UNIVERSITY AD HOC TASK FORCE*

OF THE

EXECUTIVE SUBCOMMITTEE

COMMITTEE ON GOVERNMENT PATENT POLICY FEDERAL COUNCIL FOR SCIENCE AND TECHNOLOGY CHAIRMAN

* Established to implement the report regarding Institutional Patent Agreements (IPA), and to draft a proposed amendment to the FPR relating to the IPA.

REPORT AND RECOMMENDATIONS

REGARDING THE ACQUISITION OF

BACKGROUND PATENT RIGHTS IN R&D CONTRACTS

1. Background

In an attempt to arrive at a more uniform Government-wide policy regarding the obtaining, under R&D contracts, of rights to a contractor's privately acquired patent position, the Executive Subcommittee established a Background Patent Rights Ad Hoc Subcommittee. This Ad Hoc Subcommittee studied the issues involved at considerable length, including:

a. Present agency practices and policies;

b. The extent to which the Government now receives some rights to a contractor's background patents under the definition of "subject invention" in view of the more recent court decisions;

c. Background rights that could or should be acquired for
Government use and for public use;

d. The limitations that should be placed on background
rights acquired for either the Government or the public;
e. The limitations on the types of contracts under which
background rights should be acquired for either the Gov-
ernment or the public; and

f. The acquisition of background rights through "boiler-
plate" contract clauses versus such acquisition on a case-
by-case through negotiations for each contract.

After submission of majority and minority reports by the Ad Hoc Subcommittee, and after considerable discussion, the Executive Subcommittee referred these reports to a small Task Group with the instructions to (1) identify the major unresolved policy issues, (2) identify alternative policies for each major issue, and (3) discuss the advantages and disadvantages for each alternative policy. The Task Group report is attached, and will provide some measure of the magnitude and complexity of this problem.

11. Conclusions

The Executive Subcommittee has considered extensively all of the materials on this subject and has concluded that a single Government-wide policy of acquiring a contractor's background patent rights, for either the Government or the general public, is neither feasible nor desirable in view of the wide variation of responsibilities in the Government's research efforts. Nevertheless, the Executive Subcommittee does believe that a set of basic principles permitting variation in acquisition would be useful in

achieving greater Government-wide consistency. Variations in this policy area are desirable because R&D sponsored by the several agencies ranges from basic research to development of specific items, the R&D results may be intended for Government use or for public use, and the types of contractors and types of background rights that may be involved make the adoption of a uniform practice and clause language throughout the Government impracticable.

The equities of acquiring rights in a contractor's privately developed background patents are similarly complex and will vary from situation to situation. Generally speaking, the acquisition of such rights (1) could lead to an increase in the contract price, and (2) could discourage participation in Government research by private firms, especially those firms having the most advanced background position and therefore highest capability. On the other hand, failure to acquire such rights could negate the value of any rights acquired by the Government for the general public in Subject Inventions, or limit the public's utilization of the research results.

The Executive Subcommittee generally concluded that there is normally no need for the acquisition of private background patent rights for use by the Government in view of the authority of the Government and its contractors to use any patent under 28 U.S.C. 1498 (a) for reasonable compensation. Situations were recognized, however, where acquisition of background rights might be in the Government's best interests, as where further Government R&D is contemplated through pilot plant development necessary to verify commercial feasibility, or where further Government uses are anticipated. Also, it is recognized that when the R&D results are intended for use by the public (including, in particular cases, state and local government), acquisition of background rights of a contractor must be carefully considered in order to insure availability of the research results to the public.

It should be the responsibility of each agency to identify the contracting situation, balancing all factors involved, where acquisition of rights to a contractor's background patent position, for either the Government or the general public, would be in the overall public interest.

III. Recommendations

Notwithstanding the case-by-case nature of this policy issue, the Executive Subcommittee did agree on the following broad policy considerations or principles which could serve as a guide to the agencies, and which would have an effect of bringing about a greater degree of Government-wide consistency:

a. Whenever an agency deems it appropriate at the time of contracting for research and development to acquire express rights in a contractor's background patents, and is not willing to rely on possible implied rights, such rights should be acquired through specific contract language that identifies the rights that are being acquired and the scope and nature thereof.

b. Any rights in a contractor's background patents that are acquired, for either the Government or the general public, should be limited to the use of such background patents that are necessary for the use of subject inventions and/or the subject matter or work object of the contract and/or other specified needs or objects of the R&D program.

1. When rights are acquired for the Government's use, the contract, whenever practicable, should specify the scope of the uses that would be covered and provisions for royalties, if any.

2. When rights are acquired for the use by the general public or third parties, the contract should specify, where applicable:

(a) The particular uses to be licensed;

(b) Specific conditions precedent to licensing, such as: (i) Qualification of perspective licensees;

(ii) Unavailability of the licensed item from the contractor on reasonable terms;

(iii) Unavailability of acceptable commercial substitutes; and

(c) Guidelines in determining reasonable royalties. c. Each agency may negotiate in particular situations to specifically exclude, or include, at the time of contracting, identified inventions from, or in, the contract clauses pertaining to background patent rights.

d. Although general consideration of the acquisition of rights to a contractor's background patents, either for the Government or the general public, should be handled on a case-by-case basis, it is recognized that the majority of contracting situations of some agencies, or in certain programs within an agency, will require the acquisition of background rights of some type. Accordingly, in these situations, administrative convenience may dictate the formulation of standard background patent rights clauses for use in solicitations in order to conveniently initiate negotiations for background rights.