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when the Patent and Trademark Office cannot even hire to fill present vacancies but must try to process more and more applications with less and less staff, a clear message is sent to our inventors that the Government does not take them very seriously despite all of the rhetoric about lagging innovation and productivity.

We are all familiar with the statistics indicating the present sorry state of American ingenuity. Statistics like the 47-percent decline in our patent balance between 1965 and 1975-while Japan's patents have increased nearly 100 percent in every major industrial category-and the fact that 35 percent of all patents issued in this country are going to foreign inventors, are pretty good indications that something has gone wrong. There are many explanations for this disturbing trend, yet virtually every expert that I have talked with has mentioned the crisis in the Patent and Trademark Office as a significant contributing factor to our decline in innovation and productivity.

In a recent speech to the American Bar Association, Mr. Donald W. Banner, a former Patent and Trademark Commissioner, summed up the situation like this:

In my view we are faced with a slowly but steadily declining Patent and Trademark Office. Not only are we failing to make the PTO a model office, we are failing to provide the necessary maintenance. If we do not promptly reverse this direction of movement, it shall soon be infected with an administrative dry rot condition, rendering it moribund.

This is not an idle warning from someone who is speculating about something that he does not really understand, but the thoughtful statement of a man who has actually tried to update and reform the patent and trademark system from within and has been frustrated in his attempts.

The problem quite simply is that the Patent and Trademark Office is never able to directly make its needs known, but must communicate with the Congress and the Office of Management and Budget through the Commerce Department which has not shown much sensitivity to its needs. The Patent and Trademark Office budget as it is presented to the Congress does not reflect the opinions of the people who are actually running the system. The Patent and Trademark Office has been seriously underfunded for years, yet this simple fact has never been clearly stated in the budget requests that we consider. The real needs of the Office became evident to me when I received replies to the written questions that I had submitted during the presentation of the fiscal year 1980 Commerce Department authorization about the situation in the Patent and Trademark Office. The answers that I received were shocking. I discovered that not only are a large number of patents missing from the files, but that only a small percentage of the files are covered by a security system to prevent theft and misfilings. The Patent and Trademark Office is not able to hire the needed personnel to fill existing vacancies-the number of trademark examiners in 1980 will be the same as in the mid-seventies yet they are expected to process 65 percent more applications. Patent examiners have 20 percent to 30 percent less time to spend on patent applications than 30 years ago which means that all too often a patent holder is shocked to find his patent struck down by the courts because of data that was not considered by the patent examiner in his hurried search of previous patents and related

materials. Inventors and businesses must also wait longer and longer for their patent and trademark applications to be processed. These are extremely serious matters to the inventor or business which is competing with increasingly strong foreign competitors who have dependable patent systems to insure the protection of their inventions.

The answer is not to blindly throw more money into the Patent and Trademark Office and hope for the best, but to undertake a fundamental reform which will insure that the Office will be able to carry out its mission as effectively as possible. The Congress must be able to find out directly what the real needs are and to consult directly with the people who are actually carrying out the day-to-day duties of the Office without any intermediaries. As long as any communication from the Patent and Trademark Office has to filter through the Commerce Department bureaucracy this will be impossible. As former Commissioner Banner said recently.

The PTO has nothing to hide and would welcome close scrutiny by the Congress and OMB. It would thrive in the bright sunshine of such scrutiny, out of the shadow of the Department of Commerce. The mission of the Patent and Trademark Office is clearly set by the statutes under which it performs. The Department of Commerce cannot and does not assist the PTO in carrying out its functions under those statutes in any way which cannot be better done by the PTO itself. The added cost of the PTO as an independent agency would be minimal, estimated at about $150,000 a year, but this would be well spent in achieving a much more efficient operation than we have today.

This view has been seconded by most of our former Commissioners, all of whom are with us today except for Mr. Watson who was unable to be here today.

During its history the Patent and Trademark Office has been under the auspices of the Departments of State, Interior, and Commerce. Its technical function quite clearly does not fall within the mission of any of these agencies. My bill will not create any new bureaucracy, but will insure that the Patent and Trademark Office will be able to improve its efficiency and give American inventors and businesses the services that they deserve.

We should remember the words of Abraham Lincoln-a patent holder-who said that "the patent system adds the fuel of interest to the fires of genius." If we stand idly by and permit that fuel to run out we will suffer serious economic consequences that are even now becoming apparent. Even more seriously we will be cheating our children and grandchildren of the rich heritage that we ourselves have been enjoying. To a great extent we are all still living "on grandfather's money," because the high standard of living that we have is the direct result of the unprecedented wave of inventiveness of the last 80 years. If we are not to squander this inheritance we must act forcefully to shore up our patent and trademark system which has served us so well in the past as an incentive to American inventiveness.

As I mentioned before, the committees are certainly honored today to have as witnesses in addition to a spokesman from the Department of Commerce, every living former Patent and Trademark Commissioner with the exception of Mr. Watson whose health prevented him from attending. I think that the views of these former Commissioners certainly deserve very careful consideration of the committees. I appreciate having the opportunity of

receiving your thoughts gained from years of experience on the desirability of having an independent Patent and Trademark Office.

I yield to my friend and colleague from Missouri.

OPENING STATEMENT OF SENATOR DANFORTH

Senator DANFORTH. Thank you, Mr. Chairman.

I am pleased to be one of the cosponsors of S. 2079, which you have introduced.

The bill is simple. First, it would remove the Patent and Trademark Office from the Commerce Department and establish it as an independent agency. Second, it would create a 6-year statutory office for the Commissioner of Patents and Trademarks.

I am very concerned about the sorry state of American technology. I am convinced that American industry is not committing sufficient resources to research and development, and I am convinced that the Government is not doing enough to encourage such efforts. Therefore, on March 23 of last year, I introduced S. 700, a bill to provide a 10-percent tax credit for research and development expenditures and on May 3, consistent with that effort, I introduced S. 1065, a bill to provide a tax credit to corporations which give colleges and universities grants earmarked for basic research. But the incentives which Congress extends to industry to invest in research and development can be seriously impeded if industry is unable to count on the assistance of the U.S. Patent and Trademark Office. Increasingly, it appears that industry cannot depend on the Patent and Trademark Office. Increasingly, it appears that the Patent and Trademark Office is incapable of doing this job well. Reports reach Congress that patent filings cannot be located, that security is dismal, that research by overworked patent officers is rushed and unreliable, and the blame is placed squarely at the feet of the Department of Commerce.

Interestingly enough, these charges come not only from the Patent bar and industry, but also from former Commissioners of the Patent and Trademark Office, some of whom have been very outspoken in their criticism of the Department of Commerce.

As indicated earlier, the bill we consider today proposes that the Department of Commerce be stripped of its administrative control over the Patent and Trademark Office and be made an independent agency capable of dealing directly with the Congress.

Further, it provides for stability in the administration of the new agency by creating a 6-year statutory office for the Commissioner of Patents and Trademarks.

I do not join as a cosponsor lightly, but increasingly it appears that this is the only course we can take if we are to have an effective and efficient Patent Office.

Thank you. Mr. Chairman.