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was recognized at an early date and in July 1965 upon the recommendation of the Patent Advisory Panel, the Commissioner of Patents, and the FCST, the Chairman of the Patent Advisory Panel sent a letter to all panel agencies to include or require the inclusion of notice of Government rights in patents issuing on inventions made under Government contracts. This practice has, in fact, been adopted by all the agencies.

Despite these past efforts, the time appears ripe for an intensive evaluation of the situation. The Commission Recommendation points up the need for further consideration of the “marchin" area. Accordingly, the Executive Subcommittee has decided to establish a task force to study the need for further action. The task force will be asked to consider further ways in which the administration of "march-in” rights could be improved and strengthened.

IV. Conclusions

The Executive Subcommittee has concluded that following the consummation of a study, appropriate procedures to implement the Recommendation should be developed.

V. Discussion

There was unanimous agreement that an effort should be undertaken, in light of the Commission's Recommendation, to give a fresh examination to highlight "march-in" rights. It is generally agreed that the accomplishment of this Recommendation requires a study of the ways in which it could be accomplished. At that point a realistic evaluation of the administrative burdens involved versus the benefits can be made and further procedures adopted.

In general most members feel that any actions will probably be in the area of publicizing the "march-in” rights and following up inventions in which contractors are allowed to retain title. It is probably premature to attempt to specify procedures for deciding “march-in” requests in view of the lack of experience in the area.

No attempt was made to solicit industry viewpoints. It may be necessary, depending on the nature of the implementation recommended after the task force completes its efforts, to obtain some comments from industry. This might also be useful in gaining insight as to whether the present practices regarding "march-in" rights have had an impact or not. That is, little is known as to whether the licensing or marketing policies of contractors have been influenced by the Government's reservation of “march-in” rights. It could be that contractors have issued licenses who might not otherwise. However, the Commission collected no data on this question, and the Executive Subcommittee has not had the time nor resources to do so. This might be explored in connection with future activities concerning this Recommendation.

VI. Implementation

As indicated in III, above, the Executive Subcommittee has established a task force to study this Recommendation and report its findings by June 1, 1974. We believe this constitutes the proper first step on the implementation of Recommendation 1-3, especially in view of Section 3 of the President's Policy which places responsibility in this area in the FCST. OMB/GSA should monitor these activities, and decisions regarding further implementation can be made at a later date.

VII. Dissenting Views

No dissenting views were voiced.

FINAL VERSION

Proposed Executive Branch Position for

Recommendation 1-4 of the

Report of the Commission on Government Procurement

Rendered November 15, 1973 I. Summation

a. Recommendation 14
Amend 28 U.S.C. 1498 to make authorization and consent
automatic in all cases except where an agency expressly
withholds its authorization and consent as to a specific patent.

The Recommendation appears on page 123 of Volume 4 of the Report, and is in Category B.

b. Proposed Position

It is proposed that the Recommendation not be adopted by the Executive branch.

II. Background

The Recommendation is considered to encompass two separate yet interrelated provisions; i.e., (1) an automatic authorization and consent in all research and development-type and supply-type contracts, and (2) withdrawal of authorization and consent as to specific patent(s).

The primary objective of the first provision of the Recommendation was to eliminate contractors' uncertainties as to the applicability of the Government's authorization and consent which may lead to the addition of contingency costs in bids. The primary objective of the second provision was to place vendors of standard commercial items to the Government on the same infringement liability footing as when providing such items to commercial vendees.

III. Findings

In the consideration of the Recommendation, the following findings were developed.

The areas of contractor uncertainty largely arise under contracts where only a limited authorization and consent is generally granted by the Government or where a contract is silent on authorization and consent.

Examples of areas of uncertainty arising under supply-type contracts are the applicability of the authorization and consent to an infringing process or machine used by a contractor in the manufacture of an item to be supplied to the Government, to an item delivered by a contractor but unaccepted by the Government, and to an item manufactured but not yet accepted by the Government under a terminated contract.

The areas of uncertainty are magnified at the subcontractor levels.

An automatic authorization and consent will minimize the incentive for supply contractors to adopt noninfringing manufacturing practices when options are available.

The inclusion of an automatic authorization and consent in a supply-type contract will result in the loss of Government control against a contractor's use of an avoidable infringing manufacturing practice.

The instances of use of the withholding authority as to specific patents at the time of contracting will likely be infrequent and its use by agencies engaged in large scale supply procurement is viewed as impractical.

The use of the withholding provision will create a more commercial atmosphere in Government procurement of standard commercial items between licensed and unlicensed bidders.

The recognition which may be accorded patents in Government contracting by the withholding authority might serve to encourage private innovators to anticipate Government needs by their own designs of needed items.

Statutory language providing for withdrawal of authorization and consent as to specific patent(s) creates the inference of authorization and consent to infringe as to all other patents thereby precluding agencies from withholding authorization and consent under other conditions.

The availability of the withholding authority may encourage unmeritorious assertions of infringement of patents by prospective contractors and thereby disrupt the procurement process.

The Comptroller General in his Decision B-159356 dated September 20, 1966, 46 Comp. Gen. 227,241 voiced doubt that an express withholding of authorization and consent from a contractor to use a patented process in the manufacture of an item to be furnished to the Government would of itself give a patentee the right to seek relief directly against the contractor in a district court.

IV. Conclusions

Although the Government would derive some advantages by adoption of the Recommendation, the advantages are deemed to be outweighed by the resulting disadvantages to the Government.

The present law permits Government agencies to exclude its authorization and consent in appropriate supply contracts with respect to the use of patented inventions neither required nor necessary to contract performance. The legislation recommended by

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