Federal Patent PolicyâIts Development and Present Status - ACS

1 Federal PatentPolicy—ItsDevelopment and Present Status JAMES E. DENNY

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Assistant General Counsel for Patents, Department of Energy, Washington, D C 20545

Government Patent Policy concerns the allocation of rights to inventions which have been either conceived or f i r s t actually reduced-to-practice under Government-sponsored research and development contracts or grants. The basic issue i s whether the Government should acquire title (or exclusive rights) to the inventions resulting from Government-sponsored R & D work, commonly referred to as the "title policy," or allow the contractor to retain such rights with the Government acquiring merely a royalty -free license for Governmental purposes, commonly referred to as the "license policy." This has remained one of the oldest, most studied, debated, and unresolved policy issues i n the Federal Government, having been under consideration by Congress, the Executive Branch, and the public for over 30 years. More specif i c a l l y , over the last fifteen years there have been: -- more than 30 Congressional reports and studies; -- at least three study groups appointed by the Executive Branch of the Government; -- a Congressional commission which considered this subject as one of their topics relating to procurement; and -- 14 Congressional hearings, the latest being hearings held by Congressman Ray Thornton of the House Committee on Science and Technology in September 1976 and by Senator Gaylord Nelson of the Senate Select Committee on Small Business i n December of 1977. Prior to World War II, there was little interest in Government patent policy issue since most Government-sponsored research and development (R & D) was performed by Government employees i n Government laboratories. Where R & D was contracted for, no established uniform patent policy was used by the Government agencies. During and after the war, with the continuing increase i n Government-supported R & D being contracted to industry and universities, the agencies began to develop individual patent p o l i cies. Some agencies, notably those within the Department of Defense, developed a policy of acquiring a royalty-free license to resulting inventions for Governmental purposes, leaving the con3

This chapter not subject to U.S. copyright. Published 1978 American Chemical Society

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t r a c t o r w i t h t i t l e — o r what might otherwise be d e s c r i b e d as exc l u s i v e commercial r i g h t s . Other agencies, p r i m a r i l y those more o r i e n t e d toward conducting research o f i n t e r e s t t o the p u b l i c s e c t o r o f our economy, such as the Departments o f A g r i c u l t u r e and I n t e r i o r , acquired t i t l e t o r e s u l t i n g i n v e n t i o n s . Some agenc i e s simply ignored the e x i s t e n c e o f the i s s u e , which had the e f f e c t o f p e r m i t t i n g the c o n t r a c t o r t o r e t a i n a l l r i g h t s t o invent i o n s w i t h the Government o b t a i n i n g a l i c e n s e o r no r i g h t s a t a l l . The

Issue Debated

Most arguments, p o s i t i o n s and proposed s o l u t i o n s surrounding t h i s i s s u e i n i t i a l l y took the form o f e i t h e r one extreme o r the o t h e r — t h a t the Government should always acquire t i t l e t o r e s u l t ing i n v e n t i o n s , o r should always acquire only a l i c e n s e f o r Government use. The t i t l e p o l i c y and the l i c e n s e p o l i c y advocates became entrenched e a r l y , w i t h each s i d e m a r s h a l l i n g major s t u d i e s to b o l s t e r i t s p o s i t i o n . On the s i d e supporting the l i c e n s e p o l i c y , there was the N a t i o n a l Patent Planning Commission r e p o r t (1_). The Commission, created by P r e s i d e n t F r a n k l i n D. Roosevelt a t the end o f 1941, was t o i n v e s t i g a t e patent abuses s p o t l i g h t e d by the Temporary N a t i o n a l Economic Committee (2). The Commission recommended t h a t the Government should not normally a s s e r t f u l l owners h i p o f p a t e n t s , except i n the p u b l i c h e a l t h o r s a f e t y f i e l d . The Commission urged t h a t patents should be a v i l a b l e on an e x c l u s i v e b a s i s , as " I t o f t e n h a p p e n s , . . . p a r t i c u l a r l y i n new f i e l d s , t h a t what i s a v a i l a b l e f o r e x p l o i t a t i o n by everyone i s undertaken by no one " ( 3 ) . The t i t l e p o l i c y advocates found support i n the U. S. A t t o r ney General's Report on Government Patent P r a c t i c e s and P o l i c i e s (4). The r e p o r t urged the establishment o f a Government Patents A d m i n i s t r a t o r t o administer a uniform patent p o l i c y . The b a s i c p o l i c y recommended was t h a t a l l Government c o n t r a c t s f o r r e s e a r c h and development should c o n t a i n a requirement t h a t the Government be e n t i t l e d t o a l l r i g h t s t o i n v e n t i o n s produced i n the p e r f o r mance o f the c o n t r a c t . However, t h i s r e p o r t d i d recognize a need f o r exceptions i n c e r t a i n s i t u a t i o n s . S p e c i f i c a l l y , i f the c o n t r a c t o r p r i o r t o the c o n t r a c t had already made a s u b s t a n t i a l independent c o n t r i b u t i o n and other q u a l i f i e d o r g a n i z a t i o n s were u n a v a i l a b l e , o r i n the case o f cooperative research p r o j e c t s , exceptions could be made. In such cases the c o n t r a c t o r should grant the United States a nonexclusive r o y a l t y - f r e e l i c e n s e t o make, have made, use and dispose o f any i n v e n t i o n . In a d d i t i o n , the c o n t r a c t o r was t o agree t o make adequate commercial use o f these i n v e n t i o n s w i t h i n a designated p e r i o d , o r , i f such use was not being made, t o l i cense a l l a p p l i c a n t s a t a reasonable r o y a l t y . The r e p o r t a l s o recommended r o y a l t y - f r e e l i c e n s i n g o r d e d i c a t i o n o f a l l Government-owned p a t e n t s . With these r e p o r t s and p o s i t i o n s , the debates began. The

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t i t l e advocates supported t h e i r p o s i t i o n w i t h the argument t h a t r e s u l t i n g i n v e n t i o n s were no d i f f e r e n t from the end product which was produced under the research c o n t r a c t , i . e . , the Government p a i d f o r the i n v e n t i o n j u s t as i t p a i d f o r the end r e s u l t . The Government should own i t , f o r t o do otherwise would be t o give away Government propoerty. The l i c e n s e advocates contended t h a t the Government d i d not c o n t r a c t f o r the making o f i n v e n t i o n s but r a t h e r f o r R & D work performed i n a p a r t i c u l a r t e c h n o l o g i c a l area, o r f o r s p e c i f i c hardware. The c o n t r a c t o r was p a i d f o r the work whether o r not an i n v e n t i o n was made. I f i n v e n t i o n s d i d r e s u l t , they were i n c i d e n t a l to the performance o f the c o n t r a c t . F u r t h e r , i t was argued t h a t the Government does not t o t a l l y pay f o r the R & D i n v o l v e d , s i n c e the c o n t r a c t o r was s e l e c t e d t o perform the research program because o f h i s s u b s t a n t i a l amount o f background knowledge, know-how and e x p e r t i s e , as w e l l as having made s u b s t a n t i a l investment i n the form o f f a c i l i t i e s and t r a i n e d personnel. I t was a l s o a s s e r t e d t h a t the l i c e n s e p o l i c y was the most e f f e c t i v e p o l i c y s i n c e i t provided the maximum use o f the patent incentive and induced p r o s p e c t i v e c o n t r a c t o r s t o b r i n g t h e i r background knowledge and commercial experience t o bear on Government t a s k s , thereby tending t o reduce the c o s t o f Government r e search. With a t i t l e p o l i c y , i t was argued, the most competent c o n t r a c t o r s would refuse t o perform R & D work f o r the Government, or even worse, i f they d i d perform such work, a t i t l e p o l i c y would tend t o induce c o n t r a c t o r s t o i s o l a t e t h e i r commercial know-how and competence from t h e i r Governmental t a s k s . On the other hand, t i t l e advocates argued t h a t p e r m i t t i n g the c o n t r a c t o r t o r e t a i n e x c l u s i v e r i g h t s t o i n v e n t i o n s was tantamount t o r e q u i r i n g the p u b l i c t o pay twice i n order t o u t i l i z e the i n v e n t i o n ; f i r s t , through the Government's support f o r R & D and, second, as a r o y a l t y charge i n the commercial marketplace. Acc o r d i n g l y , t h i s argument concluded t h a t these i n v e n t i o n s should be made f r e e l y a v a i l a b l e t o the p u b l i c , s i n c e broad-scale a v a i l a b i l i t y o f such i n v e n t i o n s would provide the p u b l i c w i t h a wider base o f products and processes. The counterargument o f the l i c e n s e advocates i s t h a t when an i n v e n t i o n i s f r e e l y a v a i l a b l e t o a l l , there i s no i n c e n t i v e f o r anyone t o use i t s i n c e one o f the primary inducements o f the p a t ent system i s t o encourage the investment o f r i s k c a p i t a l i n the development and marketing o f an i n v e n t i o n . I t was contended t h a t no one would be w i l l i n g t o r i s k such an investment without a t l e a s t a temporary degree o f e x c l u s i v i t y as a f f o r d e d by patent protection. The t i t l e advocates a l s o s t a t e d t h a t p e r m i t t i n g c o n t r a c t o r s to r e t a i n e x c l u s i v e commercial r i g h t s tends t o i n c r e a s e the conc e n t r a t i o n o f economic power because the l a r g e c o r p o r a t i o n s r e c e i v e by f a r the g r e a t e s t p o r t i o n o f the Government's funds f o r R&D. T h i s was, i n t u r n , countered by l i c e n s e advocates w i t h the a s s e r t i o n t h a t patent r i g h t s are much more c r i t i c a l t o small

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businesses than t o l a r g e ones, and t h a t a t i t l e p o l i c y would f u r t h e r reduce the a b i l i t y o f small c o r p o r a t i o n s t o compete. Accordi n g l y , i t was argued t h a t a t i t l e p o l i c y , not a l i c e n s e p o l i c y , would tend t o r e s t r i c t competition. And so the arguments went, each with i t s own j u s t i f i c a t i o n s , p h i l o s o p h i e s , and i n d i v i d u a l case examples. U n f o r t u n a t e l y , both o f these extreme p o s i t i o n s are o v e r s i m p l i f i e d , only p a r t i a l l y c o r r e c t , and n e i t h e r recognizes the many v a r i a b l e s i n v o l v e d i n the Government's R & D c o n t r a c t i n g processes. P o l i c i e s Developed by Congress As the i s s u e s surrounding the proper a l l o c a t i o n o f r i g h t s t o i n v e n t i o n s r e s u l t i n g from Government-sponsored r e s e a r c h and development began t o draw more p u b l i c a t t e n t i o n , the Congress began to enact l e g i s l a t i v e guidance i n t h i s area. However, the guidance provided by Congress was no more c o n s i s t e n t than t h a t which had been developed by the agencies themselves. For example, i n some i n s t a n c e s the Congress provided guidance to the e n t i r e r e s e a r c h and development program o f a Government agency. In other s i t u a t i o n s , guidance was provided o n l y t o a p a r t i c u l a r r e s e a r c h and development program o f an agency, or t o a program which crossed agency l i n e s . G e n e r a l l y , the guidance r e q u i r e d , or was i n t e r p r e t e d t o r e q u i r e , the Government t o take t i t l e t o a l l i n v e n t i o n s , or t o i n v e n t i o n s i n a p a r t i c u l a r t e c h n i c a l f i e l d , but l e s s s t r i c t standards were a l s o provided. Examples o f Congressional guidance t o the e n t i r e program o f an agency can be found i n the Atomic Energy A c t , i n the N a t i o n a l Aeronautics and Space A c t , and i n the N a t i o n a l Science Foundation Act. Congress d i r e c t e d the Atomic Energy Commission to acquire a l l r i g h t s to i n v e n t i o n s i n the atomic energy f i e l d except when a determination was made t o waive such r i g h t s . 42 U. S. C. 2182 states : "Any i n v e n t i o n or d i s c o v e r y u s e f u l i n the p r o d u c t i o n or u t i l i z a t i o n o f s p e c i a l n u c l e a r m a t e r i a l or atomic e n e r g y . . . s h a l l be vested i n , and be the p r o p e r t y o f , the Commission, except t h a t the Commission may waive i t s claim...as the Commission may deem a p p r o p r i a t e . . . " The Congress t o l d NASA, however, t o acquire r i g h t s t o a l l i n v e n t i o n s , r e g a r d l e s s o f the f i e l d o f technology i n v o l v e d , unless such r i g h t s were waived. The Space Act s t a t e s (42 U. S. C. 2457 ( a ) , ( f ) ) t h a t i n v e n t i o n s become the : " e x c l u s i v e p r o p e r t y o f the United S t a t e s . . . u n l e s s the Admini s t r a t o r waives a l l or any p a r t o f the rights...(when he) determines t h a t the i n t e r e s t o f the United S t a t e s w i l l be served thereby." However, the Congressional advice t o the N a t i o n a l Science Foundat i o n was much d i f f e r e n t , i n t h a t Congress requested NSF (42 U. S. C. 1871(a)) t o a l l o c a t e r i g h t s to i n v e n t i o n s : . . . i n a manner c a l c u l a t e d t o p r o t e c t the p u b l i c i n t e r e s t M

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and the e q u i t i e s o f the i n d i v i d u a l o r o r g a n i z a t i o n w i t h which the c o n t r a c t o r other arrangement i s executed..." I n c o n s i s t e n c i e s i n l e g i s l a t i v e g u i d e l i n e s a l s o e x i s t e d where the g u i d e l i n e s were d i r e c t e d toward a p a r t i c u l a r research program. One o f the e a r l i e s t examples o f Congressional guidance o f t h i s type was given t o the Department o f A g r i c u l t u r e i n t h e i r r e s e a r c h and development e f f o r t s under the Research and Marketing A c t (7 U. S. C. 4 2 7 ( i ) ) . T h i s a c t s t a t e d t h a t t h e i r r e s e a r c h r e s u l t s should be: " . . . a v a i l a b l e t o the p u b l i c through d e d i c a t i o n , assignment t o the Government, o r such other means as the S e c r e t a r y s h a l l determine." However, i n the e a r l y I960's, Congress switched t o language which simply s t a t e d t h a t research r e s u l t s should be made " . . . a v a i l a b l e to the general p u b l i c . " T h i s language was i n s e r t e d i n the Coal Research A c t (30 U.S.C. 666), the Helium A c t Amendments (50 U.S.C. 167(b)) and i n the S a l i n e Water Conversion A c t (42 U.S.C. 1954(b)). The Departments o f A g r i c u l t u r e and I n t e r i o r , t o which these acts a p p l i e d , i n t e r p r e t e d t h i s language as r e q u i r i n g the a c q u i s i t i o n o f t i t l e t o r e s u l t i n g i n v e n t i o n s i n the Government, and merely p r o v i d i n g l i c e n s e r i g h t s t o the i n v e n t i n g c o n t r a c t o r o r t o any others who requested them. T h i s i n t e r p r e t a t i o n a l s o encouraged these agencies t o u t i l i z e a t i t l e p o l i c y i n areas o f r e s e a r c h that were not covered by these a c t s . In the mid 60's, a f t e r the issuance o f P r e s i d e n t Kennedy's Memorandum and Statement o f Government Patent P o l i c y , The Congress i o n a l guidance f l u c t u a t e d c o n s i d e r a b l y . In the Water Resources Act, 42 U.S.C. 1961 c-3, research r e s u l t s were t o be "...made f r e e l y and f u l l y a v a i l a b l e t o the general p u b l i c , " as opposed t o merely " a v a i l a b l e t o the p u b l i c " — t h e language t h a t was u t i l i z e d p r i o r t o t h i s time. In the Appalachian Regional Development A c t , 40 U.S.C. 302(e), the word " f u l l y " was e l i m i n a t e d , and the research r e s u l t s were t o be "...made f r e e l y a v a i l a b l e t o the general public'.' In the N a t i o n a l T r a f f i c and Motor V e h i c l e S a f e t y A c t , 15 U.S.C. 1395(c), Congress r e v e r t e d back t o the " f r e e l y and f u l l y a v a i l a b l e " language but threw i n the s t i p u l a t i o n t h a t these g u i d e l i n e s were to apply only where the Government's c o n t r i b u t i o n was more than minimal. And f i n a l l y , during t h i s e r a , Congress r e v e r t e d back t o e q u i t a b l e g u i d e l i n e s o f the type o r i g i n a l l y u t i l i z e d i n the Nationa l Science Foundation A c t and f i r s t gave l e g i s l a t i v e r e c o g n i t i o n t o the P r e s i d e n t i a l Statement o f Government Patent P o l i c y . In the S o l i d Waste D i s p o s a l A c t , 42 U.S.C. 3253(c), research r e s u l t s : " . . . w i l l be made r e a d i l y a v a i l a b l e on f a i r and e q u i t a b l e terms t o i n d u s t r i e s u t i l i z i n g . . . a n d f u r n i s h i n g . . . s o l i d waste d i s p o s a l (processes and equipment)...(and f u r t h e r t h a t the Secretary o f I n t e r i o r and any other government agencies o p e r a t i n g under the act)...would make use o f , and adhere t o , the Statement o f Government Patent P o l i c y which was promulgated by the P r e s i d e n t i n h i s memorandum o f October 10, 1963."

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The F e d e r a l F i r e Prevention and C o n t r o l A c t , 15 U. S. C. 2213(d), r e q u i r e s adherence t o the r e v i s e d 1971 P r e s i d e n t i a l Patent P o l i c y Statement r a t h e r than the o r i g i n a l 1963 Statement, The Congress came f u l l c i r c l e i n 1969 by going back t o the language "...be a v a i l a b l e to the general p u b l i c " i n the F e d e r a l Coal Mine Health and S a f e t y A c t , 30 U. S. C. 951(c), except t h a t a degree o f f l e x i b i l i t y was added by the language "...with such exceptions and l i m i t a t i o n s , i f any, as the S e c r e t a r y (of HEW),., may f i n d to be necessary i n the p u b l i c i n t e r e s t . . . . " S i m i l a r language was used again i n the Surface Mining C o n t r o l and R e c l a mation Act of 1971, 30 U. S. C. 1201. P r e s i d e n t i a l Patent P o l i c y Statements On October 10, 1963, P r e s i d e n t Kennedy i s s u e d the f i r s t Government-wide patent p o l i c y Memorandum f o r the heads o f Execut i v e Departments and Agencies (5). The Memorandum i n c l u d e d a Statement of Government Patent P o l i c y . The purpose o f the Memorandum was to o b t a i n a g r e a t e r c o n s i s t e n c y i n agency patent p o l i c y for those Government agencies whose p o l i c i e s were not c o n t r o l l e d by s t a t u t e and to minimize o r e l i m i n a t e the need f o r continued piecemeal l e g i s l a t i o n by Congress. T h i s f i r s t attempt to r e s o l v e t h i s long-debated p o l i c y i s s u e on a Government-wide b a s i s had two main o b j e c t i v e s : (1) a c o n s i s t e n t , Government-wide patent p o l i c y , s u b j e c t to s t a t u t o r y r e q u i r e ments, which would take i n t o account the missions o f r e s p e c t i v e agencies; and (2) common g u i d e l i n e s and p r i n c i p l e s f o r the a l l o c a t i o n o f i n v e n t i o n r i g h t s i n a manner t h a t would best serve the p u b l i c i n t e r e s t and, more s p e c i f i c a l l y , i n a manner t h a t would: (a) achieve e x p e d i t i o u s development and commercial u t i l i z a t i o n o f i n v e n t i o n s developed under Government sponsorship; (b) o b t a i n the cooperation o f i n d u s t r y i n a s s i s t i n g the Government i n i t s r e s e a r c h and development e f f o r t s ; and (c) not c o n t r i b u t e to the c o n c e n t r a t i o n o f economic power or s u b s t a n t i a l l y i n t e r f e r e w i t h f r e e competition i n commerc i a l markets. The s a t i s f a c t i o n o f p u b l i c i n t e r e s t , however, i s a d i f f i c u l t goal to achieve, p r i m a r i l y because .the p u b l i c c o n s i s t s o f d i f f e r ent groups whose i n t e r e s t s are, i n some i n s t a n c e s , c o n f l i c t i n g . F u r t h e r , the o b j e c t i v e s o f a c h i e v i n g expeditious commercial u t i l i z a t i o n , o b t a i n i n g the cooperation o f p r i v a t e i n d u s t r y , and maint a i n i n g competition may be i n c o n f l i c t i n any given s i t u a t i o n because the g r e a t e s t cooperation of i n d u s t r y would probably be a achieved by p e r m i t t i n g c o n t r a c t o r s t o r e t a i n t i t l e to r e s u l t i n g i n v e n t i o n s , but t h i s course o f a c t i o n may not best support competition. In a d d i t i o n , such a c t i o n may or may not best achieve widespread commercial u t i l i z a t i o n o f these i n v e n t i o n s . A c c o r d i n g l y , the a c q u i s i t i o n o f p r i n c i p a l or e x c l u s i v e patent r i g h t s by the Government, or a t i t l e p o l i c y , and the d e d i c a t i o n or l i c e n s i n g of these i n v e n t i o n s by the Government to the p u b l i c

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might b e s t serve the p u b l i c i n t e r e s t i n s o f a r as such a p o l i c y w i l l promote widespread use o f the i n v e n t i o n s . On the other hand, a t i t l e p o l i c y may not support the p u b l i c i n t e r e s t i n s o f a r as i t might discourage the use o f i n v e n t i o n s which need f u r t h e r development, o r would tend t o discourage p a r t i c i p a t i o n o f those prospect i v e c o n t r a c t o r s which have the g r e a t e s t p r i v a t e l y developed background and know-how i n the area o f i n t e r e s t t o the Government. The P r e s i d e n t ' s Statement attempted t o r e s o l v e these conf l i c t s by r e c o g n i z i n g t h a t the arguments both f o r and a g a i n s t the t i t l e and l i c e n s e p o l i c i e s were c o r r e c t i n c e r t a i n s i t u a t i o n s , and incorrect i n others. I t was based on the premise t h a t no s i n g l e p o l i c y could accommodate the d i f f e r i n g missions o f the F e d e r a l agencies, the d i v e r s i t y o f Government c o n t r a c t o r s ranging from e d u c a t i o n a l i n s t i t u t i o n s t o manufacturing o r g a n i z a t i o n s , o r t o the r e s u l t i n g i n v e n t i o n s t h a t w i l l range from n u c l e a r r e a c t o r s t o fertilizers. A c c o r d i n g l y , the Statement took a f l e x i b l e approach: ident i f y i n g c o n t r a c t i n g s i t u a t i o n s where the p u b l i c i n t e r e s t would best be served by the Government a c q u i r i n g o r r e s e r v i n g the r i g h t to a c q u i r e p r i n c i p a l o r e x c l u s i v e r i g h t s t o r e s u l t i n g i n v e n t i o n s ; and i d e n t i f y i n g other s i t u a t i o n s where such r i g h t s would best be l e f t w i t h the c o n t r a c t o r . In a d d i t i o n , r e c o g n i z i n g t h a t the p o l i c y was based on a number o f assumptions and l i m i t e d f a c t u a l i n formation, the Statement u n d e r l i n e d the need f o r f l e x i b i l i t y and safeguards by s p e c i f y i n g exceptions t o the general r u l e and by r e s e r v i n g c e r t a i n r i g h t s i n the Government. The 1963 Statement i n S e c t i o n 1(a) f i r s t i d e n t i f i e d four s i t u a t i o n s where the p u b l i c i n t e r e s t would normally best be served through the Government's a c q u i s i t i o n o f p r i n c i p a l o r e x c l u s i v e r i g h t s a t the time o f c o n t r a c t i n g . The f i r s t i s where: "...a p r i n c i p a l purpose o f the c o n t r a c t i s t o c r e a t e , develop, or improve products, processes, o r methods which are intended f o r commercial use (or which are otherwise intended t o be made a v a i l a b l e f o r use) by the general p u b l i c a t home o r abroad, o r which w i l l be r e q u i r e d f o r such use by governmental r e g u l a t i o n s . . . " (Section 1(a)(1)) Thus, t h i s Statement recognized t h a t many times agencies conduct R & D i n response t o the needs o f a p a r t i c u l a r segment o f the p u b l i c and c o n t r a c t f o r development o f products o r processes t o s a t i s f y these needs. In these cases, the presumption was made t h a t i t would be i n the best i n t e r e s t o f the p u b l i c t o reserve t o the Government the p r i n c i p a l r i g h t s t o any i n v e n t i o n s which might cover o r c o n t r o l the u t i l i z a t i o n o f products o r processes r e s u l t ing from the c o n t r a c t . The second s i t u a t i o n i s where: "...a p r i n c i p a l purpose o f the c o n t r a c t i s f o r e x p l o r a t i o n i n t o the f i e l d s which d i r e c t l y concern the p u b l i c h e a l t h o r p u b l i c w e l f a r e . . . . " (Section 1(a) (2) T h i s i s a g e n e r a l i z e d form o f the f i r s t s i t u a t i o n , the p r i n c i p a l d i f f e r e n c e being t h a t i t i s not who u t i l i z e s the end product o f

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the r e s e a r c h t h a t i s important, but r a t h e r whether the f i e l d being explored under the c o n t r a c t i s concerned w i t h the p u b l i c h e a l t h o r welfare. Here again, the presumption was t h a t i n r e s e a r c h conducted i n an area o f primary p u b l i c concern and where a market presumably e x i s t s f o r the research r e s u l t s , the Government should c o n t r o l , a t l e a s t i n i t i a l l y , the r i g h t s t o r e s u l t i n g i n v e n t i o n s . The t h i r d s i t u a t i o n f o r p r i n c i p a l r i g h t s i n the Government i s where : "•..the c o n t r a c t i s i n a f i e l d o f science o r technology i n which there has been l i t t l e s i g n i f i c a n t experience o u t s i d e o f work funded by the Government, o r where the Government has been the p r i n c i p a l developer o f the f i e l d , and the a c q u i s i t i o n o f e x c l u s i v e r i g h t s a t the time o f c o n t r a c t i n g might confer on the c o n t r a c t o r a p r e f e r r e d o r dominant p o s i t i o n . . . " (Section 1(a)(3)) T h i s p r o v i s i o n was t o cover c o n t r a c t s i n f i e l d s where the Government would c o n t r i b u t e t o , o r a c t u a l l y c r e a t e , a p r i v a t e monopol i s t i c s i t u a t i o n under Government funding i f i t s c o n t r a c t o r r e t a i n e d p r i n c i p a l o r e x c l u s i v e r i g h t s . A good example o f t h i s s i t u a t i o n was atomic energy. T h i s f i e l d was v i r t u a l l y unexplored before the Government undertook t o fund the major p o r t i o n o f the R & D i n t h i s f i e l d o f technology. A l s o , t h i s R & D e f f o r t was concentrated i n a r e l a t i v e l y few c o n t r a c t o r s f o r reasons o f secur i t y and because o f the l a r g e - s c a l e development c o s t s i n v o l v e d . To have allowed t h i s small group o f c o n t r a c t o r s , o r any one o f them i n d i v i d u a l l y , t o o b t a i n a dominant commercial p o s i t i o n i n t h i s new f i e l d , based on t h e i r Government c o n t r a c t s , would have been g r o s s l y i n e q u i t a b l e . Atomic energy was about the o n l y example which f i t t e d t h i s situation. I t i s questionable, however, whether t h i s presumption would apply t o a l l phases o f atomic energy today because o f the s u b s t a n t i a l amount o f p r i v a t e funds p r e s e n t l y being i n v e s t e d i n t h i s f i e l d f o r R & D by p r i v a t e p a r t i e s . The f o u r t h and l a s t s i t u a t i o n i s d e f i n e d where: "... the s e r v i c e s o f the c o n t r a c t o r a r e : (i) f o r the o p e r a t i o n o f a government-owned r e s e a r c h o r production f a c i l i t y ; o r ( i i ) c o o r d i n a t i n g and d i r e c t i n g the work o f o t h e r s . . . " T h i s c o n t r a c t i n g s i t u a t i o n was based p r i m a r i l y on e q u i t a b l e considerations. I t was p r i m a r i l y intended t o cover the Governmentowned, contractor-operated (GOCO) f a c i l i t i e s and the s i t u a t i o n where the c o n t r a c t o r i s p r i m a r i l y i n v o l v e d i n c o o r d i n a t i n g and managing the research and development work o f other c o n t r a c t o r s . In e i t h e r o f these s i t u a t i o n s , the c o n t r a c t o r c o n t r i b u t e s l i t t l e towards the conception o r development o f the p a r t i c u l a r i n v e n t i o n s involved. A f t e r d e f i n i n g the four s i t u a t i o n s f o r the a c q u i s i t i o n o f e x c l u s i v e or p r i n c i p a l r i g h t s by the Government, the 1963 S t a t e ment d e c l a r e s t h a t : "In e x c e p t i o n a l circumstances, the c o n t r a c t o r may a c q u i r e

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g r e a t e r r i g h t s than a nonexclusive l i c e n s e a t the time o f c o n t r a c t i n g , where the head o f the department o r agency c e r t i f i e s t h a t such a c t i o n w i l l best serve the p u b l i c i n t e r e s t . " (Section 1(a)) Under t h i s p r o v i s i o n the agency i s authorized, a t the time o f c o n t r a c t i n g , t o permit the c o n t r a c t o r t o r e t a i n e x c l u s i v e r i g h t s to e i t h e r a l l inventions or s p e c i f i c a l l y i d e n t i f i e d inventions. No guidance was provided as t o when an agency should make t h i s f i n d i n g , except when i t would best serve the p u b l i c i n t e r e s t . T h i s c r i t e r i o n was g e n e r a l l y considered a p p l i c a b l e when an o r g a n i z a t i o n , deemed e s s e n t i a l t o the e f f o r t , refused t o accept a cont r a c t u n l e s s i t was permitted t o r e t a i n e x c l u s i v e patent r i g h t s i n r e s u l t i n g i n v e n t i o n s . T h i s i s most l i k e l y t o occur when the p r o s p e c t i v e c o n t r a c t o r has a very strong, p r i v a t e l y developed, commercial p o s i t i o n , and the advantages t o be gained under the c o n t r a c t are not worth the p o s s i b i l i t y o f j e o p a r d i z i n g i t s comm e r c i a l p o s i t i o n . A l s o , s i t u a t i o n s may a r i s e when a p r o s p e c t i v e c o n t r a c t o r has a l r e a d y expended a s u b s t a n t i a l amount o f p r i v a t e funds toward the development o f an i n v e n t i o n t o be developed under the c o n t r a c t , but has not y e t a c t u a l l y reduced the concept to p r a c t i c e . The 1963 Statement a l s o provides t h a t : "Greater r i g h t s may a l s o be acquired by the c o n t r a c t o r a f t e r the i n v e n t i o n has been i d e n t i f i e d , where the i n v e n t i o n . . . i s not a primary o b j e c t o f the c o n t r a c t , provided the a c q u i s i t i o n o f such g r e a t e r r i g h t s i s c o n s i s t e n t with the i n t e n t o f t h i s S e c t i o n 1(a) and i s a necessary i n c e n t i v e t o c a l l f o r t h p r i v a t e r i s k c a p i t a l and expense t o b r i n g the i n v e n t i o n t o the p o i n t o f p r a c t i c a l a p p l i c a t i o n . " (Section 1(a)) T h i s exception was designed t o permit the Government t o consider the a l l o c a t i o n o f r i g h t s t o i n d i v i d u a l i n v e n t i o n s a f t e r such i n v e n t i o n s had been i d e n t i f i e d . T h i s p r o v i s i o n covered i n v e n t i o n s which were not s p e c i f i c a l l y r e l a t e d t o the o b j e c t i v e s o f the cont r a c t and t h e r e f o r e the presumption o f S e c t i o n 1 ( a ) , o f p r i n c i p a l r i g h t s t o the Government, needed t o be reviewed. T h i s review should c o n s i d e r the nature o f the i n v e n t i o n i n r e l a t i o n s h i p t o the c o n t r a c t and the n e c e s s i t y t o r e l y on p r i v a t e r i s k c a p i t a l to develop the i n v e n t i o n so i t would be a v a i l a b l e t o the p u b l i c i n the form o f new products o r processes. A f t e r i d e n t i f y i n g , i n S e c t i o n 1(a), c o n t r a c t i n g s i t u a t i o n s i n which the Government should have the f i r s t o p t i o n t o a c q u i r e t i t l e because o f p u b l i c i n t e r e s t o r e q u i t a b l e c o n s i d e r a t i o n s , the 1963 Statement d e f i n e s those s i t u a t i o n s where the p u b l i c i n t e r e s t would favor the presumption t h a t the c o n t r a c t o r should have the o p t i o n t o r e t a i n the e x c l u s i v e o r p r i n c i p a l r i g h t s i n the i n v e n t i o n s r e s u l t i n g from the c o n t r a c t . The 1963 Statement d e f i n e s , i n S e c t i o n 1(b), s i t u a t i o n s other than those d e f i n e d i n S e c t i o n 1(a) as embracing the case: "...where the purpose o f the c o n t r a c t i s t o b u i l d upon e x i s t i n g knowledge o r technology t o develop i n f o r m a t i o n , products

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processes or methods f o r use by the Government, and the work c a l l e d f o r by the c o n t r a c t i s i n a f i e l d o f t e c h n i c a l compet a n c e . . . d i r e c t l y r e l a t e d to an area i n which the c o n t r a c t o r has an e s t a b l i s h e d nongovernmental commercial p o s i t i o n . . . " In such cases, the Statement concludes t h a t the c o n t r a c t o r should normally be allowed to acquire e x c l u s i v e commercial r i g h t s . In these s i t u a t i o n s , the r e s e a r c h i s not intended f o r p u b l i c use, does not d i r e c t l y concern the f i e l d s o f h e a l t h or w e l f a r e , and i s not i n a f i e l d which was p r i n c i p a l l y developed by the Government. F u r t h e r , i t i s not as l i k e l y t h a t these i n v e n t i o n s w i l l be d e v e l oped to the p o i n t o f commercial a p p l i c a t i o n by the Government, s i n c e the agency i n v o l v e d would not have such a m i s s i o n , and there i s l i t t l e l i k e l i h o o d t h a t a present p u b l i c demand w i l l e x i s t f o r these i n v e n t i o n s i n view o f the purpose of the c o n t r a c t . This p r o v i s i o n g i v e s f u l l r e c o g n i t i o n t o the c o n t r a c t o r ' s e q u i t a b l e and commercial background p o s i t i o n , thereby encouraging p a r t i c i p a t i o n by c o n t r a c t o r s and the a p p l i c a t i o n of p r i v a t e l y developed knowledge t o the c o n t r a c t t a s k s . As i n the case w i t h S e c t i o n 1 ( a ) , t h i s s e c t i o n a l s o has exceptions t o the presumptions on which i t i s based. There w i l l be i n s t a n c e s where even though an i n v e n t i o n i s d i r e c t l y r e l a t e d t o the c o n t r a c t o r ' s commercial product l i n e , the i n v e n t i o n w i l l not be e x p l o i t e d . To i n s u r e t h a t such a c t i o n does not adversely a f f e c t the p u b l i c i n t e r e s t , the p o l i c y i n S e c t i o n 1(f) s t i p u l a t e s t h a t the government should reserve the r i g h t to r e q u i r e the cont r a c t o r to grant l i c e n s e s t o others on a nonexclusive r o y a l t y free basis. "...unless the contractor...has taken e f f e c t i v e steps w i t h i n three years a f t e r a patent i s s u e s on the i n v e n t i o n t o b r i n g the i n v e n t i o n t o the p o i n t o f p r a c t i c a l a p p l i c a t i o n or has made the i n v e n t i o n a v a i l a b l e f o r l i c e n s i n g r o y a l t y - f r e e or on terms t h a t are reasonable i n the circumstances..." T h i s s e c t i o n was to i n s u r e t h a t these i n v e n t i o n s would not be suppressed. I f the c o n t r a c t o r e i t h e r does not commercialize the i n v e n t i o n , or does not o f f e r others the opportunity to do so, the Government could r e q u i r e the issuance o f l i c e n s e s to o t h e r s . The 1963 Statement a l s o s p e c i f i e s i n S e c t i o n Kg) t h a t where a c o n t r a c t o r r e t a i n s p r i n c i p a l or e x c l u s i v e r i g h t s the Government should reserve the r i g h t to r e q u i r e the c o n t r a c t o r to grant l i censes to others e i t h e r r o y a l t y - f r e e or on reasonable terms: " . . . t o the extent t h a t the i n v e n t i o n i s r e q u i r e d f o r p u b l i c use by governmental r e g u l a t i o n s or as may be necessary to f u l f i l l h e a l t h needs, or f o r other p u b l i c purposes s t i p u l a t e d i n the c o n t r a c t . " These l a s t two p r o v i s i o n s (Sections 1(f) and Kg)) have been r e f e r r e d t o as the "march-in" r i g h t s . The 1963 Statement f i n a l l y provides i n S e c t i o n 1(c) t h a t when a c o n t r a c t i n g s i t u a t i o n does not f a l l w i t h i n the presumptions s e t f o r t h i n e i t h e r S e c t i o n s 1 (a) or 1 (b), the a l l o c a t i o n o f r i g h t s t o i n v e n t i o n s should be decided on a case-by-case b a s i s as they are

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brought t o the a t t e n t i o n o f the government agency. I n t h i s manner, a l l a v a i l a b l e f a c t u a l i n f o r m a t i o n can be u t i l i z e d i n d e t e r mining whether ownership by the Government o r the c o n t r a c t o r would best serve the p u b l i c i n t e r e s t . S e v e r a l years a f t e r the 1963 Statement was i s s u e d , the Committee on Government Patent P o l i c y o f the F e d e r a l C o u n c i l f o r Science and Technology (FCST) supported the most e x t e n s i v e study ever made on the government patent p o l i c y , i s s u e . The r e s u l t s o f t h i s study, conducted under c o n t r a c t by Harbridge House, Inc. i s reported i n a two-volume work p u b l i s h e d i n 1968 ( 6 ) . As a r e s u l t o f the Harbridge House study and seven years o f monitoring the agencies o p e r a t i n g under the P r e s i d e n t i a l P o l i c y c r i t e r i a , the Committee on Government Patent P o l i c y came t o the following conclusions: "The Committee on Government Patent P o l i c y has concluded t h a t r i g h t s t o i n v e n t i o n s made under Government c o n t r a c t s should be a l l o c a t e d i n accordance with a f l e x i b l e , government-wide p o l i c y which f o l l o w s the b a s i c p r i n c i p l e s and c r i t e r i a o f the October 1963 P r e s i d e n t i a l P o l i c y Statement, as t h i s P o l i c y Statement i s b e l i e v e d t o provide the b e s t o v e r a l l balance o f the i n t e r e s t s o f the p u b l i c . The P r e s i d e n t i a l P o l i c y was developed as a r e s u l t o f c a r e f u l interagency study, and was based on the a c t u a l o p e r a t i n g experiences o f the f e d e r a l departments and agencies over many y e a r s . In a d d i t i o n , the F e d e r a l C o u n c i l has found, based on s e v e r a l years o f operat-r i n g experience, t h a t the P r e s i d e n t i a l P o l i c y has been e f f e c t i v e i n b r i n g i n g about a g r e a t e r degree o f c o n s i s t e n c y i n the patent p o l i c i e s and p r a c t i c e s o f the f e d e r a l departments and agencies, and has p r o v i d e d a g r e a t e r degree o f p r o t e c t i o n o f the p u b l i c i n t e r e s t . T h i s c o n c l u s i o n i s a l s o g e n e r a l l y supported by the f i n d i n g o f the Harbridge House study, which may be summarized as f o l lows : (1) The Harbridge House study r e s u l t s c o n c l u s i v e l y demo n s t r a t e t h a t a s i n g l e presumption o f ownership o f a patent i s n o t i n the p u b l i c i n t e r e s t , a p p l i e d e i t h e r governmentwide, t o a s i n g l e agency, o r t o a p a r t i c u l a r government p r o gram. (2) The Harbridge House study r e s u l t s i d e n t i f y f a c t o r s which when p r o p e r l y considered, can a f f e c t commercial u t i l i z a t i o n o f government-sponsored i n v e n t i o n s , p a r t i c i p a t i o n o f i n d u s t r y i n government R&D programs, and competition i n comm e r c i a l markets. The most c r i t i c a l f a c t o r s a r e : — the m i s s i o n o f the r e s e a r c h sponsoring agency; — the purpose and nature o f the c o n t r a c t ; the commercial a p p l i c a b i l i t y o f and market p o t e n t i a l f o r the i n v e n t i o n ; — the extent t o which the i n v e n t i o n was developed by the r e s e a r c h sponsoring agency; — the promotional a c t i v i t i e s o f the sponsoring agency;

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the p r i o r commercial experience o f the c o n t r a c t o r i n the f i e l d of the i n v e n t i o n ; — the s i z e of the c o n t r a c t o r ' s p r i v a t e l y financed R&D i n the f i e l d o f r e s e a r c h ; — the c o n t r a c t o r ' s a t t i t u d e towards and c a p a b i l i t y to commercially promote the i n v e n t i o n ; and — the s i z e , nature and r e s e a r c h o r i e n t a t i o n o f the i n d u s t r y t h a t w i l l be u s i n g the i n v e n t i o n commercially. (3) The Harbridge House Study r e s u l t s and the o p e r a t i n g experience o f the government agencies i n d i c a t e t h a t the p r i n c i p l e s u n d e r l y i n g the P r e s i d e n t i a l P o l i c y , and, w i t h minor exceptions, the c r i t e r i a e s t a b l i s h e d by the P o l i c y f o r a l l o c a t i n g patent r i g h t s take i n t o c o n s i d e r a t i o n the above l i s t e d f a c t o r s i n a manner which: — p r o p e r l y balances the P o l i c y o b j e c t i v e s o f encouragi n g u t i l i z a t i o n of i n v e n t i o n s , p a r t i c i p a t i o n by i n d u s t r y , and commercial competition i n the o v e r a l l public interest; — p r o v i d e s the o p e r a t i o n a l f l e x i b i l i t y needed by the agencies t o accomplish the o b j e c t i v e s of t h e i r miss i o n s under d i f f e r i n g c o n t r a c t u a l s i t u a t i o n s ; and — w i t h i n the d i f f e r i n g m i s s i o n c o n s t r a i n t s o f the f e d e r a l agencies, promotes c o n s i s t e n t a p p l i c a t i o n of patent p o l i c i e s and p r a c t i c e s i n s i m i l a r c o n t r a c t i n g situations." In view of these c o n c l u s i o n s , the Committee recommended the cont i n u a t i o n of a f l e x i b l e , government-wide patent p o l i c y f o l l o w i n g the b a s i c p r i n c i p l e s and c r i t e r i a o f the 1963 P r e s i d e n t i a l Patent P o l i c y Statement. More s p e c i f i c a l l y , the Committee suggested t h a t such a p o l i c y should be continued e i t h e r by making minor m o d i f i c a t i o n s t o the P r e s i d e n t i a l Patent P o l i c y or by proposing l e g i s l a t i o n based on s i m i l a r p r i n c i p l e s and c r i t e r i a which would be app l i c a b l e to a l l agencies. As a r e s u l t of these suggestions, P r e s i d e n t Nixon r e i s s u e d the P r e s i d e n t i a l Patent P o l i c y Statement on August 23, 1971 Ç7). The new Statement made o n l y minor changes i n the one i s s u e d i n 1963. The

ERDA Patent P o l i c y

The patent p o l i c y provided to the Energy Research and Development A d m i n i s t r a t i o n (ERDA, now merged i n t o the Department of Energy) i n S e c t i o n 9 o f the F e d e r a l Nonnuclear Energy Research and Development Act o f 1974, 42 U.S.C. 5 9 0 8 , i s the most comprehens i v e , most thoroughly debated patent p o l i c y ever passed by Congress (8). I t r e p r e s e n t s a compromose p o s i t i o n between the " t i t l e " and " l i c e n s e " advocates, and was so d e l i c a t e l y balanced t h a t i n l e t t e r s to Senator Jackson supporting the p o l i c y , Mr. Roy L. Ash, D i r e c t o r , OMB, stated: "Thus, the r e s u l t a n t language s t r i k e s an extremely d e l i c a t e balance between d i v e r g e n t p r e f e r e n c e s . Even minor changes

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i n the t e x t of t h i s document are l i k e l y to upset the balance t o the extent t h a t one or the other o f the p a r t i e s might be o b l i g e d to withdraw i t s support. In the s p i r i t of r e c i p r o c i t y , t h e r e f o r e , the A d m i n i s t r a t i o n must ask t h a t i t s endorsement o f t h i s p r o p o s a l be regarded as withdrawn i n the event t h a t any changes are made i n the t e x t of the agreedupon language, notwithstanding the f a c t t h a t such changes might be i n the d i r e c t i o n o f the A d m i n i s t r a t i o n ' s p r e f e r ence . " and Senators Hart and Long s t a t e d : "We should note t h a t the compromise contains many h i g h l y i n t e r r e l a t e d p r o v i s i o n s and i s q u i t e d e l i c a t e l y balanced. While a number o f concepts and p r o v i s i o n s are not q u i t e what we would advance i n a b i l l o f our own, on balance we do bel i e v e a f a i r compromise on an extremely complex and c o n t r o v e r s i a l i s s u e has been reached f o r purposes o f S.1283." Subsection 9(a) o f the A c t s t a t e s t h a t whenever an i n v e n t i o n i s made or conceived i n the course o f or under any c o n t r a c t o f the A d m i n i s t r a t i o n other than n u c l e a r energy research and development pursuant to the Atomic Energy A c t , and the Administrator of ERDA makes e i t h e r o f two determinations regarding the persons who made the i n v e n t i o n , then t i t l e to such i n v e n t i o n s s h a l l be vested i n the u n i t e d States unless the A d m i n i s t r a t o r waives a l l or any p a r t of such r i g h t s i n conformity with the p r o v i s i o n s o f S e c t i o n 9. S e c t i o n 9(c) s t a t e s t h a t the A d m i n i s t r a t o r may waive a l l o r any p a r t o f the r i g h t s to any i n v e n t i o n o r c l a s s o f i n v e n t i o n s made or to be made under any c o n t r a c t w i t h the A d m i n i s t r a t i o n i f he determines t h a t the i n t e r e s t s o f the United States and the gene r a l p u b l i c w i l l best be served by such waiver. In making waiver determinations, the A d m i n i s t r a t o r was d i r e c t e d to have the f o l lowing o b j e c t i v e s : — making the b e n e f i t s o f the energy r e s e a r c h , development, and demonstration program widely a v a i l a b l e to the p u b l i c i n the s h o r t e s t p r a c t i c a b l e time — promoting the commercial u t i l i z a t i o n o f such inventions encouraging p a r t i c i p a t i o n by p r i v a t e persons i n the A d m i n i s t r a t i o n ' s energy r e s e a r c h , development, and demonstration program f o s t e r i n g competition and p r e v e n t i n g undue market c o n c e n t r a t i o n or the c r e a t i o n or maintenance o f other s i t u a t i o n s i n c o n s i s t e n t with the a n t i t r u s t laws. The Conference Report makes two important p o i n t s on t h i s p r o v i s i o n c l e a r . F i r s t , i t recognizes t h a t i n any s i n g l e waiver s i t u a t i o n , a l l four o f these o b j e c t i v e s may not be o b t a i n a b l e ; i . e . , i n some s i t u a t i o n s p a r t i c i p a t i o n may be more important than f o s t e r i n g competition, while i n others the reverse might be t r u e . The Conference Committee s t a t e s t h a t i t expected t h a t over the long run a l l four o f these o b j e c t i v e s would be o b t a i n a b l e .

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Secondly, the Report makes c l e a r t h a t waiver d e c i s i o n s o f the A d m i n i s t r a t o r are not s u b j e c t t o a p u b l i c h e a r i n g requirement. Subsection 9(d) s e t s f o r t h eleven s p e c i f i c f a c t o r s which the A d m i n i s t r a t o r i s t o consider i n making waiver determinations a t the time o f c o n t r a c t i n g . These f a c t o r s are based on the e x p e r i ence o f AEC, NASA and other F e d e r a l agencies under the P r e s i d e n t i a l Patent P o l i c y Statement. They concern c o n s i d e r a t i o n s o f : — the w i l l i n g n e s s o f a c o n t r a c t o r t o p a r t i c i p a t e — the n e c e s s i t y o f a p a r t i c u l a r c o n t r a c t o r ' s p a r t i c i p a t i o n i n a t t a i n i n g the purposes o f the program — the c o n t r a c t o r ' s background and commercial p o s i t i o n — the c o n t r i b u t i o n t h a t the c o n t r a c t o r has made o r w i l l make t o commercialization o f c o n t r a c t r e s u l t s — the purpose o f the c o n t r a c t and the intended use o f the c o n t r a c t r e s u l t s — the e f f e c t o f the waiver on p u b l i c h e a l t h , s a f e t y and w e l f a r e , and i t s e f f e c t on competition — the extent t o which U n i v e r s i t i e s have a technology transfer capability. Subsection 9(e) s e t s f o r t h c o n s i d e r a t i o n s s i m i l a r t o the cons i d e r a t i o n s f o r advance waivers t h a t must be taken i n t o account i n waiving r i g h t s t o i d e n t i f i e d i n v e n t i o n s made under ERDA cont r a c t s . A c c o r d i n g l y , ERDA had the a u t h o r i t y t o make both advance waivers a t the time o f c o n t r a c t i n g and case-by-case waivers a f t e r an i n v e n t i o n i s i d e n t i f i e d . The A d m i n i s t r a t o r was provided w i t h o b j e c t i v e s t o be achieved i n making waiver determinations, and c o n s i d e r a t i o n s t o be reviewed i n making such determinations, but Congress l e f t w i t h the Administrator the u l t i m a t e d e c i s i o n as how the c o n s i d e r a t i o n s were t o be a p p l i e d i n order t o achieve the objectives. In t h i s manner, ERDA was given the f l e x i b i l i t y t o u t i l i z e i t s waiver a u t h o r i t y i n each c o n t r a c t i n g s i t u a t i o n i n a manner which would best support the Government's i n t e r e s t s , the i n t e r e s t s o f the general p u b l i c , and best achieve ERDA s o v e r a l l mission r e s p o n s i b i l i t i e s . Subsection 9(h) s e t s f o r t h the terms and c o n d i t i o n s a p p l i c able t o waivers granted by ERDA. T h i s s u b s e c t i o n , i n paragraphs 1-4, r e q u i r e s ERDA t o r e t a i n an i r r e v o c a b l e , nonexclusive, p a i d up l i c e n s e i n any i n v e n t i o n waived. The l i c e n s e normally extends to s t a t e and domestic municipal governments, and t o f o r e i g n governments pursuant t o t r e a t y i f the A d m i n i s t r a t o r determines such f o r e i g n l i c e n s e i s i n the n a t i o n a l i n t e r e s t . Under these p r o v i s i o n s ERDA reserves the r i g h t t o seek patent p r o t e c t i o n i n any f o r e i g n country i n which the waiver r e c i p i e n t does not e l e c t t o f i l e patent a p p l i c a t i o n s . The waiver r e c i p i e n t o r e x c l u s i v e l i censee i s r e q u i r e d t o make p e r i o d i c r e p o r t s on the commercial use being made o r intended t o be made o f the i n v e n t i o n . Paragraphs 5-7 o f subsection 9(h) s e t f o r t h "march-in" r i g h t s reserved t o the Government under waivers. Paragraph 5 r e q u i r e s the waiver r e c i p i e n t t o l i c e n s e others a t reasonable r o y a l t i e s i f the i n v e n t i o n i s r e q u i r e d f o r use by Government r e g u l a t i o n or i s 1

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necessary t o f u l f i l l h e a l t h , s a f e t y , o r energy needs. T h i s i s s u b s t a n t i a l l y the same r i g h t t h a t i s r e q u i r e d under the P r e s i d e n t i a l Patent P o l i c y Statement and preserves the r i g h t o f the Government t o r e q u i r e l i c e n s i n g i n the event o f some unexpected nat i o n a l need. Paragraph 6 p r o v i d e s the r i g h t o f the A d m i n i s t r a t o r t o t e r minate a waiver, i n whole o r i n p a r t , i f the waiver r e c i p i e n t i s not t a k i n g , o r w i t h i n a reasonable time w i l l not take, e f f e c t i v e steps necessary t o commercialize the i n v e n t i o n . T h i s r i g h t i s p r o v i d e d t o prevent suppression o f the i n v e n t i o n and t o i n s u r e commercial a v a i l a b i l i t y . Paragraph 7 o f s u b s e c t i o n 9(h) i s perhaps the most important of the r i g h t s r e q u i r e d by Congress t o be r e s e r v e d by ERDA upon the grant o f a waiver. T h i s p r o v i s i o n permits the A d m i n i s t r a t o r t o r e q u i r e l i c e n s i n g , o r t o terminate a waiver, i n whole o r i n p a r t , i f i t i s shown a t a p u b l i c h e a r i n g h e l d no e a r l i e r than four years a f t e r the grant o f a waiver o r three years a f t e r the grant o f an exclusive license that: — the waiver o r l i c e n s e has tended t o v i o l a t e the a n t i t r u s t laws, o r — the c o n t r a c t o r has not and i s not expected t o take e f f e c t i v e steps t o commercialize the i n v e n t i o n . Inasmuch as the a n t i t r u s t and a n t i c o m p e t i t i v e e f f e c t s o r a waiver or l i m i t e d e x c l u s i v e l i c e n s e are d i f f i c u l t o r impossible t o a s c e r t a i n a t the time t h a t the waiver o r l i c e n s e i s granted, Congress d i d not r e q u i r e the A d m i n i s t r a t o r t o make p o s i t i v e f i n d i n g s on these i s s u e s a t the time such a waiver o r e x c l u s i v e l i c e n s e was granted. However, paragraph 10 o f s u b s e c t i o n 9(d) r e q u i r e d t h a t the l i k e l y e f f e c t o f a waiver on competition and market concent r a t i o n must be considered a t the time the waiver i s requested. In order t o i n s u r e t h a t p o s s i b l e a n t i - c o m p e t i t i v e e f f e c t s o f waivers and l i c e n s e s a r e reviewed a t the a p p r o p r i a t e time, p a r a graph 7 o f s u b s e c t i o n 9(h) p r o v i d e s f o r a h e a r i n g t o determine whether a n t i - c o m p e t i t i v e e f f e c t s have, i n f a c t , r e s u l t e d from the waiver o r l i c e n s e and whether the i n v e n t i o n i s being commerciali z e d . The h e a r i n g i s i n i t i a t e d by the A d m i n i s t r a t o r on h i s own motion, o r upon request o f any p r i v a t e persons, i f a p p r o p r i a t e . T h i s p r o v i s i o n p r o v i d e s an a d d i t i o n a l mechanism t o r a i s e important questions concerning e a r l i e r determinations o f the A d m i n i s t r a t o r , and i n t h i s manner the p u b l i c i n t e r e s t may be p r o t e c t e d . Summary The debate and search f o r s o l u t i o n s t o the patent p o l i c y i s sue are as a c t i v e as ever. Congress has been w r i t i n g ERDA type patent p o l i c y , o r making r e f e r e n c e t o the ERDA patent p o l i c y , i n t o s e v e r a l b i l l s , three o f which have passed (9). A t the c l o s e o f the Ford a d m i n i s t r a t i o n , the FCST Committee on Government Patent P o l i c y proposed a b i l l t o p r o v i d e a government-wide p o l i c y , a b o l i s h i n g a l l other l e g i s l a t i v e patent p o l i c i e s , which was based on

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the experiences o f v a r i o u s agencies and the recommendations o f the Commission on Government Procurement i n i t s f i n a l r e p o r t o f December, 1972. T h i s proposed b i l l served as a b a s i s f o r Congressman Thornton's H.R. (5249 on which hearings are planned l a t e r i n 1978. The Thornton b i l l drew c o n s i d e r a b l e a t t e n t i o n , and f i r e , d u r i n g the Nelson hearings i n December, 1977. And f i n a l l y , the whole i s s u e i s under study by OMB and the White House; w i t h the R&D sponsoring agencies r e c e n t l y being asked t h e i r o p i n i o n s r e g a r d i n g s e v e r a l p o s s i b l e approaches t o t h i s p o l i c y i s s u e by OMB. Perhaps these present e f f o r t s w i l l f i n a l l y r e s o l v e t h i s long debated i s s u e , but I somehow b e l i e v e t h a t i t w i l l s t i l l be with us a f t e r we have solved our energy problem.

Abstract Federal patent policy involves the allocation of rights to inventions made under research and development a c t i v i t i e s supported by the Federal Government. Developing such a policy involves complex l e g a l , economic, and technical issues that can and do have strong influence on an agency's research and development programs and on the u t i l i z a t i o n of technologies resulting from those programs. What the proper policy should be has been debated emotionally for over 20 years, and is of concern to Congress, the Executive Branch and the private sector of the economy. Congress has enacted legislative guidance in a piecemeal and inconsistent fashion; applying some policies to particular agencies, some policies to fields of technology and other policies to individual R&D programs. The Presidential Patent Policy Statements of 1963 and 1971 attempted to bring some uniformity and consistency to this issue, but have been unsuccessful in accomplishing this end. The most flexible and comprehensive patent policy enacted by Cogress to date has been that used by the Department of Energy. Literature Cited 1.

2.

3. 4.

Report of the National Patent Planning Commission, H.R. Doc. 239, 78th Cong., 1st Sess. (1943); Second Report of the National Patent Planning Commission, H.R. Doc. 22, 79th Cong., 1st Sess. (1945); Third Report of the National Patent Planning Commission, H.R. Doc. 283, 79th Cong., 1st Sess. (1945). Investigation of Concentration of Economic Power; Final Report and Recommendation of the Temporary Economic Committee (Pursuant to Public Resolution No. 113, 75th Congress), No. 35, 77th Cong., 1st Sess. (1941). Second Report of the National Patent Planning Commission, supra, note 35, at 5. U.S. Department of Justice, Investigation of Government Patent Practices and P o l i c i e s , Report and Recommendations of the Attorney General to the President, 3 V o l s . , Washington, D. C. (1947).

1. 5. 6.

7. 8.

9.

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Memorandum and Statement of Government Patent Policy, 28 Fed. Reg. 10943 (1963). Government Patent Policy Study, Final Report for the FCST Committee on Government Patent Policy, Contract No. 7-35807, May 1968, Government Printing Office, Washington, D.C. 36 Fed. Reg. 16887 (1971). The Conference Committee on S. 1283 in their report to both Houses pointed out that the basic structure of Section 9 was derived from the Space Act with some modifications derived from the Atomic Energy Act. Some of the detailed c r i t e r i a of Section 9 were stated as being adopted primarily from NASA and AEC regulations, as well as from the Presidential Patent Policy Statement ( H.R. Rep. No. 1563, 93d Cong., 2d. Sess. at 26). 42 U.S.C. 3253(c) Supp. V; 15 U.S.C. 2511; Section 3, P . L . 94-316.

Biographic Notes James E . Denny has served in various legal positions with five different Federal agencies over the past 20 years. At present he i s Assistant General Counsel for Patents for the Department of Energy, and Chairman of the Executive Subcommittee of the Federal Council for Science and Technology Committee on Government Patent Policy. Mr. Denny has received a baccalaureate in e l e c t r i c a l engineering from Johns Hopkins University and a Bachelor of Laws degree from George Washington University Law School. RECEIVED June 20, 1978.

Federal Patent PolicyâIts Development and Present Status - ACS

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