Department of Defense alone in the 1960 budget. Private industry altogether spends only $4 billion on its own research.

The Defense Department allows a company to keep any patents it develops, except for free use by the Government.

Many people have asked with good reason why the United States does not at least recoup its research costs by taking a cut of the commercial royalties. The British Government has been doing this for over 50 years and no one of repute has seriously contended that it hindered research there. The Vickers Viscount, developed under Government contract, has returned enough to the British treasury to pay off the original research cost and yield a profit. Jet engines have clearly been a profitable venture for the British Government. Clearly, too, British research and development is among the finest in the world. There is no overall Federal Government policy on patents in Washington, as was pointed out in a fine article in the trade magazine, Product Engineering, published by McGraw-Hill, May 4, 1959, written by David Secrest.

The Defense Department, the National Aeronautics and Space Administration, and the Atomic Energy Commission reflect three widely differing patent policies. Since many contracts cut across several Federal departments and agencies, the contractor may be dealing with half-a-dozen different patent attitudes on the same project. Certainly nothing could be more confusing, or more deleterious to the defense effort for that matter, than the lack of a sound, sane governmentwide patent policy.

I have joined with the gentleman from New Jersey, Representative Frank Thompson, Jr., and the gentleman from Utah, Representative David S. King, in offering legislation which would establish an overall U.S. patent policy and end the present confusion and "mess."

My bill, H.R. 7705, is directed primarily at the patent policy of the armed services, and preserves the present patent policies of the Tennessee Valley Authority, the Atomic Energy Commission, the National Aeronautics and Space Administration, and the Departments of Agriculture, and Health, Education, and Welfare.

Under my bill the Federal Government would share in patent royalties just as the British Government does on inventions resulting from research contracts of the National Government, and small business would be helped. The present strong monopolistic trend which dominates the Federal research and development program would be halted. The record shows that 5 percent of the larger industries and research organizations in this country are now gobbling up much of the research and development talent, the brains, and the know-how as well as 95 percent of the research contracts and doing this with Federal funds. In fact, the small business taxpayer is helping to pay for his own demise under the present patent policy.

The magazine, Product Engineering, to which I have referred, declares that:

EXHIBIT No. XVII (A)

[Excerpt from magazine, Product Engineering]

"Excessive channeling of research contracts into big business is causing considerable worry. Big business (over 500 employees) gets at least 95 percent of the Government research, and 100 firms get 85 percent among them. The top 14 companies getting contracts between 1954 and 1956 were all big electric and aircraft companies. The Attorney General has warned that channeling all this patent potential into big business is just building up the monopoly trend. "The House Small Business Committee recently spoke of the 'ominous shadow cast on the future with the monopoly of technology by big business.' Small business helps foot the Government research bill and should at least have access to patents developed at the taxpayers' expense. The big contractors reply that it is their reservoir of knowledge that makes research successful."

Miss Sylvia Porter made some of the same points in an article she wrote about the final report made by the House Small Business Committee on its investigations in 1955 and 1956. I include her short article at this point in my remarks.

(The article referred to follows:)

EXHIBIT NO. XVII (B)

PLIGHT OF SMALL BUSINESS: GOVERNMENT FRETS, BUT ACTS CONTRARIWISE

(By Sylvia Porter)

The Government itself well may be giving the kiss of death to independent small business in our land-through the Defense Department's program of channeling huge amounts of funds for research and development year after year almost exclusively to big business.

The importance of this cannot be overestimated.

In our age of technological revolution, research has become crucial. In more and more industries, what a corporation gets out of research decides whether it thrives or dies.

Yet, despite the Government's oft-repeated concern about the trend toward concentration of industrial power, its own policies are contributing to this trend. And no one who has the facts can deny it.

The House Small Business Committee of the 84th Congress has just released its final report on its investigations in 1955 and 1956. I have studied every page of the chilling 191-page document which leads its chairman, Wright Patman, Democrat, Texas, to predict that if the trends of the past 5 years continue, "within 18 years all manufacturing business and most of the distribution and service business of the Nation will be controlled by corporations having more than $100 million of assets."

But this colorful comment of the controversial Patman is not what impressed me. Rather what hit me was a chapter tucked far back in the report entitled "Government Subsidies for Research and Industrial Advancement," for it tells the following tale:

The Government currently pays for almost two-thirds of all research and development in our country.

The Defense Department is by far the biggest spender of the funds, and it alone passes out about $1.5 billion of research money annually to private companies, "100,000 times as great as the Small Business Administration's whole lending program, designed to assist small-business expansion."

Now where does the money go?

A full 95 percent of it goes to companies employing more than 500 workers. This certainly fits the definition of big business firms.

In the past 3 years, research contracts totaling $4.7 billion have been awarded. Of this $4.6 billion, or 98.1 percent, has gone to the 500 largest contractors. What are some of the implications of this?

The companies doing the research turn up not only inventions for defense but also products for civilian uses.

To quote the Attorney General himself: "Processed foods, electronic devices, and penicillin, to list only a few present-day commercial products, were all originally developed under research and development programs for defense purposes."

The companies have the privilege, under our national patent policy, to patent and control an invention if they want to. In the past 5 years alone, the companies have claimed rights to at least 6,788 inventions.

Again, this leads the Attorney General to make the extraordinary admission: "What indications are available warn that the Government expenditures may not run counter to the industry trend toward concentration but in some degree may even enforce it?"

So what, then, should be done? At a minimum, the report suggests:

The administration should eliminate the "statistical vacuum" that exists on who's getting what for research so a sound program can be worked out that will better protect our competitive system.

It certainly should greatly simplify the contract bidding process so smaller companies won't be under so brutal a disadvantage.

It should make sure that the officers in charge of awarding contracts don't discriminate against small business because of their cautious tendency to deal only with firms which have an established reputation.

It surely should begin at once a reexamination of our whole patent policy to see what amendments are in order.

In 1943, President Roosevelt asked the Attorney General to investigate Government patent practices and policies and to report to him with recommendations respecting the relationships of contractors and of Government employees to the Government with respect to their respective inventions. On the subject of inventions made by Government contractors, the Attorney General made the following findings and conclusions in his "Report of the Attorney General, Investigation of Government Patent Practices and Policies, 1947":

EXHIBIT NO XVII (C)

Excerpts from report of the Attorney General

1. Where patentable inventions are made in the course of performing a Government-financed contract for research and development, the public interest requires that all rights to such inventions be assigned to the Government and not left to the private ownership of the contractor. Public control will assure free and equal availability of the inventions to American industry and science; will eliminate any competitive advantage to the contractor chosen to perform the research work; will avoid undue concentration of economic power in the hands of a few large corporations; will tend to increase and diversify available research facilities within the United States to the Advantage of the Government and of the national economy; and will thus strengthen our American system of free, competitive enterprise.

2. To leave patent rights to the contractor may permit the suppression of an invention paid for by the public, or the imposition of an assessment for its use by the public to serve private advantage. It would constitute an unequal form of reward for comparable performance, and would tend to unbalance Federal research by making more desirable those aspects likely to lead to commercially valuable patent rights.

3. Expert opinion and experience within and without the Government support the conclusion that a policy of public ownership of inventions made under Government contract would be acceptable to a sufficient number of competent private and institutional laboratories to make it workable. However, exceptions to the basic policy should be allowed where necessary in emergency situations, to permit the contractor to retain the patent rights to inventions to which he has already made a substantial independent contribution; but in all such cases the Government should obtain at least a free license under the resulting inventions and should prohibit their suppression or the assessment of unreasonable charges for their use by others.

4. The weight of evidence is that the policy recommended herein will not substantially increase the cost of Government research contracts, or diminish the efforts of the contractor's organization to perform the work competently. To the extent that extra costs may result from the recommended policy, they would be fully justified by the advantages of making publicly financed technology broadly and freely available.

The report included recommendations consistent with these findings, and I think this committee could very well consider the feasibility of developing legislation to implement these recommendations of the Attorney General, and helping to get it enacted into law.

With your permission I would like to include here as part of my remarks the text of my H.R. 7705; the article by Ronald J. Ostrow in the Wall Street Journal of June 10, 1959, to which I have referred; and the text of chapter VI, of the final report of the Select Committee on Small Business, 84th Congress, 2d session, entitled "Government Subsidies for Research and Industrial Development."

(The documents referred to follow :)

EXHIBIT NO. XVII(D)

[H.R. 7705, 86th Cong., 1st sess.]

A BILL To amend chapter 27 of title 35 of the United States Code with respect to the rights of the United States in certain patents arising out of research and development contracts with the United States

Be is enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That chapter 27 of title 35 of the United States Code is amended by adding at the end thereof the following: "§ 268. Rights of United States in certain patents

66

(a) In the case of any patent hereafter granted which is based upon an invention, improvement, or discovery conceived or first actually reduced to practice in the course of performance of any research or development contract with a procurement agency, or of any subcontract of such a contract, or in the course of the performance of any prior experimental, developmental, or research work done upon the understanding that a contract (whether or not a research or development contract) with a procurement agency would be awarded, the United States shall have royalty-free, nonexclusive license to practice or have practiced such invention, improvement, or discovery. Each research or development contract hereafter awarded by a procurement agency shall provide that in the case of any patent covered by the preceding sentence, the United States shall receive a percentage, determined by negotiation as provided in the contract, of the income from the commercial utilization of the invention, improvement, or discovery patented.

"(b) As used in this section (1) the term 'research or development contract' means a contract entered into by a procurement agency under which payment is to be made for experimental, developmental, or research work; and (2) the term 'procurement agency' means the General Services Administration, the Post Office Department, the Department of the Army, the Department of the Navy, the Department of the Air Force, and the Department of Defense." SEC. 2. The analysis of such chapter 27 is amended by inserting immediately below

"267. Time for taking action in Government applications."

the following:

"268. Rights of United States in certain patents."

EXHIBIT NO. XVII (E)

[From the Wall Street Journal, June 10, 1959]

SWORD TO PLOWSHARE: MILITARY RESEARCH BRINGS GROWING FLOOD OF CIVILIAN PRODUCTS-ARMY HUT TURNS INTO BEACH HOUSE-NAVY GENERATOR GOES TO WORK ON PIPELINE-BUT SOME SECRETS SLIP AWAY

(By Ronald J. Ostrow)

Corporate Research, Inc., a year-old Ann Arbor, Mich., concern, plans to introduce this summer a round 230-square-foot house made of a plastic foam material lined with kraft paper. The company, aiming for the beach house and playhouse markets, will sell the house for about $249.

!

New York Savings Bank just installed a high-speed facsimile communications system linking its main office on Manhattan's 14th Street with a branch office at 46th Street and Lexington Avenue. The particular type of facsimile system was developed and is being produced by Alden Electronics & Impulse Recording Co., an affiliate of Alden Products Co., of Brockton, Mass.

These newly developed products have something in common: They were developed primarily with Government funds and made their debuts in the military market. The house grew out of an Army research contract aimed at finding

light, portable huts to house troops; the facsimile system resulted from a Navy contract.

AN INCREASING IMPACT

The mushrooming expenditures by the Government for what is familiarly known in industry as R. & D., is having an increasing impact on private industry, and ultimately on consumers. In the current fiscal year the Pentagon is spending about 90 percent of its $3 billion research, development, and evaluation outlay among more than 1,700 private U.S. concerns. A year ago the Pentagon distributed a smaller amount among about 1,600 companies.

Look at some other cases where Government-sponsored R. & D. contracts led to products that found their way into civilian markets, and you get an idea of the diversity of the civilian goods that emerge by this route.

American Optical Co., of Southbridge, Mass., recently began selling a new type of lightweight sunglasses with straight side-pieces, designed to slip on and off easily, but to remain firmly in place when worn. A $367,000 Air Force R. & D. contract financed development of the glasses, originally made to be used by flyers while wearing radio headphones. "The reception (by the civilian market) has been very good already, and we expect very good sales," says an American Optical official.

GENERATORS AND POWERPLANTS

Texas Eastern Gas Transmission Corp. plans shortly to install a 300-kilowatt generator on its natural gas pipeline in Louisiana. The generator, a newly developed product of Solar Aircraft Co., of San Diego, is powered by a 500horsepower Jupiter gas turbine engine that has been converted to run on natural gas. Solar began to develop the engine in 1947 under a Navy Bureau of Ships contract when the Navy was seeking a shipboard emergency generator. Other models of the Jupiter are on consignment to two boat builders who are experimenting with them as powerplants to run personnel craft for offshore petroleum operations.

Coleman Engineering Co., Inc., of Torrance, Calif., has sold 600 of its Digitizer devices, 70 percent of these to commercial markets, since it developed the machine while working on a $50,000 Navy contract in 1952 to develop a specialized automatic data handling machine. The Digitizer converts the movements of gages and other motion into numbers, then transmits this data to a computer; commercial applications include automatically recording temperatures and pressures in oil refineries and recording and transmitting weather data from remote observation stations, eliminating the need for such stations to be manned.

A company developing a device under a Government contract usually retains commercial patent rights, but yields to Uncle Sam a royalty-free license to have the item manufactured for military use.

Companies aren't always able to take a product developed for the military and convert it directly into an item for the civilian market, of course. "Commercial benefits from Government R. & D. are usually indirect," says Dr. James E. Lipp, director of development planning for Lockheed Aircraft Corp., of Burbank, Calif. "Technical advances made under Government sponsorship are usually applied in altered form and at a later time in our commercial products," he adds.

A MAJOR EXAMPLE

A neighboring competitor of Lockheed, Douglas Aircraft Co., Inc., provides a major example of these indirect benefits. Says A. E. Raymond, senior vice president-engineering: "The DC-8 jet airliner we're getting into service now follows the pattern of sweptback-wing planes we developed for the military."

A Douglas official explains that sweptwing aircraft, which have greater speed potential, have different flight characteristics than the conventional straight-wing planes. For one thing, the center of gravity in a sweptwing craft is farther to the rear, and the plane has a tendency to be less stable at low speeds.

To work out this and other problems, Douglas, under a Navy R. & D. contract, built the experimental sweptwing, needle-nose_D-558-2 Skyrocket, a rocket-powered plane that first flew in February 1948. Later, with Navy contracts, Douglas turned out the sweptwing A3D, which first flew nearly 6 years ago but still is being produced and used as a bomber by the fleet.

"Military experience in operation and design is very useful commercially," says Mr. Raymond, "because the military is pushing for performance primarily,