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Senator SCHMITT. But when NASA waives title, which they presently can do, their success rate jumps markedly. Doesn't that bother you a little bit?

Dr. BARUCH. What do you mean, their success rate jumps?

Senator SCHMITT. They have something like a 15 to 20 percent commercialization rate when they waive title, versus about 2 percent when they try to push the exclusive license.

Dr. BARUCH. It's interesting to look and try to decide whether that correlation shows casuality, however. Do they get the commercialization because they waive title or does the contractor insist on waiver of title because he intends to commercialize?

Senator SCHMITT. I think you have to answer that question before you ask the Congress to approve something other than title in the contractor.

Mr. HERZ. Senator Schmitt, I think the point we were trying to make is that the policy the administration is now proposing is very similar to the policy of waiving title with regard to those fields of use in which the contractor wants to commercialize. In such fields we agree, it is likely to commercialize more succesfully than the Government or anyone else trying to license from the outside would do.

What this bill tries to do is to reserve to the Government those fields of use in which the contractor does not have an interest in commercializing the invention itself—and indeed does not have an interest in licensing the invention itself, because it has some advantage in licensing as well. As Dr. Baruch is saying, NASA's record in licensing in that sort of situation is probably about what we would expect. That success ratio is not very high but it is a lot higher than what we have been experiencing in other parts of the Government, particularly where the Government takes title to the whole patent—which is not at all what's being proposed here.

Senator SCHMITT. Are you saying, then, doctor, that the exclusive license in field of use is essentially the full equivalent of title?

Dr. BARUCH. Yes.

Senator SCHMITT. Now, do we have any experience in the Federal Government of success in a field of use licensing concept?

Dr. BARUCH. We haven't done this before in the Federal Government. We do have examples of success of licensing, the NTIS licensing program.

Senator SCHMITT. Tell me again, why do you feel that licensing a part of the field of use is going to be more successful than licensing the whole patent?

Dr. BARUCH. Let me answer that. This is not a zero sum game. We are not doing one thing or another. What we are trying to do in this game is to give the contractor who has the capability-we recognize that he has the capability—the right to exclusivity to this invention in any area where he wants to use it. If he got title, that's all he would be getting.

Now, what we are doing is reserving to the Government those things he does not choose to commercialize. If the Government has any impact at all through that program, we come out ahead of the title in the contractor program.

Senator SCHMITT. Unless we create a bureaucracy whose cost is far outweighed by the possibility that you're going to license the narrow fields of use.

Dr. BARUCH. Neither this administration nor the Congress would permit the creation of such a bureaucracy, Senator.

Senator SCHMITT. That's what you're proposing.

Dr. BARUCH. No, I'm proposing that we start this program, that we do push the utilization in other areas, and we treat that program as though it were any other business that can be monitored as to its success, expanding it only as it develops a clear payback for its investments, and cutting it off if it doesn't work.

At no point, at no point, regardless of its performance, need we be any worse off in terms of utilization under this bill than with a title in the contractor approach.

Senator SCHMITT. Doctor, we have to look at the experience of Government in this area, and maybe one advantage of having a diversity of patent policies through the agency is that it does give us some experimental evidence of what works. Where there have been concerted, long-term, quality attempts to license patents, it has been extraordinarily unsuccessful. Although there are a few spectacular individual successes, the overall effort has been very unsuccessful.

But when an agency-and there are others besides NASA-does provide title to the contractor, then the success rate jumps markedly.

Dr. BARUCH. We agree. Now what we would like to do is take the sum of those two success rates, which has to be greater than either one of them.

Senator SCHMITT. Not necessarily. You're saying that it's an arithmetic sum. It may not be. There may be an interference and you may actually get less.

Dr. BARUCH. But we have no experience in that area. We have no-

Senator SCHMITT. You are suggesting that we move into an area in which you have no experience. The experience you have is that the title in the contractor provides a high success rate of commercialization.

Dr. BARUCH. We agree. Our indicators show that exclusive license in the contractor will have the same rate of success.

Senator SCHMITT. I know you believe that, but you have no experience base to indicate that's true. In fact, the experience base indicates the contrary.

Dr. BARUCH. No, we have never tried that. So we have no experience base at all.

Senator SCHMITT. You have people trying to license patents in the Government. It has not been very successful. You're saying it's going to be more successful with less to license.

Dr. BARUCH. Senator, with this committee's concern for innovation and new things that have to be done to solve our economic problems, to say we can only make those efforts in which we have experience I think is inconsistent with our joint view.

Senator SCHMITT. It's not inconsistent at all, Doctor. If we have been successful in doing something, we ought to build on that success.

Bayh bill title in the censing by haets. Howevedeavors,

Dr. BARUCH. We have successful experience in the NTIS of licensing patents that the Government held, that the contractor did not choose to utilize. We signed one license about 2 months ago that will have about $1 million revenue to the Federal Government. We have many others. It's a new program, has a very small bureaucracy. And I would be glad to give you—

Senator SCHMITT. Can you provide us statistical data on the number of patents that you manage and how you obtain those patents? Are you being selective in what you pick?

Dr. BARUCH. I'll be glad to submit that information for the record.

Senator SCHMITT. Doctor, your present proposal includes the Bayh bill approach for small business and universities, which is basically title in the contractor. It includes a waiver, as I understand it, of title for licensing by all groups abroad so that they can obtain licenses in foreign markets. However, you would depart from this approach for all other business endeavors, with the concept of exclusive license in the field of use.

Is that a correct summary of the President's proposal.
Dr. BARUCH. Yes, sir.

Senator SCHMITT. The field of use would then be defined by the contractor?

Dr. BARUCH. Right.

Senator SCHMITT. I think this committee is going to have trouble understanding why title is good for small business, and if foreign licensing is pertinent for all with waiver of title, why isn't it good for everything in between? Why do you create more incentives by your policy than would be created by title in the contractor across the board?

Dr. BARUCH. We want to insure the use of inventions made with Federal sponsorship or support in this country in order to increase our economic base. We do not have the same motivation overseas to increase the use of these inventions by foreign companies.

Senator SCHMITT. No, but you do want our inventors to be able to license their inventions abroad; is that not correct?

Dr. BARUCH. We're more interested in their being able to use them abroad, so that it becomes an activity of an American company located elsewhere. But I'm not interested in encouraging the licensing abroad. I just don't think that's appropriate.

Senator SCHMITT. But your bill provides for waiver of title to a U.S. company or inventor so that they can license abroad and can have that net return on their patent; is that not correct?

Dr. BARUCH. Yes. But as I said before-

Senator SCHMITT. Why did you do it, then, if you don't care about it?

Dr. BARUCH. It was necessary for a couple of reasons. One is you can't prosecute a patent overseas unless you happen to be the titleholder. This was pointed out by NASA. But since we don't feel that those companies will in fact license very effectively overseas any more than we feel they would do it over here, we don't expect this to markedly increase the foreign use of American patents.

Dr. BARVNet return entor so that provides

The information requested was not available at the time of printing. When received, it will be retained in the files of the Committee on Commerce, Science, and Transportation.

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Senator SCHMITT. Is there a lack of trust in your mind or the President's mind that draws a distinction between small and large business?

Dr. BARUCH. No, sir, it is not at all based on trust. It's based on our experience with the growth, the dynamism, the contribution that small business makes to our industrial base, and the fact that they have fluidly changing areas of use for their patents.

Senator SCHMITT. You don't change that if you allow medium and large businesses to obtain title also.

Dr. BARUCH. They don't have the same fluidly changing boundaries to their exercise.

Senator SCHMITT. Some do, some don't.

Dr. BARUCH. A company can select as many fields of use as it intends to commercialize by developing or licensing the invention, and that seems to me to take care of the case of the large company.

Senator SCHMITT. Mr. Chairman, I have a few more questions, but I will yield.

Senator STEVENSON. Thank you.

If the contractor designates the field of use, couldn't he stretch his imagination and designate every conceivable field of use, come in with a laundry list that designates everything? Dr. BARUCH. That's a question of trust, Mr. Chairman.

The contractor also agrees to commercialize in all those fields of use, and we don't believe that business will agree to commercialize in the fields of use where it really has no intention of doing so.

Senator STEVENSON. Can he select fields of use outside his line of business?

Dr. BARUCH. Certainly.

Senator STEVENSON. What if he designates the field of use, gets this exclusive right and then later conceives another, perhaps related field of use or finds a potential licensee who wants to develop it; can he go back to the agency for another license?

Dr. BARUCH. If it has not already been taken by some action of the agency with another industrial firm. Certainly.

Senator STEVENSON. Let's go back to Senator Schmitt.
Senator SCHMITT. Thank you, Mr. Chairman.

Senator STEVENSON. Excuse me, Senator Schmitt, I neglected to mention earlier, and I think you did, too, Dr. Baruch, that you are accompanied by Mr. Charles Herz, the General Counsel of the National Science Foundation.

Dr. BARUCH. And, Senator, by David Guberman, who did substantial staff work for me in developing this legislation.

Senator STEVENSON. Thank you. Did you have a statement also, Mr. Herz? Mr. HERZ. I do have a written statement for the record, Senator, and I am prepared to speak briefly from it. I would like to submit the written statement for the record. · Senator STEVENSON. It will be entered in the record. Why don't you proceed now. If you can remain a few minutes, Dr. Baruch, we will be able to come back to both of you. Mr. HERZ. Thank you, Senator.

Before I launch into the few things I have to say, I would just like to expand a little bit on the line of questioning Senator Schmitt was following.

One answer Dr. Baruch gave was so short that its importance might have been missed. You asked whether—I think maybe Senator Stevenson asked whether exclusive license in these fields of use is the equivalent of title and Dr. Baruch said yes.

I think that's important. We are not proposing that in any field of use where the contractor is interested either in developing itself, or in licensing that it get something less than title. Technically an exclusive license has a different name, but has the same effect.

If I might add to that remark, I think its too bad that the patent policy debate has been carried on for so long as if the argument was between title and license. I think that is not only confusing for a layman not familiar with the technical terms, but it is also confusing for anyone because the legal effect of a license can be the same as the effect of title.

A license is to a patent as a lease is to a building. As you know, a 99-year lease renewable for another 99 years can be the equivalent of title. So I think it's important to recognize what Dr. Baruch is trying to say. Yes, we are giving the equivalent of title to the large business every place that the large business wants to undertake commercialization.

In those other fields of use where it doesn't, then that is a matter of trust. As Senator Stevenson brought out, we are saying, let's let the Government do what it can, recognizing that the Government probably will not exceed the success rate that NASA has achieved with its very active and vigorous program. Hopefully it will exceed the success rate that has been achieved with less active and vigorous programs. Together with the contractor's effort, it should give us a better utilization rate than either could alone.

That's what we are trying to say. What I would like to say for myself is this: Dr. Baruch has outlined the general case for the proposed act in the larger context. From our special perspective at the National Science Foundation, I would like to dwell on its merits in three particular respects.

From a personal perspective I might add a fourth that is not in my written statement.

First, the Foundation is the agency of the Government whose special responsibility is to maintain and stimulate science and scientific research for the benefit of the public. Because of that responsibility, the NSF has a deep interest in the working out of science for the use of the public. And we think the proposed Patent Policy Act would do much to bring the fruits of science to the public.

Second, we are a research-support agency, and most of the research we support is performed by universities and by small businesses. We therefore share with other research-support agencies a concern for the impact of Government patent policy on research performers, and we have a particular concern for its impact on universities and small businesses. And we think the proposed Patent Policy Act would be a major plus for them.

Third, we have had a special interest, deriving in part from the President's special interest, in drafting legislation and regulations so that they are as clear and comprehensible as the substance and the subject can permit. In drafting the proposed Patent Policy Act, the administration has tried very hard to develop a logical and

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