We Depend on Invention: An Answer to Thurman Arnold

by LAWRENCE LANGNER

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I HAVE met Thurman Arnold only once — in the Board Room of the House Committee on Patents, on March 11, 1941. Mr. Arnold was accusing our industrialists of hampering the Army and Navy by means of patents. The subject of ethyl gasoline came up for discussion — an invention which by adding a mixture of tetraethyl lead and other compounds to gasoline has revolutionized both the automobile and the airplane industry, and has created more horsepower than fifty Boulder Dams. At this time I heard Mr. Arnold make the following astonishing remark: “Now whether these [ethyl] patents were good, I do not know. It struck me at the time, what else could you do with tetraethyl lead but put it in gasoline? You can’t put it in coffee.”

I remembered when a brilliant young scientist, Tom Midgley, in Dayton, Ohio, was looking through a window he had made in an engine to try to find a way of stepping up its horsepower. I thought of the years of patient experimenting by Midgley and his staff in testing out the properties of over twenty thousand compounds until he hit upon the perfect formula of tetraethyl lead and substances which doubled and then quadrupled the horsepower of all the gas engines in the world.

I remembered the difficulties of placing the new invention, called ethyl gasoline, on the market; the millions spent in overcoming obstacles; the refusal of automobile companies to coöperate; the search over the Mediterranean and Dead Seas for sources of supply — ending in the building of great ships for extracting chemicals from the ocean.

I remembered the time when the chemists of the country honored Tom Midgley by making him President of the American Chemical Society — the time when he was given the Priestley Medal at Atlantic City in 1941, the highest award a chemist can receive.

“What else could you do with tetraethyl lead but put it in gasoline? You can’t put it in coffee.” Thus spoke Thurman Arnold, self-appointed author of a brand-new patent law for America. And if anyone questions Mr. Arnold’s knowledge or experience for the task, he will find justification for his doubts in another statement Mr. Arnold made at the same hearing: “I do not feel myself competent to testify as to the purely patent aspect of the patent law.”

It is Mr. Arnold’s duty, as Assistant Attorney General in charge of the Antitrust Division of the Department of Justice, to enforce the antitrust laws — not the patent laws. The American people, through action of Congress, have long ago decided that large corporations shall not use their power to oppress the small businessmen by monopolistic restraint of trade. Mr. Arnold wins our admiration for the consistency of his attacks on monopolies. In addition to attacking the large corporations, he has had the courage to strike at the monopolistic practices of labor unions. But, in attacking the patent system, he has shown himself unable to distinguish between the type of monopoly which takes from the public something which it possesses, and that which takes nothing from the public, but gives it something which it did not possess before. Thus the patent or copyright is not a monopoly in the sense that large corporations or labor unions may be monopolies, for the inventor or author, in exchange for the patent or copyright, gives the public something which did not exist before: a new invention or a new work of art. During the term of the patent or copyright, the public must refrain from infringing; but after the term has expired, the invention or work of art can be used freely by the public. Without the patent system, there would be little or no incentive for inventors to invent or for foreigners to bring their inventions to this country. According to the National Industrial Research Council, the enormous sum of over $300,000,000 in capital is invested annually by research departments of American corporations and by individual independent inventors. The patents obtained upon the resulting inventions represent insurance policies for the return of this capital to the progressive industrialist or inventor who expends it.

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Because of Mr. Arnold’s crusading attitude towards big business and the labor unions, the public believes that, in attacking the patent system, Mr. Arnold is merely continuing his fight against monopolies which are harmful to the interests of the public. In my opinion, quite the contrary is the case. I believe that this crusade of Mr. Arnold’s is not only detrimental to the public interest but will also be detrimental to the war effort. Mr. Arnold’s “cup of coffee" attitude towards inventors is no casual position. He is out to destroy the fundamentals of the American patent system. This is evidenced by the fact that he has prepared a Senate bill (S.2491) which, as will be explained later, would have the effect of discouraging not only invention by individual inventors, but also the expenditure of large sums in research departments by corporations.

We depend on our American inventors and the organizers of our inventors, the industrialists who have established the research laboratories of our industries, which are bending every effort to help win the war. This is no time to harass them.

But from Mr. Arnold’s point of view it is the best opportunity he has yet had to “cauterize big business.” The technique is simple: it is to accuse the large industrialists of submitting to Germany in the matter of patents and thereby hampering our war efforts, and then to use the ensuing public wrath and indignation as a smoke screen to wreck the patent system.

The great prosperity of industrial America, our high standards of living for labor, our ability to produce more wartime goods than all the other nations put together because of our manufacturing processes and quantity production machinery — all this is largely due to the encouragement given our inventors, research workers, and industrialists under the patent system, which Mr. Arnold now seeks to emasculate.

After the last war it was the enormous new development of the radio, the automobile, the motion pictures, the chemical and metallurgical industries — all stimulated under the patent system — which ultimately absorbed our returning soldiers, sailors, and war workers; and it was our new inventions in all classes of machinery which built our export trade to its highest peak in our history. Destroy our incentive to invent after the present war, and you destroy one of the most potent forces for the reconstruction of the shattered world. Emasculation of the American patent system will mean the decline of American invention, and this in turn will be followed by the decline of industrial civilization as we now know it.

Mr. Arnold accuses the DuPont Company, Bausch & Lomb Company, General Electric Company, Standard Oil Company of New Jersey, Aluminum Company of America, and a number of other concerns of having been engaged in conspiracies with German “cartels” or “combines,” and charges that, as a result, American factory capacity to manufacture important war materials has been restricted if not largely prevented by the Germans. Mr. Arnold further claims that these manufacturers have been duped by the Germans and have been playing Hitler’s game by holding up American war production.

If Mr. Arnold’s charges are true, then these industrialists have played the role of near-traitors, and the public is entitled to know why they are permitted to have control of billions of dollars of war contracts.

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Let us examine Mr. Arnold’s major contention: that our American manufacturers have been duped by the Germans and have been playing Hitler’s game by holding up American war production. As Senator Bone has pictorially expressed it: “Our industrialists have been holding hands with Hitler.”

But it is as plain as a pikestaff that it is not the Germans who have duped the American manufacturers, but the American manufacturers who have duped the Germans. For, as Mr. Arnold states, most of these German inventions of strategic materials have proved to be extremely valuable to us.

I affirm positively, without fear of contradiction and on Mr. Arnold’s own testimony, that under the beneficial operation of our patent system these same American manufacturers whom Mr. Arnold vilifies secured from Germany knowledge of the following strategic materials, which I list from Mr. Arnold’s own catalogue: —

Tetracene, a percussion explosive. Information obtained from Germany by the Remington Arms Company, a subsidiary of the DuPont Company.

Optical glass and instruments. Information obtained from Germany by the Bausch & Lomb Company.

Plexiglass, a plastic glass used for airplanes. Information obtained from Germany by Rohm & Haas.

Carboloy, a tungsten steel alloy used for hardening steel. Information obtained from Germany by the General Electric Company.

Buna rubber, a synthetic rubber substitute. Information obtained from Germany by the Standard Oil Company of New Jersey.

Magnesium, a substitute for aluminum. Information about new processes obtained from Germany by the Aluminum Company of America.

Atabrine, a substitute for quinine. Information obtained from Germany by the Winthrop Chemical Company.

100-octane aviation gasoline. Information on which American process is based obtained from Germany by the Standard Oil Company of New Jersey.

Synthetic toluol for TNT. Information on which American process is based obtained from Germany by the Standard Oil Company of New Jersey.

Yet Senator Bone tells us that the men who got these inventions out of Germany, were “holding hands with Hitler!”

I know of very few instances where Germany has profited in the war from inventions secured from us — largely because our inventors and industrialists were not busying themselves on inventing strategic materials at the time when Hitler was urging his inventors and industrialists to prepare for war. It must also be remembered that our industrialists, in bringing these inventions over here, had to risk millions of dollars in the building of plants in this country. Moreover, as mentioned above, some of these inventions, notably 100-octanc gasoline and synthetic toluol, developed by our own inventors and industrialists were based upon information received from Germany. From this list and from the publicity which has been given to these inventions, the impression may exist that the best inventions are “made in Germany.” This impression is quite erroneous. I believe that large numbers of inventions of considerably greater value to our war effort than those listed above have been made by our inventors and in our research laboratories - thanks to the stimulation of our patent system.

Lest there be any doubt that these German inventions were brought to this country by the American corporations now under fire, let us look at the Senate records. One small corporation located in Philadelphia, Rohm & Haas, made the statement before the Senate Committee that, but for their contract arrangements with the Germans, “there would not now be an inch of Plexiglass in American bomber or fighting planes today”; while the Remington Arms Company, which made its explosives agreement with the Germans in the year 1929, stated that “but for this agreement Tetracene would not be available at all to the United States Government.”

Even a child can understand that we are better off with the knowledge of these inventions than we should be without them, Mr. Arnold has never directly or indirectly dealt with this reality. He has discolored it by the statement that, in bringing over these inventions to the United States, the Germans, by means of agreements under patents, produced a shortage of these materials here.

His contentions can be divided into two parts: (1) that the Army and Navy have been directly prevented from securing war supplies by means of patents; and (2) that our manufacturers, and the public in general, have been prevented from receiving adequate supplies of these strategic materials because the factory facilities of the United States have been restricted, as compared with what they would have been had it not been for the existence of patent agreements with the Germans.

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The first part of Mr. Arnold’s contention has been denied by both the Army and Navy. Under the law of June 25, 1910, as amended July 1, 1918, our government, which includes the Army and Navy as well as its contractors (and, by court interpretation, its subcontractors), need pay no attention whatsoever to patents, and may use any patented invention without so much as a “by your leave" to the patentee. This is so whether the country is at war or at peace. If the government or the contractor refuses to pay a royalty, the patentee’s only remedy for securing just compensation is a suit against the government (and not against the contractor) in the Court of Claims. Some of the claims which were lodged against our government by patentees for the use of their inventions during the last war are still pending before the Court of Claims.

When Mr. Arnold was trumpeting forth his same charges in the newspapers a year and a half ago, Chairman Kramer of the alert House Committee on Patents prepared a bill (H.R.3360) entitled “A bill prohibiting issuance and enforcement of injunctions on patents when necessary in the interest of national defense.” Mr. Arnold was invited to appear before the Committee and tell them how the patent system was causing shortages and whether this bill would help him. He did so, but he failed to convince this Committee, made up of competent lawyers and businessmen, that any change in the patent law was necessary.

Mr. Fritz Lanham of Texas, one of the ablest Congressmen in the House, was quick to understand the situation when Mr. Arnold drew comparisons between the great increase in production in Germany as compared with the alleged restricted production in this country. He put the matter to Mr. Arnold in a nutshell: —

MR. LANHAM: IS not this increased production that has come on through the years in Germany due to the fact that, so to speak, they have been looking forward and preparing for Der Tag, and that over in this country we have been making no such preparations and have not had, with the normal demand, any reason to increase our production so greatly?

MR. ARNOLD: I think, if you mean that we have been asleep at the switch to permit situations like magnesium, optical instruments, tungsten carbide and aluminum, and all of these things, to occur - I think that we have been asleep at the switch, and the bill is something which I think might wake us up by putting a direct responsibility on the appropriate departments of the government to see if we could keep awake.

Neither of the “appropriate departments” (Army and Navy) seemed to agree with Mr. Arnold, in 1941, that any such shortages or bottlenecks as existed in their direct supplies were due to the misuse of patents. I quote the following from the examination of Major Francis Vanderwerker of the Patent Section of the War Department: —

THE CHAIRMAN: At the present moment the War Department is not being hindered in any way by any industry with patents in the manufacture of any devices that the War Department finds it necessary to have?

MAJOR VANDERWERKER: At the present time there is no situation in the War Department which would require legislation of this type.

The Navy was not as clear as the Army on the subject of shortages. Lieutenant Commander Caldwell told the Committee that there might be some shortages, and difficulties insofar as the subcontractors were concerned, but he could not be sure. He was questioned by Chairman Kramer for a single instance in which the work of the Navy had been hampered by patents. I quote the following: —

THE CHAIRMAN: We have been at this for eight months, and we have not been able to disclose any.

LIEUTENANT COMMANDER CALDWELL: I am not in a position to disclose any, either.

Nor did the Office of Production Management agree with Mr. Arnold, for its counsel, Mr. O’Brian, wrote the Committee as follows: —

A systematic inquiry made among members of our staff reveals no particular instance in which thus far production for national defense has been unduly delayed or hampered by the assertion of patent rights.

At this hearing of March, 1941, before the House Patents Committee, Mr. Arnold produced a great deal of the testimony which is now being considered by the Senate Patents Committee. He paraded a list of miscreant manufacturers of aluminum, tungsten carbide, glass, and magnesium; to them he has now added some new names, including the Standard Oil Company of New Jersey, but he also dropped some accusations on which he leaned very hard a year or so ago.

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One of these was a claim that the Bausch & Lomb Company, by agreements with German manufacturers of optical instruments, had impeded the war effort. Possibly the reason Mr. Arnold is no longer so vociferous on the subject is that Secretary of War Henry L. Stimson, under date of August 20, 1940, addressed to the Bausch & Lomb Company in Rochester, at the very time that Mr. Arnold was accusing the company in the press of hindering the war effort, a letter from which I quote the following: —

The relations between the Bausch & bomb Company and the War Department extending over a long period of years have been most satisfactory from every standpoint. At this critical time the War Department has complete confidence in your company, for the excellence of workmanship, productive ability, and patriotic coöperation.

But in case anyone may be skeptical that Mr. Stimson’s letter might have been written without the full knowledge of his staff, let me again quote from the interrogation of Major Vanderwerker by Chairman Kramer on the same subject: —

CHAIRMAN KRAMER: I might ask you, Major Vanderwerker, — that is, if you know, - in the Bausch & Lomb situation, had the War Department any interference there or were Bausch & Lomb at all times assisting in every way with the production and manufacture of their articles so that the War Department was getting all of the benefits of the needs of their bombsights and whatever other articles that they manufactured?

MAJOR VANDERWERKER: From all of the inquiries that I was able to make in the War Department with respect to the Bausch & Lomb situation, I failed to find that we had any trouble at all, sir.

Now contrast this clear testimony of the Secretary of War and Major Vanderwerker with the statement of Thurman Arnold made before the same Committee: —

THURMAN ARNOLD: We believe that as a result of the illegal use of the patent monopoly of Bausch & bomb we are now in the present serious situation of a shortage of military equipment.

Who knew the most about the shortage of military equipment in March, 1941 Secretary of War Stimson and Major Vanderwerker of the War Department or Mr. Thurman Arnold of the Department of Justice?

There is here the indication that Mr. Arnold did not know what he was talking about. It came from Mr. Arnold himself, for during the same hearing he made the following remark: “I am not engaged in enforcing the patent laws; I am not engaged in interfering with the Army and Navy and their requirements; in fact, I am so busy that I do not know what they are.”

So in March, 1941, when Mr. Arnold was in the headlines all over the country about the shortages of the Army and Navy, he was so busy he did not even know what they were!

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One would imagine that since March, 1941, Mr. Arnold would have had the time to find a considerable number of other essential war materials in which shortages directly due to patents had taken place. He introduced the case of Plexiglass, a nonbreakable plastic glass used in the front-end housings of aeroplanes and extremely important for the war, to the Senate Patents Committee and accused the small Philadelphia concern which had obtained these inventions from Germany of hampering production. The concern replied that it had licensed a number of other United States manufacturers, and fold the Senate Committee that the production in this country was so great that the concerns handling this material were able to supply all the needs of the United States army and navy, as well as the British, thus releasing some of the British Plexiglass to be shipped to the Russians.

On a Saturday in May there was a dramatic scene at the Senate hearing. Mr. Arnold, searching as ever for a real shortage directly attributable to a patent, produced from his vest pocket a small gadget and held it up before the expectant Senate Patents Committee. Eyes bulged and breasts heaved. “ This,” said Mr. Arnold to the spellbound throng, “is a patented device for holding down the cowling of airplanes. At one plant eighty airplanes were delayed in their production; at another plant the same thing happened to twenty Flying Fortresses. . . . I do not say there may not be other factors involved in the shortage of this screw. . . . I do say that the patent problem is the center,”

According to an eyewitness, broad sighs of relief came from the assembled staff members of the Antitrust Division. Congratulations were exchanged all around. Here, after the expenditure of tens of thousands of the taxpayers’dollars and the printing of millions of words, Mr. Arnold had been able to pull the rabbit from the hat.

Alas for Mr. Arnold! A few days later a timid little man appeared before the Committee, accompanied by his lawyer. He was the inventor, William Dzuz, and he told a sad story. There were three such fasteners on the market and all were used by the airplane companies. He had been able to supply all his orders until Pearl Harbor, but, in trying to increase his facilities after Pearl Harbor, he could not get the screw machines and materials for lack of the proper priorities. Feeling that the airplane companies could do better than he could, he offered them a royalty-free license to make them.

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Mr. Arnold’s second contention is that our manufacturers have been prevented from receiving adequate supplies of strategic materials because our factory facilities have been restricted as compared with what they would have been had it not been for the existence of patent agreements with the Germans. Space does not permit me to deal with all of Mr. Arnold’s specific accusations, but I will take the case of the two extremely important materials, rubber and quinine. Everyone knows that the shortages in these two materials are due to the Japanese conquest of Malaya and the Dutch East Indies, and that before Pearl Harbor we and all our allies had ample supplies of both.

No intelligent person expected any American manufacturer to engage in the business of making synthetic rubber for tires at a far more expensive price than natural rubber, when the natural product was plentiful and cheap. Yet Mr. Arnold does not hesitate to blame Standard Oil of New Jersey for failing to have made production facilities available earlier for taking care of this shortage.

The facts regarding the rubber situation are extremely complex and are filled with conflicting statements from the chemical experts. At the time of this writing, a controversy is going on among the technicians as to the best source of raw material, and we hear it variously stated that petroleum, coal, alcohol, wheat, and potatoes are respectively the best sources.

The Germans developed the product known as buna rubber, which they are now using in their tires. The Standard Oil Company developed butyl rubber made from petroleum, of which supplies are plentiful in this country, while there was little or none in Germany. In return for giving the German company this butyl rubber made from petroleum, Standard Oil received information regarding the following products: buna rubber, high-octane aviation gasoline, and synthetic toluol — essential for the manufacture of TNT.

Who got the best of this bargain — the Germans or the Americans?

The knowledge which Standard Oil gained from the Germans enabled the company to develop a process of making 100-octane aviation gasoline, which gives the United Nations’ aircraft 25 to 30 per cent more power than Hitler’s aircraft. Standard Oil, as part of this bargain, further secured from the Germans the information from which their technologists developed synthetic toluol made from petroleum. This enabled the United States to more than double the toluol available in this country for TNT for use by the United Nations. This looks to me like pretty good Yankee horse-trading.

Time after time, proposals were made by our industrialists to establish synthetic rubber plants financed by the government to take care of this emergency. Time after time, this was refused by the government.

Finally a project for manufacturing 100,000 tons of synthetic rubber was discussed with the government. The amount was whittled down to a meager 40,000 tons! The question may be asked: “Why did not Standard Oil and the rubber companies themselves put up the money for building plants capable of manufacturing synthetic rubber to meet the demand for tires in case we should go to war with Japan? The answer is found in the estimated cost of over $800,000,000 for plants which will be required to supply enough synthetic rubber for the needs of this country, now that the supply of natural rubber has been cut off.

In my opinion. Standard Oil’s conduct was reprehensible in supplying fuel to the Italian airlines between brazil and Italy, but this offense was not an abuse of patents. When our bombers, operating on Standard’s new 100-octane fuel, drop bombs on Germany containing TNT made from Standard’s new synthetic toluol, and when we ride on Standard’s buna tires, I believe their patent policy will be vindicated.

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Finally, we have been asked to believe inspired articles on the subject of the quinine “shortage.” An American concern, the Winthrop Chemical Company, by its former alliance with the Germans, has the American patent on the synthetic substitute for quinine known as Atabrine, invented in Germany. Winthrop Chemical Company was never able to sell much of this Atabrine in competition with quinine, for it was difficult to sell the synthetic product against the tough competition of the natural product. But Winthrop Chemical Company in the summer of 1941, working with our United States Army, Navy, and Public Health officials, embarked on a program for vastly increasing Atabrine production. Witbout, waiting for government orders or financing, the company spent $300,000 in enlarging a factory and thereby increased by 4000 per cent its capacity to manufacture Atabrine. The quinine shortage found the concern ready to supply all comers.

Winthrop Chemical Company also entered into an arrangement with Merck & Company, which will soon double the present manufacturing facilities. Recently the Army called on Winthrop to supply six million tablets — more than a year’s normal prewar demand - of Atabrine. Army trucks drew up to the factory and the tablets wore delivered the same day. A short time later the Army called for thirty million tablets. They were supplied within the time limit (twenty-one days) called for under the contract. Winthrop and Merck are in a position annually to supply enough Atabrine to take care of 26,500,000 malaria patients. Soon they should have enough to meet the needs of all the world outside of Japan, Italy, and Germany; and by manufacturing on this huge scale they have been able to bring down the price so that it costs about half as much to treat malaria patients with Atabrine as with quinine.

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One of the lurid pictures which Mr. Arnold has painted in the press is that of monster German “cartels” making agreements with monster American “cartels.” A company, he maintains, “first getting a stranglehold over the domestic market, then uses this control to give away foreign markets to our enemies in return for the privilege of restricting production at home.”

This indicates Mr. Arnold’s ignorance of how inventions have been promoted in foreign countries for generations. Inventions, like art, music, literature, the drama, and motion pictures, flow from one country to another. This is the normal process of civilization. A play produced by a prominent English or French theatrical manager could appear in New York under the auspices of the Theatre Guild the following season. An invention originating in Germany, or England, or France found its way to America, and vice versa. Just as publishing houses in New York and London have agreements to exchange books, so it was the normal course of business for some of the larger American concerns to have exchange agreements with English, French, and German concerns relating to inventions. Our industrialists had patent agreements with the Germans because the Germans sometimes — though not always — produced good inventions, usually in the chemical and metallurgical fields. We did not have them with the Chinese because the Chinese did not produce such inventions. As a general rule (though there may be a few exceptions), when an American company originated an invention, it kept the United States and most of the world rights, but turned over its British patent to its British associated company, its German patent to its German associated company, and so forth.

Mr. Arnold tells the story quite differently. These large American companies to which he has referred have used their control of the domestic market “to give away foreign markets to our enemies in return for the privilege of restricting production at home.” If Mr. Arnold can find one case in which this clearly took place, I will find him fifty in which the opposite is true.

There is a two-way international flow of inventions. If the inventions originate in this country our American companies, as a rule, hold the patents in all the markets in which they are able to handle export business, and especially the markets of Latin America. In those countries in which they are unable to do business, because of high tariffs or for other reasons, they either license foreign companies or form foreign subsidiary companies. Since the depression, owing to the raising of tariffs throughout Great Britain and Europe, it has been quite usual to license British, German, and other companies to handle the American inventions in their own territories because the high tariff walls prevented the import of American merchandise. Owing to the fact that far more inventions flow from the United States to foreign countries than from them to us, American industrialists have penetrated deeply into the industries of other countries. British and German concerns generally follow the same practice as American companies. By means of their patents they hold the markets in Latin America and elsewhere for inventions originated by them. Our tariffs are such as to force these foreign concerns to license American companies or to form subsidiary companies here, in which they may participate on a whole or part ownership basis. This creates a healthy international peacetime competition for the production of inventions to foster the trade of each country, following the normal economic laws. Mr. Arnold believes otherwise.

“Our American companies give away foreign markets to our enemies, in return for the privilege of restricting production at home,” Mr. Arnold states; so, for example, “Germany got control of all the drug outlets in South America, and built up in this hemisphere a powerful instrument of enemy propaganda and economic influence.” This is downright humbug. Germany did not get control of all the drug outlets in South America. There are dozens of American and British drug companies whose products are sold through drug outlets in South America. Here is a list of some of them: United Drug Company, American Home Products Corporation, Wyeth Chemical Company, Norwich Pharmacal Company, Vick Chemical Company, Bristol-Myers Company, Novocol Chemical Manufacturing Company, Inc., William R. Warner & Company, Inc.: Dr. W. B. Caldwell, Inc., Calco Chemical Company, Parke-Davis Company, Squibbs, Inc.

Mr. Arnold does not believe in exchange agreements for inventions between American companies and foreign companies. His proposed “solution,” taken verbatim from his testimony before the Senate Patents Committee, requires no comment: —

MR. ARNOLD: I think if we want to develop and acquire information from foreign countries there is only one sensible way to do it, and that is to subsidize government research. There have been marvelous things done in agriculture that are outstanding. That does not mean that private research is stopped at all, but it means that the government, either by subsidizing companies or by directly investigating, is turning this new technique over to the public. I think that that will take care of the whole situation if we free these patents.

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Two bills are now before the Senate Patents Committee. The first of these, S.2303, is a wartime measure and provides for the grant of compulsory licenses under all patents during the war period. If the existing right of the government and its contractors and subcontractors to use all patented inventions and to seize all German and enemyowned patents is not sufficient, then this bill can be accepted in principle if it is surrounded by the proper safeguards and the license is limited to the war period. Mr. Arnold is apparently not satisfied with this temporary measure but seeks the permanent revision of the patent system by Senate Bill S.2491.

Most of the valid accusations made by Mr. Arnold relate to cases in which groups of patents have been used to control an industry, creating a type of monopoly control which goes far beyond the individual patents. Mr. Arnold has the most powerful weapon against such monopolistic practices in the existing antitrust laws; but he now proposes to cure these offenses by (1) making patents subject to compulsory license, and (2) prohibiting the patent owner from granting licenses with any substantial restrictions. This is like performing a skillful operation while killing the patient. Compulsory licenses have been suggested to Committees of Congress half a dozen times in the past twenty years, but have been rejected on the evidence of hundreds of small businessmen that these compulsory licenses would work against their interests in favor of those of the large corporations. This was eloquently expressed by a Mr. Dudley Sharp of the Mission Manufacturing Company of Houston, Texas, who appeared at the hearings on this subject before the House Committee on Patents in 1938: —

We do not believe that in our small company the compulsory licensing of patents would in any way help employment or progress or the limiting of the activities of the larger corporations as against the smaller ones.

. . . we are in competition with such concerns as the United States Steel Company through the Oil-Well Supply Company, the Youngstown Sheet and Tube Company through the Continental Supply Company, and the Republic Steel Corporation through the Republic Supply Company, so we have plenty of powerful competition.

Due to the protection of this patent, which we purchased along with others which we purchased on other articles, we have been able to build up a fairly secure volume of business. I mean it is ample enough to pay our 100 men well, keep them working steadily. . . .

Gentlemen, we are definitely against any kind of licensing of patents which will take away the only protection that we little men have against these big corporations.

It is, in my opinion, impossible to write a compulsory license law without hurting the smaller man and, what is more important, without damaging the patent system as a whole. If you permit the unprogressive manufacturer, who has not invested in research, to benefit from the research of the progressive manufacturer (who usually pays for nine failures before he achieves one success), you put a premium on laziness and a penalty on progress, That our American manufacturers are generally so much more progressive in developing new inventions, when compared with European manufacturers, is largely because the European patent systems have compulsory licensing while ours does not. Mr. Arnold’s second suggestion, to prohibit restrictions in licenses, would simply have the effect of preventing the patent holder from sharing the benefits of his patent with other manufacturers, and would thus restrict production to the factory of the patentee — an absurd result for a law the alleged main purpose of which is to increase production.

Patent lawyers have repeatedly told the House Committee on Patents that the remedy lies in an amendment of the antitrust law so that its application to patents is clearly defined. I have come to believe that a simple law permitting the defendant in a patent suit to escape the penalties of infringement if the patentee is using his patent to break the antitrust laws would cure this entire situation. To save the defendant in such suit the expense of this new defense, the law might well provide that the Antitrust Division of the Department of Justice shall intervene on behalf of the defendant. This proposal would help the “little man” instead of injuring him — unlike a compulsory license law; but more important still, it would deter monopolistically inclined large corporations from using their patents to break the antitrust laws. In addition, all patent licenses should be registered at the Patent Office as private documents, but should be scrutinized by the Department of Justice, at the time they are made, for possible breaches of the antitrust laws.

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Mr. Arnold, in a press release issued when he appeared before the Truman Committee investigating the war effort, made the following statement: “We cannot wait until the end of the war to put an end to these cartels. If we would have strength in war and security in peace, we must solve this problem now.”

If the cartels to which Mr. Arnold refers are the agreements between American and German industrialists, all these arrangements were canceled the day we declared war on Germany. Some of them were made long before the advent of Hitler, and it is fortunate that this was so, in view of the many valuable strategic materials which were introduced to the United States as a result of them. If Mr. Arnold proposes to shut off the importation of inventions from abroad when the war is over, he will be treading on very dangerous ground.

We have the best patent system in the world, as shown by its results, — and I know all the others, — but, like every other human institution, our patent system is susceptible of improvement. The President has appointed a Patents Planning Commission, under the chairmanship of Dr. Charles F. Kettering, for the specific purpose of studying the patent system and suggesting its permanent improvement for the post-war period. It is my firm belief that, when the war is over, we of the United Nations will have ahead of us the inspiring task of building a new world. In this task we shall rely more than ever on the work of inventors and of industrialists who promote invention and research. Giving all credit to Mr. Arnold for his attacks on illegal business monopolies, I nevertheless feel that the task of making permanent changes in the patent laws can best be arrived at by the Patents Planning Commission after careful study of the workings of the patent system.

Judge Frank, in a recent decision of the United States Circuit Court of Appeals, makes the following statement: “The controversy between the defenders and assailants of our patent system may be about a false issue — the stimulus to invention. The real issue may be the stimulus to investment. On that assumption a statutory revision of our patent system should not be too drastic.”

I heartily endorse Judge Frank’s conclusion: “We should not throw out the baby with the bath water.”