Research on rice distribution patterns provides the rice industry for the first time with fundamental information on the characteristics of the domestic market for rice on a State-by-State and on an aggregate basis. It also has provided benchmarks for evaluating results of increased sales, educational, and promotional activities.

The prevention of insect damage to rice as it is stored in the gulf coast States is the subject of an extensive research effort. One phase of the research is the use of protective sprays and dusts for rough rice stored in bulk or in bags. It was found that malathion and synergized pyrethrum could be used in amounts effective in controlling insects without exceeding tolerances established for these insecticides.

A study of cost of operating 33 Southern rice mills (of which 14 were located in Louisiana) reveals that the larger the volume of rice milled the smaller the per unit cost of milling. Only small reductions in per unit cost were observed in mills which operated in excess of 1 million hundredweight of rough rice annually. The study was designed to provide basic information for the individual rice miller for possible use in cost reduction appraisal.

Senator LONG. Thank you so much.

(Prepared statement submitted by True D. Morse, Assistant Secretary of Agriculture, follows:)

PREPARED STATEMENT OF TRUE D. MORSE, ASSISTANT SECRETARY OF AGRICULTURE
DECEMBER 2, 1959.

HON. RUSSELL B. LONG,
Chairman, Subcommittee on Monopoly, Select Committee on Small Business,
U.S. Senate.

DEAR SENATOR LONG: Reference is made to your letter of November 18, 1959, requesting a statement of this Department's patent policies, an analysis of the economic effects therefrom, and whatever recommendations we may consider appropriate.

From the third paragraph of your letter we presume that you are primarily concerned at this time with this Department's policies relating to patents which may result from Government-financed research contracts with private industry or with universities or private research organizations, rather than such policies relating to employee-made inventions.

Contracts for research by the Department of Agriculture are made under the authority of 7 U.S.C. 427, 427i, and 1621. Section 427i contains a provision that "Any contracts made pursuant to this authority shall contain requirements making the results of research and investigations available to the public through dedication, assignment to the Government, or such other means as the Secretary shall determine."

In accordance with the above-quoted provisions, the Department of Agriculture has consistently followed the practice of requiring a worldwide assignment to the Government of the patent rights in any inventions and patent applications arising from work carried out under research contracts.

As a result of the above-stated policy and practice, our contractors do not themselves apply for any patents on inventions made by them since they do not retain any proprietary rights in these inventions; but such patent applications have been made by the Department of Agriculture itself, with the worldwide patent rights assigned to the Government.

Any patents granted for such inventions are made available to the public under royalty-free nonexclusive licenses. This practice arises from an interpretation of an opinion by the Attorney General (24 Op. Atty. Gen. 320) that an exclusive license in a Government-owned patent may not be granted in the absence of statutory authority.

It is our view that, since research or developmental contracts entered into by the Federal Government are paid for with public funds, the benefits should accrue entirely to the public. In addition, any discovery resulting from such contracts should also belong to the public.

The nature of the research carried out by this Department, either in its own laboratories or in private laboratories under contract, is predominantly of a public service and utilization nature, as, for example, to discover new uses for agricultural products in contrast to the procurement type of research with which the defense agencies are concerned. A mere license to the Government

in any patent resulting from an invention or discovery made in the course of a research project of this Department would in most instances be a hollow gesture if the public itself did not have free access to the invention.

While the cost of the research might be reduced by permitting the Government to share in the royalties, we believe that it would actually tend to increase the cost to the public since the contractor who had title to the patent could well arrange to recover from the ultimate consumer the share of the royalties which he had paid to the Government.

For some years the Department has favored legislation to empower the Secretary of Agriculture to grant exclusive licenses for the use of patents under the control of the Department of Agriculture. While such proposal has not related expressly to the licensing of patents secured as a result of contract research, such patents were of course expected to be included. A provision for such exclusive licenses with a time limitation appeared as Section 9(b) of H.R. 8639, 86th Congress, 1st Session, which passed the House on September 1, 1959. Experience has shown that in some instances further developmental work has to be conducted before an invention, even though patented, can be put in a form which is economically feasible. Under the policy of granting only nonexclusive licenses, as the interpretation of the above-mentioned Attorney General's opinion requires, some difficulty has at times been encountered in interesting the investment of private capital for the commercialization of patents under the control of this Department. It is therefore believed that if some provision were made for the protection of a private investor by means of an exclusive license, even if only for a limited time, whereby he would be assured of the absence of competition until he has carried out further developmental work and has established himself in the market, more interest would be awakened in Government-held patents.

In view of your request that this report be submitted by December 1 if possible, we have not obtained advice from the Bureau of the Budget on its submission. Sincerely yours,

TRUE D. MORSE, Assistant Secretary.

Senator LONG. Mr. Banta, I am sorry to keep you waiting.
Mr. BANTA. That is all right, Senator.

STATEMENT OF PARKE M. BANTA, GENERAL COUNSEL, DEPART-
MENT OF HEALTH, EDUCATION, AND WELFARE; ACCOMPANIED
BY MANUEL B. HILLER, OFFICE OF GENERAL COUNSEL; AND
ARTHUR H. BISSELL, OFFICE OF THE SURGEON GENERAL

Senator LONG. Will you please summarize your statement, sir. Mr. BANTA. I am responding for the Secretary on this occasion, Senator Long, and I have filed a statement with the committee in which an attempt has been made to set forth the patent policies of the Department of Health, Education, and Welfare, and explain in some detail our activity under them.

The statement points out that the Department patent policy is developed by the Department Patents Board composed of representatives of the various operating agencies of the Department, which Board is advisory to the Secretary.

Because of the activity of the Department in the field of research and development contracting being of more or less recent origin and comparatively limited, our experience under them is not susceptible at this time to accurate or significant appraisal.

It is explained that the bulk of the Department's research lies in the field of medical research by the Public Health Service.

This research is largely accomplished by a substantial number of grant programs in which the grants, appropriately conditioned, are

41 Prepared statement, p. 361.

made to public and nonprofit agencies and individual members of the scientific community and under special circumstances to private firms. And, of course, we do, to a lesser degree, contract for research.

Consistent with the Department's statutory responsibility for the dissemination of information and making public the results of the research, this statement points out that it is the basic policy of the Department that the results of Department-financed research should be made widely, promptly, and freely available to other research workers and the general public.

This availability can usually be provided by dedication of a government-owned invention to the public by publication.

Copies of the pertinent regulations and the patent policy statement of the Secretary have been furnished to the committee.42

You will note two exceptions to our basic policy. In the grant and contract areas we have permitted grants to or contracts with nonprofit institutions to provide for the retention by the institutions of invention rights for disposition by them in accordance with the institution's established policies and procedures, where it is found that the invention will be made available without unreasonable restrictions or excessive royalties.

Of course, in every such case the Government reserves the irrevocable royalty free nonexclusive license.

The second exception is in the field of cancer chemotherapy industrial research contracts, and is permitted only because of the peculiar exigencies of this program, and in order that the resources of the pharmaceutical and chemical firms might be brought to bear with a minimum delay in exploring exhaustively and rapidly the potentialities of chemical compounds in the control and treatment of cancer. Under the exception provided for by the Department's regulations, and more particularly set out in a policy statement by the Secretary, copies of which have been furnished to the committee,42 the rights of inventions resulting from cancer chemotherapy industrial research contracts are left to the contractor, subject to the right reserved to the Department to nullify contractor's patent rights which they may have obtained if the invention is not made available in sufficient quantities or at a reasonable price or in a quality that is adequate.

To indicate our limited experience, it is pointed out in the statement that during the fiscal year 1958-59, the Public Health Service entered into a total of 227 research and development contracts, and less than 15 of which, 12, I think, would be exact-were cancer chemotherapy contracts which left invention rights to contractors pursuant to this exception.

I believe this sufficiently summarizes the statement relating to the Department's patent policies, and the extent of our contract experience. Senator LONG. How much money do you spend a year on it? How much money a year do you spend on research?

Mr. BANTA. Well, last year the Public Health Service had approximately $400 million for research, and I think that was allocated $250 million probably for grants, and if that is the right amount for grants, then $150 million would have been available, for contracts and for our own operations in the research field.

42 see exhibit XVI, p. 364.

Senator LONG. $150 million for contracts?

Mr. BANTA, AS Mr. Bissell, who sits to my left, points out, that too, would include the cost of our own direct research, so that contracts and our direct research costs would approximate the $150 million. The total amount which is obligated for contracted research is less than $30 million.

Senator LONG. Have you found that the fact that the contractor in most instances would not receive patent rights to that which would be developed has created any great difficulty in finding adequate contractors to do research for you?

Mr. BANTA. I do not think we have had any difficulty at all with the policy which we have promulgated, Senator.

It would certainly be quite minimal; there is no area with which I am familiar to indicate that we have had difficulty with application of the policy I have just mentioned.

Senator LONG. Your field is one in which people are more than ordinarily interested in serving mankind and, perhaps, less interested in the profit involved than most, I would take it?

Mr. BANTA. We could probably find people who would take issue with us about that, but we like to think that our field is largely in the area of doing something genuinely of value to the individual and to all individuals.

Senator LONG. You like to think it, whether it is true or not.

Mr. BANTA. Well, to us it is true. But I suspect there are those who would take some issue.

Senator LONG. Thank you very much, Mr. Banta. I will let counsel ask you the questions.

Mr. GORDON. The usual practice of your Department, as I understand it, is that it reserves the right to determine the ownership and disposition of any resulting invention resulting from research and development work sponsored by you, with the two exceptions. Mr. BANTA. That is right.

Mr. GORDON. One of the two exceptions is a contract with nonprofit institutions, and I have some questions about this subject. What is the reason for this exception? What would have been the consequence for not giving this exception even if the institutions demanded it?

Mr. BANTA. You have reference in these three questions, now, to the nonprofit institutions?

Mr. GORDON. That is right.

Mr. BANTA. I think the only reason is that it was an exception thought to be appropriate when the contracting unit of the Department could find that the patent policies of the institution were sufficiently comparable with the patent policies of the Department so as to lead the person making the decision to believe that the public would have the same general access to the invention under the policy of the institution as if we ourselves had retained the title.

Mr. GORDON. Do you have a contract provision which requires the prompt reporting of any invention resulting from research and development sponsored by you?

Mr. BANTA. Oh, yes.

Mr. GORDON. Do you have a contract provision which requires the prompt delivery of data to you?

Mr. BANTA. I think such a provision is contained in all of our contracts. We have access to the data and it is for the Department; we have access to the report. We require the report to contain all of the information and, of course, it is made to us and, therefore, it is our property. It may become the basis for a decision as to whether or not we would permit the inventor, in line with our policy, to have the title to the invention.

Mr. GORDON. Is there any provision by the Department for the prompt dissemination of new scientific knowledge?

Mr. BANTA. Yes.

Mr. GORDON. What is the reason for the cancer chemotherapy exception? What would have been the consequence of not having made this exception?

Mr. BANTA. I do not think I can answer your second question: Taking your questions in the inverse order of inquiry-I do not think I can tell you what would have been the consequences if we had not made the exception.

But, you know, it is very obvious that dealing with the industries, we found we were dealing with different institutions or organizations than when we dealt with nonprofit institutions, colleges and universities, and the people we were accustomed to dealing with in our grant program.

I do not know, but I suspect that the industries with which we dealt were in many instances accustomed to patent policies more liberal than our basic patent policy.

Maybe it is enough for me to say that we did not get any contracts for a considerable length of time, and I believe none under our basic policy, and that it may be those who are responsible for advising the Secretary. The Patents Board to which I have referred, determined that some modification of the basic policy would be in order, and that this exception would be acceptable and letting us get into the chemotherapy research program more promptly, and that was certainly one of the things we wanted to do.

Mr. GORDON. Mr. Banta, could you make inquiries and try to find out what the exact reasons are, and if it is possible we would very much like to know the companies, for the record, which did not

Mr. BANTA. Well, of course, I am sure I can give you the names of all of the companies

Mr. GORDON. Which did not take a contract.

Mr. BANTA (continuing). With which we have contracts.

Mr. GORDON. I mean the companies not with which you have contracts but who refused to take contracts to do research in the cancer field unless they got the patent rights.

Could you supply that for the record within the next week or so? Mr. BANTA. I will promise you, Mr. Gordon, that I will take a look to see if the record anywhere in our Department discloses that information. If it does I will provide it.13

Mr. STULTS. Your testimony was that no company was willing to take such a contract, is that right?

43 Following is excerpt from letter dated Dec. 16, 1959, to the Senate Subcommittee on Monopoly, signed by Mr. Banta :

"I have made careful inquiry and I am told that there are no records in the Department (Health, Education, and Welfare) which disclose the name of any company or companies which refused to negotiate a cancer chemotherapy contract merely because of our basic patent policy."