Harbridge House reported that the concern for patents and the resulting patent activity in these institutions is beginning to increase as these institutions search for additional sources of income. There is a substantial variation in the concern for and activities regarding patents among the institutions, and this is best illustrated by the two institutions described in Cases 1 and 8. 14 The university described in Case 1 is highly patent conscious, requiring mandatory assignment of all inventions to the university and providing for a liberal division of royalties with the inventor. Under a policy change in 1963, this university permitted the inventor to receive 50% of the net royalties resulting from the licensing of a patent, and since the adoption of this policy, disclosures reported to the university have increased by 600%. As a matter of policy, this university will file patent applications only if there is a reasonably foreseeable market, and it appears likely that the resulting costs can be recovered through licensing of the invention. The university will seldom undertake promotion of an invention without exclusive patent rights because of the inability to offer any particular incentives to firms seeking to develop the invention. The institution had the most active utilization program in the study and used a variety of promotional activities. This particular university was the only one identified in the study which would consider delaying the publication of its research findings in order to insure patent protection. In contrast is the university described in Case 8, which 14/ The case numbers refer to the case studies dis cussed in Part IV of Volume IV of the Harbridge House Final Report to the FCST Committee on Government Patent Policy. advice to staff members who wish to prevent the patenting The other educational institutions interviewed fall somewhere between these two extremes, with varying amounts of activity in identifying, patenting, and promoting inventions, and provide varying amounts of incentives to inventors. Most of these institutions make use of the patent development firms for patenting and promoting inventions which they own. Several of the case studies appear to be of special interest. For example, the research institute covered in Case 13 indicated that ordinarily the institute's policies provide for allowing patent rights to pass on to the sponsor of the research. There was one striking exception to this policy, however, and that was in a field in which the institute has maintained a dominant and proprietary position for several years. In this one area, the institute will insist upon retaining exclusive rights to resulting inventions regardless of whether the research is sponsored by the Government or an industrial customer. This case illustrates once again that firms, both profit and nonprofit, become highly patent sensitive in areas where they have prior investment and a commercial position. This shift in sensitivity to patents is also illustrated in Case 16. The patent development firm interviewed in this case was one of three affiliated corporations, the other two being a nonprofit research institute and a manufacturing subsidiary which engages in prototype development and promotion of promising inventions for which the patent development firm cannot find industrial licensees. The research affiliate expressed relative disinterest in patents, considering them a subsidiary result of the main mission of solving scientific problems of their research sponsor. The feeling was also expressed that, due to the more basic type of inventions resulting from their research, there is less need for patent protection. On the other hand, the attitude of the manufacturing and development affiliate was quite the opposite, and this firm stated that they would not even consider working with an invention where the Government had retained title. The industrial contractors identified as having the highest and lowest rates of commercial utilization of the inventions in the two year sample were interviewed to identify the factors which affected the utilization of patents by these firms. In addition, the interviews were intended to gather more general information on the firms' attitudes toward patents, the scope of the firms' privately sponsored research, and the relationship of the firms' government sponsored and privately sponsored research. Whenever possible, interviews were conducted with managers of various functions in each company to obtain a balanced view of the role of government patents and government patent policy in the business affairs of these organizations. Twenty-one industrial contractors were interviewed in all, ten of which were classified as high utilizing firms (having a utilization rate of 12% or higher) and eleven firms were classified as low utilizers (having a utilization rate of 7% or lower). Because the number of patents held and commercially utilized by responding firms in the two year sample were concentrated, the twenty-one firms interviewed accounted for 53% of the inventions and 130 of the 200 inventions used by industrial contractors. The case studies showed that industrial organizations focus their attention on marketable products, and not on the exploitation of inventions per se. For this reason, evaluation of an invention's market potential, applicability to commercial uses, and expense of development generally take precedence over those factors directly relating to the patentability of the invention or to the rights that a firm may have to it. It was found that some types of firms, for example those that develop large systems, rely on broad management and engineering skills rather than patent protection to maintain their market positions. In other situations, where the invention is directed to markets that change rapidly, current technology is quickly bypassed and the value of a patent may be short lived at best. In these types of situations, therefore, the availability of patent rights may make very little contribution to the Thus, the development risk in commercializing an invention in relation to its expected commercial potential influences a company's concern for patent rights. In a high-risk, low-potential situation, lack of exclusive rights often is a factor retarding commercial development. On the other hand, in a low-risk, high-potential situation, a company may utilize inventions in. their commercial products without regard to patent rights. Harbridge House generally noted, however, that the greater the company's investment in research and development of new commercial products, the greater was its sensitivity to patent protection. The interviews of the twenty-one high and low utilizing firms indicated that the most fundamental factor affecting the commercial utilization of the great majority of the sample inventions was low commercial potential. Harbridge House concluded that many of these inventions, derived mainly from defense programs, are too far from consumer needs to be very useful. Developed under hardware programs in many instances, these inventions represent applied engineering to meet a specific military requirement which tends to limit their applicability to commercial products. Several examples are found in the descriptions of the high and low utilizing companies of the difficulties involved, or the development costs incurred, in attempting to achieve "spin-off" uses for these military oriented inventions. In the description of Company A,15 two examples are given of unsuccessful attempts to commercially produce and market products based on such inventions, both of which were subsequently abandoned. One of the attempts is particularly in point, as the company reported that the competition in the commercial market was significantly different from the similar military market. The military market was based on tight government specifications with heavy emphasis on reliability, as opposed to the more cost conscious commercial operation. As a result of these experiences, this company has generally abandoned its efforts to develop commercial "spin-off" from government sponsored inventions. 15/ The companies mentioned in this section are described in Part II of Volume IV of the Harbridge House Final Report to the FCST Committee on Government Patent The companies interviewed indicated that their market orientation had a major effect on utilization. It was found that firms that were almost totally oriented toward government work and which have little or no interest in commercial business showed little interest in utilizing inventions. In a similar manner, firms that were almost totally oriented in commercial markets, to such an extent that they separated their government and commercial work in order to eliminate any question of the rights, also showed little interest in attempting to utilize government sponsored inventions. However, with this latter type of firm, the opposite position was held in regard to inventions resulting from their privately sponsored research. 2. Dominant Industrial Attitudes Toward Government As a result of the interviews of the twenty-one industrial firms included in this portion of the study, Harbridge House identified six basic attitudes reported by these firms on the importance of inventions derived from government research and development and on the importance of government patent policies. It might be noted that the attitudes of these firms depend in a large measure on the commercial orientation of the firm. Similarly, the attitude of a division of a large multi-division corporation depended in large measure on this same factor. Attitude #1 Patents Have no Importance to the Firm's Commercial Activities Firms displaying this attitude were characterized as doing a preponderance of their business with the Government in aerospace and defense markets. These firms, being government oriented, had no desire to expand into commercial markets and had no mechanism for using the inventions commercially. Harbridge House speculated that variations in government patent policy with respect to the ownership of patents would have little effect on either the participation of these firms in government contracts, or in the utilization of inventions resulting from such contracts. Attitude #2 Patents Have Little Value to CommerFirms expressing this attitude indicated that patents have little value to their business activities in comparison with technical and management competence, production capability, and corporate reputation. These cial Activities - |