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At least three maxims prevail in research. One, researchers do not usually find what they are not seeking. Two, most research is done where the light is best. Three, first use of an invention is usually not the most important one. Normally, the developer commercializes a first use, then broadens into other uses after it has gained additional technical and market knowledge about the invention.

For example, suppose the fiber division of a large diversified company finds a way to improve the tensile property of nylon in carrying out a government contract to develop better truck tires. The first field of use is tire cord, or perhaps more broadly fibers. The invention is tested, market studes are made, a pilot plant is constructed, and a hundred or so tires are rigorously tested. This may take two to five years, and the costs exceed by many times the costs of the research leading to the original invention

Meanwhile, the knowledge gained in the tests may have suggested other new uses for the improved nylon-such as in injection molding of machine parts, or in sheets, or in other uses, none of which come under the original field of use. So the contractor faces the disincentive that the government may have already licensed others in these new fields of use. As it now reads, this provision seems to me to restrain innovation in the long run because it narrows the options.

I urge that the field-of-use concept be reconsidered. But if it is retained, I would like to suggest two improvements.

First, the contractor should have the right to designate the field of use anytime during a fixed period such as three years. Preferably, there should be no designation until the agency has concluded that is necessary to hasten commercialization and to broaden exploitation of the invention.

Second, I suggest that once a contractor has chosen a field or fields of use, he should have the right of first refusal of new uses as they are identified by the agency on its own or by a third party seeking a license from the agency.

Overall, this bill is a move in the right direction from past policies. I do urge you to consider whether it is necessary or wise to distinguish between universities and small businesses, on the one hand, and large businesses, on the other. And, as I said earlier, I wonder if the field-of-use concept is necessary, when the government's right of march-in achieves all that field-of-use is designed to do.

But with these qualifications, I believe you have before you a bill with many excellent provisions. Stemming from the President's initiatives in improving the climate of innovation, this bill combines many of the best proposals on government patent policy. Proper patent policies can help rejuvenate American innovation-to the benefit of government, business, and especially the tax-paying American public.

Senator STEVENSON. Thank you, sir.

I recognize that you must leave very shortly, so we'll see if there are questions for you, and then you are free to leave.

I have just one. Are you suggesting that if the Congress were to accept the field-of-use approach, with or without your modifications, that it should be applied to small businesses as well as to larger businesses?

Mr. THRODAHL. We would say so, yes. We don't really find the distinguishing between small and large very helpful. The arguments that you were carrying out earlier I think would share our views quite well.

Senator STEVENSON. Senator Schmitt.

Senator SCHMITT. Pursuing that field-of-use question a little bit further, it would seem to me, that by your proposed modifications you are basically saying you might as well go to title with march-in rights. Mr. THRODAHL. We would prefer that. I think we would say that.

But, on the other hand, if the mood of the Congress would be to not deal with the title question, we could live with this. That's what we're really saying.

Senator SCHMITT. You could live with it. You have a considerable record of contracts with the Federal Government, so you can see into the organization. What would you think would be the effect of

Mia suspect it mighthink our maineen exclusivity work any more

the President's proposal on the activities of the agencies with which you've had your principal dealings?

Mr. THRODAHL. I hadn't thought about that in those terms. I would suspect it might improve the receptivity of the agencies to us for the contractor. I think our main concern would be exclusivity; and that if we had to choose between exclusivity by license, and title, we'd take title. And I'm not sure we would work any more diligently. Hopefully we would be more inclined to move into some of the other use areas that I tried to illustrate earlier that we normally just would not think about.

I can tell you that we had some contracts-gee, this is many, many years ago-it must be 15—with the Office of Saline Water. And these were in regard to dealing with clarification of brackish and saline water.

Some of that work lay fallow for many, many years. And long after some of the original patents might have expired we carried on some of the legacy of that work into fields that were allied but distinctly different. And now, well over 15 years later, we end up with what we hope is a promising set of new applications for what you'd say would be the son of the initial work we did.

But we would never have done it under the basis of the original relationships we had with the Office of Saline Water, because any patents there would have been nonexclusive, so we would have had no incentive at that time.

But, again, to repeat, sir, I think if we have to take the choice between two, we'd rather have exclusivity by way of title. We think it would be much simpler.

Senator SCHMITT. Well, we do, too. But your testimony basically is that there are tremendous definitional problems and practical problems in the field of use, contrary to the testimony we've had from the administration.

Mr. THRODAHL. Yes. And that is one of the most difficult things we have internally to deal with.

Senator SCHMITT. And this would be particularly true if, as I understand, the President's proposal, the definition by the contractor has to be with sufficient peculiarity to allow the Government to identify those fields of use not accompanied by the described field. Mr. THRODAHL. We find it very difficult.

Senator SCHMITT. You don't know what the field of use is going to be for years after the invention.

Mr. THRODAHL. That's right. That's why we would say put a time limit in it at least. I don't mind time pressure; I think that's not bad. But there's just no way that I'm aware of that people are imaginative enough to come up with other uses at the outset.

Senator SCHMITT. Well, I'm concerned that if you're going to have field-of-use, or even if you had an aggressively pursued march-in program, which is an alternative approach, that the bureaucracy that it would take for the individual agencies to exercise that in a responsible way would be very large. Many of the things that are done now, for example, in the Department of Defense by people not trained in legal matters would probably not be possible; would you agree with that?

Do you deal with the Department of Defense in these contracts?

th Mr. Tunegotiations approach bthat the Press.own.

Mr. THRODAHL. I do not personally deal with the Department of Defense.

Senator SCHMITT. Monsanto does.

Senator SCHMITT. Is it your understanding that much of the negotiation work is done with military officers on assignment to that particular endeavor for some short period of time?

Mr. THRODAHL. Yes, it's difficult for them. In fact, it's difficult for anybody to deal with an area that's not his own.

Senator SCHMITT. Do you feel that the Presdent's proposal would require a different approach by the Department of Defense to contract negotiations in terms of the personnel assigned?

Mr. THRODAHL. I couldn't answer that, but I would certainly think it would take a different kind of understanding than we've seen in the past. Therefore, that might be a logical conclusion, that there would have to be a different sort of personnel assigned.

Senator SCHMITT. Finally—and then I'll let you go—the President's proposal precludes a contractor from acquiring even an exclusive license if it would be contrary to the requirements of the agency's mission. Does that give you any pause?

Mr. THRODAHL. It certainly would. It would give pause. But, again, I came to this table with the thought that if we could break the barrier of nonexclusivity versus exclusivity-if we could break that barrier, I would like to see that barrier broken in favor of exclusivity with the understanding that, for the reasons I gave, that it's the most critical thing for anyone who has to go through the uncertainty and the patience and the commitment of lots of resources beyond the invention stage to make it come to the public good, so that the public benefits and the organization that assumes the risks and the uncertainty benefits.

Then it seems to me that that's the main thing that we have to get over. And I'd be willing to compromise a good deal to get that part of exclusivity in any kind of bill.

Senator SCHMITT. Well, we have to be very careful. I think the Congress and the Administration-at least in their rhetoric-agree that we need to be aiming toward a uniform policy. Mr. THRODAHL. That's correct.

Senator SCHMITT. And the exclusivity, in itself, is important. The controversy is going to come down to what does the administration proposal really represent, a uniform policy? It clearly does not, in terms of the definition of business and other entities. It does not in terms of giving the agencies latitude to make decisions on whether they apply the President's proposal.

Uniformity is not there nearly as much as many of us would like to see. I'm afraid that it has potential for building in the same kind of problems that we have all faced whether we've been in Government or out of it with the diversity of patent approaches and background of approaches that one finds in the Federal Government today.

Mr. THRODAHL. I would say, Senator, that there are many features of the two bills, S. 1215 and S. 414, along with this one. And I think with some judicious melding we could come up with most of what all of us would think fair. bringi that emphat's a sn

the ti commercializationg agencies that we willing

Again, if I bear in on the exclusivity factor, I think I testified before your bill, Senator Stevenson, S. 1215, that I would be willing to see a payback to Government funding agencies that would be the result of successful commercialization.

I like to use the term “bringing to the public good.” I really believe that's one way to get over that emotional hurdle that seems unfair when you first think about it. But that's a small price to pay to get that particular-

Senator SCHMITT. That may be a small price to pay for Monsanto, but it's a very large price to pay for a small company, to have that hanging over their heads if and when they're trying to go out and raise funds based on the existence of a patent that they're eventually going to have to pay back on.

And I think those arguments have to be discussed.
Mr. THRODAHL. Certainly.

Senator SCHMITT. But it's not at all clear to me that the overall public interest is served by that kind of requirement. It can inhibit the commercialization process.

Mr. THRODAHL. I agree with you, sir. And I think it's more imaginary than real. But again, on the whole premise-

Senator SCHMITT. It's not imaginary if you're a small business trying to raise capital.

Mr. THRODAHL. I understand what you're saying, sir. I was really speaking that it's more imaginary in the general public's mind that somebody is getting an unfair advantage because he would get an exclusive license out of a patent granted by the Federal Government, paid for by the general taxpayers' funds.

Senator SCHMITT. But I think that's starting to break down. Mr. THRODAHL. I'm glad to hear that.

Senator SCHMITT. There's a greater understanding in the Congress of the issue now and more discussion. Your testimony and the testimony of your colleagues will help in that.

Thank you very much. Mr. THRODAHL. Thank you. Senator STEVENSON. Thank you, sir. Mr. BENSON. Could I ask Mr. Throdahl one question before he leaves? This has to do with the statements we heard earlier about the fluidity of big business.

Monte, what percentage of the product that Monsanto markets today weren't on the market 10 years ago? Do you have an idea?

Mr. THRODAHL. Were unmarketed or were not on the market?
Mr. BENSON. Were not on the market 10 years ago.
Mr. THRODAHL. Well over half. Well over half.

That would mean that we now have more than trebled our size, I would think, in the last 10 years. But our constant struggle is how do we fight the obsolescence of what we have because of the fastmoving nature. I would say that certain people who are representing my own industry struggle very, very hard to avoid this obsolescence, and I have testified to this point. The presence of a regulation is not a totally unwelcome thing, because, in fact, we should have been more far-seeing in years past than we have been now or than we are now.

I would think that, for the most part, we struggle very hard to keep an open mind on how is it that we bring to the public good

and, therefore, to our shareholders' good, that would be lost to us if we don't have the capability for fair innovation.

Mr. BENSON. It's essentially true, that if you don't do that you are going to fall behind in market share and basically you are not going to prosper. Mr. THRODAHL. That is correct.

Senator STEVENSON. Gentlemen, that is why we are here, because we are falling back in our market share in the world. And usually, those products are not generated exclusively by internal research, but more and more frequently, it's under license from foreign corporations.

Mr. THRODAHL. That's right.
Senator STEVENSON. Thank you.
Mr. THRODAHL. Thank you, sir.
Senator STEVENSON. We better keep pushing.
Mr. Benson, can we proceed with you next?
Mr. BENSON. Thank you.

I was asked to testify primarily on the Patent Advisory Subcommittee of President Carter's domestic policy review on industrial innovation. I was chairman of that committee. My prepared statement includes a complete copy of that report, so I will limit my remarks to some of the features and some of the background of that report, and I will try not to be repetitious of some of the things that have already been said.

As you know, one of the four major recommendations of that subcommittee was that the Government should develop a better system of transferring the commercial rights to Government-supported research to the private sector.

The conclusion of our committee, unanimously, was that if the Government really wanted to increase the amount of Governmentowned technology incorporated in products which actually get into the marketplace, it must find a way to transfer the rights to that technology to the private sector in a sufficiently attractive form that would induce members of the private sector to make an additional investment. Clearly, the preference of our committee was that you just give them the title.

Now, you have to understand what a businessman faces everyday. He has only so much money to spend on various projects, and he has to look at them, compare their merits, their potential, the likelihood of return, and make a decision. So, therefore, any grant from the Government that has restrictions on it is less attractive than one which comes out of our own labs.

When you put restrictions on the grants that you're giving to people in the private sector, you make it less attractive to them. That is one of the reasons why some of this Government technology has never been commercialized. In fact, I would go a little bit further than some of the other people that spoke today. I think that the whole concept of march-in rights is a disincentive. If anyone especially a small corporation, is asked to invest millions of dollars in developing the market, with the threat hanging over their head that because they didn't develop this particular part for some area of the market, someone else is going to come in and get an exclusive license over them this threat certainly has to be a deterrent.

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