has not been brought out is we cannot quite say that this research is being done entirely with Government money.

Certainly the Government is giving some support to it. But much that has been done before has also gone into it, and also a lot of the university's finances. In other words, this is not a full support of anything. It is a help toward their doing it.

Mr. GORDON. But it could be?

Mr. HOFF. It could be? Very unlikely.

Mr. GORDON. Very unlikely?

Mr. Horr. Because, after all, all we are doing is supporting some of a man's work. He may have been working on it for 20 years previously. What we are doing is, in the typical case, permitting him to get some assistance.

The university is generally paying his salary itself as the chief investigator; that in almost all cases is paid by the university, so what you have got is assistance on an ongoing job or on a new job this fellow has thought of because of what he has done in the past.

Now, to put this again into perspective, certainly there has been the vitamin D patent which came out of research which was very valuable, and so have been a few others.

The total value of those, though, is not large in terms in which we are thinking and, futhermore, of the thousands of grants that we have made, we have only received word, although it is required, we have only received word of applications having been filed in 15, and we have received no word of any patents having been issued, and in the great bulk of the cases any returns would go back into the purposes for which the money was appropriated by Congress, namely, research and education in the universities.

Mr. GORDON. Let us get back to this Research Corp. you are talking about. Is it a private or Government institution?

Mr. HOFF. It is a nonprofit private organization for this purpose. Mr. GORDON. It appears that this nonprofit institution decides what patents to secure for the universities it has contracts with; is that correct?

Mr. HoFF. First, I believe the universities screen them. After all, as you know, in the patent business, a lot of ideas come along, and the first question is, "Is this worth patenting?"

Nobody wants to go to the trouble and spend the sums necessary if they think the thing is of no commercial use, and it is in this sense that Research Corp. decides whether they are willing to go ahead and bear the costs of prosecuting a patent application.

Mr. GORDON. But they also can decide not to do so if they find

Mr. HOFF. Certainly. I do not know what percentage. I would assume in the great majority of cases put to them they decide it has no commercial use.

Mr. GORDON. But it is this private organization which decides, in a way, what patents to secure, what patents to license, once it secures the patents; whom it should license, which patents it should license; how much royalty should be paid, and so forth?

Mr. HOFF. Yes.

Mr. GORDON. This is a private institution. Is it a good idea to have a private organization, with which the Government does not have an agreement, decide what should be done with the product of

Government-sponsored research, even if the Government paid for only part of it.

Mr. HOFF. Part of it.

Mr. GORDON. Shouldn't this be a governmental function?

Mr. HOFF. Well, I suppose the universities would argue on the other side; namely, that they have a large stake in this, and they do not care to have the Government take it over. I think you can argue that on both sides. I think if the Government were to do it—well, I will put it this way.

If the National Science Foundation were to require that it make a determination and prosecute patents, and if any substantial volume of inventions arose, our staff would go up not only appreciably, but dramatically. We would have to staff entirely differently. We would have to have many times the lawyers that we have now, and so forth, and I question whether this would be worthwhile from the Government's standpoint.

Senator LONG. I do not care to argue the point any further, but it does seem to me that this agreement you made with this private company where the Government has a nontransferable license to use the machine that this man is to develop, and if the Government cannot use this to provide services to the general public, it would appear that anybody who wanted to compete with this fellow in the weather research business, unless he was directly on the Government payroll, would not be able to use this machine that you wanted him to develop unless he agreed to it.

Mr. HOFF. Let me take a shot at telling my views to you on this. In this case we are making a grant of $16,000 to a corporation which has put a great deal of development work and so forth into their whole going business, and into the manufacture of this particular thing, which is why we placed the contract with them, I would assume.

Now, I would like to reiterate what Dr. Waterman just said, that where we make the contract with a private profitmaking concern, and it looks as though there might be an invention of substance not just in line with its own business, something it has been perfecting over a long period of time, what we would do, would be to consider reserving the right to determine the disposition of the patent rights until such time as the implications of any invention could be determined with some degree of reality.

Now, as we have mentioned, we have only had eight contracts with private concerns to date.

We go to the private concerns because they are the ones that have a peculiar competence in that particular field, as shown by eight contracts with commercial organizations for scientific research with a total value of less than $400,000, as against approximately 6,200 grants to universities, amounting to approximately $120 million made since the Foundation was established.

When we do go to them with a small contract, which comes on the end of the work they have done, I think we should consider what we can do for the Government, but I doubt that we ever are going to be able in that type of situation to get the full patent rights for the Government. That is my feeling on the matter.

Senator LONG. It would seem to me that if you are going to draw up a sample contract and are going to have a definite policy, rather

than try to anticipate what might happen under a contract, you might do better to draw one up that would cover all eventualities. That is why my thought would be that you would not want to do for one company what you would not do for another.

Mr. HOFF. No, sir. It depends on the nature of the work. It is not that one company gains over another, but if we give a $16,000 contract to manufacture a tool, in effect, which they are in the business of manufacturing, that is one type of situation.

If, on the other hand, we were to make a contract for applied research in dispersing storm clouds, and this was something the company had not spent, well, it is not something that they had put an overwhelming amount of their own money into, then I would say we would have an entirely different situation, and no matter what the company is, the possibilities of the Government there would be much greater, and should be taken care of in drawing the contracts.

Dr. WATERMAN. You see, Mr. Chairman, after all, the situation is simply this: we are asking the company to build a box that they know how to build. Well, it is purely of use to the basic research people in studying this problem. But anyone who knows the field cannot perceive any possible way that it could ever be used commercially except for special basic research at this particular stage.

To a scientist this looks like straining a point, but, as Mr. Hoff said, if we foresee any possibility in a thing like this, we would certainly guard against this by a suitable clause.

Senator LONG. I have no further questions.

Thank you very much.

I was going to hear Mr. Herbert B. Warburton of the Post Office Department, but if you do not object, I believe we will recess and let you have some lunch, because we will have some questions to ask you when you return at 2 o'clock. We will meet here then at 2 o'clock. (Whereupon, the hearning was recessed at 12:30 p.m., to reconvene at 2 p.m., the same day.)

AFTERNOON SESSION

Senator LONG. All right, Mr. Warburton, come forward and summarize your statement briefly.

STATEMENT OF HERBERT B. WARBURTON, GENERAL COUNSEL, POST OFFICE DEPARTMENT; ACCOMPANIED BY LOUIS J. DOYLE, ASSOCIATE GENERAL COUNSEL; ADAM G. WENCHEL, ASSISTANT GENERAL COUNSEL; AND RAYMOND B. ROBINSON, ASSISTANT MANAGER, PROGRAMING AND CONTROL STAFF, OFFICE OF RESEARCH AND ENGINEERING

Mr. WARBURTON. It is pretty much in summary form, Mr. Chair

man.

Senator LONG. Read it if you want to.

Mr. WARBURTON. I think it would be more helpful.

Mr. Chairman, I am Herbert B. Warburton, General Counsel for the Post Office Department. I am accompained by Mr. Louis J. Doyle, Associate General Counsel, Mr. Adam G. Wenchel, Assistant General Counsel, and Mr. Raymond B. Robinson, who is Assistant

Manager, Programing and Control Staff, Office of Research and Engineering.

The Post Office Department entered into the research and development contract field in 1949 when the Congress enacted the first statute directing that it embark on this type of activity, and the citation for that staute is title 39 United States Code, section 847 and 847 (a). The purpose was to introduce modern practices in the postal field service, with emphasis on the development of new mail handling machinery and equipment.

The first Post Office Department developmental contract was let in fiscal year 1952. The initial momentum was giving to the program with the Department's establishment of the Office of the Chief Industrial Engineer early in 1953. That office eventually was designated as the Office of Research and Engineering.

The Department has entered into a total of 39 contracts of this type since 1952 and their objectives have been and are for the development of, as example, facing and culling machines, mail sorters, electronic reading machines, and the like.

The Post Office Department had 14 research and development contracts in force as of September 21, 1959. The total amount of money obligated was $7,511,320. Of these contracts, nine were held by what may be designated as small businesses. In fact, the Department has and continues to seek the active engagement of this type of business concern in this work.

Since the Post Office Department entered into this field relatively recently, when, in its understanding, a general Government patent practice had been established, it naturally fell into line with that practice and adopted the Armed Services Procurement Regulations clause on patent rights. The Department has felt not only that it did not have the experience necessary to strike out in a direction different from other Government contracting agencies, but also felt that any major deviation from the general practice would result in confusion.

Therefore, the policy of the Post Office Department with regard to patent rights under research and development contracts is to require the contractor to grant to the U.S. Government an irrevocable, royaltyfree license to practice, and cause to be practiced, by or for the U.S. Government, throughout the world, each subject invention in the manufacture, use, and disposition, according to law, of any article or material, and in the use of any method. The type of organization involved as the contractor is immaterial.

The Government's license, so granted, is nonexclusive. The contractor is free to grant licenses to others, and the Government may not, under its license, manufacture, have manufactured, or use any subject invention to provide services or supplies to the general public in competition with the contractor or any of his commercial licensees. However, it is further provided in our contracts that the U.S. Government, acting through the Post Office Department, may grant or authorize the granting of a sublicense to one or more foreign governments for use, in such instances, solely in that Government's mail handling activities.

This policy leaves the contractor free to hold title to all patents, either domestic or foreign, on any subject invention, to grant licenses to others, and to avail himself of all commercial applications and

benefits, while permitting the U.S. Government to avail itself of all applications for governmental operations and purposes, and to sublicense foreign governments when such is advantageous to the United States, either politically or in connection with an exchange of technical information.

In all research and development contracts, regardless of the type of organization involved, it is the Post Office Department's policy to include provisions whereby the Government may duplicate, use, and disclose in any manner and for any purpose whatsoever, and have others so do, all subject data delivered under the contract. It is provided also that if any subject data are, at the time or any time thereafter, covered by copyright, the contractor will grant to the Government, its officers, agents and employees acting within the scope of their official duties, a royalty-free, nonexclusive, irrevocable license throughout the world, to publish, translate, reproduce, deliver, perform, dispose of, and to authorize others so to do.

As a result of its research and development program, the Department is beginning to collect technical data of various types. Thus far, it is not aware of any desire on the part of business for access to these data. However, should requests be made for such access, the Post Office Department would consider them sympathetically, of

course.

In Senate Report No. 97, Senate Judiciary Committee, dated March 9, 1959, it was stated on page 1 that "*** the President's budget for 1960 submitted to Congress asked for over $5 billion for research and development ***" The Post Office Department requested $512 million, or about eleven-tenths of 1 percent. All of this money does not go for funding research and development contracts of the nature we are discussing here, in the sense that a portion pays for the salaries of employees, and like uses. The comparison does appear to support the proposition, however, that the Department's effect upon the economy in the area in which this subcommittee is interested is insignificant.

The Department has entered into 39 research and development contracts since the beginning of its program in 1952. Contractors have reported the filing of 25 applications for the granting of patents under the program, four of which have been granted.

This Department is aware of the controversy as to whether commercial title to inventions made under research and development contracts should be retained by the contractor or the Government. Thus far, Congress has not spoken. Absent a definitive decision by the Congress, each Government agency must decide for itself what disposition of interests in inventions made as a result of research and development contracts will best promote the Government's interest. We believe that the policy which this Department has followed best serves the Government's interests.

Mr. WARBURTON. Thank you.

Senator LONG. We will go ahead with questions from counsel. Would you like to ask some questions, Mr. Gordon?

Mr. GORDON. What is the basis for your statement on page 2 that a general Government patent practice had been established? My impression was that it had not been established.

Mr. WARBURTON. Mr. Gordon, when this program was initiated, we had no patent experts in the Department. We made what was