native B, the Government would acquire title to every invention and permit the contractor to obtain an exclusive license on those inventions on which the contractor filed a patent application and declared his intent to commercialize the invention. Under both alternatives of Option II, after the expiration of a period of exclusivity, which could be extended to satisfy the equities of a contracting situation, the invention would be made available for licensing to third parties.

The Committee considered these options and, after much deliberation, agreed upon a merger of the policy concepts of Alternative A and Alternative B directing that the proposed legislation include the policy concepts of the merged alternatives. Briefly, the merger provided for the adoption of the policy concepts of the so-called "Alternate Approach" of the Commission's Report basically as set forth in Alternative A, with the added provision that the Federal agencies also acquire a right in the Government to license third parties under certain circumstances under the march-in right provisions.

The "merged" legislative proposal would permit the contractor to obtain invention rights subject to the usual license to the Federal Government, with a requirement that third parties be licensed under resulting patents in specified public interest situations. Accordingly, the Committee directed that this legislative proposal be developed.

In August 1976, the Committee's draft legislation (APPENDIX D) entitled, "Federal Intellectual Property Policy Act of 1976," was forwarded to the Office of Management and Budget (OMB) and circulated for official comment.

(B) Action Necessary

The comments received by OMB are under review with a view of refining the legislative proposal prior to further consideration by the Executive Branch.

RECOMMENDATION 2.

Enact legislation to make clear the authority of all agencies to issue exclusive licenses under patents held by them.

(A) Action Taken

The Executive Branch adopted the Recommendation as long as the proposed legislation would allow greater administrative flexibility than is currently authorized under the licensing regulations found at 41 CFR 101-4.1.

This Recommendation was based, at least in part, on the belief of the Commission that "uncertainty in this area would interfere with the effectiveness of an exclusive patent licensing program." The Commission's concern was highlighted by the litigation on the FPMR licensing regulations.

It is generally believed that there is adequate legal authority to exclusively license Federally-owned inventions as provided by the FPMR licensing regulations. However, the regulations contain restrictions which were included to strengthen the legality of the licensing arrangement and, accordingly, do not provide sufficient flexibility for a fully effective licensing program.

The Licensing Working Group drafted a bill entitled "To Protect and Encourage Utilization of Government-owned Technology, to Further Public Interests of the United States Domestically and Abroad, and For Other Purposes." This draft bill was approved by the Executive Subcommittee and forwarded to the Committee on Government Patent Policy for its consideration. The Committee reviewed the draft legislation and asked that the provisions of the draft be included in the legislation drafted to implement Recommendation 1.

The proposed legislative package submitted to OMB to implement Recommendation 1, also includes provisions to implement Recommendation 2.

(B) Action Necessary

The comments received by OMB are under review with a view of refining the legislative proposal prior to further consideration by the Executive Branch.

RECOMMENDATION 3. Supplement the President's Policy by the adoption of uniform procedures for application of the rights reserved. to the Government under that policy.

(A) Action Taken

One of the premises of the 1971 Presidential Policy Statement is that whenever the contractor retains title, the Government and the public are protected by the "march-in" rights. "March-in" rights are those rights acquired by the Government by which it can require the contractor to license others under certain circumstances.

The Patents Working Group prepared a report, APPENDIX E, recommending additional notice to the public of its right to obtain a license to contractor-owned patents on reasonable terms. under certain circumstances in accordance with the "march-in"

rights acquired by the Government under the terms of the contract. The report which implements Recommendation 3 was approved by the Committee on Government Patent Policy on September 23, 1975.

An invention utilization questionnaire and procedures for its use recommended by the report is to provide information on the use contractors are making of inventions where they have retained title. Collection of such information will enable Federal agencies to better evaluate the utilization that is being made of inventions and the need to take added steps to promote the utilization of technology not being used.

(B) Action Necessary

Following the submission of the report to and its adoption by the Office of Federal Procurement Policy and clearance by the Office of Management and Budget of the proposed questionnaire, the Federal agencies will take appropriate action.

RECOMMENDATION 4. Amend 28 U.S.C. 1498 to make au

(A) Action Taken

thorization and consent automatic in all cases except where an agency expressly withholds its authorization and consent as to a specific patent.

The Executive Branch rejected the Recommendation. The reasons for rejecting the recommendation are set forth in APPENDIX E.

(B) Action Necessary

None

RECOMMENDATION 5. Amend agency regulations and

(A) Action Taken

clauses to provide that all contractual warranties against patent infringement be provided by specific contractual language and not by implication.

The Commission Report indicates the objective of the Recommendation was to preclude the reading of implied warranties into contracts.

It is somewhat unclear whether the Recommendation contemplates a contractual provision expressly negating the availability to the Government of commercial warranties against patent in

fringement, or a contractual provision expressly setting forth the availability of such warranties to the Government. The Recommendation is being interpreted under the latter connotation.

A contractual provision expressly indicating the applicability of commercial warranties will encourage bidders, especially unlicensed suppliers, to more seriously evaluate their potential infringement liabilities and to reflect the same in their bid prices thereby enabling a more realistic Governmental assessment of the complete cost of a purchased item.

Implementation of the Recommendation, as interpreted by the Executive Branch, is to be accomplished by issuing an appropriate amendment to the FPR, and to the Armed Services Procurement Regulations. A proposed amendment to the FPR was drafted by the General Services Administration and has been circulated to the Federal agencies for comment. The comments have been evaluated and a revised proposal prepared which has been referred to the Executive Subcommittee for its consideration. (B) Action Necessary

After review and consideration of the comments on the proposed amendment by the Executive Subcommittee, the amendment, with the concurrence of the Office of Federal Procurement Policy, is to be issued by the General Services Administration.

RECOMMENDATION 6. Authorize all agencies to settle patent

infringement claims out of available appropriations prior to the filing of

suit.

(A) Action Taken

The basis for the Recommendation was to provide patent owners with a uniform alternative which might be less expensive and more timely than a suit in the Court of Claims in the consideration of their claims of unauthorized Government use of their patented inventions.

The Commission believed that authority as provided by the Royalty Adjustment Act of October 31, 1942 had lapsed. The May 4, 1973 decision, B-178104, 178 USPQ 370, of the Comptroller General also held this authority to have lapsed. The need for the recommended authorization was emphasized by the Comptroller General opinion which stated that, in the absence of express statutory authorization, an agency cannot enter into a license agreement with a patent owner either to settle past unauthorized Gov

ernment use or to authorize future governmental use of the owner's patented inventions.

However, a decision of the Court of Claims, International Telephone and Telegraph Corporation, et al vs. United States, et al, 536 Fed. 2d 1361, 191 USPQ 739, rendered on June 16, 1976, held that the Royalty Adjustment Act had not lapsed. Accordingly, need for legislation to implement the Recommendation would appear to be unnecessary.

(B) Action Necessary

The Legislation Working Group is to reassess the need for legislation in view of the Court of Claims decision.

RECOMMENDATION 7. Grant all agencies express statutory

authority to acquire patents, applications of patents, and licenses or other interests thereunder.

(A) Action Taken

The underlying consideration of the recommendation was to provide an opportunity in the Government procurement process for all agencies to realize economies by acquiring patent rights prior to making procurements which might lead to infringement resulting in costly litigation, and to create an atmosphere that would give patent owners greater assurance of early compensation for Government use of their inventions.

The Commission believed that authority as provided by the Royalty Adjustment Act of October 31, 1942 had lapsed. The May 4, 1973 decision, B-178104, of the Comptroller General also held this authority to have lapsed. The opinion of the Comptroller General stated that, absent express statutory authorization, an agency cannot enter into a license agreement with a patent owner either in settlement of past unauthorized Government use or to authorize future Governmental use of the owner's patented inventions.

A recent decision of the Court of Claims, International Telephone and Telegraph Corporation, et al vs. United States, et al, 536 Fed. 2d 1361, 191 USPQ 739, rendered on June 16, 1976, however, held that the Royalty Adjustment Act had not lapsed.

(B) Action Necessary

The Legislation Working Group is to reassess the need for legislation in view of the Court of Claims decision.