are risks inherent in innovation and that one way to promote innovation is to reduce these risks. The purpose of the patent system is to provide an incentive through which the risk inherent in innovation can be reduced. There are similar incentives in the form of taxes and direct subsidies.

Incentives play an important part in determining rights to inventions resulting from federally financed research and development. It may be more appropriate for the contractor who has extensive private know-how to put the invention to work commercially than it is for the Government to assume that risk, either by developing the patent or by exclusively licensing it. Or, in the case of smaller companies, it may be desirable to protect the previous patent position of a small contractor when his existence may depend on the strength of his patent position, and thereby give him an added incentive to compete in the commercial market.

In our view, the question whether Government should take principal or exclusive rights to inventions made under Federal research and development contracts depends on a variety of factors and equities. We believe that in recognizing the variety and complexity of the problem, a policy which provides flexibility for judgment to be exercised will achieve the best results in apportioning rights between society and individuals, taking into account incentives. Of the bills before this committee, S. 1809, in following the President's policy, would best provide for this kind of flexibility.

In summary, therefore, the Department of Commerce urges the enactment of S. 1809 as revised in accordance with the foregoing comments. There is enclosed a memorandum from the Patent Office directed to certain technical aspects of the wording of the different bills with particular attention to those provisions relating to functions to be performed by the Patent Office.

The Bureau of the Budget advises that there would be no objection to the submission of this report from the standpoint of the administration's program. Sincerely,

ROBERT E. GILES.

PATENT OFFICE COMMENTS ON S. 789, S. 1809, S. 1899

There follow the views of the Patent Office with respect to the above identified bills which have for their common purpose the establishment by statute of a uniform policy throughout the Federal Government with respect to the property interests of the Federal Government in inventions conceived in the carrying out of federally financed contracts and more particularly contracts for research and development.

The Patent Office is not the owner or assignee of any property interest in inventions arising either from contracts or from work of its employees. Section 4 of title 35 of the United States Code prohibits application for patent by an employee of the Office during his term of employment or for a period of 1 year after such term. The comments of the Patent Office are, therefore, of a technical nature concerned in the most part with those instances where the Commissioner of Patents would be involved in the proposed programs outlined by the various bills, and are not directed to the management or administrative aspects of the patents once issued by the Patent Office.

S. 789

S. 789 includes (sec. 3 (a) and (b) and elsewhere) an irrevocable, nonexclusive, nontransferable, royalty-free license within the term "proprietary interest in an invention." Such a license is merely a contractual right to make, use, or sell the claimed invention without being subject to a suit for infringement by the patentee and is not properly characterized as a "proprietary interest." See further section 1 of "Ellis Patent Licenses," third edition. A. W. Deller, Baker, Voorhis & Co., Inc., 1958.

Section 6 declares the right of the contractor in an invention to be voidable at the option of the concerned Federal agency under certain listed circumstances. The effect of this action is not clear. The section refers to rights in an invention although the timing of the action seems clearly to limit the action to an issued patent. If the purpose of this action is to place the claimed invention in the public domain or to place the Federal Government in the position of the inventor or patentee it would seem helpful to spell out this result. Considera

tion might also be given to a more generalized statement since mere assignment by the contractor of his rights might defeat the entire purpose of this section. Section 12 authorizes the head of an agency involved, presumably the contracting agency, who takes the principal rights to an invention, to make application to the Commissioner of Patents for the issuance of a patent therefore to the head of the agency on behalf of the United States. If this language is construed to mean the right to apply for the issue of the patent applied for in the first instance by the inventor as required by the patent statutes (see 35 U.S.C. 111), it preserves the desirable aims of these statutes that the inventor apply for the patent. This rule of having the inventor make the original application should be maintained. To the extent possible the Patent Office should be given firsthand the circumstances attendant upon the discovery of the invention claimed. The head of the agency should file the original application for patent, instead of the inventor, only in those circumstances set forth in 35 U.S.C. 118 which appear to protect the agency head when the inventor is not available or is unwilling to execute the application (see further detail on this difficulty in the comment on other bills).

S. 1809

This bill defines "Government agency" so broadly (sec. 2) that an "office," such as the Patent Office appears to be such an agency with the result that the head of this Office as an "agency head" might be required to implement the bill separately from the implementation which would be provided by the Secretary of Commerce for the Department of Commerce.

It appears that because of a typographical error, the identification “(c)” in line 13, page 8, should read "(b)”.

Section 7 creates uncertainty regarding filing an application for patent. The inventor, as an initial matter, is the person to file an application. He speaks with firsthand knowledge of what he claims to have invented. Under existing law, others are allowed to file the application only when the inventor is dead, incapacitated, unable to be located, or refuses to execute the application (see 35 U.S.C. 117 and 118). We believe the agency head should be allowed to file on the same basis only. If the inventor refuses to execute the application, then the agency head may show that he has "sufficient proprietary interest in the matter" to justify his making application for patent. Similarly, the word "contractor" at line 22, page 13, should be changed to "inventor" with preferably the addition of the phrase, "or other person pursuant to 35 U.S.C. 117 and 118." Section 8 by directing the agency head to make "application * * * for the issue of a patent therefor to such agency head * * *" again creates uncertainty and runs into the difficulties described in the preceding paragraph. Language such as "directs (or requests) the Commissioner of Patents to issue the patent therefor, etc." would clarify this point and achieve the desired results.

S. 1899

S. 1899, by section 3(c) introduces the uncertainty attendant upon the application for a patent by a person other than the inventor as described above in connection with the other two bills. The use of the word "application" appears to create the difficulty. The word "notice" or "request" instead of the phrase "application made" would alleviate this difficulty.

The same paragraph 3(c) would relieve the Administrator from the requirement of paying the issue fee and other fees attendant upon the issue of a patent. There is presently pending before the Senate Judiciary Committee, proposed legislation to increase certain statutory fees paid to the Patent Office in the prosecution of patent applications, and the House of Representatives has passed a measure for this purpose (H.R. 4185). This latter act, and the other bills for this purpose under consideration by the Senate (S. 729, S. 1228, and S. 730, a companion bill to H.R. 4185) all contain a provision making the fees charged in the prosecution of a patent application applicable to Federal agencies. We believe this is an important provision of this legislation. No objection has been taken to this provision during the hearings in either House on these proposals. The report of the Committee on the Judiciary of the House of Representatives (Rept. 113, 89th Cong., 1st sess.. p. 8) on H.R. 4185 sets forth in considerable detail its views for the inclusion of such a provision. A record is provided of the particular activity of the Federal agencies and the extent of the work. The Patent Office is required to pay about $4 million a year to the Government Printing Office which is another Federal agency. The Federal Government, because

of its extensive research and development work, makes many applications for patents to the Office. The 1964 figure for such applications filed was 2,194. These applications are as complex and demanding on the Office as those filed by other applicants. Finally, the imposition of fees has a disciplinary aspect on demands on the Office which is not present when services are for the asking. We urge against any provision relieving Federal agencies from fees charged other users of the services of the Patent Office (see further 5 U.S.C. 140 establishing as an objective that services rendered to special beneficiaries by Federal agencies should be self-sustaining to the fullest extent possible).

Section 6 again by the use of the word "application" creates uncertainty concerning the filing of an application for a patent. See comments above.

Section 9 (e) and (d) provide for the Board of Patent Interferences of the U.S. Patent Office to resolve differences between the Administrator and the inventor, contractor, or other applicant or assignee claiming property rights in the claimed invention.

Members of the Board are graduate lawyers but their day-to-day work is limited to the determination of priority of invention between competing applicants or applicants and patentees. This is quite a different matter from resolving the question propounded by section 9 which is whether the contractor (or inventor) is entitled to the property rights in an invention as against the United States. This latter question turns not on priority of invention but on the relationship of the invention to the contract, to the work assigned under the contract, to the scope of employment of the inventor and related matters. We suggest that appeal from the Administrator's decision to the Board, which is not particularly experienced in these matters, is neither fair to the Administrator, the contractor, nor the Board itself.

It is also suggested that an administrative appeal might more properly be to a person or body privy to the goals of the particular program of the Administrator. Appeal to a body completely isolated from this knowledge, except as presented in a particular case, would create an atmosphere of the hypothetical case when adjudicated by such a body. This situation is, of course, to be distinguished from adjudication by a judicial body which practices its own disciplines built up from experiences. We suggest as an alternative, therefore, that appeal from the decision of the Administrator be allowed directly to the courts under provisions of section 10 of the Administrative Procedure Act, or otherwise, instead of an appeal to the Board of Interference Examiners.

Finally, the reference to "public policy” at page 22, line 13, appears vague in the absence of a conventional provision in the bill so identified.

B-1406660.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., July 2, 1965.

Hon. JAMES O. EASTLAND,

Chairman, Committee on the Judiciary,
U.S. Senate.

DEAR MR. CHAIRMAN: By letters of May 6, 1965, you requested our views on S. 789,, S. 1809, and S. 1899, bills directed toward the establishment of a national policy with respect to the acquisition, disposition, and use of proprietary rights in inventions made, and in scientific and technical information obtained, through the expenditure of public funds.

The question of appropriate Government policy concerning the subject matter of these bills has been debated in the Congress and the executive branch, and throughout the private sector, for many years. The central issue emerging from this extensive consideration concerns determination as to where the public interest lies with respect to private versus public rights in inventions and in scientific and technical information developed at taxpayers' expense. A number of variations in the handling of rights in inventions and data under Governmentfinanced programs have been employed in the past, depending upon specific legislative requirements governing particular agencies and upon policies and practices established administratively. The basic differences reduce themselves to the Government taking title in resulting inventions and patents granted thereon as opposed to the contractor receiving the title and patent rights with the Government retaining a royalty-free license to use the inventions. The bills mentioned, although varied in approach, seek to strike that balance which is proper for promotion of the Government and public interest while at the same time pro

tecting the legitimate interests of the contractors who deal with their Government.

We have no recommendation as to which of the three bills constitutes the best approach to the problem, but we do urge, in light of the widely divergent current views and practices in this field, that there is a pressing need for an overall congressionally declared policy in the public interest.

While each of the bills prescribes a national policy with respect to the acquisition, disposition, and use of proprietary rights in inventions made, and in scientific and technical information obtained, through the expenditure of public funds. none of them reaches the situation where the Government indirectly finances a substantial portion of a contractor's research and development program through payment under negotiated contracts of overhead costs which include costs for research and development unrelated to the contract purpose. Generally, in accordance with current policies in the defense area, the Government does not acquire any rights to inventions or data financed in such manner. In view of the position taken by the Department of Defense, your committee may wish to consider (1) the extent to which the Government should support, through acceptance as costs allocable to Government-negotiated contracts, contractor independent research and development programs, and (2) the desirability of defining within the national policy to be established the Government's rights with respect to inventions and data resulting from such Government supported research and development programs.

S. 789

1. On page 2, lines 17 through 24 define a contract covered by the bill and limits the coverage to those contracts "*** where a purpose of the contract is the conduct of experimental, developmental, or research word." We believe this coverage may be too restrictive inasmuch as negotiated contracts for “production" frequently involve development, improvement, or modification work which also may lead to inventions. The Congress may wish to revise the definition of a contract to include any contract other than a contract awarded on the basis of formal advertising.

2. In connection with the use of the word "made" with references to inventions and inventive contributions on page 3, line 22, we note that a definition of that word appears in a "Statement of Government Patent Policy" by the late President John F. Kennedy, issued October 10, 1963. We suggest that a similar definition be inserted on page 3 in language somewhat as follows: "The term 'made,' when used in relation to any invention, means the conception or first actual reduction to practice of such invention in the course of or under the contract." This covers the situation where conception occurred prior to the contract but where the first actual reduction to practice occurred under the contract. 3. Page 3, lines 18 through 20 contain the limitation "*** which has as one of its principal purposes the performance of experimental, developmental, or research work, * * *" (see comment 1 above.) This limitation is even more restrictive than that contained in the "Definitions" section, because the limitation relates to "*** one of its principal purposes The committee may wish to eliminate the limitation for the reasons stated in comment 1, and also because the contract may fit the criteria (1) through (5) on pages 4 and 5 although experimental, developmental, or research work may not be its principal purpose. 4. On page 12, lines 22 and 23 include the phrase "* * * within three years of the taking of ownership by the Government, * as the time limitation after which an exclusive license could be granted to the contractor in certain circumstances. Since the date of "taking of ownership" may not always be readily ascertainable, the Congress may wish to consider changing the limitation to "within three years of the issuance of a patent."

*

5. On page 13, lines 10 and 11 include the phrase "** ** and upon written request therefor, * * *" in discussing the circumstances under which a contractor's title rights would be voided on an invention the title to which had been waived by the Government. The Congress may wish to eliminate this phrase so as to make it mandatory that the contractor demonstrate commercial use, licensing. etc., rather than require a request by the Government for such demonstration. 6. On page 13, line 23, and page 14, line 1, the words "* ** during the course of or at the conclusion of a contract * *" in describing the time within which the Government may initiate a declaration of taking of rights to inventions in certain circumstances. The Congress may wish to eliminate these words so as to allow the Government to initiate the taking at any time since the "new, unusual,

and compelling factors related directly to national security, public health, or welfare" may become known subsequent to the conclusion of the contract.

7. Subsection 12(b) on page 23 provides for licensing of inventions where the patent title is held by the Government. A nonexclusive license is to be granted to any United States national who applies if the license is for a purpose set forth in subsection 3(b) (governmental purposes) and to grant an exclusive license if such nonexclusive license fails to result in the practice of an invention. The Congress may wish to eliminate the restriction of licenses for subsection 3(b) purposes so as to cover any purpose including commercial. The Congress may also wish to state whether the licenses are to be granted upon payment of royalties or other fees or royalty free. Further, the Congress may wish to consider imposing a minimum time limitation in which nonexclusive licenses are granted before an exclusive license may be granted.

8. It appears from the provisions of subsection 11 (b) (3) with regard to awards for inventive contributions excluding from consideration the amount of salary received for services rendered as an officer or employee of the Government that such exclusion is also intended to apply with respect to the provisions of subsection 11(h). If so, the intent of subsection 11 (h) would be more clearly stated by inserting the words "(other than salary received for services rendered as an officer or employee of the Government)" after the word "law" at line 8, page 22, of the bill.

S. 1809

1. The definition of an invention on page 2, lines 20 and 21, includes the words **** which appears to be reasonably patentable under title 35, United States Code." The Congress may wish to eliminate these words and substitute "whether or not patentable", since a contractor may not consider inventions reasonably patentable.

2(c). In defining a contract on page 2, lines 8 through 15, the words, "where a purpose of the contract is the conduct of experimental, development, or research work" are used, we believe this coverage may be too restrictive, inasmuch as negotiated contracts for "production" frequently involve development, improvement, or modification work which also may lead to inventions. The Congress may wish to revise the definition of a contract to include any contract other than a contract awarded on the basis of formal advertising.

3. Section 3(a) on page 3 includes the words "*** where a purpose is the conduct by a person of experimental, development, or research work, ***" The Congress may wish to eliminate the words "by a person," or substitute therefor the words "by a contractor," or provide a definition of the word "person" so as to avoid any confusion. The Congress may also wish to eliminate the words "* * * where a purpose is the conduct *** of experimental, development, or research work, ***" for the reasons stated in comment 2 above.

4. Paragraph (5) of subsection 3(b) on pages 4 and 5 provides for licensing third parties where the contractor has retained title to an invention, and there is a determination (1) that there has not been substantial effort to bring the invention to the point of practical application and (2) the public interest would be served thereby. The Congress may wish to establish a time limitation within which the contractor must bring the invention to practical application such as "within three years after issuance of the patent." This would permit the contractor sufficient time to develop the invention and to bring it to the point of practical application so as to preclude excuse for his failure to do so by reason of inadequate time.

5. The reference in subsection 4 (c) to subsections (a) and (c) at line 13, page 8 of the bill, are apparently intended as references to subsections (a) and (b).

S. 1899

1. Throughout the bill the words "scientific and technical information" are used. The Congress may wish to provide a specific definition of these words so as to leave no doubt as to what is meant by the words.

2. On page 12, lines 17 and 18, reference is made to "*** proprietary rights to inventions, and technical information ***." The Congress may wish to insert the words "scientific and" between the words "and" and "technical" since scientific information is included throughout the bill and to leave it out here could be confusing.

3. On page 13, line 17, reference is made to "technical information". The Congress may wish to precede these words with the words "scientific and".