Atomic Energy Act of 1954, as amended. The administration of any atomic energy inventions and atomic energy technical information to be exchanged with a foreign government would appear to be in the Administrator, pursuant to sections 6, 7, and 8 of the proposed bill, without regard to those provisions of the Atomic Energy Act. The authority of AEC for the consummation of international agreements in the atomic energy field should not be fettered by separate agreements on patents and technical information negotiated by an Administrator not responsible for the promotion of peaceful uses of the atom. In fact, one of the principle aspects of agreements for cooperation is the exchange of technical information and the acquisition of rights in resultant inventions so that there could be serious conflicts between the purposes and desires of the Atomic Energy Commission in the administration of international agreements for cooperation. and the administration by the Administrator of inventions and scientific and technical information in the atomic energy field. We urge that any authority of the Administrator in the foreign field should be subject to the paramount jurisdiction accorded the Government agency which has statutory authority and responsibility for the conduct of the international program.

As noted hereinbefore, while the proposed bill repeals section 152 of the Atomic Energy Act of 1954, it does not repeal the authority of the Commission to grant licenses under section 156 of the Atomic Energy Act. However, under section 6(a) (4) of the subject bill, the custody and control of all patents is transferred to the Administrator although the authority in the Commission under section 156 of the Atomic Energy Act is not to be affected or impaired pursuant to seetion 14(d). Further, the proposed bill, while it does not affect the authority of the Commission to acquire, purchase, lease, and hold real and personal property, including patents, as agent on behalf of the United States, and to sell, lease, grant, and dispose of such property, as provided in section 161(g) of the 1954 Atomic Energy Act, the transfer of custody under section 6(a) (4) of the proposed bill would, at least, place in jeopardy the Commission's authority under said section 161 (g) of the Atomic Energy Act to acquire ownership or license rights in patents or to grant licenses under patents.

Section 12 of the proposed bill establishes an award procedure under the Federal Inventions Administration. The Commission now has authority to make general awards under the second sentence of section 157 of the 1954 Atomic Energy Act, and established the Fermi and E. O. Lawrence general awards. The Commission also has the authority to conduct hearings, grant awards, make just compensation, and determine reasonable royalties as to certain inventions in the field of atomic energy pursuant to the first sentence of section 157 of the 1954 Atomic Energy Act. The award provisions of the proposed bill do not repeal the Commission's authority so that parallel award procedures would exist. It is to be noted that under section 12(d) (1) of the proposed bill, the acceptance of the award requires the recipient to surrender all claims that such person may have to receive compensation for use of his invention, so that it would thus appear that if a recipient accepted an award under this bill, no subsequent claim could be instituted under the Atomic Energy Act. However, in the reverse situation, unless the AEC voluntarily secured release of all claims, which it has in the past, recipients of just compensation, awards, etc., could still seek an award under section 12 of the proposed bill.

The ward provisions of section 12 of the proposed bill do not specifically exclude the applicability of the Administrative Procedure Act to awards so that there may be a question as to whether the Administrative Procedure Act applies to the awards proceedings under section 12 of the proposed bill. If it is intended that the award proceedings be within the provisions of the Administrative Procedure Act, and subject to Court review, it might be desirable to provide for appeals to specified courts, as well as include a period of limitation on any initial or appellate action, such as is now provided in 28 United States Code 2401 and 2501 as respects claims against the Government in the courts, and claims under the Atomic Energy Act, section 157 (d).

Hon. JAMES O. EASTLAND,

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET, Washington, D.C., May 28, 1965.

Chairman, Committee on the Judiciary, U.S. Senate,
Washington, D.C.

DEAR MR. CHAIRMAN: This is in reply to your request for reports on S. 789. S. 1809, and S. 1899, bills which would establish a national policy with respect to proprietary rights in inventions made through the expenditure of public funds.

Though each of the above bills proposes a national policy for the disposition of rights to inventions made in the course of federally financed research and development, they differ materially in their basic provisions. Some of the differences involve the proprietary interests of the Government in inventions and others relate to the procedures proposed for the administration of the legislative provisions.

Among the administrative differences, for example, are provisions in both S. 789 and S. 1899 that would authorize the issuance of rules and regulations by an agency in the executive branch for the guidance of all executive agencies, but S. 1809 would leave the responsibility for implementing its provisions to each of the agencies affected. Also S. 789 and S. 1899 would establish a monetary awards system for inventive contributions to the Government and would set forth conditions and procedures under which such awards would be authorized; S. 1809 would not authorize awards.

The right of administrative and judicial review of executive agency decisions with respect to ownedrship of or interest in inventions has been included in the provisions of S. 789 and S. 1809, but not in S. 1899. The latter bill, however, would establish a Federal Inventions Administration to collect, evaluate, and disseminate scientific and technological information and to conduct economic research to ascertain the effectiveness of the proposed agency in promoting the growth of trade and commerce of the United States and the stimulation of competition among private enterprises. Neither S. 789 nor S. 1809 has any provisions along these lines.

These and other administrative provisions proposed in the bills, though significant for an effective Federal inventions program, do not appear to involve issues where opposing views have been expressed and are strongly held. We are confident that the executive agencies can reach agreement with respect to these administrative provisions; however, we have not become sufficiently informed of agency views and of the relative advantages and disadvantages of the various administrative proposals to form an opinion with respect to their individual merits at this time.

We are more concerned about these provisions of the subject bills which relate to the proprietary interests of the Government in inventions growing out of federally financed research and development. At present, the executive agencies are guided by a memorandum and statement of Government patent policy issued by President Kennedy on October 10, 1963. Developed within the framework of present legislative authority, this policy was issued to achieve greater consistency in agency practices with respect to inventions and discoveries while recognizing that "it is not feasible to have complete uniformity of practice throughout the Government in view of the differing missions and statutory responsibilities of the several departments and agencies engaged in research and development."

That statement of policy contains criteria under which Government agencies should acquire the principal rights to inventions; and it also identified circumstances where the public interest would be served by according exclusive commercial rights to the contractor. In addition, the statement called for the establishment of an advisory panel under the Federal Council for Science and Technology with responsibilities which include encouraging the acquisition of

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data by Government agencies on the disposition of patent rights to inventions resulting from federally financed research and development and on the use and practice of such inventions to serve as a basis for policy review and development. This administration fully subscribes to the statement of Government patent policy.

With respect to the subject bills, S. 1809 contains provisions which closely parallel those of the President's patent policy whereby the principal rights to inventions resulting from federally financed research and development may be acquired by the Government under certain circumstances or may be left with the contractor where the public interest would be served. Provisions of S. 1899, however, are contrary to the administration's statement of patent policy in that they would compel the Government to acquire the exclusive rights to all such inventions.

S. 1809 is very similar to S. 1290 of the 88th Congress about which we wrote to you on December 5, 1963. In that letter we stated that the administration's statement of Government patent policy "reflects a significant step in the direction proposed in S. 1290 and is entirely consistent in objective." We also expressed the view that agencies should be permitted to implement the principles set forth in the statement and "to function under the new policy for a period of time within the framework of existing legislation." The Patent Advisory Panel, established under the Federal Council for Science and Technology, has been at work less than 18 months. In this period, however, it has substantially increased interagency cooperation in patent matters and the consistency of agency interpretations. Significant progress has been made toward the collection of data with respect to the disposition of inventions resulting from agency research and development contracts.

For the reasons outlined above, if legislation is to be enacted in this complex area we would not be opposed to a bill which included provisions generally along the lines contained in S. 1809. We would strongly favor this approach over that reflected in the other bills under consideration and would also favor it over program-by-program legislation.

DEAR MR. CHAIRMAN: This is in reply to your request for views of the Department of Commerce with respect to S. 789, S. 1809, and S. 1899, bills for the common purpose of establishing a uniform policy to govern the disposition of property rights in inventions made in the performance of Federal research and development contracts and grants.

Each of the above bills differ materially in their basic provisions. S. 1809 contains provisions for disposing of property rights in inventions resulting from federally financed research and development which closely parallel those of the patent policy issued on October 10, 1963, by President Kennedy. S. 1899, on the other hand, is contrary to this statement and, in effect, would favor a policy of the Government's acquiring exclusive rights to all such inventions. S. 789 appears to favor the Government's taking a license to use all such inventions.

The Department of Commerce believes that consideration of the Government's patent policy through appropriate legislation is desirable in addition to sound executive action. Generally, we favor the enactment of S. 1809 rather than S. 1899 or S. 789.

The President's memorandum and statement of Government patent policy issued in 1963 reflects the experience and views of 20 Government agencies. The policy was carefully drafted after 18 months of interagency discussion and consultation. It was agreed to by the Department of Commerce and all the other agencies as an important first step to establishing a Government-wide patent policy. It recognized that there were cases in which the rights to the inventions made under federally financed research and development contracts should properly be placed in the Government and conversely that there were appropriate

cases where the rights should remain with the contractor. It rejected an absolute view of either the so-called title or so-called license approach. We believe that S. 1809 best reflects this balanced and flexible approach to allocating property rights in inventions made under publicly financed contracts.

A flexible policy under specific guidelines will permit administrative discretion in balancing the equities at the time of the contract. When a decision cannot be made at that time it would defer the determination until after an invention is disclosed. Thus the policy set forth in S. 1809 would require the Government to take title in contracts involving the public health, welfare or safety or when the contractor had no well-established nongovernmental commercial position. But it would also permit the contractor to retain the patent rights when the contract is in a field in which he has a well-established nongovernmental technical and commercial position. We think this is a desirable incentive to call forth private resources and competence from the contractor's nongovernmental commercial position to accomplish the purposes of the contract.

S. 1899 would not permit an equitable determination of this kind to be made at the time of the contract, and could result in increasing the cost of Government research contracts.

Concerning the administrative differences in the bills, both S. 789 and S. 1899 would authorize a single agency in the executive branch to issue rules and regulations for the guidance of all executive agencies. S. 1809 would leave the responsibility to each agency affected.

We believe the implementation of any legislation enacted could best be carried out by the agency heads, under direction of the President. It would be preferable, therefore, to place the responsibility in the President and the agency heads, rather than in a separate agency or in the agency heads alone. More particular comments on each bill follows:

S. 1809

Section 4 of S. 1809 would establish, as one of the primary guiding principles, that the United States at the time of contracting would declare its right to the title in inventions conceived during performance of the following classes of contracts: contracts (1) to create, develop or improve products, processes, or methods which are intended for commercial use by the general public, or which will be required for such use by governmental regulations; or (2) to explore fields directly concerned with the public health; or (3) in the field of science and technology where there has been little significant experience outside of work funded by the Government, or where the Government has been the sole, principal, or prime developer of the field, and the acquisition of exclusive rights at the time of contracting might confer on the contractor a preferred or dominant position; or (4) for the services of the contractor to operate a Government-owned research or productive facility, or for coordinating and directing the work of others.

S. 1809 would declare that in other instances the contracts would provide for a license to the Government for practice of the invention throughout the world by or on behalf of the United States or by a foreign government under agreements with the United States, for comprehensive disclosure of inventions made in the course of the performance of the contract, for licensing third parties by the patentee in appropriate cases when the public interest would be served, and for voiding the contractor's interest in the invention when there has been failure to submit a proper disclosure.

If the contracting agency head believes that the public interest would suffer as a result of the contractor's acquiring the principal or exclusive rights under contracts which do not fall under section 4, the agency head may acquire such rights to the invention after disclosure of the invention. While the provision for such acquisition in the contract does appear vague or indefinite, it might be remedied by using the guidelines of section 4. Normally the rights of the parties should be determined at the time the contract is negotiated. However, there would be situations, as indicated above, when no determination of rights could be made intelligently without knowing the nature of the invention to be disclosed. It seems to us that these provisions adequately protect the public interest and provide the heads of agencies contracting for research and development with a basis for the exercise of that scope of judgment to enable them to exercise their responsibilities.

It is clear that the functions described by this bill would be exercised in full public view. Semiannual reports to the Congress would spell out in detail the activities undertaken. Agency heads would thus have to demonstrate that reasonable judgment had been exercised in the decisions S. 1809 would require them to make in the public interest. In supporting this bill, however, we believe it would be desirable to amend it to authorize the President to coordinate the application of the bill's principle throughout Government by issuing appropriate policies and regulations.

S. 1899

S. 1899 does not, in our opinion, provide sufficient scope for the decisions of agency heads in allocating patent rights. It does not really attempt to provide for the exercise of judgment, under equitable guidelines, but resolves the matter, in effect, by requiring Federal contracting agencies to take the principal property interest in inventions. If a right less than the entire right is to be taken, certain difficult determinations would have to be made, including a clearance from the Attorney General to the effect that the step would not facilitate *** the concentration of economic power with respect to any part of the trade or commerce of the United States. [Section 10(a) (2), emphasis supplied.]

The establishment of an agency to coordinate the activities of the executive branch, the Government Printing Office, and the Library of Congress poses serious difficulties. Presently, the executive branch is guided by Presidential policy. Under S. 1899, the Administrator, by regulations consonant with the act, would direct Cabinet members, the heads of the Government Printing Office, the Library of Congress, and the Executive Office of the President concerning the discharge of their responsibilities in this area. There can be honest differences in the interpretation of a law as complicated as that proposed by S. 1899 and the organizational technique of this bill is not set up to handle them. The centralization of responsibility in the Administrator diminishes the control which we believe is more properly in the Chief Executive. We strongly urge that this responsibility be placed in the President.

A further organizational difficulty is posed by the express right of chairmen of congressional committees with interest in the matter to direct the Administrator to conduct special studies, make such special reports, and furnish information on the subject matter of the bill (sec. 5(j)). This described right of direction goes beyond the "oversight" exercised by the Congress and is inconsistent with the generally accepted practice whereby the Congress assigns responsibility to the executive branch for the performance of a function, looks to that branch for the execution of the function, and through its investigatory and oversight powers evaluates the performance.

Section 3 of S. 1899 would resolve the issue of property rights to inventions made by Federal employees. This issue is presently governed by Executive Order 10096, of January 23, 1950. The standards of section 3 of the bill providing for an exclusive right in the Federal Government to such an invention (3(a)(1)) appear to be much too rigid as they would require a taking of the absolute right without regard to the nature of the Federal contribution. Even a very minor use of facilities, equipment, or materials, or references to a federally sponsored publication would require the Government to take exclusive rights. We do not favor the absolute nature of such a rule.

S. 789

Although the general aims of S. 789 appear to us to be set forth in a manner which is more workable than the program proposed by S. 1899, we think S. 1809 is more desirable. We prefer the latter bill because (1) the standards imposed by S. 1809 for the taking by the Government of more than a license are more precise and workable (compare sec. 3 of S. 789 and sec. 4 of S. 1809); (2) the issues for the successful administration of the bill are more comprehensively anticipated (see sec. 3 of S. 1809); and (3) S. 1809 omits the provision requiring any award under the incentive award program to be referred to congressional committees for what amounts to concurrence (sec. 11 of S. 789).

COMMENT OF INCENTIVES

A sound patent policy should be designed to provide the best and most equitable incentives for bringing new products or processes made under the patent to the market. It is desirable that public policy recognize that there