The more important answer is that at least in its own established markets, the contractor is usually a much better bet to successfully develop and market the invention than anyone else. The contractor is usually established and experienced in the technical field to which the invention pertains. It has the equipment, models, computer programs, and so on that were use in maturing the idea. It has any knowhow surrounding the invention that has already been developed. Above all, it has the inventor as an employee.

Having the inventor is doubly important. The inventor is not only the one person who knows most about the invention and therefore is most qualified to carry forward its development. The inventor is also emotionally committed to his creation. A common theme found in research about progress in technology is that to become a successful innovation and invention needs a "champion"-someone who believes in it deeply and will devote time and energy to making it work and getting resources devoted to it. In most success stories this champion, in the early stages at least, is the inventor.

In theory, of course, the Government could license someone other than the contractor and require by contract that the contractor make its employee-inventor and its invention-related know-how available to any such licensee. I think I need not belabor the practical difficulties and delays involved in trying to make such an arrangement work across institutional and geographic barriers, especially when neither the inventor nor the inventor's employer has any financial stake in further development.

For all these reasons and more, the most sensible policy, and the one most likely to bring the fruits of scientific research and technical development to public use, is one that allocates principal rights in the invention to the contractor wherever the contractor is interested in developing or actively licensing the invention. That is the approach adopted by the Administration's proposed Patent Policy Act.

This Act would recognize, however, that the contractor often has no deep interest or no interest at all in developing or licensing inventions outside its regular markets. The inventions might nonetheless have substantial potential application in other markets if someone would "champion" them there. Unless a contractor is willing to make a serious licensing effort in such other markets or fields of use, therefore, the Government should be given sufficient rights to let it champion the invention there. Under the proposed Patent Policy Act the Government would retain rights in all fields of use where the contractor does not undertake to bring the invention to public use by either development or active licensing. We think this too will help bring the fruits of Government-sponsored science and technology to the public.

In promoting innovation, no previous proposal seems to us to combine so effectively the advantages of allocating principal rights to the contractor with the advantages of Government licensing.

Relieving the Burden on Research Performers

The present state of Government patent policy is, in my view, a briar patch for contractors and grantees. They must deal with twenty-plus different statutes and sets of regulations, all overlain by the President's Statement on Government Patent Policy, which has the effect of an Executive Order. Several of the statutes, though not the Foundation's impose serious procedural and paperwork burdens that often result in months or, not uncommonly, years of delay. At least one proposal now pending would layer yet another statutory scheme, affecting only certain types of contractors, on top of the existing structure.

The proposed Patent Policy Act would cut through all this and replace it with a single statute covering all classes of contractors and grantees. It would be implemented by a single Government-wide set of regulations and a single Governmentwide standard patent clause. Though agencies would retain reasonable flexibility to reflect the peculiar needs of their own programs or the special circumstances of individual cases, all would work from the same basic framework, instead of twentyodd different ones.

Nor would the proposed Act impose any excessive administrative burden. Field-ofuse designation, in particular, should be manageable. They know their own markets. When the time comes for field-of-use designation they will know the invention and have some idea of its possible uses as well. Moreover, this is not a matter the contractor has to debate with the agency. So long as it is prepared to commit to an effort to develop or license in any field of use, its designation of that field will not be questioned-unless, of course, it is later shown to have done nothing to commercialize in a field where other firms would like to try.

From the standpoint of the universities and small businesses who are the Foundation's principal performers, the proposed Patent Policy Act is particularly favorable.

Indeed, it is essentially similar to S. 414, which has been favorably reported from the Judiciary Committee. The virtues of the approach adopted were well developed in hearings there. The only departures are in drafting style and in the elimination of a few minor restrictions on nonprofit and small-business contractors, restrictions the Administration considers unnecessary and undesirable. The major difference, of course, is that this legislation would not deal with the problem only for nonprofit and small-business contractors, but with the whole problem. And it would prune the present legal thicket, not add to it.

Coherent Structure and Plain Language

Finally, I would like to say a word about the special effort that has been made to provide the proposed Act with a coherent, logical structure and to couch it in language that is as comprehensible as the subject and the substance permit.

I do not mean to claim that the Act will be easy reading for someone new to the subject. This is, after all, a complex and technical area; patent law is almost a profession in itself. We cannot avoid using its specialized terms-"exclusive license", "field of use", "author's certificate", and so on. Nor can we avoid complex and technical provisions. The considerations bearing on policy in this area that must be accommodated within the rules established preclude simple solutions.

What we can do, however, is avoid the whereases, thereupons, convoluted constructions, and half-page uninterrupted sentences that still unfortunately abound in Federal statutes and regulations. We can also structure the statute so that it is as easy as possible to follow and to understand and so that its principal provisions stand out. Those things the Administration has tried to do in drafting this legislation. I do not argue that we have succeeded completely, but I think we have succeeded substantially.

In our view, this is not a minor virtue, having to do only with the surface of things.

Not far from the surface, of course, "plain English" drafting reduces the length of the legislation and makes it easier to understand. All those who have to work with it-especially laymen and those new to the subject, but experienced practitioners as well-will therefore be saved both effort and frustration.

A deeper contribution of "plain English" drafting is to the substantive formulation and subsequent operation of the statute. By making what is said plainer, it ensures that those who are to implement or comply can easily understand what is expected of them. It also minimizes the unintended ambiguities that create disputes in the administration of the statute. It thus enhances the effectiveness of the law and the respect paid to both spirit and letter.

Most deeply, "plain English" highlights remaining flaws and issues that unfamilar legalisms and convoluted structure would obscure. This is a vital, substantive service for drafters, legislators, and the public.

To us, indeed, that is one of the great virtues not only of the style in which the proposed Patent Policy Act is drafted, but of the Act itself. Whether it represents an ultimate resolution of the issues in Government patent policy remains to be seen. But its speedy enactment would remove the thicket of laws, Executive issuances, and regulations that now obscures this area. It would highlight the issues and allow us to move on to refinement of a coherent policy. It would also allow us to move on to related, probably more important, issues from which the tedious and seemingly endless debate on Government patent policy has been keeping us.

Senator STEVENSON. Thank you, sir.

If exclusive rights in specified fields of use is good for big business and the public interest, why not for small business?

You have said that these exclusive rights are tantamount to title. I anticipate that your answer goes back to your feelings about the rigidity of big business as opposed to the flexibility of small business.

However, small business has other limitations, bigger limitations. It may not have the resources, credit, production facilities, research facilities, and so on with which to exploit all of the fields of use to which it is entitled, and which, incidentally, could be found in a larger company.

It may not even have the resources with which to identify all the fields of use or the necessary incentives to license them if it did.

Why, therefore, shouldn't we apply the same approach, exclusive rights in identified fields of use, to small businesses? That would also overcome our problems in identifying what is small and what is big. We could treat everybody uniformly and we wouldn't have to leave it to the SBA or anybody else. And you wouldn't be punishing them, if that's the right expression, as soon as they become big. Success is rewarded.

Dr. BARUCH. Senator, it is not my view of big businesses that they are rigid, but I do believe that, because of their size, they have less flexibility in the kinds of changes they can make in their lines of business.

You are quite right that we will find small businesses which are as rigidly narrow as the worst conception one might have of a large business-I could name two or three-And you are quite right to ask, why give them title.

Senator STEVENSON. I am agreeing with you. Maybe rigid is the wrong word. I think big business tends to be rigid. You are being more favorable to big business, I suppose, than I am.

I am willing to assume the truth of whatever it is that you are saying. I think you used the word "fluid." Let's just assume then that it's just a question of fluidity. Small business is fluid and big business is not.

What I'm trying to suggest is that there are other limitations on small business.

Dr. BARUCH. If those limitations interfere with the use of those patents, then the Government can-and in the unlikely occurrence a small business is not utilizing it, it is reasonable that it willexercise the march-in rights the Government will retain.

Senator STEVENSON. Do you want to expand a little on your experience in march-in rights for Senator Schmitt?

Dr. BARUCH. Senator, there are certain areas in which you and I completely agree. One of them is utilization and the inability or unwillingness of the Government to exercise its march-in rights.

I would like to point out some of the biggest bars to small businesses for expanding fields of use, exercising patents, are financial ones.

Senator SCHMITT. And regulatory. Administration regulation. Big business has an advantage.

Dr. BARUCH. Let's take the financial one first, because the patent doesn't help them much in the other area. You're right; it does. I'm sorry. If we give them title, it's one less tie to the Government that they have.

But, in fact, if you give them title, they have an asset which provides a valuable tool for raising cash, either by borrowing against it or by using it for licensing and getting royalties without investments, and that kind of encouragement to the growth of a small business is in the national interest.

Senator STEVENSON. Senator Schmitt?

Senator SCHMITT. Mr. Chairman, if I understand correctly, one of the reasons, if not the reason, for the difference between small and large business approaches is to provide some extra advantages to small businesses. Is that correct?

Dr. BARUCH. No, sir. It's to provide for the opportunity for small business to utilize these inventions in a wide range of areas. It's

not an additional advantage, because we have put the big business under no disadvantage.

Senator SCHMITT. There's not complete agreement on that.

Dr. BARUCH. I'm clearly voicing the opinion of a witness.

Senator SCHMITT. If that's true, why change the policy as the business gets larger?

Dr. BARUCH. Because as businesses get larger, they become less likely to license those patents in fields of use other than those in which they're actually engaged.

Senator SCHMITT. Are we forgetting that there's a middle ground here in which most businesses fall? Can you point to statistics which show that the medium-sized businesses-whatever is between small business and the Fortune 500-in fact, do poorly in licensing?

Dr. BARUCH. No, sir. But as is the case with most executives, I frequently have to make decisions based on insufficient evidence, and I do the best I can.

Senator SCHMITT. Over here in Congress, some of us at least try to make our judgments based on experience and history and what the basic facts are.

Let me move in a little bit different direction, Mr. Herz. To the best of your knowledge, what is the university community's position on the President's proposal?

Mr. HERZ. Senator Schmitt, I would hesitate to speak for the university community. Among other things, since the President's proposal, as you correctly said, officially hit the streets sometime late last evening, it's a little early to ask the whole university community to react. We have talked with a few people. I think realistically-I'll try to be as candid as I can in answering that-I think the university community likes the administration bill substantively. Their worry is, "Hey, we have this bill that takes care of our problems, that's already been reported out of committee and may be less controversial. We're worried that by pressing the administration's bill, you'll jeopardize the chances for that bill."

And what we have said to them at the very least is: "Wait and see. We think the administration's bill or some bill like it does have real political prospects. If you will support the effort to get such a bill, we certainly are for the same approach, that's in the bill the university community is concerned about."

I think candidly that the university community will find that although the bills are essentially similar, the administration's bill is slightly more favorable to universities—or at least has fewer appendages, you might say.

One of those is one you pointed out earlier. There is no so-called recoupment requirement in the administration's bill-as there is not in yours-although I don't think that kind of requirement is so serious a requirement for universities or anyone else if it's done right. It is not in this bill, and I would find that better.

There are a number of other small things rather like that. Senator SCHMITT. But as of now, you have not explored substantively with the university community how they feel about the details of the bill?

Mr. HERZ. I have explored it informally with a few of the most obvious representatives, and I think I have accurately stated their

reaction. I think that they do like the administration bill as it affects universities substantively, and their worry is a political one about its impact on the other bill.

Senator SCHMITT. Outside NSF, what has been the reaction of the major Federal R. & D. agencies to the President's proposal? And I would include the R. & D. portion of HEW in that question.

Mr. HERZ. Senator, I would personally hesitate to speak for them, except to say, this is the administration's bill and they're supporting it.

Senator SCHMITT. They're expected to fall into line. Right?

Dr. BARUCH. As of yesterday, we had an agreement on this bill. Senator SCHMITT. Was that agreement by Presidential edict? What was the advice that the agencies gave to the President with respect to this or other proposals?

Dr. BARUCH. It's a negotiated position throughout the administration, as are most positions.

Senator SCHMITT. Well, this committee has had testimony that would indicate that at least during those negotiations, there were very strong objections expressed.

Dr. BARUCH. To some other versions of the bill. Many changes have taken place in this bill.

Senator SCHMITT. In particular, to the concept of exclusive licensing.

Mr. HERZ. Senator, I think one thing would be helpful on this, and this goes back to the comment I made before I started my own formal, oral statement.

I think early on there was a lot of concern in a number of quarters, including the committee, that the exclusive license arrangement was intended to be something negotiated between the contractor and the agency. That would be very troublesome. It is, as we've tried to explain very carefully, not what's intended at all by the bill, and I think a lot of the concerns that were earlier expressed reflect that worry.

Senator SCHMITT. But you still have to monitor field of use, right? How is the monitoring of a license in the field of use going to be undertaken?

Dr. BARUCH. What do you mean, "monitoring." I'm sorry.

Senator SCHMITT. You're defining a field of use, presumably. Dr. BARUCH. Our policy asks the contractor to do that. Yes. Senator SCHMITT. It's going to be self-enforcing?

Dr. BARUCH. In general, if you want to look at the practicality of using this, the question of whether the contractor is actually commercializing some field of use is most likely to be brought up, not by the government, but by some third party, who would like to get a license for that field and hasn't been able to do so-who claims that they're not using it; And that he want to commercialize it. That's about the only circumstance that I expect that the question of field of use adherence to come up.

Senator SCHMITT. You don't expect any definitional problems on whether this field of use of clothes includes hats or shoes or whatever?

Dr. BARUCH. No, I do not.

Senator SCHMITT. Well, where is the burden of proof in this? Is it on the Government to prove that the contractor is outside the field