In general, the Committee finds that the study results pro-
vide no basis for changing the basic principles of the
Presidential Policy, although they do indicate a few areas
where modification in the criteria would be appropriate.
In particular the study confirms the statement in the Presi-
dential Policy that--

"

a single presumption of ownership

does not provide a satisfactory basis for govern-
ment-wide policy on the allocation of rights to
inventions."

Throughout the study effort, the identification of factors that might be found surrounding an invention or a contracting situation which affect the utilization, participation, and competition issues, demonstrated that a single "title" or "license" policy would not be in the public interest, whether applied to a government-wide policy or to the policy of any particular agency. The study results indicated that to increase participation and utilization, government patent policy must accommodate itself to factors other than patent rights that have a great influence on these goals--for example, the market potential of an invention, the organizational and commercial structure of government contractors, the development and promotional activities of the government agencies, and the state of development of the invention. By taking these factors into consideration, the data suggests that the allocation of patent rights can have an influence on the three policy objectives.

B. Section 1(a)

Government Acquisition of Title

Section 1(a) of the Presidential Policy Statement sets forth four areas where the Government should normally acquire title to inventions at the time of contracting, and also defines the exceptions that can be made to this policy. Briefly stated, this section states that title should normally be acquired by the Government where (1) a principal purpose of the contract is to develop or improve products or processes intended for use by the general public, or where public use will be required by governmental regulation; (2) a principal purpose of the contract is for research directly concerned with the public health or welfare; (3) the contract is in a field of science and technology primarily funded by the Government; and (4) the services of the contractor are for

operating a government-owned facility or for coordinating the work of others. The research contract developed information and data on the first two title taking categories, but little or no data regarding the second two.

The Committee finds that the data developed under the Harbridge
House contract generally supports the normal acquisition of
title by the Government whenever the purposes of the contract
are public-oriented (Section 1(a)(1)): The Harbridge House
study indicated that exclusive rights were often not necessary
in order to achieve commercial utilization in this area for
the following reason:

(1) The inventions derived from this type of research
were normally directed towards areas where there
is a waiting commercial market or a present public
need for the results of the research;

(2) Often the research results from this type of
public-oriented contract are developed to the
point where the technical and commercial feasibility
of the results has been demonstrated, and little
additional private investment is required in order
to market these inventions; and

(3) When agencies support this type of research, they sometimes follow up the research with promotional and marketing activities directed towards the industries most concerned.

In addition, Harbridge House concluded that when these three factors were present and where further development costs were minimal and the commercial potential of the research results was high, exclusive rights in one organization may inhibit widespread use.

However, as indicated throughout the study, an inflexible presumption of ownership of patent rights is not in the public interest, even where the above circumstances exist, as several examples were identified where exclusive patent rights may be necessary or helpful in obtaining widespread utilization in the public interest. The Committee believes that these situations can be adequately handled in the exceptional circumstances and the greater rights provisions

of Section 1(a) which will be discussed in Section C of this Part.

Less data were accumulated under the contract on Section 1(a)(2) of the Presidential Policy concerning the health and welfare areas, except as this subsection overlaps with Section 1(a)(1). For example, few inventions from HEW were found in the two-year sample. However, the survey of the interrelationship between NIH, the university community and the pharmaceutical industry in the NIH medicinal chemistry grant program demonstrated the participation problems that can arise from a government patent policy that takes title when the Government's support does not progress beyond the more basic research levels, and when the industry involved is patent sensitive because of its own related R&D investments in furtherance of its commercial position. Studies of other agencies and the in-depth studies indicate that if these factors are present, there may be a participation problem regardless of whether the research is directed towards the health-welfare field or any other field. Again, the Committee believes that the proper application of the exceptional circumstances and greater rights provisions of this section would appear to be sufficient to resolve the patent problems in this health-welfare area, even though they may occur more frequently than under subsection 1(a)(1).

No date was collected which directly concerned paragraphs
(3) and (4) of Section 1(a). Therefore, the Committee has
no basis to recommend changes in these provisions which
are founded on what appears to be sound principles.

C. Section 1(a) Exceptional Circumstances and Greater Rights The latter part of Section 1(a) states that, in exceptional circumstances, the contractor may acquire rights greater than a nonexclusive license at the time of contracting when the agency head certifies that such action will best serve the public interest. The Patent Advisory Panel has interpreted this provision to be applicable to either all inventions developed under the contract, or to particular inventions identified prior to contracting. Section 1(a) also provides for granting greater rights after contracting to the contractor to identified inventions where such rights are a necessary incentive to the utilization of the invention, and where such action is consistent with the overall intent of

The Committee believes that the Harbridge House study indicated the necessity for providing exceptions to the government title taking provisions of Section 1(a). The necessity or usefulness of exclusive rights in attracting contractors or in obtaining utilization of these inventions was found to vary considerably, depending upon such factors as the amount of privately financed R&D undertaken by the contractor in areas related to the research, the state of development to which the government agency carries the invention, the research orientation of the industry that must use the invention, and the commercial orientation or promotional abilities of a

contractor.

For example, the in-depth studies demonstrated that a few contractors would not undertake government contract work in limited areas, or would not further develop the results of such work when exclusive rights to the inventions were not available because of possible conflict with company-sponsored research activities in their commercial fields. The effect of such a refusal by any particular contractor on an agency's program would depend on that agency's ultimate research mission and goals, and the particular agency program involved. Accordingly, the Committee believes it important for each agency to have the authority to make exceptions to the presumption of government ownership whenever such action would materially assist the agency's research programs and further the public interest.

Similar discretion is needed by the agencies in obtaining utilization of resulting inventions when the contract clause reserves the principal rights to the Government. For example, exclusive rights may be necessary or useful where the government funding of the research is limited to the basic level and a substantial amount of privately financed development is needed to perfect the invention to the point of commercial use. Even where the agency has demonstrated the technical or commercial feasibility of the invention, exclusive rights may be useful where the potential market is small or the industry involved has failed to commercialize the invention. And finally, the granting of such rights may be in the public interest for certain inventions made by the educational and nonprofit institution, which Harbridge House found to be more difficult to develop and put into commercial use. This would especially be true where the institution has an aggressive promotional activity and where the agency does not plan to develop the invention to the point of commercial application.

The Committee is aware that, as Section 1(a) specifically
permits the granting of greater rights to identified inven-
tions only when the inventions are not the primary object
of the contract, some have interpreted this to mean that
greater rights cannot be granted to identified inventions
which are a principal purpose of the contract. Without
commenting on the correctness of this interpretation, the
Committee believes that insofar as it is correct, the
Harbridge House study has demonstrated the need for change.
It is precisely these object-type inventions -- those
directed towards health and public needs -- that should be
placed in the hands of the public. If exclusive rights are
necessary or useful to accomplish this result, then it is
more important that the agencies be authorized to grant such
rights on these inventions than on inventions which are not
a primary object of the contract.

D.

Section 1(b) - Contractor Acquisition of Title

Section 1(b) provides that in contracting circumstances not within Section 1(a), where the purpose of the contract is to build upon existing knowledge or technology to develop products or processes for use by the Government, as opposed to use for the general public, then the contractor should normally acquire title when he has an established nongovernmental commercial position directly related to the field of the contract.

The Harbridge House findings that can be used to analyze this section are not conclusive. For example, the questionnaire data indicated that the inventions resulting from the research of the mission-oriented agencies are not as directly applicable to commercial uses as are the inventions of some of the public-oriented agencies, and therefore, these inventions often need considerably more technical development to commercialize them than do the public-oriented inventions. Nevertheless, areas were found where there was direct overlapping between government and commercial uses of a few of these inventions. Also, the questionnaire data showed a statistical correlation between increased commercial use of these inventions and the contractor's having both prior commercial experience and exclusive rights. However, during the years studied, most of the contractors had the initial option to acquire title to resulting inventions and their choices presumably were based in part on some expectation of commercial value. Thus, there was little, if any, persuasive statistical information to determine whether or not a contractor would have utilized an invention without exclusive rights.