Senator MCCLELLAN. It isn't what is in his mind. You don't interpret what is in a Congressman's mind.

Dr. HAAS. Mr. McClellan, if we are going by the wording of it, and I think we have to, on page 18, lines 7 and 8, when it says "technical and commercial feasibility and for the development of inventions," in the jargon of my industry, which is research and development, “development" means pilot plant work.

Senator MCCLELLAN. I would say this at this point without a final decision. If this bill is to be accepted and reported I think this language needs some clarification. That would be my thought on it. Very well. Any questions.

Senator BURDICK. Thank you, Mr. Chairman. I came late and I don't have the benefit of your earlier testimony. But I assure you I will read your testimony.

Senator MCCLELLAN. The next witness, Senator Saltonstall, is on his way and we promised to hear him next. Everybody be at ease. (Short recess.)

Senator MCCLELLAN. The committee will come to order.

Senator Saltonstall, the committee welcomes you, sir. We have under consideration a bill of which you are the author and we will be very glad to have your comments in support of it and if you can say kind words about anyone elses we have here I will be glad to have that,

too.

[Laughter.]

STATEMENT OF HON. LEVERETT SALTONSTALL, A U.S. SENATOR FROM THE COMMONWEALTH OF MASSACHUSETTS

Senator SALTONSTALL. I say, Mr. Chairman, that I don't think that your bill and mine are very different. Therefore, we can support each other and, I hope, have the support of all of the other members of the committee.

Mr. Chairman, I want to speak very briefly in behalf of S. 789, and before I do so, I would like to say that I received a letter from Senator Tower, of Texas, in which he says: "I would appreciate it very much if you feel it appropriate to have me included as a cosponsor of your bill, S. 789, at its next printing."

Senator MCCLELLAN. I don't know whether this is a procedure by which you can become a cosponsor or whether you have to get the consent of the Senate, but so far as the committee is concerned without objection he becomes a cosponsor.

Senator SALTONSTALL. Thank you, that is all I wish.

Mr. Chairman and members of the committee, I appreciate this opportunity to testify today on the merits of S. 789 and to discuss the need for legislation to establish a national policy toward the disposition of patent rights arriving out of Government research and development contracts.

I know, Mr. Chairman, of the long abiding interest which you have shown toward establishing a reasonable and workable Government patent policy in this area; a policy based upon placing the legitimate rights of all parties in a proper perspective. I appreciate your holding these hearings on this important and complex subject. The way I became involved with this subject was, Mr. Chairman, through

drafting of the original NASA bill. I worked on this measure with then Senator, now President Johnson, particularly with respect to the patent provisions of that bill. This is a most complex subject complicated by the fact that I am not a patent lawyer.

I have been concerned by an attempt to impose a virtually inflexible title approach to this subject through amendments offered on the floor of the Senate. This is especially so because they have been offered to unrelated legislation. These amendments are hastily imposed without benefit of hearings such as these through which due, deliberate, and reasonable consideration of the merits of this subject can be made. The direct result of this approach is to prevent proper clarification of the important issues involved in any determination of the proper method to the disposition of rights under Government research and development contracts.

I have sponsored and support legislation to establish a Federal patent policy under Government research and development contracts. My bill, S. 789, is intended to insure protection of the rights of all parties to these contracts. It is designed to give due recognition to their respective contribution and effort in a manner consistent with our system of free enterprise. In this way, the legitimate rights of the Government and the private contractor will be protected.

I would like to comment briefly about certain provisions of my bill. S. 789 provides that rights to an invention shall usually be determined at the time a research and development contract is negotiated. There is a specific exception to this which permits the Government to take greater rights than it did under the original terms of the contract if there develops "new, unusual and compelling" factors related to the national security, public health and safety which did not exist at the time of contract negotiation. Regardless of the disposition of rights under a contract, the Government will always be assured of receiving an irrevocable, nonexclusive, nontransferable, royalty-free license to any invention, discovery, or improvement development under a contract.

The requirement that rights under a research and development contract should normally be fixed at the time of negotiation is, I believe, consistent with general contract procedure. The contracting parties are entitled to be made aware of their rights and responsibilities at the time an obligation is assumed.

In my opinion, this approach should be followed under research and development contracts save for those instances where the subject matter of the contract cannot be reasonably identified. Then, disposition might be deferred until a later time agreed to by the parties under rules and regulations to be established under my bill by the Secretary of Commerce.

I think that is very important because there are approximately 20 Government departments and agencies which enter into research and development contracts. If there is to be established a national patent policy to govern disposition of rights under these contracts, it would seem desirable to achieve the greatest possible compatibility and consistency in application of this policy by these departments and agencies.

It is my belief that this can be best assured through inclusion of specific guidelines for determining proper disposition of rights. Such

an approach will avoid vagueness which can easily result in confusion. This is the reason for inclusion of the criteria in my bill. I believe the criteria in S. 789 establish reasonable standards which can be applied by all contracting departments and agencies in determining the contributions made by parties to a research and development contract in the light of its nature and purpose.

S. 789 provides protective devices to insure that when waiver of rights is granted by the Government, the Government will retain an interest sufficient to insure that the subject matter to which these rights relate will be developed for commercial utilization by the public as soon as practicable. This goal is very important, Mr. Chairman. It can be insured through provisions which permit the Government either to void a patent obtained under a waiver granted the contractor or compel the contractor to license others to manufacture and sell under the patent. This can be done upon a showing of failure to develop the invention for commercial use within a 3-year period from the date the patent was issued.

To insure proper safeguards against abuse of the rights of parties under Government research and development contracts, administra tive and judicial procedures are established in my bill. They would be available under those provisions which concern:

1. Voidability of the rights of a contractor;

2. Licensing of a patent;

3. Administrative determination regarding Government declaration of ownership subsequent to negotiation of a research and development contract.

Furthermore, a contractor will be authorized to obtain an administrative determination with right of judicial appeal for alleged infringement. This is desirable, I believe, as remedy for those who cannot afford the necessary investment in time or money which often results from a protracted law suit. Hopefully, this provision will serve, also, to deter would-be infringers.

I do not favor permitting an executive department or agency head discretion to confer either an exclusive or nonexclusive license to work a patent owned by the Government, unless certain conditions are satisfied. This discretion could create the possibility of favoritism toward selected parties. Accordingly, S. 789 provides that the first Government patent licenses of inventions developed under research and development contracts must be nonexclusive in character.

If the Government obtains a patent, it should be made available to all through nonexclusive licenses unless national security prevents this from being done. The only exception to this would be where there has been a failure to develop the subject matter of the patent for commercial utilization. In this event, the Government might then be authorized to grant an exclusive license. If so, a finding of the need therefor should be made. Provision for this contingency is contained in my bill.

There is included in S. 789 provision for inventive contribution awards to be made by the Government to those who, through inventive genius, have enriched our technology. This is only justifiable recognition of contributions made for the benefit of the Government and will serve to stimulate other worthwhile contributions for improvement of our economy.

I believe that the basic provisions of S. 789 and your bill, Mr. Chairman, are highly compatible. This appears to be the case, also, with respect to the statement on Government patent policy promulgated by the late President Kennedy in October 1963 and endorsed by President Johnson. Differences which exist are more in form than substance. Either of these bills as well as the President's statement can serve as a reasonable basis for disposition of rights under Government research and development contracts.

These bills and the President's statement reject any premise that a reasonable and equitable solution to this complex subject can be predicated upon a virtually inflexible policy of retaining for the Federal Government proprietary rights to inventions developed under Government research and development contracts. This is so especially when such a policy is based almost exclusively upon the financial contribution of the Government regardless of amount and circumstances under which it is made.

In my view, this convenient solution ignores sound judgment and fairness. It subordinates other equally compelling factors involved in the performance of research and development contracts. These factors would include consideration of the financial contribution, technical competence, background expertise, and physical facilities of a contractor used in performance of a contract.

It is only through a flexible policy which gives due recognition to these factors and applies then to the facts of a specific contract that proper disposition of rights can be made and the best interest of the public service.

I am convinced that a flexible policy, and that is the important part of your bill, sir, as it is with mine, will serve to increase incentive to participate in Government research and development contracts. One cannot be certain that under an inflexible, restrictive patent policy, all qualified companies will desire to participate in research and development contracts. If this is the case, then the Government is not getting best value for its investment. A flexible policy should better insure greater participation in research and development contracts, improve research as well as accelerate commercial utilization of those inventions capable of being adapted to public use.

Arguments have been advanced in the past to show that proprietary rights are not essential to commercial utilization of an invention. It is certainly possible to cite instances where product development has not depended upon proprietary rights protection. However, such protection would appear essential to insure full commercial utilization where additional development of an invention will be required; where financial investment appears necessary; where the subject matter is complicated, or where a market will have to be developed. As I have expressed, Mr. Chairman, S. 789 is not the only solution to this complex subject; however, I believe it is a reasonable approach. It shares with your bill and the President's statement on Government patent policy a premise based upon the need for flexibility in the negotiation of rights under research and development contracts. I think logic and equity alone prove the value of a flexible approach to this subject. The correctness of this approach is also shown through the long, detailed study and consideration which preceded issuance of the President's statement on Government patent policy. This state

ment explicitly recognizes the need for flexibility in negotiation of contracts for research and development which will "get the job done at the lowest cost to the taxpayers" and "promote full utilization of resulting technology."

The absence of a statutory Government patent policy, having the force of law, has resulted too often in confusion and inconsistency within the Government and among private segments of our society. This condition should not be permitted to continue. I hope legislation will be passed providing flexible standards for disposition of rights under Government research and development contracts. Equity and sound judgment require that this be done.

I thank you, Mr. Chairman and Mr. Hart, for this opportunity to present my statement on this subject. I say, very frankly, that, I am not an expert on patents. However, one need not be an expert to know that if we are to continue to invent, if we are to continue to stimulate inventive genius on the part of our citizens, if we are to continue to move ahead in the manner of Mr. Edison and Mr. Bell, perhaps this Nation's two greatest examples of inventive genius, we have got to give a certain stimulus to invention. Out of this, the public will derive results from this genius.

We know that the Government today provides substantial sums, I think up to $15 billion all told for research and development. I know $6 billion is expended in Defense for research; certainly we expect the Government in these difficult times to continue these expenditures.

But to derive best benefit for all under these expenditures, what we must have is flexibility in contracting. It is in this way that we can be assured of moving ahead in a Government way, in a private way, and in a commercial way for the future.

I thank you very much.

Senator MCCLELLAN. Thank you, Senator.

There is an issue here before the committee now arising out of the different bills and their provisions. I want to determine and explore, if we can, of course, first explore it and then determine, whether there will be, can be or likely be, great abuses if the right to grant a waiver is authorized, and that discretion placed in the Administrator.

In other words, if we give that authority, and there is testimony indicating there are some circumstances where it should be done and that it will be in the interest of the Government to do it, and the argument against it is, of course, that that permits great abuses and shows favoritism to the company being contracted with, and the company gets a great advantage by reason of expenditures of taxpayer's money. I would like to have you elaborate on that a little, and then I would like to ask could not and cannot and will not the opportunity for substantially committing the same abuses be present if the Government takes title and then has authority to give exclusive licenses. I can't see how there would be very much difference in the likelihood of abuse in granting a waiver where the facts may justify it in the beginning or in the Government. taking title and then vesting the Administrator with the discretion to issue an exclusive license to whomever he may choose. I would appreciate your comments on that. Senator SALTONSTALL. Well, I think, Mr. Chairman, that what we want to do is to have the Government retain primary rights where