Hatch’s ‘Submarine’ Patent Deform Bill Threatens To Sink The Engine Of U.S. Competitiveness, National Security

(Washington, D.C.): Tomorrow, the
Senate Judiciary Committee is expected to
act hastily on legislation eagerly sought
by its chairman, Senator Orrin Hatch
(R-UT). The sponsor’s strategy for moving
S. 507 — which has the benign-sounding
title of “The Patent Improvement
Act” — has seemingly drawn on the
classic stealth tactics of a submarine
captain: Run silent, run deep.

The effect of having this
legislation surface for committee mark-up
with negligible advance notice and with
minimal opportunity for deliberation and
debate is to maximize the chances of
Senate approval of a legislative
initiative that probably would not
otherwise pass muster. That
would be a serious mistake — for
American economic competitiveness and for
U.S. national security.

What is at Stake

Indeed, this benign-sounding bill
could have very adverse implications for
innovative Americans whose
constitutionally-mandated patent rights
may be seriously infringed by such an
effort to “streamline” the
patent process. Particularly distressing
is the fact that S. 507 would require the
publication of patent applications 18
months after filing — irrespective
of whether a patent has been issued or
not.

This would have the effect of denying
U.S. inventors protection against large
multinationals or foreign-owned
enterprises with a demonstrated interest
in stealing America’s technological
seed-corn. In War by Other Means,
a recently published study of economic
espionage and other unfair techniques
foreign governments and companies are
using to undermine U.S. competitiveness,
President Clinton’s chief economist,
Laura D’Andrea Tyson, is quoted as
estimating that the U.S. lost
$105 billion in potential sales from
1985-1989 due to patent theft by the
Japanese.

Threat to National Security

Of particular concern is the prospect
that such expedited publication of patent
applications — entailing the disclosure
of sufficiently detailed information to
produce working models — will not only
make wholesale patent infringement
likely. It would also increase
the chances that technology with
considerable potential in the national
security field may be released before
that potential is properly evaluated and
protected by patent secrecy orders.

For these reasons, the Casey Institute
of the Center for Security Policy joined
a number of leading figures in the
national security field in opposing the
House counterpart of the Hatch patent
“reform” bill, H.R. 400 when it
was considered two weeks ago. This group
included: House National Security
Committee Chairman Floyd Spence
(R-SC) and the chairman of that
Committee’s Military Procurement
Subcommittee, Rep. Duncan Hunter
(R-CA), as well as Rep. Dana
Rohrabacher (R-CA) who serves on
the House Science and International
Relations Committees, Phyllis
Schlafly, president of Eagle
Forum and Steven Shore,
president of the Alliance for American
Innovation. Their efforts succeeded in
stripping several of H.R. 407’s most
controversial provisions when it was
considered on the House floor.

Specifically, an amendment offered by Rep.
Marcy Kaptur (D-OH) exempted
individual investors, small businesses
and universities from the requirement to
publish patent applications within
18-months of filing. It also deleted a
provision that would have greatly
expanded the opportunities for
“reexamination” of existing
patents — an invitation to foreign and
multinational corporations endlessly to
challenge patents that have already been
awarded. The latter feature, which
remains in S. 507, would mean that small
businesses and individual investors, who
produce an enormous number of the
Nation’s technological breakthroughs,
could be blackmailed by the threat of
such assaults on their patents, and the
associated legal costs, unless the
patents are shared.

S. 507 Cannot Be Fixed

Unfortunately, if Sen. Hatch’s
strategy succeeds, S. 507 will retain
both the troubling provisions struck by
the Kaptur amendment and those that
remain in H.R. 400. A
particularly insidious example of the
latter is language granting “prior
user rights.” This would have the
effect of breaching the
“first-to-invent” philosophy
that has been the cornerstone of U.S.
patent law since George Washington signed
the first Patent Act in 1790. Instead, it
would push the United States toward a
“first-to-file” arrangement —
which amounts to a
“first-to-steal” formula —
that has characterized other nation’s
patent systems and contributed to the
relative paucity of important
technological breakthroughs produced
elsewhere. This change could force a
compulsory license on the patentee — and
likely violate the “exclusive”
ownership rights guaranteed in the
Constitution and essential to U.S.
innovation.

The big corporations, foreign
governments and enterprises that are
providing the muscle behind the effort to
eviscerate America’s brilliantly
successful patent system claim that
reform is necessary to stop an abuse
known as “submarine
patents.” These are patents
filed but left inactive until they are
surfaced to challenge subsequent
inventions whose applications touch in
any way on the original application.
While such patents — a term believed to
have been coined by the Japanese Patent
office — have been exploited from time
to time since 1965 when they were first
identified in the Patent Examiners’
Handbook, there are available remedies
well short of legislation that would
effectively undermine the entire U.S.
patent system. Indeed, submarine
patents can be prevented today, if only
the Commissioner of Patents utilizes his existing
authority and allows his examiners fully
to exercise U.S. law.

Another objectionable feature of the
House-passed bill and S. 507 is one of Al
Gore’s “reinventing government”
initiatives: corporatizing the
Patent Office. Ironically, the
current Patent Office may approximate the
ideal for government
bureaucracies — its costs are completely
covered by patent application and other
fees charged to inventors. In fact, this
organization actually netted a surplus
recently, returning $93 million to the
Treasury. Patent Commissioner Bruce
Lehman has big plans for his new,
“reformed” and
“corporatized” Patent Office:
He envisions spending up to $2 billion
(which would either come from
substantially increased fees, in effect a
burdensome new tax on invention) to
purchase new office space, furniture and
computers.

This legislation would also phase out
much of the civil service protection
currently afforded to patent examiners,
exposing them to politicization. The bill
would also allow contracting out of the
examination function which means that
foreign entities could be in a position
to determine U.S. property rights.
Incredibly, it would create an
appointed Board of Advisors, some of whom
could be employed by companies — foreign
or domestic — with a vested interest in
Patent Office business. S. 507 even
allows the Patent Office to receive
monetary or real property contributions.

Coming on the heels of a
Clinton Administration effort in the
spring of 1996 — the same period John
Huang, Charlie Trie and others were
brokering large and illegal Chinese
contributions to the Clinton reelection
campaign — to give the Chinese
government the entire U.S. patent data
base (including the technical support
necessary to exploit this wealth of
information) such changes clearly seem
ill-advised, if not recklessly so.⁽¹⁾
The opportunities for political
interference, corruption and malfeasance
at the expense of the national interest
seem endless.

The Bottom Line

The United States can ill-afford to
tube a patent system that has produced
technology which is the envy of the
world, particularly since it is clear
that such envy will prompt competitors to
use any deforming of the
protections currently in place to rip-off
the seed-corn of America’s economic and
military strength. Sen. Hatch’s
submarine legislation should be sunk
before it sinks the United States’ vital
technological edge.

– 30 –

1. See “U.S.
Patent Chief Negotiating to Give Chinese
U.S. Patent Data Base,” FDA Week,
Vol. 2, No. 14, 5 April 1996.