patents a year; show us why we need a 10-percent rather than a 5percent search file integrity review, and why search file integrity review is the best response of the system. Show us the data; that is all we are asking. Document the record in order for us to go forth with a solidly defensible budget that we can present to the public and to the Congress. Those are the questions that have needed further study and that is exactly what we have been doing over this past year, to prepare the documentation and reach a sound understanding of what levels and what specific actions will strengthen the Office.

Senator BAYH. Do you believe that when Secretary Baruch added his approval last year for the request of $14 million in additional funding for the PTO that this was done without sufficient examination of whether this money was going to be spent wisely or not. Dr. WOLEK. Senator, we have worked repeatedly on this question for a long period of time. Over that long period of time, for most of it, we have had to rely upon an internal system which we have come to understand has difficulties and needs renovation. At various times, our recommendations have been based upon results and data whose validity we afterwards came to question.

Senator BAYH. Is that answer yes or no, was a request insufficiently prepared, inappropriately presented, based on faulty data or not?

Dr. WOLEK. The request was based on incomplete data, yes.

Senator BAYH. Incomplete data, but when the President's Domestic Policy Review goes back and studies it, they come to the same conclusion. Did they use incomplete data?

Dr. WOLEK. The Domestic Policy Review came to the conclusion that work in those fields was useful. It did not state what the levels are. What we are doing now in preparation for the 1982 budget cycle is implementing those Domestic Council recommendations with specific targets as to levels of activity.

Senator BAYH. Well, we are playing ping-pong back and forth. I don't know how anyone can read that Domestic Policy Review's report and not understand its meaning. Page 1, proposal 1, “Upgrade the Patent and Trademark Office." You can't say you need outside review and then when the outside review agrees with what you have been told all along by the Patent Office, that the PTO has too narrow a view-your own experts reached precisely the same conclusion. The fact of the matter is, that somewhere in that structure, somebody is prohibiting those people who know how to run the office from running it as efficiently as possible. The President may veto this bill, but if he does, he is going to veto it over the personal advice of people like the Senator from Missouri and the Senator from Indiana. I think that this is important enough that the President should also hear from other than those people who are wed to continuing the process which everybody, even those people themselves, know is inefficient. Obviously the President has a lot of things on his mind, but before he vetoes this bill, he is going to know there are other thoughts than those that are reaching him through the channels. That is, I guess, one of the responsibilities we have. What he will do is his responsibility. I appreciate the position you are in.

Dr. WOLEK. The upgrading has already taken place in the 1981 budget submittal which is a direct response to the President's message that came out on October 31. To be specific, the kind of upgrading that has not been talked about internally, which is a strengthening of the management team, a modernization in the application of computer technology to office operations, various other types of activities. We are not waiting, not holding, not treading water. We are going forward, as you will see when the 1981 budget submittal comes to Congress next week.

Senator BAYH. What was the figure you got last year, the Patent and Trademark Office?

Dr. WOLEK. About $100 million.

Senator BAYH. And what are you going to request this year? Dr. WOLEK. I am sorry, I am not able to give you the specific numbers yet.

Senator BAYH. Can you tell us what has been recommended? Dr. WOLEK. No, sir, I have been embargoed from referring to specific numbers, but that will be available to you on Monday. Senator BAYH. I assume that is also true of the people at the Patent and Trademark Office. I must say I get the rather distinct impression that the people at the Patent and Trademark Office have been embargoed from giving us any ideas, that all of their ideas, their suggestions as to how you run the office efficiently have to be run through somebody above them who takes into consideration the broader perspective that you have mentioned so often. I understand the need for a broad perspective, but if the Congress and a significant constituency in this country think that the Patent and Trademark Office needs to be upgraded, then it seems to me that this influence must be felt.

Thank you, very much, gentlemen. I appreciate you coming up, keeping your cool and presenting your thoughts on the subject. Dr. WOLEK. Thank you, Senator.

Senator BAYH. We now have a panel of six former Patent and Trademark Office Commissioners-Donald Banner, C. Marshall Dann, Robert Gottschalk, David Ladd, William Schuyler, Jr., and Edward Brenner. Here we have a group of public officials who have served under the terms of six Presidents. Despite the fact you gentlemen all have a very narrow point of view, we appreciate you sharing that narrow point of view with us.

Who is the ringleader here?

Mr. GOTTSCHALK. There is no ringleader, as far as I know.

Senator BAYH. If we are not going to have a ringleader, my normal prejudice of starting with Purdue graduates would have to surface, and I would have to ask Mr. Banner to proceed, but I don't want to intervene.

Mr. LADD. I think we can nominate Mr. Banner. We yield to Mr. Banner.

TESTIMONY OF DONALD W. BANNER, MCLEAN, VA.; C. MARSHALL DANN, PHILADELPHIA, PA.; ROBERT GOTTSCHALK, CHICAGO, ILL.; DAVID L. LADD, CORAL GABLES, FLA.; WILLIAM E. SCHUYLER, JR., WASHINGTON, D.C.; EDWARD J. BRENNER, ARLINGTON, VA.

Mr. BANNER. Thank you very much. Mr. Chairman, I am pleased to be here today.

I was a little surprised to find that I was an outsider as you will see in a moment. I gave a speech as an outsider last August which clearly reflected my concern, some of the things Senator Danforth talked about-recession, foreign deficit payments, inflation. With your permission, Senator, I would like to ask that that talk be incorporated by reference here.

Senator BAYH. Without objection it will be inserted at this point. [The statement referred to follows:]

101

APPENDIX A

LUNCHEON

August 11, 1979

ADDRESS

Donald W. Banner, Immediate Past Commissioner of Patents and Trademarks

Shortly after I resigned from my office as Commissioner of Patents and Trademarks, Chairman Benson called, stating that he would like me to tell the Section of the more important conclusions I reached as a result of having been Commissioner. I accepted that challenge and am pleased to have the opportunity to speak with you this afternoon.

To do this I must discuss activities in two very different places, namely, that of the Patent and Trademark Office in Arlington, Virginia, and that of the Department of Commerce in Washington, D. C. This reminds me of Dickens' famous "A Tale of Two Cities." While the Dickens' tale was fiction, and my comments are factual, nonetheless I can succinctly summarize my experiences as Commissioner by using the Dickens' statement:

"It was the best of times. It was the worst of times. It was the age of wisdom. It was the age of foolishness. It was the epoch of belief. It was the epoch of incredulity. It was the season of light. It was the season of darkness. It was the spring of hope. It was the winter of despair." Let me be more specific. There is so much useful work to be done, so many things that should promptly be accomplished to improve the nature and strength of our country. As we all know, we are in an inflationary period in which the annual inflation rate is about 13%; the government economists tell us we are in a deepening recession; last year the balance of payments deficit was a record 28.5 billion dollars. On June 28 of this year the New York Times said,

“Last year, trade in manufactured products was in deficit by 6 billion dollars. A deteriorating performance in this sector has been the major cause of the decline in the overall trade balance since 1975.

"In 1970 West Germany replaced the United States as the world's largest exporter of manufactured goods. Today, Germany is close to replacing the United States as the leading exporter of all goods, and Japan is threatening to drop the United States into third place among exporters of manufactured products.”

Most everyone agrees that a vigorous, innovative climate in the United States would assist in all of these areas; that is to say, in reducing inflation, in lightening or eliminating the recession and in improving the balance of payments deficit. There is nothing more important for us to address for these are fundamental challenges to our way of life. Every reasonable step to solve these problems must be taken. Furthermore, almost everyone agrees that the role of the patent and trademark systems in creating such an innovative ambience is vital. If, however, we look to determine just what is the policy of the United States with respect to the patent and trademark systems, we become aware of some rather disturbing facts. For example, in the June 13 Congressional Record Senator Schmitt said.

"Despite the obvious significance of the Patent and Trademark Office

to the innovative process and national productivity, real dollar funding for the Office has been steadily declining over the past three years.” We all know that unless the inventor --and particularly small business-can have reasonable certainty that, once granted, his patent is (1) valid and (2) enforceable, then the rights conveyed by a patent are illusory and, ultimately, the patent system becomes a cruel hoax. Despite this fact we are still today permitting gradual degradation of the integrity and completeness of the patent search file, the principal source in determining patentability of inventions; there are serious limitations on efforts to improve case of access to the search file by restructuring the many obsolete classifications and instituting modern mechanized search and search-assist systems; and we are not able to institute a system to ensure comprehensive inclusion and control of foreign patents in the search file. Furthermore, and despite the fact that technical literature is both proliferating at an exponential rate while at the same time becoming more complex, the average time that an examiner devotes to an application today is substantially less than it was in the past. It is estimated that 15 years ago 20 to 30% more time was allotted to every application, and 30 years ago an even greater amount of time was allotted to such examination. This dire neglect of the Patent and Trademark Office is also obvious in that many patent examiners must send out their Office actions in longhand, and there are not sufficient funds provided so that the United States of America has a duplicate copy of its official record of the progress of a patent application through the Office, the file history. It is astonishing that throughout the years the Patent and Trademark Office has been so underfunded that it could not make a microfilm copy of the official record of proceedings in the Patent and Trademark Office for its permanent file, especially in view of the fact that the paper copy is placed in the Public Search Room upon issuance of the patent whereupon sections of that official record frequently disappear. Indeed, it is not unheard of for the whole file wrapper to totally disappear.

Furthermore, despite the need for patents to issue as promptly as possible so that the technology becomes available, so that small businesses can obtain financing or licenses, so that issuance of patents in other countries to foreigners on the same technology is prevented, so that research and development is spurred and for the many other reasons which we could catalog, in this fiscal year the total number of patents which will issue is over 20% below that which issued last year due to budgetary problems. At the same time the average pendency of a patent application is increasing.

In the trademark area, the situation is approaching disaster proportions, and Sidney Diamond may have something to say in more detail on this subject during his luncheon address on Tuesday. Suffice it to note that the number of trademark examiners to be on board in 1980 will be the same as that in the mid-1970's while there will be 65% more applications to handle. The pendency to first action will be 13 months in 1980, 16 months in 1981, and rising from there unless somehow checked. We need not, therefore, probe the statistics of the trademark problem any further at this time.

What are we to conclude from the above? 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 move