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1) Improving the Efficiency of the PTO is in the Public Interest. Commissioner Ladd: Our immediate business at hand, of course, is to discuss whether the Patent Office should be made an independent agency, but this has been a very encouraging meeting to hear statements from both of you [Senators Bayh and Danforth] about the need of encouraging technological innovation and improved productivity. This is an urgent problem. Business Week, in the current edition indicates the American standard of living in real terms has now begun to decline; and so I appeal to you and to the other Members of Congress and the Government to get on with the business of stimulating the creation of wealth through increased productivity. The efficient operation of the Patent and Trademark Office and the patent system are an important element in encouraging research and innovation.

Commissioner Schuyler: When the United States began to lose its position of leadership in technological development in the 1950's, it has been blamed on many different causes, but never on the lack of confidence in our patent system or the submersion of the Patent and Trademark Office in the Department of Commerce. Whenever there are discussions about restoring the technological development activities in this country, the conversation always turns to financial incentives such as government subsidies or tax advantages. While mention is made of strengthening the patent system, constructive suggestions are never implemented. It is very apparent that the lag in technological development in this country has followed the deterioration of the position of the Commissioner of Patents, and the Patent Office in the Government organization. The situation of the Patent and Trademark Office has been going down hill steadily since World War II until it is now completely submerged in the Department of Commerce and has very little identity of its


This Congress has an opportunity, by enacting 2079, to take a major step in restoring the patent incentives which brought this country from a developing nature to the leadership of the world in technological development over the span of a century and a half. Regaining that leadership will not happen over night, but it may never happen unless the Patent and Trademark Office is restored to the position in the Government that it occupied before we started downhill. Enactment of S. 2079 is an opportunity without any downside risk.


The "Submersion" of the PTO in the Department of Commerce and the Effects.

Commissioner Dann: The Department of Commerce often impeded our efforts and rarely was of assistance to the Patent and Trademark Office. Because the Office is a bureau of the Department of Commerce, a great many actions could be taken only after approval by or with active participation by the Department. At best, this involved delay, while quite often it amounted to obstruction of what we viewed as very constructive undertakings.

Many of the problems resulted simply from having additional layers of review. For example, on legislative matters, not only was it necessary to have clearance from the Office of Management and Budget before views were presented to the Congress, but it was also necessary for the Patent and Trademark Office to go to the Department of Commerce before there could be any communication to OMB. Sometimes Patent Office personnel had direct contact with OMB, though often they did not. The same thing was true on budget matters. On personnel matters requiring the approval of what during my tenure was known as the Civil Service Commission, it was invariably necessary to go first through the Personnel Office of the Department of Commerce. Internal Patent and Trademark Office organization changes could be made only with approval from the Department.

Clearance with the Department did not ordinarily mean the approval of one person. Instead, in routine bureaucratic fashion, each approving person had a staff of persons reporting to him who first had to review the matter at issue. In all the paper-shuffling, there was rarely a sense of urgency.

Commissioner Banner: The Patent and Trademark Office, totally subordinate to the Department of Commerce, is in danger of becoming second rate; it has not been able to perform up to the standard the American people have a right to expect. The main reason for this failure, in my view, can be obviated by making the Patent and Trademark Office an independent agency.

The PTO is a complex machine, the functions of which are set out by the patent and trademark statutes. It is not--and should not be--political. It has responsibilities which are both domestic and international. It should be moved into the sunlight of direct scrutiny, both by Congress and by OMB. It should have an experienced and capable Commissioner at its head appointed for a fixed term of 6 years so that he can adopt programs, carry them out, and be responsible for their results.

It is a matter of putting the Commissioner in a position in which; he can freely and frankly present his views to Congress and OMB. It is a matter of formulating domestic and international policy of the United States in patent and trademark matters in a manner which is informed, thorough and expeditious.

Commissioner Gottschalk: I am convinced that the deterioration of the Office in recent years, in fact, stem largely from domination and control of the Office by the Department of Commerce which has deprived it of the opportunity to conduct its operations with dignity, dispatch and efficiency. I believe that it is high time that the Office be restored to status which befits the nature and importance of its mission, and that it be permitted to function with the efficiency and effectiveness of which it is capable.

And I would second the remarks expressed by Commissioner Dann with respect to the difficulties and delays encountered in the Office because of the need for Department of Commerce involvement and approvals.

This entire subject has caused much concern over a period of many years to many people. I truly hope that, at this juncture and at long last, we can resolve the matter as proposed in S. 2079.

I think it is worth noting that, for such reasons as have been mentioned here this morning, Senators Hart and McClellan, among others in the Congress, have in the past proposed establishment of the Patent Office as an independent agency.

In June 1973, Senator McClellan in this connection stated in a report to the Senate that:

A chronic unsatisfactory relationship has existed between the Department of Commerce and the Patent Office, and that this contributed to frequent changes in the Office of the Commissioner of Patents and the instability in the administration and programs of the Office.

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Commissioner Gottschalk: Reference has been made to the need for stability in management. This, I believe, is essential. Stability, as badly as we need it, has been woefully lacking. That has been made amply clear. The provisions of S. 2079 which provide for a fixed term of office for the Commissioner, and for removal of the Commissioner only by the President with the consent of the

Senate should go far to provide the stability which the Office needs so badly and which it has lacked.

Such a change would be most welcome. In fact, the average tenure of a Commissioner in recent years has been shorter than the average time it takes a patent application to be processed through the Office.

Commissioner Dann: Twenty years ago Robert Watson was the Patent Commissioner. In the time since he left office and before the present incumbent, Commissioner Diamond,was sworn in, six other Commissioners came and went. Their average time in office was less than three years. Considering that it takes quite some time for any new person to become acquainted with all the detailed activities of the Patent and Trademark Office and to become effective in international treaty discussions, it would be very much in the public interest to arrange for longer tenures. The fixed term of six years provided in S. 2079 seems to me quite a satisfactory time, long enough to allow the Commissioner to become fully effective, but not so long as to prevent the introduction of new viewpoints when that seems appropriate.

Commissioner Brenner: With regard to the matter of the 6-year term, I think that would be a very important step forward. I think one of the major problems the Patent Office has had has been the lack of continuity. When there are changes of Commissioners, the office loses momentum.

You can just observe a loss of productivity, a breakdown in our relationships internationally with other patent offices. I think all of this could be cured by a 6-year term.

4) The Nature and Unique Function of the PTO

Commissioner Schuyler: Almost all studies,, including the report of the Hoover Commission, agree that quasi judicial functions should be performed by independent agencies or commissions. While most of these agencies and commissions are regulatory in nature and impose controls on American industry, the Patent and Trademark Office provides incentives for industry to spend the time, money and effort necessary to succeed in research and development projects. These are incentives that do not cost anything. They are not monetary in nature. They do not reduce the Government revenues. They stimulate rather than hamper industry. Quasi judicial functions performed by the Patent and Trademark Office should be established in a independent Patent and Trademark Office as provided in S. 2079.

Commissioner Banner. This daily activity of the Patent and Trademark Office
in granting and, in certain cases, withdrawing substantive rights to persons of
all classes throughout this country as well as persons in almost all other
countries throughout the world, and this selection by the Patent and
Trademark Office of the particular one of a plurality of claimants to patent
claims or trademark registration obviously constitutes quasi-judicial action.

It is submitted that this conduct of quasi-judicial nature which constitute the basic activity of the Patent and Trademark Office, and which is of pivotal importance to the strength and industrial vigor of our nation, together with the historic role of the Patent and Trademark Office -- founded on an express Constitutional provision and operating throughout our history clearly makes the Patent and Trademark Office unique.

Commissioner Dann: The principal thing which distinguishes the PTO from
most bureaus throughout the government is its quasi-judicial authority. It is
no more appropriate for the PTO to be part of a cabinet department than it
would be for the Federal Trade Commission, the International Trade
Commission, the National Labor Relations Board, or any of the other
independent boards and commissions that adjudicate rights between members
of the public.

S. 2079 was supported by the AIPLA, the American Bar Association, and numerous local and regional patent law associations. The bill was also supported by the Aerospace Industry Association, American Chemical Society, Chemical Manufacturers Association, Pharmaceutical Manufacturers Association, National Security Industrial Association and the United States Trademark Association. S. 2079 was not acted on by the Senate committees.

On September 9, 1980, the Committee on the Judiciary of the House of Representatives voted favorably on H.R. 6933 which, inter alia, would have established the PTO as an independent government agency. House Report 96-1307, Part I. The bill was sequentially referred to the Committee on Government Operations.

The Committee on Government Operations held a hearing on H.R. 6933, at which the Secretary of Commerce "strongly opposed the removal of the agency from the Department." House Report 96-1307, Part II at page 4. No witness from the private sector testified at the hearing. The committee agreed with the Secretary of Commerce.

It is expected that if an independent Patent Office were established with its own administrative hierarchy, and which must make available the facilities and services that are now being provided by the Department of Commerce, such a reorganization would be a very costly operation. Furthermore, taking the Patent Office out of Commerce will not necessarily enhance its efficiency or improve its services to the business community and

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