21 Effect of Patent Policy on Innovation in Industry
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and Government DONALD W. BANNER U.S. Patent and Trademark Office, Washington, D.C. 20231
Reports of the Small Business A d m i n i s t r a t i o n were the subject of an article i n the WALL STREET JOURNAL dated J u l y 25, 1979 under the heading "Reports Say U. S. S t i f l e d Research." The Small Business A d m i n i s t r a t i o n r e p o r t s to which I r e f e r were prepared f o r c o n s i d e r a t i o n during the w e l l known Domestic P o l i c y Review. One step recommended by the SBA to cure that perceived unfortunate r e s u l t was to change f e d e r a l patent p o l i c y so that, under stated c o n d i t i o n s , small businesses would take title more frequently to patents which r e s u l t from f e d e r a l l y -sponsored research. This was s a i d to spur small businesses to innovate even more a c t i v e l y , a r e s u l t undoubtedly b e n e f i c i a l to our n a t i o n . As many of us know, t h i s i s one side of a dialogue that has been i n progress since we all were young. Like the phoenix a r i s i n g from the ashes, t h i s seemingly endless debate about who should own the patents a r i s i n g from federally-funded research c o n t r a c t s r e a s s e r t s itself i n t o the p u b l i c consciousness p e r i o d i c a l l y . The view contrary to that taken by those who f e e l that the c o n t r a c t o r should own the patents stemming from f e d e r a l c o n t r a c t s i s c h a r a c t e r i z e d by the slogan, "Since the government paid f o r i t , the government should own i t . " This view i s frequently a r t i c u l a t e d by Admiral Rickover who, i n t e r e s t i n g l y enough, f e l t that he p e r s o n a l l y should own the copyrights covering speeches he gave as an admiral. The f a c t that i s hard to swallow i s that i n 1975 the United States government owned over 28,000 U. S. patents a v a i l a b l e f o r l i c e n s i n g , f a r more than anyone e l s e ; about 1,200 of those 28,000 were l i c e n s e d — about the same number as were l i c e n s e d i n 1963 when the f e d e r a l government owned only 14,000 patents. Furthermore, f o r an average y e a r l y value, computed f o r the years 1963 through 1975, the f e d e r a l government has been f i l i n g w e l l over 2,000 a p p l i c a t i o n s f o r patents every year. This chapter not subject to U.S. copyright. Published 1980 American Chemical Society Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
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What i s t h e f e d e r a l g o v e r n m e n t g o i n g t o do w i t h t h e s e patents? T h i s i s the heart o f the f e d e r a l patent p o l i c y controversy. A t t h e t h r e s h o l d we must a s k — what i s a patent? A p a t e n t i s a r i g h t , g r a n t e d by t h e f e d e r a l g o v e r n m e n t , t o e x c l u d e o t h e r s from making, u s i n g , o r s e l l i n g t h e s u b j e c t matter patented. I t does n o t g r a n t the r i g h t t o p r a c t i c e the i n v e n t i o n p a t e n t e d , n o r t h e r i g h t t o p r a c t i c e any i n v e n t i o n at a l l . I t i s s o l e l y t h e r i g h t t o e x c l u d e o t h e r s from m a k i n g , u s i n g o r s e l l i n g something. W i t h t h e g o v e r n m e n t o w n i n g o v e r 28,000 U n i t e d S t a t e s patents, i t can e i t h e r (1) use the r i g h t to exclude; (2) l e t o t h e r s use the r i g h t t o exclude; o r (3) not use the r i g h t t o exclude. I f the f e d e r a l government d e c i d e s t o use the p a t e n t r i g h t s , t h a t i s t o s a y , t h e r i g h t t o e x c l u d e , s h a l l we s e e the g o v e r n m e n t e x c l u d i n g i n d i v i d u a l s o r c o m p a n i e s f r o m , f o r example, making o r s e l l i n g c e r t a i n p r o d u c t s i n t h e U n i t e d States? A r e t h e power and r e s o u r c e s o f t h e f e d e r a l g o v e r n m e n t , and e s p e c i a l l y t h e D e p a r t m e n t o f J u s t i c e , t o be p u t t o t h a t use? Indeed, suppose the f e d e r a l government d e c i d e d t h a t a c e r t a i n p r o d u c t c o v e r e d by a f e d e r a l l y - o w n e d p a t e n t s h o u l d be made o n l y i n a d e p r e s s e d a r e a i n A p p a l a c h i a so t h a t t h e e c o n o m i c c o n d i t i o n o f t h e c i t i z e n s i n t h a t a r e a m i g h t be i m p r o v e d ; i s t h e g o v e r n m e n t t h e n t o sue c o m p a n i e s i n L o s Angeles, Chicago, or A t l a n t a f o r patent infringement to p r e c l u d e t h e i r m a n u f a c t u r e o f t h e p a t e n t e d goods so t h a t t h e A p p a l a c h i a n p r o d u c t i o n w o u l d n o t be d i s t u r b e d by c o m p e t i t i v e market f o r c e s ? The c o n s t i t u t i o n a l r i g h t o f t h e f e d e r a l g o v e r n m e n t t o e x c l u d e a U. S. n a t i o n a l f r o m m a k i n g a p r o d u c t i n t h e U n i t e d S t a t e s by v i r t u e o f a f e d e r a l l y - o w n e d p a t e n t , a r i s i n g f r o m r e s e a r c h w h i c h t h a t U. S. n a t i o n a l h e l p e d t o f i n a n c e t h r o u g h h i s t a x e s , has never been d e c i d e d . T h e r e a r e many who f e e l t h a t t h e f e d e r a l g o v e r n m e n t h a s no s u c h r i g h t u n d e r t h e Constitution. T h e r e a r e many o t h e r s who f e e l t h a t e v e n i f the f e d e r a l government does have such a r i g h t , i t s h o u l d n e v e r be e x e r c i s e d t o p r e c l u d e a U. S. n a t i o n a l f r o m o p e r a t i o n s here i n the United S t a t e s . The b a t t l e l i n e s may w e l l be s h a p i n g up o v e r t h i s argument at the present time. I t m i g h t v e r y w e l l be s o o n t h a t t h e f o r c e o f t h e f e d e r a l g o v e r n m e n t w i l l be b r o u g h t t o b e a r a g a i n s t a n i n f r i n g e r o f a U n i t e d S t a t e s government-owned patent here i n t h i s country. F o r example, on May 16, 1979 E l m e r B. S t a a t s , t h e C o m p t r o l l e r G e n e r a l o f t h e U n i t e d S t a t e s , t o l d t h e S e n a t e Committee o n t h e J u d i c i a r y t h a t i t was " t h e g o v e r n m e n t ' s r e s p o n s i b i l i t y t o o b t a i n d o m e s t i c and f o r e i g n p a t e n t s . . . and t o e n f o r c e t h e p a t e n t s a g a i n s t u n l i c e n s e d users."
Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
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21.
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Policy
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I i n v i t e y o u r a t t e n t i o n t o my s e c o n d a l t e r n a t i v e — namely t h a t t h e f e d e r a l government c a n p e r m i t o t h e r s t o u s e the o v e r 28,000 p a t e n t r i g h t s ( a ) b y l i c e n s i n g o r ( b ) i n effect, transferring t i t l e to others. I f t h e government m e r e l y l i c e n s e s some p e r s o n ( f o r e x a m p l e , i n A p p a l a c h i a ) and a n o t h e r p e r s o n i n f r i n g e s t h e p a t e n t , i t may be a r g u e d , a s t h e C o m p t r o l l e r G e n e r a l d i d , t h a t t h e government s h o u l d p r o t e c t t h i s l i c e n s e e and b r i n g s u i t a g a i n s t t h e i n f r i n g e r — p r o v o k i n g , t h e r e f o r e , t h e l e g a l and p o l i t i c a l c o n t r o v e r s y mentioned e a r l i e r . At t h e o t h e r e x t r e m e — my t h i r d a l t e r n a t i v e — i s t h a t the f e d e r a l g o v e r n m e n t s h o u l d n o t u s e p a t e n t r i g h t s t o e x c l u d e o t h e r s from making, u s i n g o r s e l l i n g i n t h e U n i t e d S t a t e s . I f my t h i r d a l t e r n a t i v e i s f o l l o w e d , t h e q u e s t i o n s a r i s e , Why a r e we s p e n d i n g a l l t h e t i m e and e f f o r t n e c e s s a r y t o o b t a i n those patent rights? What i s t h e p u r p o s e o f t h i s enormous w a s t e , and what i s t h e r e t u r n o n o u r i n v e s t m e n t o f the t a x d o l l a r s i n t h i s e x e r c i s e i n f u t i l i t y ? The c r o w n i n g i r o n y i n a l l o f t h i s i s t h a t i t i s t h e U.S. p o l i c y t o f i l e p a t e n t a p p l i c a t i o n s o n i n v e n t i o n s made by i t s e m p l o y e e s and c o n t r a c t o r s — a p o l i c y w h i c h i s e x p e n s i v e a n d almost c e r t a i n l y e x c e e d i n g l y w a s t e f u l under p r e s e n t c o n d i t i o n s . On t h e o t h e r h a n d , i t a p p a r e n t l y a l s o i s t h e U. S. p o l i c y to h a v e no c o n s i s t e n t p o l i c y o n who s h o u l d o b t a i n t h e r i g h t s to i n v e n t i o n made u n d e r f e d e r a l l y - s p o n s o r e d R & D . At t h i s t i m e t h e r e a r e some t w e n t y s e p a r a t e , d i f f e r e n t s t a t u t e s a n d as many i m p l e m e n t i n g regulations applicable respectively to the d i f f e r e n t f e d e r a l agencies. The c o n f u s i o n , r e s e n t m e n t and f r u s t r a t i o n s — a s w e l l a s t h e e x p e n s e — f a c e d b y b u s i n e s s a r e r e a l and d i s c o u r a g i n g . For over a q u a r t e r o f a c e n t u r y we have b e e n u n a b l e t o make up o u r m i n d s a b o u t what to do w i t h f e d e r a l l y - o w n e d p a t e n t s . As t h e S m a l l B u s i n e s s A d m i n i s t r a t i o n s t u d y c o n c l u d e s , i n v e n t i o n u t i l i z a t i o n by a t l e a s t some s m a l l b u s i n e s s c o n c e r n s i s hampered b y c e r t a i n present federal patent p o l i c i e s . Some t e n y e a r s ago, t h e H a r b r i d g e House R e p o r t , s p o n s o r e d by t h e F e d e r a l C o u n c i l f o r S c i e n c e and T e c h n o l o g y , r e a c h e d t h e same c o n c l u s i o n . At t h i s t i m e when o u r n a t i o n a l i n n o v a t i v e e f f o r t s may w e l l be w a n i n g , why d o n ' t we do s o m e t h i n g t o s e t t l e t h i s m a t t e r ? We h a v e been s t r u g g l i n g as a n a t i o n w i t h c o n f u s i o n s u r r o u n d i n g t h i s p r o b l e m f o r o v e r 35 y e a r s . I h a v e a c o p y o f a memo F r a n k l i n R o o s e v e l t w r o t e i n 1943 i n d i c a t i n g t h a t two y e a r s e a r l i e r he had a s k e d t h e N a t i o n a l P a t e n t P l a n n i n g C o m m i s s i o n t o s o l v e t h e p r o b l e m , b u t t h a t e a r l y i n 1943 he h a d a l s o a s k e d t h e D e p a r t m e n t o f J u s t i c e t o do t h e same t h i n g . The memo w i t h d r e w h i s r e q u e s t t o J u s t i c e , w h i c h c o n t i n u e d t h e work anyway. C o n f u s i o n t h e n — a s now.
Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
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F o r t u n a t e l y Senators Bayh and Dole have taken a step forward r e c e n t l y by i n t r o d u c i n g S. 414, "The U n i v e r s i t y and Small Business Patent Procedures A c t . " At l e a s t t h i s act would improve the s i t u a t i o n for u n i v e r s i t i e s , n o n p r o f i t o r g a n i z a t i o n s , and small businesses, by p r o v i d i n g uniform procedures throughout the government with respect to ownership of patent r i g h t s a r i s i n g out of f e d e r a l l y - s p o n s o r e d research for such groups. While t h i s c e r t a i n l y won't solve a l l of the problems, i t i s a d i s t i n c t step forward. In a d d i t i o n , Senators Schmitt, Cannon and Stevenson introduced S. 1215 which, among other t h i n g s , would provide that the c o n t r a c t o r i n most instances could r e t a i n t i t l e to patents a r i s i n g from government-sponsored r e s e a r c h . This b i l l a l s o i s a very c l e a r move i n the r i g h t d i r e c t i o n . I would s i n c e r e l y hope, however, that the b a s i c and fundamental i s s u e of the f e d e r a l government's r i g h t to use i t s powers to enforce patents against U. S. n a t i o n a l s w i l l soon be c a r e f u l l y considered i n a l l of i t s r a m i f i c a t i o n s . I do not think that t h i s i s a matter which should be backed i n t o , but r a t h e r one which should be faced squarely and decided before the l e g i s l a t i v e branch of the f e d e r a l government, r a t h e r than i n a court proceeding i n which a l l of the i s s u e s important to the p u b l i c might not be presented. I f we do not face up to t h i s b a s i c i s s u e of the r i g h t of the f e d e r a l government to stop U. S. n a t i o n a l s from manufacturing a patented product i n t h i s country, then we s h a l l i n e v i t a b l y face a s i t u a t i o n i n which someone i s going to be h u r t . I f we agree with Admiral Rickover when he says that "the r i g h t s to inventions developed at p u b l i c expense should be made a v a i l able f o r use by any U. S. c i t i z e n , " how do we r e c o n c i l e that concept with the f a c t that the r i g h t of a U. S. c i t i z e n to p r a c t i c e such an i n v e n t i o n can be precluded by the f e d e r a l government's use of a patent which i t owns? Do we mean that the government should stop o b t a i n i n g patents, d e d i c a t i n g those i t owns, and merely p u b l i s h i n g i t s research r e s u l t s henceforth? I f not, what do we mean? Do we f e e l that there are circumstances i n which the f e d e r a l government should use a patent to stop, f o r example, your company from making some product for one of your customers? I f so, what are those circumstances ? At the very l e a s t , i t behooves us to solve i n a r a t i o n a l and c a r e f u l manner t h i s issue which i s t r u l y fundamental to the r e l a t i o n s h i p between the f e d e r a l government and i t s citizens. RECEIVED November 16,
1979.
Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
