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present practices. Furthermore, establishment of prior invention by the government would generally constitute a defense in an infringement suit on the basis of prior invention. Prior invention may not be an adequate defense in instances where the government has not reduced the invention to practice, or has, for good reasons, kept the invention secret; special legislation may be required to provide adequate protection to permit royalty-free government use in such instances.

Senator STEVENSON. Thank you, sir.
Dr. Broseghini.

Dr. BROSEGHINI. I am going to make my comments very brief, by pointing out that the reason why I asked to testify is that 2 weeks ago, when I first heard about this bill, nonprofits weren't included in the administration's proposal which obviously got me a little upset as it did a number of my colleagues. Subsequently, nonprofits were included by incorporating essentially the Bayh-Dole provisions. This, we can support.

I don't think that I need to go over the record. However, I do have a statement, which I would like to have entered, which summarizes the peculiar problems that nonprofit organizations, such as Children's Hospital and universities have in dealing with companies and are addressed in provisions of this bill as well as other proposals.

We've been encouraged by the Government to establish a technology transfer program, as we call it, and for the past 4 years we have been actively pursuing relationships with industrial firms. We do have patents pending in the Patent Office now. We have been awarded patents.

Many of the things that I have been hearing in this room concerning the problems of titles and licensing and march-in rights are exactly the sort of things which we want to avoid. Getting title solves these problems. Companies will not even talk to us unless we do have clear title to an invention. Getting a license or anything similar to it, for a nonprofit corporation, of course, doesn't mean anything because we can't do anything with it; we don't have the financing.

I would have hoped that the administration would have supported one of the pending bills in the Congress now rather than coming up with its own proposal at this late date in the session.

I think Mr. Herz clearly indicated the general feeling of nonprofits, and I am pleased to hear that Senator Schmitt reassures us that this proposal will not derail things that are already pending. Obviously, we support S. 414. We can live with the administration's proposal if it goes through. We would obviously like to have something, and my testimony here is really to lend support to getting something this session.

Thank you.
[The statement follows:]

STATEMENT OF ALBERT L. BROSEGHINI, PH. D., DIRECTOR, OFFICE OF RESEARCH

ADMINISTRATION, THE CHILDREN'S HOSPITAL MEDICAL CENTER BOSTON, MASS. The Children's Hospital Medical Center is one of the largest, independent, research hospitals in the United States. According to figures supplied by the National Institutes of Health, using that agency's research awards as a unit of measure, we are now the third largest such hospital in America. In fiscal year 1979 we received in excess of $15 million in research funds of which 65 percent came from federal sources. Our research programs range from the most basic laboratory investigations in recombinant DNA technology to research incorporating the state of the art in

computer technology and engineering as applied to medicine. Many of our research programs rely heavily upon collaboration with institutions such as Massachusetts Institute of Technology and Harvard University as well as industrial firms, both large and small. As with any organization oriented towards basic research we find ourselves increasingly faced with the problem of transferring technological advances made in our laboratories to the public sector. Accordingly, in 1976, at the urging of the federal government, we developed a technology tranfer program to ensure that technological advances made in our laboratories would receive the widest possible dissemination and use. Since then we have made great strides in maximizing our resources so that the greatest possible benefit will be gained from our research programs.

I am aware of the intense discussions that have transpired concerning federal sponsorship of research and the disposition of rights resulting from that research. Since The Children's Hospital Medical Center receives a majority of its research support from the federal government we are vitally affected by any policy that addresses these issues. We have supported, therefore, those individuals and organizations which have labored over the past few years to develop an awareness within the federal government that current federal policies relating to patents and technology transfer are in need of revision. To this end we endorsed Š. 414, sponsored by Senators Bayh and Dole, as being a reasonable approach to improving the relationship between the federal government and the private sector in these matters. S. 414 establishes a precedent for further industrial innovation initiatives. It has a good chance of passage in this session. I believe that it is in the public interest for the Administration to support and endorse it. Indeed, President Carter implicitly did so when, in his message to the Congress on industrial innovation, he stated, “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." We took this statement as endorsement of the provisions of S. 414 which has received strong support from virtually every corner of the public and private sector.

In contrast to the support S. 414 has received, it is my understanding that the Administration's patent proposal received little if any support from delegates attending the White House Conference on Small Business held last week. In fact, a majority of the delegates specifically endorsed S. 414 provided no major modifications were made. Since universities and non-profits have already indicated support for S. 414 it is this bill which should now be endorsed by the Administration. This would be consistent with the President's commitment contained in his technology message to Congress of October 31, 1979.

Unlike S. 414 which has been subject to intensive discussions and debate the Administration's proposal has only recently surfaced. For example, I received a copy of the final proposal yesterday and I must admit that the time available to me has not permitted the kind of analysis I would have liked to prepare for your committee. However, the fact that the Administration's proposal has not been widely circulated to those organizations affected by it is disturbing since the issue of federal patent policies is too important to receive this sort of treatment. When I first heard of the Administration's proposal non-profit organizations were excluded from it and it was this omission that led me to ask to testify first, on behalf of the Children's Hospital Medical Center and secondly, on behalf of other non-profits. Even when the Administration recognized the need to include non-profits it did so but defined them in such a way that many of them, including Children's Hospital, would have been classified as large businesses. The proposal now under consideration has rectified this treatment of non-profits by adopting the definition contained in S. 414.

I cite this very brief history of my involvement with the Administration's proposal because it illustrates clearly my uneasiness. During the past 10 days since I first became aware that the Administration was preparing a legislative proposal and I asked to appear before this committee, I have been exposed to widely conflicting descriptions of what the Administration's position on patents is. Given the legislative history of the various proposals dealing with Government patent policies it is difficult for me to understand why the Administration does not lend its considerable prestige behind one of the pending bills (S. 414 or S. 1860). Furthermore, given the events of the past week I have been led to believe that the Administration is not united on the issue of federal patent policies. Speaking for the Children's Hospital Medical Center I urge the Administration to support S. 414 which adequately deals with the problems of educational institutions, small businesses and non-profits and has received the endorsement of these groups. I am pleased to say that this request for enactment of S. 414 has the endorsement of the Association of Independent Research Institutes. Dr. Walter D. Syniuta, President, Advanced Mechanical Technology, Inc., (Newton, MA), also supports passage of S. 414.

Attachments.

ASSOCIATION OF INDEPENDENT RESEARCH INSTITUTES Addiction Research Foundation, Palo Alto, Calif.; American Type Culture Collection, Rockville, Md.

Boston Biomedical Research Institute, Boston, Mass.

Cancer Research Center, Columbia, Md.; Caylor-Nickel Foundation, Inc., Bluffton, Ind.

Eye Research Institute of Retina Foundation, Boston, Mass.

Forsyth Dental Center, Boston, Mass.; Friends Medical Science Research Center, Inc., Baltimore, Md.

Haskins Laboratories, Inc., New Haven, Conn.; Fred Hutchinson Cancer Research Center, Seattle, Wash.

Institute for Medical Research, Camden, N.J.; The Institute for Medical Research, San Jose, Calif.; The Institute of Medical Sciences, San Franciso, Calif.; Institute for Research in Social Behavior, Berkeley, Calif.

The Jackson Laboratory, Bar Harbor, Maine; W. Alton Jones Cell Science Center, Lake Placid, N.Y.; Joslin Diabetes Foundation, Inc., Boston, Mass.

The Lindsley F. Kimball Research Institute, the New York Blood Center, New York, N.Y.; Lovelace Foundation for Medical Education and Research, Albuquerque, N. Mex.

Virginia Mason Research Center, Seattle, Wash.; Medical Care and Research Foundation, Denver, Colo.; Medical Foundation of Buffalo, Inc., Buffalo, N.Y.; Mental Research Institute (MRI), Palo Alto, Calif., Michigan Cancer Foundation, Detroit, Mich.

Alton Ochsner Medical Foundation, New Orleans, La.; Oklahoma Medical Research Foundation, Oklahoma City, Okla.; Oregon Research Institute, Eugene, Oreg.

Pacific Health Research Institute, Honolulu, Hawaii; Palo Alto Medical Research Foundation, Palo Alto, Calif.; Papanicolaou Cancer Research Institute at Miami, Inc., Miami, Fla.; Pasadena Foundation for Medical Research, Pasadena, Calif.; Professional Staff Association, Harbor General Hospital, Torrance, Calif.

The Roche Institute of Molecular Biology, Nutley, N.J.

The Salk Institute for Biological Studies, San Diego, Calif.; Scripps Clinic and Research Foundation, La Jolla, Calif.; Southwest Foundation for Research and Education, San Antonio, Tex.

Trudeau Institute, Inc., Saranac Lake, N.Y.

The Wistar Institute, Philadelphia, Pa.; Worcester Foundation for Experimental Biology, Inc., Shrewsbury, Mass.

ADVANCED MECHANICAL TECHNOLOGY, INC.,

Newton, Mass., January 23, 1980. Dr. ALBERT L. BROSEGHINI, Ph. D., Director, Research Administration, The Children's Hospital Medical Center, Boston, Mass.

DEAR DR. BROSEGHINI: I am writing in opposition to the “Government Patent Policy Act of 1979”, as proposed.

I have had a long standing interest in government patent policies, especially as it pertains to small business, non-profit institutions, and universities. Our present government patent policy is counterproductive in stimulating innovation in the very sector that has shown the greatest productivity of innovation-small business. While the proposed act would take positive action with regard to small business rights to inventions, it would do so at the cost of a further increase of government involvement (Department of Commerce, Administration of General Services, the Secretary of Defense) through monitoring not just of contract inventions, but also of commercialization of inventions after rights have been relinquished by the government. Not only will this lead to higher government management and monitoring costs, but through its reporting requirements, it will also increse costs by the supposed beneficiaries of this policy.

The act also attempts to further the exploitation of inventions owned by the government. This is in no doubt in response to the government's present poor performance in this area. However, in my opinion the act merely establishes a

larger bureaucracy to work toward this end, but without any reasonable reassurance that the objectives would be achieved.

The Bayh-Dole bill (S. 414, revised) offers a reasonable and intelligent approach to stimulating innovation by improving government patent policy. The "Government Patent Policy Act of 1979" does not. Very truly yours,

WALTER D. SYNIUTA, President. Senator STEVENSON. Thank you. Your complete statement, and the others, will be entered in the record. Mr. Blair. Mr. BLAIR. Thank you, Mr. Chairman, Senator Schmitt.

I am vice president of Itek Corp. One aspect of my background which might have a bearing in this bill is that I am a past president of the Licensing Executive Society, As a matter of fact, LES has members in all of the companies on this panel, and most big manufacturing companies do. The people in LES are those who have significant responsibility in licensing.

Licensing is a two ways street: You license your own technology; and you go out and buy technology from others. At Itek—and I know this is true with many, many other corporations in this country—we license more technology in than we do out. That's a situation which I believe will become more common, because there is reduction of R. & D. development of new products in this country. More and more of us are having to go outside our own companies, and sometimes outside of our country, to get the technology we need.

I want to briefly mention Itek's background and how it's relevant to this. I feel a little bit like a thorn between two roses here, between my two associates on each side of me from big corporations, and Eric Schellin represents small business. We're sort of in the middle, not giant, not small.

We were formed in 1957 out of the Applied Physics Laboratory of Boston University. We started out in very large, sophisticated optics, strictly a government contract company. Now we're not in the Fortune 500. We would like to get there someday, but we're not there yet our sales at present are about $300 million. .

About 25 percent of our business is in government contracts; 75 percent is in commercial business. One part of the products we make in the commercial business relates to certain aspects of printing. The printed patents that are first issued from the U.S. Patent and Trademark Office are printed using our equipment.

In our Government business there are a couple of things you're familiar with, although possibly not by name. The photographs that were taken on the surface of Mars and were sent back to this country were taken with Itek equipment. Frankly, we found they worked better on Mars than they did on Earth.

Senator SCHMITT. Less noise. Mr. BLAIR. Right. Also, remember seeing the Apollo astronauts go outside their capsule to pick up film from cameras. Some of that film was from Itek cameras, which were taking photographs of the Moon's surface.

I have one comment to make pertinent to Dr. Baruch's comments on the flexibility of small business and large business. At Itek, we were not in the photo typesetting business until 3 years ago. Now we're in it in a big way. It's bringing new business to us,

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but it relates to a marketing area in which we have some expertise, which we were able to use to get into that business. I think we're flexible in that area.

Briefly, patents don't really give you the right to do anything, and they don't give you the ability to do anything. There are some comments in my prepared remarks about how patents are not really a monopoly. If you get a license under a patent it just means that the guy who owns the patent won't sue you. You still have to worry about somebody else's patent.

More important, particularly to the licensee, you have to have the know-how, the technical information. If you get a license under a patent, that gives you the right to go out and do research, I suppose. But you haven't got a product ready to go. When you're getting a license from the Government you may get immunity from a lawsuit, but you're unlikely to get the person-to-person contact with the technical people that can give you the technical information they know and you need. They have to have an incentive to do this.

Personally, I agree with Bob Benson that the large number of Government patents are not very useful. Frankly, I think the vast majority of them, maybe even 90 percent or more, if they had been owned by industrial corporations, would not have even tried to be patented. Not because they aren't inventions. They are inventions. But the market isn't there for the patented product or process. We get inventions on very large, sophisticated mirrors or lenses that we make up to 80 inches in diameter, or something like that, and we're only going to sell one of those things. Why get a patent on it? We don't bother with patents unless it's something we're going to manufacture in enough quantity to make it worth our while.

I would recommend if the government does decide to go in the licensing business, as has been mentioned, it should only be done if the licensing agency makes a profit.

If they don't make a profit and they're spending more taxpayers' money, I frankly don't think it's worth the effort.

I'd be surprised if they did make a profit.

I think one problem with the administration proposal is that if the Government retains the rights in these various fields that are not elected by the contractor, I think it will be nearly impossible to license those rights because you're merely offering the naked patent license.

People in the licensing business will tell you naked patent licenses are very difficult to sell. Usually, the only way you can really go after one of those licenses is by a lawsuit, which can be very expensive. If you haven't got the know-how to tell somebody how to do something, you won't be successful in licensing.

I'd like to give very briefly—there's more detail in my written comments an example which might have some bearing on this situation.

In the early 1960's, our people came up with some inventions in photographic film processing, the construction of the processors and how you get excellent contact between the film being processed and the various chemicals involved.

This turned out to be useful in a wide variety of fields in photographic processing.

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