Mr. BANTA. I do not believe we have had any experience in that area. I am sure I would say, "no." The answer is no. Mr. ANSBERRY. Have any significant discoveries come out of your research program to date?" Mr. BANTA. Do you mean in our total research program or do you mean in our field of contracts? Mr. ANSBERRY. In your entire research program. Mr. BANTA. Oh, yes; in the entire research program. Mr. ANSBERRY. Have any of them been developed commercially as yet? Mr. BANTA. Yes, sir; some of them. Mr. ANSBERRY. Can you give us some outstanding examples? Mr. BANTA. Well, I guess the most, perhaps the most important, most recent one, is the NIH discovery of-it is known to me only by number-the number is 7519. It is a synthetic drug that is used as an analgesic and Mr. ANSBERRY. Is that the morphine substitute? Mr. BANTA. Yes. Perhaps, by the layman it can be said to be a substitute for morphine. Mr. ANSBERRY. With less deleterious side effects? Mr. BANTA. Presumably. Mr. ANSBERRY. Has that been developed commercially or is that solely an NIH product? Mr. BANTA. Licenses have been issued by the Secretary to six firms,. upon the recommendation of the Bureau of Narcotics although many more firms have indicated interest in the drug. Senator LONG. I want to thank you very much. PREPARED STATEMENT BY PARKE M. BANTA, GENERAL COUNSEL, DEPARTMENT OF Mr. Chairman, and members of the committee, permit me to express the appreciation of Secretary Flemming for the invitation extended to him to appear before this committee and to inform you of the policies of this Department with respect to patent and invention rights. Secretary Flemming regrets his inability to respond in person to your invitation. You no doubt know that the Department of Health, Education, and Welfare makes comparatively limited use of contracts in its research and development activities; with two exceptions hereinafter referred to, such contracts reserve to the Government the right to determine the ownership and disposition of any resulting invention and that to date only one invention under a research contract has been reported although we have been informally advised that two others will be reported in the near future. The one invention reported was made at a State university and it has now been dedicated through publication. (Incidentally the two inventions which we expect to be reported soon arose under a contract with a firm which is included on the "List of Small Companies for Research and Development Work" issued by the Small Business Administration in May 1958.) One of the two exceptions noted above relates to research contracts with nonprofit institutions. When, after review of the patent policies and procedures of the institution, it has been determined that they are such as to reasonably 'assure that any inventions will be made available without unreasonable restrictions or excessive royalties, the contract may provide that inventions will be left to the institutions for disposition in accordance with its accepted policies (with such stipulations in the contract as may be deemed necessary in the public interest). We have made contracts with four universities under this exception. We have no reports of inventions having been made under these contracts. The second exception relates to our cancer chemotherapy industrial research. contract program, under which the research contracts may grant a conditional 49646-60-24 right to the contractor to patent and exploit certain inventions arising under the contract. We have made contracts with a number of companies under this exception. However, in any case where the contractor is permitted to retain invention rights, we reserve to the Government an irrevocable, royalty-free, nonexclusive license to practice the invention. In addition, in any case where a contractor is allowed to take title to an invention pursuant to the Department's patent policy in the administration of the cancer chemotherapy industrial research program, the Department reserves the right to license other companies or to dedicate the invention after complying with appropriate procedural safeguards, in the event that the contractor fails to meet the public need for the invention with respect to supply, quality, or price. Having rather summarily highlighted certain aspects of the Department's policies as they affect patent rights resulting from Government financed contracts entered into by us, I believe it would be helpful for me to give you some more complete information about the nature of the patent policies of this Department and how they conform to the authority and responsibilities of the Department. Perhaps a brief statement regarding the Department's activities < and responsibilities may be helpful as a backdrop to the discussion of its patent policies. As you may be aware the Department of Health, Education, and Welfare, having within its structure such agencies as the Food and Drug Administration, Social Security Administration, Public Health Service, Office of Vocational Rehabilitation, is primarily concerned with the well-being of the people of this Nation. Keeping in mind our responsibilities and concern for the well-being of the public at large, as well as our statutory responsibilities for dissemination of information and making public the results of research, the Department has, over the years, formulated patent policies which are based on the position that the public interest will, in general, be best served if inventive advances resulting from its research activities be made freely available to the Government, to science, to industry, and to the general public. As early as 1949, the then Federal Security Administrator established an Agency Patents Policy Committee, under the chairmanship of Miss Mary E. Switzer, then assistant to the Administrator, now Director of the Office of Vocational Rehabilitation, to study the patent problems of the Agency and to formulate recommendations for an agencywide patent policy. Upon the issuance of Executive Order 10096 on January 23, 1950, the committee drafted an Agency order (FSA Order No. 110, July 10, 1950) setting forth the patent policy and procedures of the Agency, and in that order, approved by the Administrator, the Agency Patents Board was established. After the establishment of the Department of HEW, this Board was converted into the Department Patents Board. At the outset it may be noted that the bulk of the Department's research activity is in the field of medical research. Additionally, it should be noted that the Department's research activities are carried out cooperatively with public and nonprofit agencies and with individual members of the scientific community. This activity is largely accomplished through the administration of a substantial number of grant programs. The policy of the Department of Health, Education, and Welfare with respect to inventions arising from research conducted with the aid of grants or in the performance of contracts for research is set forth in regulations of the Department (45 CFR, pts. 6-8). These were recently amended to provide more explicitly for contract research and to authorize special alternatives for industrial contracts for the cancer chemotherapy research program. Specific authority to contract for research is comparatively new for this Department, and applies to relatively few programs. Research grant authority is of long standing, and applies to a greater number of programs, including most of those in which there is now authority to contract for research. The distinction between contracts and grants for research is, roughly speaking, a distinction between a procurement or purchase and assistance or support. Under the research contract authority research for which the Government is to pay is undertaken by an institution pursuant to contractual obligations and in accordance with specifications imposed by the Government. A research grant, on the other hand, is made in support of research activities or projects proposed by an applicant institution. The patent policy has been framed in the light of these distinctions as well as with regard to the basic policy objectives of all research programs of the Department. The regulations of the Department are controlling on the various constituent agencies of the Department (such as the Public Health Service) in the award grants and in the negotiation of contracts and also in determining the disposition to be made of rights in inventions in accordance with the terms of such awards or contracts., In the formulation of the patent policies a study by a group of Department officials representative of the various operating agencies resulted in the development of several basic theses. In the first place, it was determined, consistent with Executive Order 10096, that inventions made by employees which are directly related to their official functions or to which the Federal Government has made a substantial contribution, should be owned and controlled by the Government for the public benefit. Patenting in the name of the United States would have significance only as a means to assure the availability of the invention to the public health and safety. In the case of grants for research the basic objective is the same: i.e., the development of knowledge and techniques for use as broadly as possible, for the public health and welfare. In this connection, the responsibility for dissemination of information is a specific duty for the achievement of such objective. To the accomplishment of such objectives the Department has issued three separate regulations. Title 45, Code of Federal Regulations, subtitle A, parts 6, 7, and 8. As was stated in section 6.1 of part 6: "Inventions developed through the resources and activities of the Department are a potential resource of great value to the public health and welfare. It is the policy of the Department: "(a) To safeguard the public interest in inventions developed by Department employees, contractors and grantees with the aid of public funds and facilities; ***" In order to accomplish and thus safeguard the public interest "it is the general policy of the Department that the results of Department research should be made widely, promptly, and freely available to other research workers and to the public. This availability can generally be adequately provided by the dedication of a Government-owned invention to the public by publication" (sec. 6.2, ibid). The provisions of part 7 (dealing with disposition of invention rights to employee inventions) and part 8 (dealing with disposition of invention rights resulting from research grants, fellowship awards, and contracts for research) are all designed to meet the basic objective to safeguard the public interest. For the convenience of the committee we are supplying at this time copies of the three regulations alluded to above. Section 8.1 of part 8, relating to research grants, provides in the alternative that: "(a) That the ownership and manner of disposition of all rights in and to such invention shall be subject to determination by the head of the constituent unit responsible for the grant, or "(b) That the ownership and disposition of all domestic rights shall be left for determination by the grantee institution in accordance with the grantee's established policies and procedures, with such modifications as may be agreed upon and specified in the grant, provided the head of the constituent unit finds that these are such as to assure that the invention will be made available without unreasonable restrictions or excessive royalties, and provided the Government shall receive a royalty-free license, with a right to issue sublicenses as provided in section 8.3, under any patent applied for or obtained upon the invention." It will be noted that the alternative of leaving invention rights to a grantee institution is conditioned upon the availability, under such institution's administration, of the invention rights of any invention without unreasonable restriction or excessive royalties. Section 8.2 provides the criteria for the head of the constituent unit responsible for the grant in determining what disposition shall be made of invention rights. Each of the four alternatives provided by this section is calculated to meet the objective of securing the wide availability of the invention. It will be seen that there is thus provided the criteria for disposition of invention rights in the field of employee inventions, research grants, fellowships and research contracts which are designed to enable the Department to fulfill its responsibilities for the dissemination of scientific and technical information and for serving the health, safety, and welfare of all segments of the population. Section 8.6 provides for similar disposition of invention rights arising out of the performnace of work under research contracts, with an exception about which more will be said later. The same alternative provided to nonprofit grantee institutions is carried forward in the contract area by a provision in the regulation (8.6(b)) which provides that contracts for research with nonprofit institutions may leave the invention rights for disposition by the institution if it is determined that its policies and procedures are acceptable as meeting the requirements applicable in the grant situation (sec. 8.1 (b)). The cancer chemotherapy program of the Public Health Service is an intensified effort, with special appropriations made available under a congressional directive, to explore exhaustively and rapidly the potentialities of chemical compounds in the control of cancer. Because of the peculiar exigencies of this program and in order that the resources of pharmaceutical and chemical firms may be brought to bear with a minimum of delay, certain exceptions to general Department policy are permitted in the negotiation of industrial contracts for this program. Such exception is set forth in a patent policy statement of the Secretary copy of which is also furnished to committee. In essence, such alternative provides that in industrial research contracts in the cancer chemotherapy program, the contractor may accept either the standard patent clausewhich implements the general policy of the Department reserving the right of disposition of inventions to the Surgeon General, or a standard alternative clause leaving the right to patent inventions with the contractor subject to certain limitations deemed necessary to protect the public's interest in contracted research. The crucial provision of such alternative (Sec. B. 4 of the policy statement) reserves to the Surgeon General the right, subject to specified procedural safe-guards calculated to make the exercise of such right a deliberate rather than precipitous action, to either dedicate the invention to the public or to issue royalty-free nonexclusive licenses notwithstanding and in derogation of any patent which the contractor had theretofore obtained. The exercise of such right is conditioned upon a finding that either the supply of the invention is inadequate to meet the public need, the price is unreasonable or its quality is insufficient. The procedural steps required to be observed prior to the exercise of the rights are specifically spelled out in paragraph B. 4 of the Secretary's statement of policy. There is thus provided a mechanism by which the public interest in any inventive advance resulting Government-financed research is protected against inadequacy of supply to meet the public need, unreasonable price or inadequacy of quality. At the same time, there is structured into such policy and the contracts under it a reciprocal protection against precipitate governmental action to destroy the contractor's rights. Whereas a total of 227 research contracts were entered into by the Public Health Service during the fiscal years 1958 and 1959, under the cancer chemotherapy exception less than 15 contracts were executed which left invention rights to the contractors. It is the conviction of the Department that its policy of making freely and generally available the benefits of research in lieu of giving away patent rights to contractors is not only consistent with the program responsibilities of the Department, but is in the greater public interest. We also firmly believe that such policy provides equal opportunity to small business to participate in the Department's programs. EXHIBIT No. XVI MANUAL-GENERAL ADMINISTRATION PART 6-PATENTS AND INVENTIONS CHAPTER 6-10 REGULATIONS AND PROCEDURES 6-10-00 Scope 6-10-10 Regulations (from Federal Register of 9/14/55 and 12/4/57) From Federal Register, title 45, subtitle A PART 6-INVENTIONS AND PATENTS (GENERAL) Publication or patenting of inventions. Sec. 6.0 Definitions. 6.1 General Policy. 6.2 6.3 6.4 6.5 6.6 Issuance of patents on non-fee basis; certification of public interest. Government-owned patents; licensing; dedication to the public. Procedures relating to employee and grantee inventions. 6-10-00 7.8 Sec. 8.0 8.2 Employee's right of appeal. PART 8-INVENTIONS RESULTING FROM RESEARCH GRANTS, FEL- 6-10-20 SCOPE 8.3 8.4 8.5 8.6 8.7 Cancer chemotherapy industrial research contracts. Patent Policy Applicable to Cancer Chemotherapy Industrial Research A. This Chapter contains: 1. Department regulations relating to inventions (a) made by Department employees, or (b) resulting from research grants, fellowship awards, or research contracts under programs administered by the Department; and 2. Department patent policy, approved 7/31/58 by the Secretary, establishing the limitations referred to in section 8.7 of the Department regulations for the negotiation of cancer chemotherapy industrial research contracts. B. The substance of the Department regulations relating to employee inventions is incorporated in a statement for the general information of supervisiors and employees which was issued 10/19/56 in HEW General Administration Manual Guide No. 1. 6-10-10 REGULATIONS (from Federal Register of 9/14/55 and 12/4/57) TITLE 45-PUBLIC WELFARE SUBTITLE A-DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, GENERAL ADMINISTRATION PART 6-INVENTIONS AND PATENTS (GENERAL) PART 7-EMPLOYEE INVENTIONS PART 8-INVENTIONS RESULTING FROM RESEARCH GRANTS, FELLOWSHIP AWARDS, AND CONTRACTS FOR RESEARCH The following parts are Department rules and policies relating to inventions which are made by Department employees having a relation to their official duties or with some contribution from the Government or which arise from research or related activities assisted by grants or otherwise under programs administered by the Department. PART 6-INVENTIONS AND PATENTS Sec. 6.0 Definitions. 6.1 General policy. 6.2 6.3 6.4 Publication or patenting of inventions. Government-owned patents; licensing; dedication to the public. Central records; confidentiality. 6.5 Procedures relating to employee and grantee inventions. 6.6 Issurance of patents on non-fee basis; certification of public interest. AUTHORITY: 88 6.0 to 6.6 issued under Reorg. Plan No. 1 of 1953, 18 F.R. 2053; 3 CFR 1953 Supp. E.O. 10096, 15 F.R. 391; 3 CFR, 1950 Supp. § 6.0 Definitions. As used in Parts 6, 7, and 8 of this subtitle: (a) "Department" means the Department of Health, Education, and Welfare. (b) "Secretary" means the Secretary of Health, Education, and Welfare. (c) "Head of constituent organization" includes the Surgeon General of the Public Health Service, the Commissioner of Education, Commissioner of Social |