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94 /Tk.2Y3Y S S. HRG. 99-291 PATENT AND TRADEMARK OFFICE AUTHORIZATION HEARING BEFORE THE SUBCOMMITTEE ON PATENTS, COPYEIGHTS AND TRADEMARKS OF THE COMMITTEE ON THE JUDICIAEY UNITED STATES SENATE NINETY-NINTH CONGRESS FIRST SESSION ON S. 866 A BILL TO AUTHORIZE APPROPRIATIONS FOR THE PATENT AND TRADEMARK OFFICE IN THE DEPARTMENT OF COMMERCE JULY 23, 1985 Serial No. J-99-41 Printed for the use of the Committee on the Judiciary 94 /tK.2Y3Y S. HRG. 99-291 PATENT AND TRADEMARK OFFICE AUTHORIZATION HEARING BEFORE THE SUBCOMMITTEE ON PATENTS, COPYRIGHTS AND TRADEMARKS OF THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE NINETY-NINTH CONGRESS FIRST SESSION ON S. 866 A BELL TO AUTHORIZE APPROPRIATIONS FOR THE PATENT AND TRADEMARK OFFICE IN THE DEPARTMENT OF COMMERCE JULY 23, 1985 Serial No. J-99-41 Printed for the use of the Committee on the Judiciary U.S. GOVERNMENT PRINTING OFFICE 51-688 0 WASHINGTON : 1985 COMMITTEE ON THE JUDICIARY STROM THURMOND, South Carolina, Chairman CHARLES McC. MATHIAS, JR., Maryland JOSEPH R. BIDEN, JR., Delaware PAUL LAXALT, Nevada EDWARD M. KENNEDY, Massachusetts ORRIN G. HATCH, Utah ROBERT C. BYRD, West Virginia ALAN K. SIMPSON, Wyoming HOWARD M. METZENBAUM, Ohio JOHN P. EAST, North Carolina DENNIS DECONCINI, Arizona CHARLES E. GRASSLEY, Iowa PATRICK J. LEAHY, Vermont JEREMIAH DENTON, Alabama HOWELL HEFLIN, Alabama ARLEN SPECTER, Pennsylvania PAUL SIMON, Illinois MITCH McCONNELL, Kentucky DENNIS W. SHEDD, Chief Counsel and Staff Director DIANA L. WATERMAN, General Counsel DEBORAH G. BERNSTEIN, Chief Clerk MARK H. GITENSTEIN, Minority Chief Counsel SUBCOMMITTEE ON PATENTS, COPYRIGHTS AND TRADEMARKS CHARLES McC. MATHIAS, JR., Maryland, Chairman PAUL LAXALT, Nevada PATRICK J. LEAHY, Vermont ORRIN G. HATCH, Utah , HOWARD M. METZENBAUM, Ohio ALAN K. SIMPSON, Wyoming DENNIS DECONCINI, Arizona RALPH OMAN, Chief Counsel STEVEN J. METALTTZ, Staff Director PAMELA S. BATSTONE, Chief Clerk (II) CONTENTS STATEMENTS OF COMMITTEE MEMBERS Page Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont 1 Mathias, Hon. Charles McC, Jr., a U.S. Senator from the State of Maryland, chairman, Subcommittee on Patents, Copyrights and Trademarks 25 PROPOSED LEGISLATION S. 866, a bill to authorize appropriations for the Patent and Trademark Office in the Department of Commerce 3 CHRONOLOGICAL LIST OF WITNESSES Moorhead, Hon. Carlos J., a Representative in Congress from the State of California 5 Quigg, Hon. Donald J., Acting Commissioner of the Patent and Trademark Office, Washington, DC, accompanied by Bradford Huther, Assistant Com­ missioner for Finance and Planning 26 Reed, Warren G., Director of Information Management and Technology Divi­ sion, General Accounting Office, Washington, DC 241 Banner, Donald W., president, Intellectual Property Owners, Inc., Washing­ ton, DC; Robert B. Benson, Esq., president, American Intellectual Property Law Association, Arlington, VA; William A. Finkelstein, president, United States Trademark Association, New York, NY; and Paul Zurkowski, presi­ dent, Information Industry Association, Washington, DC 283 ALPHABETICAL LIST AND MATERIAL SUBMITTED Banner, Donald W.: Testimony 283 Prepared statement 285 Replies by Intellectual Property Owners, Inc., to questions from Senator Mathias 307 Benson, Robert B.: Testimony 316 Prepared statement 318 Responses to written questions of Senator Mathias 329 Finkelstein, William A.: Testimony 332 Prepared statement 334 Responses to written questions of Senator Mathias 345 Huther, Bradford: Testimony 38 "Review of Patent and Trademark Automation," study of the U.S. De­ partment of Commerce, July 12, 1985: Chapter 1—Management Review of Patent and Trademark Office Automation Project 44 Chapter 2—ICST Report on Trademark Automation 67 Mathias, Hon. Charles McC., Jr.: Prepared statement of John Flannery on behalf of inventor Joseph W. Newman 81 Moorhead, Hon. Carlos J.: Testimony 5 Prepared statement 8 mil IV Page Moorhead, Hon. Carlos J.—Continued House report to accompany H.R. 2434 13 Quigg, Hon. Donald J.: Testimony 26 Prepared statement 28 PTO responses to additional questions of: Senator Mathias 86 Senator Leahy 236 Reed, Warren G.: Testimony 241 Prepared statement 244 Responses to additional questions of Senator Mathias 252 Zurkowski, Paul: Testimony 351 Prepared statement 354 "Development of an O.M.B. Policy on Federal Information Management," statement of the Information Industry Association 356 Letter from David Peyton, director, Government Relations, Information Industry Association, to J. Timothy Sprehe, Office of Information and Regulatory Affairs, Office of Management and Budget, May 14,1985 382 "Meeting Information Needs in the New Information Age," a policy statement of the Information Industry Association 384 Responses to written questions of Senator Mathias 398 PATENT AND TRADEMARK OFFICE AUTHORIZATION TUESDAY, JULY 23, 1985 U.S. SENATE, SUBCOMMITTEE ON PATENTS, COPYRIGHTS AND TRADEMARKS, COMMITTEE ON THE JUDICIARY, Washington, DC. The subcommittee met, pursuant to notice, at 9:40 a.m., in room SD-562, Dirksen Senate Office Building, Hon. Charles McC. Ma- thias, Jr. (chairman of the subcommittee), presiding. Present: Senator Leahy. Staff present: Steve Metalitz, staff director; Ralph Oman, chief counsel; John Podesta, minority chief counsel; Randolph Collins and Sharon Donovan, professional staff; Pamela Batstone, chief clerk; and Beverly McKittrick, counsel for Senator Laxalt. OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE STATE OF VERMONT Senator LEAHY [presiding]. Good morning. Senator Mathias is on his way and has asked that I open this meeting, and I am glad to do so. I have a statement which I will give before we go to the distin­ guished list of witnesses, who will be led off with Congressman Moorhead. The encouragement of invention and innovation has always been a vital part of our free enterprise system, and has been in no small part responsible for the rise of the United States as the premier economic force in the world. I think one key to what might be called our ingenuity is the system of patents by which those persons who do invent or inno­ vate are ensured that they reap the benefits of their hard work and creativity. That was true when the framers of the Constitution ac­ knowledged the need for a viable patent system. It was true when Abraham Lincoln said that this incentive to inventors adds the fuel of interest to the fire of genius. And it is still true today. Perhaps it is even more important today as technical innovations in modern laboratories and workshops become the economic life- blood of entire new industries of tomorrow. We only need to look around to see the tremendous importance of innovation in today's highly competitive and technology-based business environment. Through that, we appreciate the importance of a viable patent and trademark system. (l) 2 And if that system breaks down and fails to provide the protec­ tion to innovators for their efforts, the incentive to create is dimin­ ished. Today, the United States cannot afford to lose any of its competi­ tive edge in the high-technology industries that are dependent on the innovative new products and processes. We cannot afford any breakdown of our patent and trademark systems. Right now, we have some trouble with our system. The Patent and Trademark Office is in the process of revamping its record­ keeping system. It is going from a shoebox type of information stor­ age that has been used for 160 years to an automated system, al­ lowing for rapid access to the Office's records. Now, that sort of systematic change has never been easy, but the Patent Office has encountered more than the usual amount of problems, and a recent report by the GAO points out several in­ stances of poor management within the Patent Office in its pro­ gram to automate. Among other things, the GAO has found the Patent Office failed to identify the basic needs of the users of the system; they accepted terminal equipment that did not meet its re­ quirement, and replaced that equipment with other equipment which in itself was deficient. They improperly used exchange agreements to circumvent Federal procurement regulations; they negotiated terms of exchange agreements that restricted the Of­ fice's control over its own resources, restricted public access to trademark information, and would have resulted in higher fees being charged to the public, and then they accepted an automated search system without fully testing it, and that resulted in a system that is no better than the manual system it replaced. The House has already passed legislation that would alter the funding structure of the PTO so that this automation program is funded by the Office's appropriation rather than from user-fee income. I think this is going to give the Congress better oversight of this important project. It should serve to prevent future abuses of the type that I just noted. I am generally in agreement with the other body on this matter, and I believe that the Patent Office should be closely watched in its effort to automate and to provide continued public access to its records, especially in light of its serious mistakes in managing the program already. But I am also concerned about the consequences of the House re­ strictions on the PTO's use of available funds, if the administration prevails in its effort to keep the 1986 funding for the Office at the $84.7 million level, rather than to provide the $101.6 million level the House bill seeks. If that result occurs, in all fairness to the Patent Office, it gets caught in the middle. Not only would it be short of funds for the proper fulfillment of its basic services, but it might also be unable to divert user-fee funds into the automation project. With the great need for that project and the efficiency it should add to the Office, such a result could be detrimental to the basic purpose for which the PTO exists—that of instilling confi­ dence in users of the PTO that they have an effective system to protect the results of their innovation.
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