i
GOVERNMENT
Federal Patent Policy Scored Turning over patent rights to government R&D contractors creates monopoly, Senator charges INDUSTRY'S
RIGHT to obtain
patents
on inventions conceived under government research and development contracts may be challenged when Congress reconvenes. Sen. Russell Long (D.-La.) says h e plans to introduce a bill at the next session that would turn over to the Government all patents on inventions conceived under government R&D contracts. Some agencies, notably the Defense
U . of Md.'s Hamberg . inventions belong to t h e people .
Aerojet's .Reicbard . patent rights are vital 32
C&EN
DEC. 2 1 . 1959
Department, permit contractors to o b tain patents on inventions made under R&D contracts provided the Government receives a royalty-free license t o use the invention. Says Sen. Long, "This policy will bestow unearned monopolies throughout the country. These monopolies will restrict competition and force the public to pay high prices for new products which would be sold more cheaply if competitors were allowed in the field/* Sen. Long fired this blast as his committee wound up three days of hearings on patent policies of government agencies. Sen. Long is chairman of the Subcommittee on Monopoly of the Select Committee on Small Business. Testimony presented at the hearings showed that the Government has no uniform policy on disposing of rights to patents on inventions conceived under government contract. Some agencies—Atomic Energy Commission, N a tional Aeronautics and Space Administration, Department of Agriculture, Interior Department—take title to these patents. But most government agencies secure a royalty-free, nonexclusive license to use the invention and permit the contractor to take title to the patent. > No R i s k - N o Patent. Patent rigbts confer monopoly power on the patentee. But the basis of the patent system is that the prospect of monopoly profits will induce inventors to take the risks involved in making and exploiting inventions, Dr. D. Hamberg, professor of economics at the University of Maryland, told the committee. An industrial firm working on a government R&D contract takes no risks except the risk of contract cancellation, he says. Almost all government R&D contracts are on a cost-plus basis, Dr. Hamberg says. No matter how difficult or expensive a project turns out to be, the costs are covered by the Government. The contracting firms
invest none of their own funds. I t there are no risks, there is no justification for a monopoly profit such as might result from patent rights. According to Dr. Hamberg, the Government spends tax money for research on the grounds that such research promotes the general welfare, and then turns the results over to private corporations on an exclusive, monopoly basis. "This amounts to public taxation for private privilege. It seems palpably evident that new discoveries derived from research supported b y public funds belong to the people." Even though industrial firms lose the rights to inventions made under government contracts, they would still have a competitive edge, Dr. Hamberg says. The firm that does the research gains know-how not available to anyone else. This should permit the contractor to put the product o n the market faster than a competitor who holds a license to a government patent. • No Giveaway. "We buy only what we need," James P. Falvey, deputy assistant secretary of defense (supply and logistics), told the committee. On patent rights resulting from Rod!) contracts, all the Defense Department needs is a license to use the invention so that it will not have to pay twice. It would be a waste of time, money, and energy for the Armed Forces to require patent rights, which, if o b tained, would not be used, Mr. Falvey says. The Defense Department does not bargain for patent rights; patents are a by-product not an end product of the contract. In order to obtain weapons incorporating advanced technology, the D e fense Department must compete with
Sen. Long . monopoly in the making
the demands of the civilian market for the scientific resources of American industry, Mr. Falvey says. If industry has n o hope of commercial markets because the Government takes tide to inventions developed under contract, it will be hard to get competent firms to do the work. "Since w e must compete for industry's scientific resources, w e must provide all of the incentive consistent with the national interest. Our patent policy is part of that incentive." A change in policy transferring patent rights to the Government would remove an incentive to d o government research and would undoubtedly result in an increase in the cost of contract R&D, Emerson Reichard, Jr., of Aerojet-General told the committee. According to Mr. Reichard, the D e fense Department does not give title to inventions to government contractors; rights in inventions are part of the consideration bargained for by the Government in making the contract. Research and development contracts -are high risk, low potential, and low profit contracts; the maximum profit is about 7% of cost, Mr. Reichard says. There is no assurance that production orders will be placed with the original contractor. "Years of experience and know-how become freely available to competitors for a maximum 7% fee. The only thing left to the originator is the commercial market, which, in most instances, is relatively insignificant in relation to the military market." • No Change N o w ? For several years, an interagency committee has been studying the problem of developing a uniform patent policy for all government agencies. Last week the committee commissioned the Patent, Trademark, and Copyright Foundation of George Washington University to make a study of the effect of individual agency patent policies. Results of the study are due in a year or less. In a letter to Sen. Long, Robert A. Bicks, head of the Justice Department's antitrust division, asked the committee not to make any legislative recommendations until the study is complete. In the past, the Justice D e partment has recommended that the Government take title to all inventions conceived under government contracts. However, Mr. Bicks thinks a better solution to this complex problem may be reached if the results of the s*udy now under way are taken into consideration.
ing stilbestrol in animal feeds. If a new producer wants to get into the market HEW may ask Congress t o and petitions F D A t o approve stilbestrol modify food additives law in animal feed, F D A must reject the petition. T h e new application would as a result of stilbestrol be considered as a food additive and problems would b e handled under the food additives amendment t o the Food, Drug, X NDUSTRY'S voluntary agreement to ban and Cosmetic Act. The Delaney antithe use of stilbestrol ( diethylstilbestrol ) cancer clause in this amendment forbids for fattening poultry may spark changes the use of any additive that causes canin the food additives amendment to the cer in animals. But present users of Food, Drug, and Cosmetic Act. Secre- stilbestrol can continue to use the estrotary of Health, Education, and Welfare gen until F D A has the data n e e d e d to revoke its approval. It will be difficult, Arthur S. Flemming says he will probably ask Congress to make two changes if not impossible, to prove that stilbestrol is harmful since it leaves no in the law: modify the Delaney antiresidues in animal flesh. cancer clause; change the section of the law which permits the continued use Secretary Flemming says he probably of additives which have received prior will ask Congress t o give him authority sanction from the Food and Drug Ad- to revoke prior sanctions automatically ministration even though new applica- when new evidence turns up. He tions to use these additives would b e thinks it doesn't make good sense t o rerejected. ject new applications while continuing to approve old applications for the same FDA's problems i n controlling the uses. use of stilbestrol as a growth promoter in animals and poultry point up the inThe Secretary also plans to ask Conconsistencies in the law. Earlier this gress t o loosen some of the restrictions year F D A put a freeze on new applicain the anticancer clause. H e wants tions to use stilbestrol in animal feeds authority to approve additives that or in poultry (C&EN, June 15, page leave no residue even though the additives may induce cancer in some test 3 8 ) . Reason: Stilbestrol has caused animals. Beef and lamb from animals cancer when fed to mice in large doses. Using a more sensitive test method fed with stilbestrol-containing feed are for stilbestrol than that in use when the perfectly safe because the flesh contains no residue of stilbestrol, Secretary estrogen was approved, FDA checked Flemming says. But under the antimeat and poultry for residues of stilbestrol. N o residues were found in the cancer clause stilbestrol could n o t b e used this way. flesh of cattle and sheep fed with stilbestrol-containing feed. But residues However, Secretary Flemming emwere found in the liver, kidneys, and phasizes that he agrees with the philosskin of chickens treated with stilbestrol ophy of the anticancer clause and plans implants. to ask Congress to include the clause i n the color additives bill now under conThis raised a problem. Stilbestrol sideration. was approved under the new drug section of the Food, Drug, and Cosmetic Act. This approval can't b e revoked unless F D A can prove that the residues of stilbestrol found i n poultry are harmful. But F D A has no positive proof • U.S. investors in India can now that this is so; hence, stilbestrol canget more protection under the Innot be banned for use in poultry. ternational Cooperation AdministraAs a result, FDA held a series of contion's investment guaranty program. ferences with the poultry industry to Under a new agreement between decide what to d o about using stilthe U.S. and India, investors can bestrol in chickens. Poultry growers purchase insurance from ICA for agreed to stop using stilbestrol, retailers reimbursement by the U.S. Governagreed to take the treated chickens off ment in dollars of losses incurred the market, and stilbestrol producers because of expropriation. Under agreed to stop supplying stilbestrol to an earlier agreement ICA's program the poultry industry. H E W Secretary was limited to guaranties that capiFlemming emphasized that all these actal invested or Indian receipts tions were taken voluntarily in the pub(rupees) could b e converted into lic interest; no law had been broken. dollars. However, the freeze continues o n us-
Cancer Clause Change Due?
Potomac
DEC.
Postscript
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