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contracting. In addition, the government could induce the commercialization of any invention in which it holds title by deciding to grant any necessary exclusive license after the invention had been identified. The administrative burdens created by this policy, however, make it impractical and undesirable. An agency would be required to allocate much of its resources to the negotiation with the contractor of the appropriate allocation of invention rights, a subject of only secondary importance to the agency when compared to the primary purpose of the contract. Moreover, each agency would be required to allocate vast resources to the evaulation and promotion of federally-owned inventions. If an agency failed to grant any necessary exclusive license, the penalty paid by the public would be the noncommercialization of the invention.

The President's patent policy would reduce the administrative burden and the uncertainty that accompany present policies. The proposal, which includes elements of both the government title policy and the contractor title policy, allocates patent rights in federally sponsored or supported inventions according to unambiguous, generally applicable rules. Contractors that are small businesses and nonprofit organizations will receive title in federally-financed inventions, but the government will retain title in inventions made by all other contractors. Ordinarily, the other contractors automatically will receive exclusive licenses in whatever particular fields of use in which they agree to commercialize the invention.

The receipt of title by small businesses and nonprofit organizations is intended to provide these contractors with an advantage over their larger competitors. The advantage is justified by the special place of these organizations in our society. It also is justified by the fact that, unlike larger contractors whose commercial interest in an invention is apt to be limited by the fields in which it already is, or is planning to become, engaged, small businesses and nonprofit organizations share a strong incentive to attempt to commercialize an invention to the widest possible

extent.

The President's decision to provide contractors other than small businesses and nonprofit organizations with automatic exclusive licenses in particular fields of use recognizes that a complete transfer of title to the contractor usually is unnecessary to induce its participation in government research and development work and its commercialization of the invention. The government retains the right to license the invention or otherwise make it available to the public in all fields of use not selected by the contractor.

Although the contractor will know at the time of contracting that it automatically will be able to receive exclusive licenses under any forthcoming invention in particular fields of use, it will not actually receive those licenses until the invention has been identified, its intention to commercialize has been announced, and its selection of fields of use have been submitted to the contracting agency. After the contractor has submitted complete information regarding the invention, its intention to commercialize, and its selection of fields of use, the agency has ninety days in which it may determine whether the contractor's acquisition of an exclusive license in any selected field of use would be contrary to the requirements of the agency's mission, national security, or the antitrust laws. To reduce administrative burdens and to increase the security of the contractor's expectations of receiving exclusive commercial rights in the invention, the scope of the agency's possible inquiry underlying this determination is limited. An agency review will focus only on those unforseen circumstances of which it has become aware since the time of contracting that now require it to deny the contractor exclusive commercial rights with respect to a particular field of use. The contractor will not be denied an exclusive license solely on the basis of facts that were known or reasonably foreseeable by the agency at the time of contracting. If such facts do exist at the time of contracting, an agency normally will deviate from the standard patent rights clause so that the contractor will know at that time that it will not receive an exclusive license to practice a forthcoming invention in a particular field of use.

The agency's ability to deviate from the standard patent rights clause and to terminate a contractor's title or exclusive rights in an invention provide it with additional flexibility to fulfill its mission and protect the public interest. Although these powers are intended to be exercised only in unusual circumstances, they are available to assist the agency in fulfilling its mission, protecting the public interest, and promoting the commercialization of contract inventions.

CONCLUSIONS

Enactment of this bill would stimulate the industrial innovation process by contributing to the more effective utilization of inventions made in the course of federally sponsored or supported research and development work. Further, the bill

would resolve longstanding policy issues, answers to which the Congress, the Executive Branch, industry, and the public actively have sought for a generation. The bill is designed to reduce the administrative burden now imposed upon contractors and Government agencies alike.

Further, the bill responds to the 1972 recommendations to the Congress of the bipartisan Commission on Government Procurement, that legislation be enacted which would make uniform the Federal practices in the area of allocating the rights to contract inventions and make clear the government's authority to grant exclusive licenses under federally-owned inventions. The bill also would codify the basic policy concepts of Executive Order 10096, the provisions of which uniformly would be applicable to all Federal employees.

It is anticipated that, following enactment and implementation of this bill, greater commercial use will be made of the technology resulting from the Federal government's research and development effort, in turn creating additional employment, a higher standard of living, and an overall economic benefit to the United States as a whole, while protecting the public against any possible wrongful contractor conduct.

PROPOSAL

A BILL

To establish a uniform Federal system for management, protection, and use of inventions that result from federally sponsored or supported research or development, and for related purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Government Patent Policy Act of 1980".

Title I-Policy.
Sec. 101-Findings.

Sec. 102-Purpose.

Title II-Contract Inventions.

TABLE OF CONTENTS

Sec. 201-"Contract Inventions"; Reporting.

Sec. 202-Allocation of Rights-Small Businesses and Nonprofit Organizations. Sec. 203-Allocation of Rights-Other Contractors.

Sec. 204-Contractor License.

Sec. 205-Minimum Government Rights.

Sec. 206-March-in Rights.

Sec. 207-Deviation and Waiver.

Sec. 208-Transfer of Rights to Contractor Employees.

Sec. 209-Regulations and Standard Patent Rights Clause.

Title III-Inventions of Federal Employees.

Sec. 301-Employee Inventions.

Sec. 302-Reporting of Inventions.

Sec. 303-Criteria for the Allocation of Rights.

Sec. 304-Presumptions.

Sec. 305-Review of Agency Determinations.

Sec. 306-Reassignment of Rights.

Sec. 307-Incentive Awards Program.

Sec. 308-Income Sharing from Patent Licenses.

Sec. 309-Regulations.

Title IV-Licensing of Federally-Owned Inventions.

Sec. 401-Covered Inventions.

Sec. 402-Exclusive or Partially Exclusive Licenses.

Sec. 403-Minimum Government Rights.

Sec. 404-March-in Rights.

Sec. 405-Regulations.

Title V-Miscellaneous.

Sec. 501-Patent Enforcement Suits and Right of Intervention.
Sec. 502-Background Rights.

Sec. 503-Notice, Hearing, and Judicial Review.

Sec. 504-Relationship to Other Laws.

Sec. 505-Authority of Federal Agencies.

Sec. 506-Responsibilities of the Secretary of Commerce.

Sec. 507-Definitions.

Sec. 508-Amendments to Other Acts.
Sec. 509-Effective Date.

TITLE I-POLICY

FINDINGS

Sec. 101. The Congress, recognizing the profound impact of science, engineering, and technology policy on the well-being, health, and safety of the Nation, finds that: (1) Inventions that result from federally sponsored or supported research and development constitute a valuable national resource;

(2) Federal policy on allocation of patent rights in such inventions should stimulate innovation, should meet the needs of the Government, should foster competition, should recognize the equities of Government contractors and Federal employee-inventors, and should provide small businesses and educational institutions with special incentives to participate in Federal research and development programs and to commercialize resulting inventions; and

(3) The public interest would be advanced if greater efforts were made to promote commercial use of new technology that results from federally sponsored or supported research and development.

PURPOSE

Sec. 102. The purposes of this Act are—

(1) To establish an effective Federal system for management and use of inventions that result from federally sponsored or supported research and development;

(2) To allocate patent rights in inventions that result from federally sponsored or supported research and development in ways that—

(A) Stimulate innovation,

(B) Encourage participation of all qualified contractors,

(C) Foster competition,

(D) Reduce administrative burdens on Federal agencies and their contractors, (E) Promote widespread public use of inventions made with public support, and (F) Provide special incentives to small businesses and educational institutions; (3) To allocate equitably patent rights in Federal employee inventions;

(4) To provide for domestic and foreign patenting of federally owned inventions and licensing of federally-owned patent rights, with the objective of strengthing the Nation's economy and expanding its domestic and foreign markets; and (5) To amend or repeal inconsistent laws.

TITLE II-CONTRACT INVENTIONS

CONTRACT INVENTIONS-REPORTING

Sec. 201. (a) This Title applies to "contract inventions", which in this Act are inventions made in the course of or under Federal contracts.

(b) Every contractor will provide the responsible agency with timely written reports on each contract invention containing:

(1) Complete technical information on the invention,

(2) A list of each country, if any, in which the contractor elects to file a patent application on the invention, and

(3) Unless the contractor is a small business or nonprofit organization, a list of each field of use in which the contractor intends to commercialize the invention or otherwise achieve public use of the invention. Each field will be described with sufficient particularity to allow the Government to identify those fields of use not encompassed by the described field.

The Government neither will publish nor release these reports until the contractor or the Government has had a reasonable time to file patent applications or one year has passed since receipt of all the information required by subsection (b)(1) of this section, whichever is earlier, and may so withhold such information in other reports or records.

(c) If the responsible agency determines that the contractor has unreasonably failed to file reports as required by subsection (b) of this section, the contractor may be deprived of any or all of the rights it otherwise would have under this Title.

ALLOCATION OF RIGHTS-SMALL BUSINESSES AND NONPROFIT ORGANIZATIONS

Sec. 202. (a) A contractor that is a small business or a nonprofit organization will acquire title to its contract invention in each country it lists under section 201(b)(2)

in which it files a patent application within a reasonable time. However, title will be subject to the Government's minimum rights under section 205 and march-in rights under section 206.

(b) The Government will have the right to acquire title to any patent on a contract invention in each country in which the contractor elects not to file a patent application or fails to file within a reasonable time.

ALLOCATION OF RIGHTS-OTHER CONTRACTORS

Sec. 203. (a) The Government will acquire title to all patents on any contract invention whenever the contractor is not a small business or nonprofit organization. (b) If such a contractor files within a reasonable time a patent application on a reported contract invention in any country it lists under section 201(b)(2), it will receive an exclusive license under the patent in each described field of use, with the exclusive right to grant sublicenses. However, its license will be subject to the Government's minimum rights under section 205 and march-in rights under section

206.

(c) The contractor automatically will acquire by operation of law the right to receive an exclusive license, pursuant to subsection (b) of this section, ninety days after it provides the responsible agency with all of the information required to be disclosed by section 201(b), except that it will not acquire the right to receive an exclusive license in any field of use as to which the agency notifies the contractor within the ninety-day period that it has made a determination under subsection (d) of this section.

(d) The contractor will not acquire an exclusive license in any field of use if the responsible agency determines that the contractor's possession of such a license— (1) Would be contrary to the requirements of the agency's mission;

(2) Would impair national security; or

(3) Would violate the antitrust laws if the receipt by the contractor of such a license were deemed an acquisition of another corporation.

(e) An agency determination under subsection (d) of this section will include written reasons for the determination. The contractor may appeal the determination to the United States Court of Claims within sixty days after the contractor has been notified of the determination. That Court will have exclusive jurisdiction to determine the matter de novo and to affirm, reverse, or modify the agency determination, specifically including authority to require that the contractor receive any exclusive license provided for by this section.

(f) If the responsible agency determines that the national interest would not be affected adversely, the agency may grant the contractor title to any contract invention in any foreign country in which the contractor agrees to file a patent application.

CONTRACTOR LICENSE

Sec. 204. Any contractor that complies with section 201(b) automatically will receive by operation of law nonexclusive, royalty-free licenses to practice the contract invention in all countries where it does not receive title under section 202 and in all fields of use and in all countries in which it does not receive an exclusive license under section 203. These nonexclusive licenses may be revoked only to the extent necessary to allow the Government to grant exclusive licenses under Title

IV.

MINIMUM GOVERNMENT RIGHTS

Sec. 205. (a) The Government will have the following minimum rights in any contract invention:

(1) The right to require from the contractor written reports on the use of the invention,

(2) A royalty-free worldwide right or license to practice the invention or have it practiced for the Government, and

(3) The right to license or sublicense State, local, or foreign governments to practice the invention or have it practiced for them, if the agency determines at the time of contracting that acquisition of this right would serve the national interest. (b) Whenever the Government has rights in any invention under this Title, each patent application and patent on the invention will include a statement that the invention was made with Government sponsorship or support and that the Government has rights in the patents.

MARCH-IN RIGHTS

Sec. 206. (a) In any field of use, the Government may wholly or partly terminate the contractor's title or exclusive rights in any patent on a contract invention; may require the contractor to grant appropriate licenses or sublicenses to responsible applicants; or, if necessary, may grant such licenses or sublicenses itself. The Government may take such actions only

(1) If the contractor has not taken and is not expected to take timely and effective action to achieve practical application of the invention in one or more of the selected fields of use;

(2) If necessary to protect the national security;

(3) If necessary to meet requirements for public use specified by Federal regulation;

(4) If the contractor's rights in the invention violate the antitrust laws if the contractor's original receipt of those rights were deemed an acquisition of assets of another corporation; or

(5) If the contractor has failed to comply with the reporting requirements of this Act.

(b) These march-in rights may be exercised by the responsible agency on its own initiative or on a petition from an interested person justifying such action.

(c) Whenever under this section an agency requires a contractor to grant a license or sublicense, it may specify reasonable terms, including the royalties to be charged, if any; the duration of the license or sublicense; the scope of exclusivity; and the fields of use to be covered:

DEVIATION AND WAIVER

Sec. 207. (a) An agency may deviate from the allocation of patent rights in contract inventions provided for in any standard patent rights clause established under section 209 acquiring more or fewer rights in the inventions, to further the agency's mission and the public interest. It may so deviate on a class basis only in accordance with regulations issued either under section 209 or, unless prohibited by those regulations, by the agency. Case-by-case deviations may be authorized by the head of the agency or his designee, and described in the Federal Register.

(b) The national security and antitrust march-in rights reserved by sections 206(a)(2), 206(a)(4), and 206(c) may not be waived under any circumstances.

(c) Rights reserved by sections 203 and 206(a)(1) may be waived only:

(1) In contracts involving cosponsored, cost-sharing, or joint-venture research or development to which the contractor makes a substantial contribution of funds, facilities, technology, or equipment; or

(2) In contracts with a contractor whose participation is necessary for the successful accomplishment of the agency's mission but cannot be obtained under the standard patent rights clause.

TRANSFER OF RIGHTS TO CONTRACTOR EMPLOYEES

Sec. 208. The contractor's employee-inventor may receive some or all of the contractor's rights under this Title with the permission of the contractor and the approval of the responsible agency. The corresponding obligations of the contractor under this title then will become obligations of the employee-inventor.

REGULATIONS AND STANDARD PATENT RIGHTS CLAUSE

Sec. 209. The Office of Federal Procurement Policy will direct the issuance of regulations to implement this Title. The regulations will establish a standard patent rights clause or clauses, to be included in each Federal contract except as provided in section 207.

TITLE III-INVENTIONS OF FEDERAL EMPLOYEES

EMPLOYEE INVENTIONS

Sec. 301. This Title applies to "employee inventions", which in this Act are inventions made by Federal employees.

REPORTING OF INVENTIONS

Sec. 302. (a) Federal employees will file timely written reports on any inventions they make. Such reports will be made to the employee's agency and will contain complete technical information concerning the invention. The Government neither will publish nor release a report until there has been a reasonable time to file

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