4. Subsection 9(d) provides for assignment of title to patents to the Administrator under certain circumstances and provides a limitation of 5 years after the date of issuance of such patent within which the Administrator must request such an assignment. The Congress may wish to eliminate the time limitation of 5 years since the Administrator may not discover that the circumstances warranted assignment of the patent title before the 5 years have elapsed and since patents are usually granted for a period of 17 years.

Also, in this connection, this subsection does not provide for sanctions on the patent owner, other than the assignment of his patent to the Administrator. in the event of his providing no "statement" or an erroneous "statement" with his patent application. The Congress may wish to consider the requirement that royalties charged for the use of such patent be refunded (at least those royalties charged directly or indirectly to the Government) because such royalties could be substantial by the time the Administrator made his discovery.

5. Subsection 11(a), on page 25, contains the words "*** which requires or contemplates the performance of any scientific or technical research, development, or exploration activity ***" in referring to contracts which are to contain provisions for the protection of Government rights to inventions. We believe this language may be too restrictive inasmuch as negotiated contracts for "production" frequently involve development, improvement, or modification work which also may lead to inventions.

6. On page 29, line 18 and following "provide limitations on awards for inventive contributions in any amount exceeding $100,000." The Congress may wish to specify more clearly that awards in excess of this amount are not to be made "in the event any appropriate committee of the Congress notifies the Administrator of its disapproval prior to the making of such award." The present language would apparently allow such an award 30 days after the Administrator's report notwithstanding a committee's indication of disapproval.

7. The word "an" in subsection 8(a)(3) at line 20, page 15, should be "any" and reference in subsection 10(b) (2) to paragraph (2) at line 20, page 23, is apparently intended as a reference to paragraph (1).

8. Subsection 13 (a) (1) provides for transfer of the Government Patents Board established by Executive Order No. 10096, dated January 23, 1950. The Government Patents Board was abolished by Executive Order No. 10930 of March 24, 1961; 26 F.R. 2583, 3 C.F.R. (1959-1963) Comp., p. 456.

9. Subsection 14(1) at page 34 duplicates subsection 14(i) on the same page. 10. Reference to 72 Stat. 419 in subsection 14(n) at page 35 should be to 76 Stat. 423.

DEAR MR. CHAIRMAN: Reference is made to your request for the views of the Department of Defense on S. 1809, 89th Congress, a bill to establish a uniform national policy concerning property rights in inventions made through the expenditure of public funds, and for other purposes.

The bill establishes criteria for the division of rights between the Government and its contractors in inventions growing out of Government-sponsored research and development. It provides for detailed administrative procedures for the determination of invention rights, for judicial review of such determinations and a procedure for reporting to the Congress. Briefly, the Government would get the principal interest in inventions stemming from contracts designed to develop products for use by the general public, contracts for work directly concerning public health and safety and, contracts for work in a field of technology in which the Government has been the sole, principal, or prime developer and ownership of the inventions would put the contractor in a dominant position. On the other hand the contractor would retain the principal rights (subject to a royalty-free license to the Government) to inventions growing out of contracts

for the development of Government products where the work is in a field in which the contractor has an established commercial position and the development is that of building upon the existing technology of the contractor. Where the contract falls in either of the above two categories the division of rights would be settled at the time of contracting through the use of an appropriate contract clause. Where a particular contract is not within the above categories it falls into a third category where the determination of rights it not made until after the invention has been disclosed. In the second and third categories, however, the bill would leave the principal rights with the contractor unless the Government, pursuant to prescribed procedures, establishes that "there are special circumstances which indicate that the public interest would suffer as a result of the contractor acquiring the principal or exclusive rights." The bill provides for a hearing in accordance with the Administrative Procedure Act, and also provides for judicial review of determinations.

In general the Department of Defense supports S. 1809. More specifically the Department favors the enactment of that bill insofar as it conforms with the statement of Government patent policy issued by the President in a memorandum dated October 10, 1963. As you may know the objective of the President's statement was to achieve greater consistency among the patent practices of the various executive agencies in order to further the governmental and public interests in promoting the utilization of federally financed inventions. The statement achieved that objective by setting forth the minimum rights that Government agencies should acquire with regard to inventions made under their grants and contracts. The public interest is protected through Government acquisition of the principal rights to inventions in situations where the nature of the work to be undertaken or the Government's past investment in the field of work favors full public access to resulting inventions. On the other hand, the policy recognizes that the public interest might also be served by according exclusive commercial rights to the contractor in situations where the contractor has an established nongovernmental commercial position and where there is greater likelihood that the invention would be worked and put into civilian use than would be the case if the invention were made more freely available.

The Department of Defense has been operating under the policy set forth in the President's memorandum for approximately a year and a half. During that period the Department and the armed services have worked long and diligently to establish rules and regulations for carrying out the objectives of that policy. Through the various subcommittees of the Patent Advisory Panel of the Federal Council for Science and Technology, the Department's regulations have been reviewed and compared with corresponding regulations established by other executive agencies and have been found consistent with the President's policy. Since we are only now beginning to accumulate statistics as to the results of our implementing regulations, any definitive statement as to the overall effect of the President's policy would be premature. However, early returns give every indication that the Department's implementing regulations will work effectively, and given sufficient time to iron out relatively minor problems and gain operating experience we feel confident that the President's patent policy as implemented by our regulations will be fully effective in fostering the fullest exploitation of the inventions for the public benefit. Department of Defense has found sections 1(a)(3) and 1(b) of the President's patent policy difficult to implement especially in a manner which would provide clear guidance to contracting personnel. These provisions have been interpreted differently by many different people, hence, it has been necessary to issue supplementary interpretive memoranda in order to clarify their meaning and to give better guidance to our contracting officers. Time and operating experience alone will demonstrate whether we have achieved a truly successful implementation of the President's policy. These provisions with all the difficulties described above are carried into S. 1809 and deserve the careful attention of the subcommittee.

There are several provisions of the bill which would be a substantial departure from the policy in the President's memorandum. The first of these is in paragraph 4(c), page 8. Both the bill and the President's memorandum contemplate that the determination of rights cases fall in three categories: (1) those which arise from contracts in specified areas, such as public health, and consequently will be owned by the Government; (2) those which arise from contracts for work that builds upon the technology of contractors that have established commercial positions (4(b)) and consequently will be owned by the contractor; and (3) those which do not fall in either of these. As the first two categories depend upon the nature of the work or the business of the particular contractor, the mat

ter of division of rights to inventions is settled at the time of contracting. However, the second category is subject to the provision "unless he determines, after the invention has been identified, that there are special circumstances which indicate that the public interest would suffer as a result of the contractor retaining the principal or exclusive rights in such invention." This provision is inconsistent with the concept of fixing rights of the parties at the time of contracting. We propose that the above quoted language from section 4(b) be stricken and that the following be inserted after “3(b) (2)" on page 8, line 7, "unless he determines at the time of contracting that greater license rights are required in the public interest." This change will permit the agency head to acquire at the time of contracting greater rights than a nonexclusive license where he has determined that such rights are necessary for the conduct of the business of his agency. In addition, it is strongly recommended that the committee adopt the compulsory licensing procedure, sometimes referred to as “march-in” rights, set forth in sections 1(f) and 1(g) of the President's policy. While it is considered that the language proposed above could be construed to embrace these provisions of the President's policy, it is not certain that the "march-in" provisions would necessarily be included in contracts. Hence, it should be a legislative requirement that they be incorporated as a minimum requirement where the Government obtains a nonexclusive license at the time of contracting. Cases falling within the third category are left until after the invention is made.

The policy of the President's memorandum in regard to the third category where patent rights are allocated after the invention is made is that the determination shall be made in a manner deemed most likely to serve the public interest, taking into consideration the contractor's intention and capability of putting the invention to commercial use. Section 4 (c) of the bill, on the other hand, does not give the Government the same degree of flexibility. It simply provides that the principal rights will be in the contractor unless the Government can establish that there are special circumstances which indicate that the public interest would suffer as a result of leaving the rights with the contractor. Thus the Government, should it desire to take the principal rights in a patricular invention, must show that it would be against the public interest to permit the rights to remain with the contractor. This difference standing alone may not seem to be too great a burden to put on the Government. However, the showing by the Government must be made in accordance with the detailed procedure provided in section 5. This is in contrast to Department of Defense procedures pursuant to the President's policy, where the burden of applying for greater rights is placed on the contractor and those not applied for automatically become the property of the Government by operation of the clause. The Department of Defense believes that the above is consonant with the President's policy but the bill would reverse the position of the parties in a manner adverse to the Government where allocation of rights has been deferred. In short, the Department of Defense recommends that contractors who desire greater rights than a nonexclusive license initiate the action rather than the Government.

A further area of major departure from the policy promulgated by the President is to be found in section 5 entitled "Administrative Procedures for Determinations." Briefly, that section provides for existence, detailed and time-consuming investigations, determinations, and hearings under the Administrative Procedure Act whenever pursuant to a contract the agency head seeks to acquire, after an invention has been identified, greater rights than a nonexclusive royaltyfree license. Such a procedure in this case would undoubtedly be so burdensome on both contracting and administrative personnel as to be completely ineffective to accomplish the purpose for which it was designed. At best it would result in a considerable delay in the disposition of invention rights problems, and perhaps even more importantly would materially tend to discourage efforts by Government personnel to acquire greater rights for the Government even when the Government is clearly entitled to such rights and where the acquisition of such greater rights would be in the best interests of both the Government and the public. The Department of Defense recommends that section 5 be deleted and in lieu thereof agencies be authorized to determine allocation of patent rights in after-disclosed inventions pursuant to procedures established by the individual agencies. These procedures would, as a minimum, incorporate the guidelines in section 1(c) of the President's statement, set forth below in pertinent part:

"*** the determination of rights shall be made by the agency after the inven tion has been identified, in a manner deemed most likely to serve the public interest as expressed in this policy statement, taking particularly into account the intentions of the contractor to bring the invention to the point of commercial application and the guidelines of section 1(a) hereof * * *."

Section 9 of S. 1809 provides for the submission of semiannual reports to the Congress containing, inter alia, the general nature of each and every invention resulting from Government contracts regardless of the rights acquired by the Government. In addition, that provision requires in the case of each invention to which the Government acquired only a royalty-free license, a summary of the findings of fact upon which a determination was made to acquire only such a license. This section is inconsistent with other provisions of the bill in that it impliedly requires that a determination be made in the case of every invention despite the fact that other sections of the bill provide for the disposition of rights at the time of contracting rather than after the invention is disclosed. The burdensome nature of such a report is best illustrated by the fact that a statistical survey contained in the January 1965 Patent Advisory Panel Annual Report to the Federal Council for Science and Technology, showed that in recent years an average of approximately 7,500 invention disclosures were received by the Government from its contractors annually. Of these, an average of nearly 5,000 invention disclosures were received by Department of Defense agencies. The Department of Defense recommends that sections 9 (b) and (c) be deleted. The Department of Defense recommends that section 9(b) (2) of the bill be amended by placing a period after "United States" in line 6, page 4, and deleting the rest of the sentence. This provision as it now stands would be a windfall benefit to foreign governments under existing international agreements without concomitant benefit to the United States. If any treaties or other international agreements subsequently negotiated require giving rights to foreign governments, contractual arrangements with U.S. industry can be provided to cover the specific

case.

The Bureau of the Budget advises that, from the standpoint of the administration's program, there is no objection to the presentation of this report for the consideration of the committee.

Sincerely,

L. NIEDERLEHNER, Acting General Counsel.

DEPARTMENT OF THE AIR FORCE,
Washington, D.C., May 28, 1965.

Hon. JAMES O. EASTLAND,

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

DEAR MR. CHAIRMAN: Reference is made to your request for the views of the Department of Defense on S. 789, 89th Congress, a bill to prescribe a national policy with respect to the determination and disposition of property rights to inventions made in the course of experimental, developmental, and research work conducted under contracts or arrangements with the U.S. Government; to promote the public interest through widespread use and benefit from such inventions; to provide incentives to invention by rewarding inventors; and for other purposes. The Secretary of Defense has delegated to the Department of the Air Force the responsibility for expressing the views of the Department of Defense thereon.

This proposed legislation, the National Inventions Act, would establish a uniform policy with respect to the proprietary rights in inventions, discoveries, and improvements realized through Government research and development contracts with private parties. This policy calls for the Government to receive an irrevocable, nonexclusive, nontransferable, and royalty-free license to use each invention which results from a contract. However, in certain enumerated situations involving the national security, public health, and safety, or where the Government is the sole or prime developer, a grant to the United States of a greater proprietary interest would be required.

The Department of Defense, along with other Government agencies, is presently operating under a patent policy which, like the present bill, includes criteria for determining disposition of patent rights under Government research and development contracts and requires that the Government receive an irrevocable, nonexclusive, nontransferable, royalty-free license to any invention developed under such contracts. The current policy further resembles the bill in providing, with certain specific exceptions, that the patent rights of the parties shall be determined at the time of contracting. The Department of Defense agrees with this common approach to the subject, but notes significant differences in the criteria for determining invention rights, contract requirements, and

administrative procedures specified in the present bill from those followed under current Government policy.

S. 789 is generally similar to S. 1623, 88th Congress, introduced by Senator Saltonstall on May 28, 1963. Subsequently, the statement of Government patent policy, which established the current procurement policy with regard to patents throughout the Government, was promulgated by the President's memorandum of October 10, 1963. That policy statement has been implemented in the current Armed Services Procurement Regulation issued by the Department of Defense. The Department of Defense is opposed to S. 789 which would legislate patent policies and procedures at variance with the President's policy. The following comments, however, concerning specific provisions of the bill are offered for consideration.

Under section 2(g) (2) the term "inventive contribution" is defined as any plan or proposal for the application of any patented or unpatented item or technical data for use by any executive department or agency. It is apparent that the term is intended to encompass more than those inventions which are or may be patentable, or which reasonably appear to be patentable, but it is not clear whether the definition is intended to include each and every technical innovation, no matter how trivial, which the contractor conceives or reduces to practice under the contract.

In section 3 (a), subparagraphs (2) and (3) refer to "field of science or technology" and "field of technology," respectively. These terms pose a problem as to definition of their scope.

One of the criteria requiring a grant by contract to the United States of a proprietary interest in an invention or inventive contribution greater than the license set forth in section 3(b) is that provided in section 3(a) (4) where the contract "shows the likelihood that any inventions actually reduced to practice under the contract will have depended to a substantial degree upon the prior or parallel conceptions and work of other parties under Government contracts where Government financial assistance has been utilized." The difficulty with this language is that practically every invention which has been made depended to a substantial degree upon prior or parallel conceptions and the work of others. Even in the rare instances where a basically new field of technology akin to atomic energy emerges from the theoretical and mathematical approach stage to the first actual inventions, those inventions will have depended to a substantial degree upon the former studies. Such a criterion was considered in the formulation of the President's patent policy and discarded.

Section 3(a) also provides on page 5, lines 9 through 17, that inventions in which the Government retains more than the license provided in section 3(b) "shall be made available and the technological advances covered thereby brought into being in the shortest time possible through dedication *." The words "through dedication" are inconsistent with any property interest in the invention. Thus, there would be no exclusive rights to grant under section 5(c) or 12(b) of the bill. Also, the requirement for availability in the shortest time possible and the listing of such inventions in publications would in some cases be inconsistent with secrecy considerations in the interest of national security. The license specified to be reserved to the United States under section 3(b) is "for the practice throughout the world, by or on behalf of the United States or by any foreign government pursuant to any treaty or other agreement with the Government of the United States, or for the Government for governmental purposes, of each such invention which results from a contract." [Emphasis supplied.] In view of existing agreements with certain foreign countries for the interchange of patent rights and technical information, section 3(b) may provide a windfall to those foreign countries which have the right to request royalty-free use for defense purposes of those inventions as to which the United States can grant such a right without incurring an obligation to pay others. Further, with respect to section 3(b), the reference to "for the Government for governmental purposes," when included in the same phrase with "by or on behalf of the United States," seems to imply that the latter phrase may be for more than governmental purposes.

Section 3 (e) contains several clauses defining criteria under which waiver shall be granted to provide taking of lesser rights than are otherwise required under the criteria of section 3(a). However, the language of the criteria under section 3(e) appears to be sufficiently indefinite as to pose serious problems of interpretation and administration. For example, in clause (1) the terms "field of technology" and "acquired skill" are each subject to a variety of interpreta