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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)”.
"The Electric and Hybrid Vehicle Research, Development, and Demonstration Act of 1976”.
"Public Law 95-39”.
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.
CONTRACTOR INVENTIONS—TITLE II Background
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.:
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 A ade 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).6 7 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.
6 Amendment A-16_to Federal Property a anagement Regulations Issued January 29, 1973. (F.R., Vol. 38, No. 23, February 5, 1973.)
? Amendment 116 to Federal Procurement Regulations issued August 29, 1973. (F.R., Vol. 38, No. 170, September 4, 1973.)
Order 10096.8 Generally based on common law principles for allocating invention rights to employees in situation not covered by contract, this Executive Order applied to most, but not all, Federal employees. The order was held to be an unconstitutional encroachment on Congress' power in Kaplan v. Johnson, 409 F. Supp. 190 (N.D. Ill. 1976). This decision was reversed, however, by the court of appeals on the ground that Congress had authorized the promulgation of the Executive Order through its enactment of Sections 301, 3301, and 7301 of Title 5 of the United States Code. Kaplan v. Corcoran, 545 F.2d 1073 (7th Cir. 1976). The present bill codifies longstanding Federal practice in this area.
LICENSING OF FEDERALLY-OWNED INVENTIONS—TITLE IV Federal Property Management Regulations (FPMR)
Section 2 of the 1971 Statement directed the Administrator of General Services to issue regulations for the comprehensive licensing of federally-owned inventions. In January 1973, the Administrator issued an amendment to the FPMR concerned with the licensing of federally-owned inventions.
The validity of this regulation was challenged by a complaint filed in the United States District Court for the District of Columbia by Public Citizen, Inc., and others. 10 The complaint alleged that the exclusive licensing of federally-owned patents constituted a disposal of property in violation of Article IV, Section 3, Clause 2 of the Constitution. The District Court found for the plaintiffs, directing the Administrator to take immediate steps to void the licensing regulations. This the Administrator did.11
On appeal by the government, the court of appeals held that the plaintiffs were without standing to sue, and reversed the judgment of district court.13 The Administrator then reinstated the licensing regulations.13 Since the court of appeals did not reach the merits of the plaintiffs' complaint, the legality of any exclusive license granted by a Federal agency under authority of this regulation remains untested. Federal Procurement Regulations (FPR)
Following the issuance of the 1971 Statement, regulations providing for standard patent rights clauses for use by all Federal agencies were drafted and subsequently promulgated by the Administrator of General Services in August of 1973.14 The validity of these regulations also was challenged by Public Citizen, Inc., in the United States District Court for the District of Columbia.15 The complaint alleged that, whenever the government acquired less than title to an invention made under government contract, the government, in effect, was disposing of property in violation of Article IV, Section 3, Clause 2, of the Constitution. The Administrator cancelled the regulations pending the outcome of the lawsuit.
The district court dismissed the complaint, finding that the plaintiffs lacked standing to sue. The plaintiffs appealed, but the court of appeals affirmed the judgment of the district court.16 In May, 1975, the regulations were reissued.17 Again, however, no final judgment was had as to the merits of the complaint.
The present bill provides for a comprehensive scheme for the commercialization of federally-owned patent rights in the public interest.
DRAFT BILL Following the President's Message to the Congress, a drafting committee of CIPI members from the Departments of Commerce, Energy, and Justice, the National Science Foundation, and the Office of Science and Technology Policy, met for a
• Executive Order 10096: “Providing for a Uniform Policy for the Government with Respect to Inventions Made by Government Employees and for the Administration of Such Policy," President Harry S. Truman, January 23, 1950 (3 CFR, 1949-1953 Comp., p. 292); as amended by Executive Order No. 10930: “Providing for the Abolishment of the Government Patents Board and Providing for the Performance of its Functions,” President John F. Kennedy, March 23, 1961 (26 F.R. 2583, arch 28, 1961).
See note 6, p. 33.
11 FPMR Temp. Reg. A-10 to Federal Property Management Regulations Issued February 12, 1974 (F.R., Vol. 39, No. 34, February 19, 1974.).
12 Sampson v. Public Citizen, Inc. (C.A. No. 74-1619 D.C. Cir.).
13 Amendment A-10 to Federal Property Management Regulations Issued October 1, 1975 (F.R., Vol. 40, No. 199, October 14, 1975).
14 See note 7 above.
17 Amendment 147 to Federal Procurement Regulations Issued N ay 1, 1975 (F.R., Vol. 40, No. 89, May 7, 1975).
period of several weeks to develop statutory language embodying the President's policy. Their draft twice was circulated for comment to other Federal agencies.
The present bill stems from the belief that inventions resulting from federallysupported research and development constitute a valuable national resource; that Federal policy with respect to the allocation of patent rights in such inventions should seek to stimulate innovation, promote contractor participation in government research and development work, foster competition, recognize the equities of government contractors and Federal employee-inventors, and provide small businesses and nonprofit organizations with special incentives.
This bill establishes a uniform policy regulating the allocation and use of invention rights that belong to the Government. It eliminates the piecemeal and often conflicting approach to this subject that has developed through a combined system of regulation by general Presidential guidance and specific program-by-program statutory direction. The bill amends or repeals all other Acts and supersedes all Presidential memoranda and Executive Orders concerning the allocation of invention rights resulting from federally sponsored or supported research and develop ment and the licensing of federally-owned patent rights.
Title I states as the primary purpose of the bill the establishment of an effective Federal system for management and use of inventions that result from federally sponsored or supported research and development, based on the finding that such inventions constitute a valuable national resource which should be developed in a manner which stimulates innovation and recognizes the equities of Federal employees and contractors while safeguarding the public interest.
Title II of the bill allocates rights between contractors and the Government in inventions resulting from federal research and development contracts. When the contractor is a small business or a nonprofit organization, it may elect to acquire title in the invention in any country in which it files a patent application. Other contractors will receive exclusive licenses to practice contract inventions in whatever fields of use they choose to specify and agree to commercialize in whatever countries in which they file patent applications as long as their acquisition of such licenses would not conflict with the requirements of the agency's mission, the national security, or the Federal antitrust laws.
When the contractor receives title in or exclusive licenses to practice an invention, the Government will receive a nonexclusive, royalty-free, world-wide right or license to practice the invention or have it practiced for the Government. In addition, the Government will receive as to each invention the right to terminate the contractor's title or exclusive license, to require the contractor to grant appropriate licenses or sublicenses on reasonable terms to responsible applicants, or, if necessary, to grant such licenses itself. The Government may exercise this march-in right only if the contractor fails to commercialize the invention, if necessary to protect the national security, if necessary to meet requirements for public use specified by Federal regulations, if the contractor's rights in the invention would violate the antitrust laws were those rights deemed an acquisition of assets of another corporation, or if the contractor fails to comply with the reporting requirements imposed by the responsible agency.
The Office of Federal Procurement Policy is instructed to direct the issuance of regulations to implement Title II. The regulations will establish a standard patent rights clause allocating invention rights in according with the provisions of Title II. Generally, this clause will be included in Federal research and development contracts.
The contracting agency may deviate from the standard patent rights clause in furtherance of the agency's mission and the public interest. The agency may deviate on a class basis in accordance with the regulations issued under the direction of the Office of Federal Procurement Policy, and unless prohibited by those regulations, the agency also may deviate on a class basis pursuant to regulations that it issues itself. All other deviations must be authorized by the head of the agency or a designee on a case-by-case basis and must be described in the Federal Register.
Such a deviation may permit the Government to acquire lesser or greater rights in an invention than it normally would receive under Title II. The agency may not, however, waive the Government's right to terminate the contractor's title or exclusive license for antitrust or national security reasons.
Title III of the bill allocates rights between Federal employees and the Government in reported inventions made by Federal employees. If necessary to protect the national security, the Government will acquire all rights in an invention that was made with Federal support. In addition, the Government will acquire all rights in any invention that bears a direct relation to the duties of the employee-inventor or was made as a consequence of the employee's employment. The bill creates a