There are other examples of the study results generally supporting the present approach of Section 1(b), although not clarifying all of the areas where specific data was lacking. The case studies indicate, for example, that the greater a prospective contractor's privately sponsored R&D in the field of research directly related both to his commercial position and to the field of work called for by the contract, and the greater his commercial orientation, the greater was the likelihood that he would refuse to participate in government contracting unless he was granted title to the results of this research. However, there was no data that indicated at what point a contractor would refuse any particular contract. Moreover, during the period studied, exclusive rights were given to contractors who were not concerned about patents, their emphasis being upon know-how, systems expertise and the revenues from government work.

On the other hand, the data that was available did not indicate that contractor retention of patent rights typically had adverse effect on competition. This data, however, was not complete, and relied heavily upon the general statement of patentees that they were willing to grant licenses. Also, there was little analysis of the practical conditions of licensing, and one case was indentified where the patent owner, although willing to license his invention, was requesting a royalty rate that users of the invention believed would preclude competition. Furthermore, while only a small number of patents in any one year appeared to have commercial impact, no attempt was made to identify or measure the cumulative effects, if any, that government grant of patent rights in certain fields may have had on competition over an extended period of time.

In view of the lack of specific data regarding some of these questions, the Committee considered the possibility of amending Section 1(b) to limit the circumstances where a contractor would acquire patent rights at the time of contracting to cover only those situations where the data indicated that a participation problem might arise if title were not granted to inventions at the time of contracting. The Committee rejected this alternative, as, on balance, it was concluded that the present approach of Section 1(b) best supports the public interest, taking into consideration all of the data collected, the experience of the agencies to date, and the additional manpower and management effort such a change would require. This conclusion is based on the following considerations:

a.

The Harbridge House study clearly showed that the results of research and development directed towards specific governmental and military requirements are generally not as susceptible to commercial uses as the R&D results of the more public-oriented research. The studies also indicated that often the inventive results of this mission-oriented R&D have no direct application to commercial markets, and when they do, considerable technical development is often necessary for their commercialization. Accordingly, inventions resulting from this type of research, in general, appear to need maximum incentives to encourage commercial utilization. b. The studies also showed that contractors with nongovernmental commercial positions in the field of the R&D effort are normally more likely to commercialize inventions (with or without patent rights), and that these contractors, because of their commercial position and privately financed R&D efforts, are more reluctant to become involved in government-sponsored research unless exclusive commercial rights to inventions are available. Therefore, offering exclusive rights to contractors with commercial positions would provide maximum incentives to encourage these firms to devote their commercial expertise to governmental and military research and development problems, and at the same time, leave rights with a firm that is in a good position to commercialize the inventions. If, however, these contractors fail to use the inventions commercially, the march-in rights of Section 1(f) can be used to force the patent owner to license others.

c. The Committee concluded that for efficient operations of the larger R&D agencies, these agencies should be authorized to determine rights to inventions on the basis of general criteria, normally at the time of contracting, inso far as this can be accomplished without detrimentally affecting the public interest. Just as it was found that normally the public interest would be served by a general presumption of title in the Government under the conditions, or criteria, of Section 1(a), the Committee believes that the public interest would be served by a general presumption of title in the contractor under the conditions defined in Section 1(b). The Committee believed it would be a heavy burden to require the larger R&D agencies, having thousands of contract actions and reported inventions yearly, to study in detail each such situation unless the public interest absolutely required it.

d. The Committee concluded that, on balance, the public interest would not be detrimentally affected by the general presumption of title to inventions in the contractor in Section 1(b) situations. Although complete studies on the competition issue were not conducted, the information that was gathered indicated that, with few exceptions, contractors owning government-financed patents were willing to license them. In addition, when the se inventions were commercialized by either the contractor or his licensee, such action occurred rather quickly - in most cases, prior to the issuance of a patent. As stated previously, when contractors do not use the inventions themselves, they can be required to license others.

Also, the march-in rights of Section 1(g) can be used to require contractors to license others at any time, if the invention is required for public use under governmental regulation or as may be necessary to fulfill health needs. The Committee recommends that Section 1(g) be strengthened to handle other situations that could occur which would detrimentally affect the public interest, as the use of a government-financed invention to eliminate competition in a

particular market.

e.

And finally, although the studies indicated that there were many patents under contractor ownership which were not being used commercially, the Committee concluded that, on balance, the existence of these patents serve useful purposes, and most detrimental affects they may have can be minimized through the use of the march-in rights of Sections 1(f) and 1(g). For example, the patenting of even those inventions which have little or no commercial utility serves to publish and document the technology involved, recognizes the achievement of inventors, and provides defensive protection for government use of the inventions without the Government filing for a patent itself. This latter benefit can be a substantial one to the military departments, as they often procure large quantities of items embodying the results of their research which, if not protected, could result in substantial infringement liability. The alternative would be for the agencies to undertake to patent these inventions themselves, which would require increased staffs to protect a substantial number of inventions presently patented by contractors.

E.

Section 1(c) - Allocation of Rights to Identified Inventi ons

Section 1(c) provides for the allocation of rights to identified inventions on a case-by-case basis in all contract situations not falling under Sections 1(a) or 1(b), except in special situations prescribed by regulation where it would appear to be in the public interest to permit the contractor to retain rights greater than a nonexclusive license at the time of contracting. Here again, the results of the Harbridge House study appear to support this general presumption, and the exception made to it.

The dominant factors found by Harbridge House which effect the utilization, participation, and competition objectives of government patent policy are taken into account in the criteria of Sections 1(a) and 1(b). These factors include agency mission, the purpose and nature of the contract, the commercial background of the inventing contractor, the state of development of the invention, the size of the potential market, and other similar factors. In contracting situations in which these factors are not found, or are not as obvious, it would seem that a closer inspection should be made of the plans, intentions and capabilities of both the contractor and the sponsoring agency to determine whether government or contractor ownership would best foster commercialization of the invention, and which type of ownership would otherwise best protect the public interest.

However, Section 1(c) recognizes that there may be instances where granting rights at the time of contracting will be in the public interest, even where the cirteria of Sections 1(a) and 1(b) are not present. For example, exceptions could be made in appropriate cases for research work undertaken by educational and nonprofit institutions where they have definitive and effective programs for promoting utilization of inventions, and the agency does not. This exception could increase the chances for commercial utilization for the results of this type of research, as the Harbridge House study indicated that the inventive results of these institutions are more difficult to commercialize. Although these institutions do not utilize inventions directly, they are often instrumental in promoting their use when the incentives

These sections permit the Government to require a contractor to license to others inventions which he owns (a) if the contractor has not taken effective steps to utilize the invention within three years after a patent has issued, or (b) to the extent that the invention is required for public use by governmental regulation, or as may be necessary to fulfill health needs. The Committee believes that the provisions for such march-in rights are both useful and necessary to complete the flexible nature of the overall policy. Just as exceptions are necessary to the title taking categories of Section 1(a) in order to meet exceptional circumstances, the march-in rights provide a type of exception to allowing the contractor to have exclusive rights without limitation.

G. Section 2

Section 2 provides that government-owned patents shall be made available and the technological advances covered thereby brought into being in the shortest time possible through deducation or licensing. The Committee believes that the public interest requires that the results of governmentfinanced R&D be made available in this manner, subject to consideration of national security, using one or more of the suggested approaches that would best assure widespread commercial use.

The Harbridge House study identified several cases where the Government's promotional efforts and nonexclusive licensing activities were instrumental in obtaining wide adoption and commercial utilization of government-financed inventions. On the other hand, situations were also identified where public-oriented inventions failed to gain commercial acceptance, often because the agency did not completely develop the inventions and industry was not willing to complete them. In some of these cases, it would appear that the granting of some form of exclusive rights might provide the needed stimulus for further development and marketing of these inventions. In some cases, this could be accomplished through the granting of greater rights to the inventing contractor, but in other cases the granting of exclusive rights under government-owned patents would be necessary.