manufacturing companies. At that time many different parties had patents relating to different parts of the airplane and it was substantially impossible for an adequate airplane to be built without infringing various patents of different parties. In order to smooth out the difficulties which it was seen would arise from this situation, the Government aided the various members of the airplane industry to form the Manufacturers Aircraft Association. This organization furnishes cross licenses to its members so that a purchase from one of them frees the Government from infringement of all their cross-licensed patents. While this combination has been investigated several times to see if it is against the antitrust laws, it seems to be thought that it is probably necessary for the national defense that such a crosslicensing arrangement continue. The kind of national defense which is being arranged at the present time is very closely analogous to activities which would take place if we were at war. It is not surprising, therefore, to find that during the present session of Congress there was passed a bill providing for secrecy of inventions which is very similar to a law passed during the World War. The present law, known as Public No. 700, was approved by the President July 1, 1940. It reads as follows: "Whenever the publication or disclosure of an invention by the granting of a patent might, in the opinion of the Commissioner of Patents, be detrimental to *Patent Attorney, Washington, D. C. Paper read before the Patent Law Association of Pittsburgh, October 24, 1940, and revised and enlarged for the Journal. the public safety or defense he may order that the invention be kept secret and withhold the grant of a patent for such period or periods as in his opinion the national interest requires: Provided, That the invention disclosed in the application for said patent may be held abandoned upon it being established before or by the Commissioner that in violation of said order said invention has been published or disclosed or that an application for a patent therefor has been filed in a foreign country by the inventor or his assigns or legal representatives, without the consent or approval of the Commissioner of Patents. "When an applicant whose patent is withheld as herein provided and who faithfully obeys the order of the Commissioner of Patents above referred to shall tender his invention to the Government of the United States for its use, he shall, if and when he ultimately receives a patent, have the right to sue for compensation in the Court of Claims, such right to compensation to begin from the date of the use of the invention by the Government: Provided, That the Secretary of War or the Secretary of the Navy or the chief officer of any established defense agency of the United States, as the case may be, is authorized to enter into an agreement with the said applicant in full settlement and compromise for the damage accruing to him by reason of the order of secrecy, and for the use of the invention by the Government. ."SEC. 2. This Act shall take effect on approval and shall remain in force for a period of two years from such date." Substantially the same provision was contained in the Act of October 6, 1917, although that law was limited to "during the time that the United States is at war" and did not contain the proviso in the second paragraph. Substantially the same provision was also contained in the Trading with the Enemy Act of 1917 (Sec. 10 [i]) which also imposed a money penalty for failure to comply with the order. There the authority to issue the secrecy order was given to the President, who in turn delegated his authority to the Federal Trade Commission. The effect of the present law is to provide that when a patent application contains matter the publication or disclosure of which would be detrimental to the public safety or defense an order may be issued to keep the matter secret and failure to do so may forfeit the rights to the invention. The bill provides that such an invention may be tendered to the Government and the patentee, when the patent finally issues, may sue the Government in the Court of Claims for the use the Government may have made of the invention even before the patent issued. There is an additional provision which was not in the 1917 Act that instead of relegating the patentee to sue to the Court of Claims the Secretary of War or the Secretary of the Navy or chief officer of any established defense agency may enter into an agreement with the applicant for compensation. It is interesting to note tat during the World War the corresponding provision for secrecy was in effect for something less than two years. During that period the Patent Office issued about twenty-one hundred secrecy orders, about half of which were in cases which had been allowed and were merely awaiting payment of the final fee. (See annual reports of Commissioner of Patents for 1917 and 1918.) The Federal Trade Commission and the Patent Office cooperated so that in substantially all cases secrecy orders were issued by both organizations. In 1917 I understand the army and navy were given substantially free access to the records and files of the Patent Office and the officers of the armed forces examined applications and suggested secrecy orders which were granted substantially as a matter of course. The procedure under the present statute is materially different. The Commissioner of Patents has appointed a special committee having jurisdiction of the secrecy proceedings headed by Mr. H. H. Jacobs, one of the interference examiners. Mr. J. A. Brearley, Chief Clerk, is Secretary for the committee, the other members of which are Messrs. V. I. Richard, W. M. Adams and M. Taylor, supervisor examiners, together with Mr. D. Ringle, who is the principal examiner in charge of Division 22, which examines applications relating to aeronautics, ships, ordnance and the like, and Mr. W. G. Wiles. It is understood that this Committee has substantially complete control of the secrecy orders which are now being issued by the Patent Office. I understand the procedure adopted was to direct the principal examiners in the Patent Office to examine as rapidly as possible all of their pending applications, of which there were probably a hundred thousand, beginning first with allowed cases. The applications which the examiners seemed to think might be pertinent to national defense were referred to Mr. Jacobs' committee, who sifted out those that they thought were worth considering and these were submitted for consideration by the War Department and by the Navy Department. |