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 Í 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,

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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It also became evident that nobody in this country, and I think it's still true today, is active in all those fields. No one company. Different organizations work in those fields. You can understand this because handling microfilm one-half inch wide and processing it and getting the small amount of chemicals involved in good contact with the film being processed is one kind of technology. Handling medical X-ray films 18 inches wide is a completely different technology, as well as also being a completely different marketing operation; medical X-ray people don't know how to market microfilm, and vice versa.

There are also industrial photograph markets in which you get involved in film, say, 8- to 12-inches wide.

Itek developed this technology for aerial reconnaissance. We didn't know anything about X-ray films, et cetera.

But over a period of time we found a number of licensees. This was not done by the people in this particular division that developed the technology; it was done by the licensing people in the corporation working with the division people with their technical expertise.

We were able to find licensees who we could help get to their products. We would loan them our film processors, which they could not directly adapt to their field, but the use of our processes was still very helpful to them. It taught them the principles used. Then we could help the licensee's people on a person-to-person basis. Our people would go to their place, they would come to our place. They were able to adapt our technology to their uses, but each one wanted an exclusive license because they had to make a considerable investment to develop their product and they wanted to protect their investment.

They paid pay minimum royalties each year in order to keep their exclusivity, but after 5 years, they had the option, if they didn't want to keep exclusivity, to no longer pay the minimum.

This technology was used in a number of fields. Now it is no longer used because it became obsolete. The patent still has 2 years to go. If anybody wants a license on it, I'll be happy to work out a deal with them.

Right now it's worthless.

But this is an excellent example of how something can get out into different fields if you have some basic technology to go along with it and help the other people get there.

We could not have licensed this technology without the patent. The licensees said that they wanted exclusivity, they wanted to keep their competition out of this field as they had invested a lot of money to get the product.

On the other hand, we could not have licensed the technology with only the patent. The patent by itself would not have been much good.

They wanted our know-how, they wanted the contact with our people. They needed both.

That's why I think that one part of this Government proposal is quite difficult, because they won't be able to provide this know-how and this relationship.

I agree with Mr. Throdahl, particularly, that it's nearly impossible to select the fields in which you wish to commercialize in a

very short time after you make the invention or report it to the Government. However it's certainly better to do it at that time than at the time you make the contract.

But in our particular example our people were aerial reconnaissance experts. They didn't know anything about medical X-rays. They wouldn't even have thought about medical X-rays at the time, or microfilm.

Those uses developed over few years after we got our technology under control in aerial reconnaissance. And the licensing people, with the technical people and other marketing people were able to come up with licenses in these other areas which we hadn't even thought about.

Another problem, I think, lies in the Government negotiating licenses-my experience in negotiating with Government people in those areas are that you're dealing with lawyers. There are no people behind them with management ability and experience in the business involved.

In the licensing business, management people are necessary to make business decisions, the royalties, and other things. The lawyers do the negotiating.

Some of my associates here, you will note, are lawyers. But when they go into negotiations in licensing, they put on the business hat. They aren't there worrying about clauses, they're worrying about a business deal, trying to get the right business deal, so both people can have the best of both worlds.

Frankly, in our experience, in dealing with the Government, in the licensing we've had a lot of problems. I've made a statement before which sounds a little ridiculous, but I'll make it again.

I would rather have a patent that we own in the Soviet Union which the Soviet Union was infringing than own a patent in the United States which the U.S. Government is infringing.

I can get along better with the Soviet Government and negotiate with those people; I can't do it with our people.

There is an administrative claim procedure in this country of which many of you are aware, which can be used to negotiate a license to the Government. However many of us, rather than use it, will sue in the Court of Claims and then we'll finally get into negotiations with the Government.

That may not get me anywhere, either, as Jim Haskell says. He may be right. But I think at least Government contractors could do a better job of licensing as they have some management business people involved who understand the business aspect of the technol

ogy.

In conclusion, I do think that the administration's proposal is a very creative try. I think they gave it a good rassle. But I really don't think it would serve the Government interest best, nor the public interest.

My preference is for the Schmitt bill. If you can't get that, I think the Bayh-Dole bill is good. It's a step in the right direction. I agree with Bob Benson.

I'd rather not have recoupment in there, and I'd certainly rather have the Schmitt bill, if I had my druthers. I think that that would be the best bill in the public interest. Thank you.

[The statement follows:]

STATEMENT OF HOMER O. BLAIR, VICE PRESIDENT, PATENTS AND LICENSING, ITEK

CORP.

Mr. Chairman and Members of the Committee, my remarks will be directed primarily to my understanding of a proposed administration position of Government Patent Policy.

EXPERIENCE AND BACKGROUND

My opinion is based on my experience of some 25 years in the practice of law involving technology and, particularly, in patent, trademark and copyright law and licensing and technology transfer. I have two bachelor degrees, one in chemistry and one in physics and a J.D. Degree (law), all from the University of Washington in Seattle, Washington.

I have been an employee of five U.S. corporations and I am presently employed at Itek Corporation in Lexington, Massachusetts, where I am Vice President, Patents and Licensing.

I am a Past President of the Licensing Executives Society (U.S.A./Canada) and am the first recipient of the LES Award of Highest Honor. I have been a member of four United States Government Delegations, one to the Soviet Union in 1971 on Exchange on Patent Management and Patent Licensing, two to the United Nations (UNCTAD) in Geneva relating to the Role of the Industrial Property System in the Transfer of Technology and one to the United Nations (Economic Commission for Europe) in Geneva relating to a Manual on Licensing Procedure. I am also a member of the U.S. State Department Advisory Committee on International Intellectual Property.

THE VIEWPOINT OF THE RECIPIENT OF TECHNOLOGY-LICENSEE

Among other things, my views are based on the fact that Itek Corporation, as is true with the vast majority of U.S. corporations, has received more licenses under the technology of others than we have granted to others under our technology. This trend will increase in the future because of the reduction of new product research and development at U.S. corporations, which means that they must receive more of their new product technology from outside sources.

Thus, I and my peers spend more time evaluating the patent rights of others than we do evaluating our own patent rights.

BRIEF DESCRIPTION OF ITEK CORP.

Itek was formed in 1957 as an out-growth of the Applied Physics Laboratory of Boston University. This group had developed some very sophisticated large optics for government customers and were encouraged by these customers to form a manufacturing organization for manufacturing these complex lenses and mirrors. Thus, when Itek was originally formed, it was formed as a government contractor. Today, Itek is not as large as the Fortune 500 corporations, but we are considerably larger than small business; having annual sales of about $300,000,000 per year. About 25 percent of these annual sales are in the government contracting business, with the remainder of our sales being in various commercial markets.

Our government contracting business is made up of two primary categories. The first is large sophisticated optics and electro-optics. One example of our products, of which you are aware, are the photographs taken on the surface of Mars by the Viking lander. These photographs were taken by Itek cameras and transmitted back to Earth by Itek equipment.

Also, many of the aerial photographs taken from the Apollo Space Capsule as it circled the moon were taken with Itek cameras. As you recall, you saw the astronauts go outside the capsule to recover the film from Itek cameras to bring back to Earth.

The other part of our government contracting is in electronic counter-measures, including radar homing and warning. We make equipment which is placed on fighter planes and which will tell the pilot when someone is watching him on radar or when a missile is fired at him. This equipment will give him real-time warnings so that he may take adequate evasive action.

CURRENT GOVERNMENT PATENT POLICY

For a number of years, there has been much discussion relating to government patent policy. A considerable amount of legislation has been considered with very little being passed. Presently, each agency has its own policy. Some are required to