Subsection (a) makes the Secretary of Commerce responsible for issuing regulations to implement Title III.

Subsection (b) provides that determinations concerning a Federal employee's promotion of the employee's invention is subject to regulations to be prescribed by the Secretary of Commerce with the concurrence of the Office of Government Ethics and the Attorney General. The intention is to ensure that a Federal employee will not be prohibited from promoting his own invention if consistent with conflict of interests regulations.

TITLE IV-LICENSING OF FEDERALLY-OWNED INVENTIONS

Sec. 401. Covered Inventions.

Section 401 provides that Title IV applies to all federally-owned patent rights, including licenses or sublicenses granted or required to be granted by the Government under section 206. However it does not apply to licenses established by the other sections of Title II.

Sec. 402. Exclusive or Partially Exclusive Licenses.

Section 402 sets out terms and conditions under which a Federal agency may grant an exclusive or partially exclusive license.

Subsection (a) provides that an exclusive or partially exclusive domestic license may be granted only after public notice and opportunity for filing written objections and only if the responsible agency determines that such licensing is necessary to achieve practical application of the invention and that the scope of proposed exclusivity is not greater than reasonably necessary.

Subsection (b) provides that an exclusive or partially exclusive foreign license may be granted only after public notice and opportunity for filing written objections and after a determination whether the interests of the Government or of United States industry in foreign commerce will be enhanced.

Subsection (c) prohibits the granting of a license under this section if the responsible agency determines that the grant would violate the Federal antitrust laws if the receipt by the contractor of such a license were deemed an acquisition of assets of another corporation.

Subsection (d) requires Federal agencies to maintain publicly available, periodically updated records of their determinations to grant exclusive or partially exclusive licenses.

Sec. 403. Minimum Government Rights.

Section 403 sets forth the minimum rights the Government is to have in every exclusive or partially exclusive license. These minimum rights include:

"(1) The right to require from the licensee written reports on the use of the invention

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

"(3) The right to license State, local, or foreign governments to practice the invention or have it practiced for them if the agency determines that reservation of this right would serve the national interest."

Sec. 404. March-in Rights.

Section 404 sets forth the basis on which the responsible agency may terminate an exclusive or partially exclusive license.

Subsection (a) sets forth the grounds for such termination:

"(1) If the licensee has not taken and is not expected to take timely and effective action to achieve practical application of the invention in the fields of use affected; "(2) If necessary to protect national security;

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

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

"(5) If the licensee has failed to comply with the terms of the license."

Subsection (b) permits the responsible agency to exercise its march-in rights either on its own initiative or in response to a petition from an interested person. Sec. 405. Regulations.

Section 405 makes the Office of Federal Procurement Policy responsible for directing the issuance of regulations specifying the terms and conditions upon which federally-owned patent rights may be licensed. Agencies are permitted to deviate from such regulations on a class basis unless prohibited by the Office of Federal Procurement Policy.

TITLE V-MISCELLANEOUS

Sec. 501. Patent Enforcement Suits and Right of Intervention.

Section 501 provides for enforcement of an exclusive license under the Act by an exclusive licensee without the necessity of joining the United States as a party. The intention is to make the exclusive license the functional equivalent of title within the specified fields of use. However, the Attorney General and the agency that granted the license must be given prompt notice of the suit and served copies of papers as though they were parties to the suit.

Sec. 502. Background Rights.

Section 502 provides that nothing in the Act shall be construed to deprive the owner of any background patent or of rights under such a patent.

Sec. 503. Notice, Hearing, and Jucicial Review.

Subsection (a) requires that agency determinations under sections 201 [failure to submit the reports required by subsection (b) of section 201], 206(a) and 206(c) [Government march-in rights], and 404 [Government march-in rights] must have written reasons and be preceded by public notice and an opportunity for a hearing in which the United States, any agency, and any interested person may participate. Subsection (b) permits the United States or an adversely affected participant to appeal a subsection (a) determination to the United States Court of Claims within sixty days after it is issued. The Court of Claims is given exclusive jurisdiction to determine the matter de novo, affirming, reversing, or modifying the agency determination.

Sec. 504. Relationship to Other Laws.

Section 504 is intended to remove any implication that the Act provides immunity from the antitrust laws.

Sec. 505 Authority of Federal Agencies.

Subsections (a), (b), (c), (d), (e), and (f) set forth the authority of Federal agencies to protect patent rights at home and abroad in,

"Any invention in which the Government has an interest in order to promote the ue of inventions having significant commercial potential or otherwise advance the national interest;"

To license federally-owned patent rights; to transfer patent rights to and accept transfers of patent rights from other agencies without regard to the property transfer procedures required by the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 471); to withhold publication or release of information disclosing any invention long enough for patent applications to be filed; to promote the licensing of federally-owned patent rights; and to enter into contracts to accomplish the purpose of this section.

Sec. 506. Responsibilities of the Secretary of Commerce.

Section 506 provides the authorities necessary for the Department of Commerce effectively to assist other Federal agencies administer the licensing of federallyowned inventions or to do so entirely by itself based on a transfer of patent rights to a federally-owned invention to the Department of Commerce pursuant to section 505(3).

Paragraph (a)(1) authorizes the Secretary of Commerce to coordinate a program to help agencies carry out their authorities under the Act.

Paragraph (a)(2) authorizies the Secretary to publish notices of all federally-owned patent rights available for licensing.

Paragraph (a)(3) authorizes the Secretary to evaluate inventions referred to it by Federal agencies in order to identify those inventions with the greatest commercial potential.

Paragraph (a)(4) authorizes the Secretary to develop and manage a governmentwide program, with private sector participation, to stimulate transfer to the private sector of potentially valuable federally-owned technology.

Paragraph (a)(5) authorizes the Secretary to assist the Federal agencies in seeking and maintaining patent protection in any country, including the payment of fees and costs.

Paragraph (a)(6) authorizes the secretary to consult with the Federal aagencies about areas of science and technology with commercial potential.

Subsection (b) authorizes the appropriation to the Secretary of Commerce of such sums as thereafter may be necessary to enable the Secretary to carry out responsibilities under this section.

Sec. 507. Definitions.

Section 507 sets out the definitions, for purposes of the Act, for the terms "Agency", "Responsible agency", "antitrust laws", "contract", "contractor", "Federal employee", "invention", "made", "nonprofit organization", "patent rights", "practical application", "small business", "state", "local", and "will".

Sec. 508. Amendments to Other Acts.

Section 508 is intended to amend or repeal parts of other acts covering similar subject matter. Acts which have been identified as covering similar subject matter

are:

"Title 7, U.S.C. 427(i)”.

"Title 7, U.S.C. 1624(a)".

"The Federal Coal Mine Health and Safety Act of 1969".

"The National Traffic and Motor Vehicle Safety Act of 1966".

"The National Science Foundation Act of 1950".

"The Atomic Energy Act of 1954".

"The National Aeronautics and Space Act of 1958".

"The Coal Research and Development Act of 1960".

"The Helium Act Amendments of 1960".

"The Arms Control and Disarmament Act of 1961".

"The Appalachian Regional Development Act of 1965".

"The Federal Nonnuclear Energy Research and Development Act of 1974".

"The Tennessee Valley Authority Act of 1933”.

"The Consumer Product Safety Act".

"Title 30, U.S.C. 323".

"The Resources Conservation and Recovery Act of 1976".

"The Electric and Hybrid Vehicle Research, Development, and Demonstration Act of 1976".

"Public Law 95-39".

"The Water Research and Development Act of 1978”.

Sec. 607. Effective Date.

Section 607 provides that the Act shall take effect on the first day of the seventh month beginning after enactment. Implementing regulations may be issued earlier.

STATEMENT OF PURPOSE AND NEED

Government patent policy with respect to allocation of rights in patentable inventions resulting from federally sponsored or supported research and development bears a major responsibility for the pace of industrial innovation in the nation today as a result of the substantial amount of research and development work performed under contract with the government and by government employees.

Patents can serve several important functions in the innovation process. First, they provide the innovator with an incentive-a monopoly limited in time. Second, the exclusive rights provided by a patent can stimulate a firm to make the often risky investment that is required to bring an invention to market. Finally, a patent provides an important method for disclosure to the public of information about inventions and their uses.

In an October 31, 1979 Industrial Innovation Message to the Congress the President said:

"For over thirty years the Federal agencies supporting research and development in industry and universities have had conflicting policies governing the disposition of pertinent rights resulting from that work. This confusion has seriously inhibited the use of those patents in industry. To remove that confusion and encourage the use of those patents I will support uniform government patent legislation. That legislation will provide exclusive licenses to contractors in specific fields of use that they agree to commercialize and will permit the government to license firms in other fields. If the licensee fails to commercialize the invention, the government will retain the right to recapture those rights. I will also support the retention of patent ownership by small businesses and universities, the prime thrust of legislation now in Congress, in recognition of their special place in our society."

This bill contains the uniform government patent legislation the President announced. It is organized into three operative titles: Title II-Contract Inventions; Title III-Inventions of Federal Employees; and Title IV-Licensing of FederallyOwned Inventions.

Background

CONTRACTOR INVENTIONS-Title II

Since World War II, the Federal government increasingly has supported the overall research and development effort of the United States. At least initially, the patent policies of the Federal government generally were fashioned without any central guidance or coordination.

As the size of the Federal government's research and development effort increased, individual government agencies reacted differently to the problem of allocating rights to contractor-made inventions. Some agencies, notably the Department

of Defense, acquired a royalty-free license to contractor inventions and permitted the contractor to retain title, or what otherwise might be described as exclusive commercial rights. Other agencies financing research of interest to the private sector, such as the Department of Health, Education, and Welfare, decided to acquire all of the patent rights to inventions made by their contractors. Some agencies did not explicitly address the issue, thereby permitting their contractors to obtain all patent rights to inventions.

As the Congress became more concerned with rights in inventions made with government support, it enacted differing legislative policies for new research and development programs. In some instances the Congress provided guidance for the entire research and development effort of an agency, in others only for a specified program. Most often, the Congress required the Federal government to take title to all contract inventions.

The 1963 Presidential statement

As the issue developed prior to 1963, most participants in discussions of government patent policy advocated either that all patent rights be given to the govenment or that they all be given to the contractor (except for a royal-free, nonexclusive license for the government's own use). In 1963, President Kennedy issued a Statement on Govenment Patent Policy in an effort to achieve greater congruence in agency practices. The policy applied to the research and development programs of all Federal agencies except where specific statutory requirements intervened. The large number of differing statutes made it impossible for the policy to achieve uniformity.

The 1963 Statement took the approach of classifying contracting situations into two categories: one in which the public interest presumptively would be served best by government acquisition of title; another in which title best would be acquired by the contractor. Recognizing that the Statement was based on a limited amount of information, exceptions were provided to the general rules and safeguards were established to protect the public interest against possible undesirable results.

An unsuccessful attempt at legislatively-mandated uniformity was made in 1965.2 Congressional hearings on the then proposed legislation resulted in a bill providing for a uniform policy substantially embodying the 1963 Statement. The bill was reported out of committee, but no further Congressional action was taken.

In late 1965, the Federal Council for Science and Technology (FCST) established the Committee on Government Patent Policy in order to assess how the 1963 Statement had worked in practice, to acquire and analyze additional information that would contribute to the reaffirmation or modification of the Statement, and to identify principles that should underline sound legislation in this area. The Committee, formed in response to Congressional pressure for an Administration position on uniform government patent policy legislation, provided a forum for senior policy level officials to develop such a position.

The Committee supported what is perhaps the most extensive study ever conducted of the government patent policy issue. The results of this study, conducted by Harbridge House, Inc., of Boston, Massachusetts, are reported in four volumes.3 Based upon its analysis of the Harbridge House study and operating experience under the 1963 Statement, the Committee concluded that, with minor revisons, the criteria specified in the Statement were satisfactory. Accordingly, in 1969 the Committee recommended that legislation, if proposed, should follow the basic criteria of the 1963 Statement. Alternatively, the Committee recommended modification of the 1963 Statement primarily directed toward increasing the flexibility of Federal agencies with regard to the allocation of patent rights and providing direction to the agencies with regard to the licensing of federally-owned inventions. In 1971 President Nixon issued a revised Statement on Government Patent Policy incorporating modifications recommended by the Committee.*

'Memorandum and Statement of Govenment Patent Policy Issued by President John F. Kennedy on October 10, 1963. (Published F.R., Vol. 28, No. 200, October 1963.)

2 S. 1809. On April 23, 1965, Senator McClellan introduced in the 89th Congress, 1st Session, a Bill "To Establish a Uniform National Policy Concerning Property Rights to Inventions Made Through the Expenditure of Public Funds, and For Other Purposes." The Bill was amended and accepted by the Senate Judiciary Committee as the "Federal Inventions Act of 1966." (No vote by full Senate.)

Government Patent Policy by Harbridge House, Inc., Boston Mass., Volumes I-IV, May 17, 1968. Superintendent of Documents, U.S. Printing Office, Washington, D.C. 20402-Contract No. 7-35087.

* Memorandum and Statement on Government Patent Policy Issued by President Richard M. Nixon on August 23, 1971. (Published F.R., Vol. 66, No. 166, August 26, 1971.)

Commission on Government Procurement

In November of 1969, the Congress, by Public Law 91-129, established the Commission on Government Procurement to study and recommend methods "to promote the economy, efficiency and effectiveness" of procurement by the executive branch of the Federal government. Industry, trade and bar associations, individuals, members of the Executive Branch, and a full-time staff assigned to the Commission assisted it in the development of the Commission Report submitted to the Congress on December 31, 1972.5 The bipartisan report contained 149 recommendations, sixteen of which related to patent, data, and copyright matters.

Recommendation No. 1 of Part I, Volume IV of the Report states:

"Implement the revised Presidential Statement of Government Patent Policy promptly and uniformly."

Recommendation No. 2 states:

"Enact legislation to make clear the authority of all agencies to issue exclusive licenses under patents held by them."

Recommendation No. 1 was implemented in part by the issuance of the FPMR (licensing regulation) and the FPR (standard patent rights clause).67 However, achievement of uniformity would have required the repeal of all conflicting statutory provisions. As with Recommendation 2, this would require legislation.

In September 1975, the FCST Committee on Government Patent Policy decided to prepare drafts of an Administration bill to implement these recommendations of the Commission's report. Legislation substantially based upon the Committee's work was introduced into the ninety-fifth Congress by Representative Thornton; hearings were held, but no further action was taken.

Domestic Policy Review of Industrial Innovation

Early in the Carter Administration, the Committee on Intellectual Property and Information (CIPI), the Federal Coordinating Committee for Science, Engineering, and Technology's successor to the Committee on Government Patent Policy, began working to develop an Administration position on government patent policy. Following the initiation of the President's Domestic Policy Review of Industrial Innovation in May of 1978, this effort was coordinated with the Domestic Policy Review. As part of President Carter's Domestic Policy Review of Industrial Innovation, an assessment was made of the effect on such things as contractor participation in government research and development work and the commercial development of inventions made with government support of existing government policies with respect to the disposition of rights in patentable inventions made in the course of federally-supported research and development work. CIPI concluded that government ownership of inventions with the offer of unrestricted public use has resulted in almost no commercial application of federally-owned inventions. Without exclusive commercial rights, investors are unwilling to take the risks of developing a federally-generated invention and of creating a market for it. Thus, ironically, free public right to use a patent results, in practical terms, in a denial of the opportunity to use the invention. Second, many contractors, particularly those with strong background patents and experience, are unwilling to undertake work leading to freely available patents because this policy would compromise their proprietary position. Thus, some of the most capable performers will not undertake the government work for which they are best suited.

As a result of the strength of these considerations, most agencies have the authority, in at least some circumstances, to provide exclusive commercial rights to contractors. This issue, however, has been unsettled for a generation because of the difficulty of balancing competing considerations, and because various agencies operate under different and contradictory statutory guidance. The uncertainty and lack of uniformity in policy itself has had its negative effect upon the commercialization of technologies developed with Federal support. Title II of the present bill reflects the President's decision with respect to these issues.

INVENTIONS OF FEDERAL EMPLOYEES-TITLE III

In 1950, President Truman, in an attempt to bring about consistency in the allocation of rights to inventions made by Federal employees, issued Executive

5 Volumes I-IV, Report of the Commission on Government Procurement, Superintendent of Documents, U.S. Printing Office, Washington, D.C. 20402. Stock Nos. 5255-00002; 5255-00003; 5255-00004; and 5255-00006.

Amendment A-16 to Federal Property Management Regulations Issued January 29, 1973. (F.R., Vol. 38, No. 23, February 5, 1973.)

7 Amendment 116 to Federal Procurement Regulations issued August 29, 1973. (F.R., Vol. 38, No. 170, September 4, 1973.)