require periodic inspection, calibration, maintenance, and overhaul to insure proper performance. As a manufacturer of these instruments, we must be able to assure our users of the availability of technically competent maintenance service in convenient locations throughout the country. Our factory production facilities are not designed for repair work and we do not solicit repair work for the factory. Instead, we provide this service both through independent service organizations (currently 27 in number) whom we have found to be qualified and through aircraft service shops maintained by this company at Ontario, Calif., Cincinnati, and Dallas. In the interest of customer convenience, we have endeavored to build up a number of qualified independent organizations, and to assist more firms to acquire and maintain the necessary competence we operate an aircraft instrument school for their personnel. There is no charge for attendance at this school; the attendant pays only for transportation and living expenses. Our current list of independent qualified repair and overhaul facilities for General Electric aircraft instruments is attached as exhibit A. Because of the importance of aircraft instruments to safety of life and property, we do not in general sell special tools and test equipment or replacement parts for General Electric instruments without satisfying ourselves that the purchaser is qualified to use them. However, it is our policy where the Government awards a contract to a facility which has not taken steps to establish its qualified status with our organization to nevertheless supply repair equipment and parts whenever the Government so requests. We do this at our prevailing prices and delivery terms, which are the same as would be available to any servicing facility on the attached list, were it to be awarded the contract. This arrangement was worked out with the Government in March 1959. Since that date, upon Government request, we have quoted and regularly sold aircraft instrument parts to any Government contractor, including Action Manufacturing Co. We have examined all quotations to Action Manufacturing Co. in our files for both replacement parts and test equipment, and in each case we quoted the prevailing prices and delivery dates that were likewise available to both independent and company-owned servicing facilities. In one instance we expedited a delivery date at the Government's urgent request, and this has apparently been misconstrued by Mr. Stern as a discrepancy in quoting the original delivery date. With respect to Mr. Stern's charge of monopoly of the repair and overhaul business, the three aircraft service shops owned by General Electric Co. received approximately $300,000 of aircraft instrument overhaul business for the first 11 months of 1959. While we do not have available the total amount of repair and overhaul business on General Electric aircraft instruments which has been received by all independent servicing facilities, we feel certain that a canvass by the committee would reveal that the great majority of this business is performed by independent organizations. The statement has been made that technical manuals for overhaul are deliberately or inadvertently made incomplete to assure the performance of the overhaul work in our factory. This company takes considerable pride in the clarity, accuracy, and completeness of its service manuals, and we feel that Mr. Stern's testimony on these points is utterly unwarranted. During the life of any Government production contract awarded to this company for aircraft instruments, we are obligated to prepare overhaul manuals and to make any necessary revisions every 90 days in order to keep them up to date. This company meticulously meets these obligations with full realization of the anticipated use of our service manuals by Armed Forces personnel and their authorized representatives. Further, before acceptance and publication, these manuals are inspected by a qualified representative of the Armed Forces. The listing of parts in such manuals by General Electric part number is done strictly in accordance with military specifications which require identification by vendor part number and, where applicable, any Federal stock numbers are likewise set forth. We trust that this subcommittee will find the foregoing completely responsive to Mr. Stern's charges. Sincerely yours, F. GERALD TOYE, LETTER FROM FLOYD H. CREWS, CHAIRMAN, COMMITTEE ON PATENTS, ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK, WITH ACCOMPANYING PREPARED STATEMENT OF WILLIAM H. DAVIS Hon. RUSSELL LONG, DARBY & DARBY, New York, N.Y., December 21, 1959. Subcommittee on Monopoly, Committee on Small Business, DEAR SENATOR LONG: I enclose a copy of a statement by Mr. William H. Davis, made before the House Subcommittee on Patents of the House Committee on Science and Astronautics during the week of December 1. Mr. Davis was speak ing on behalf of the Committee on Patents of the Association of the Bar of the city of New York, and you will note he quotes a resolution of that committee on page 5 of his statement. 1 See p. 440. Mr. Davis' statement seems to me to be very pertinent to the questions which I understand your Subcommittee on Patents has been considering. I respectfully suggest that this statement be incorporated in the record of the proceedings of your subcommittee. Respectfully. FLOYD H. CREWS, Chairman, Committee on Patents, Association of the Bar of the City of New York. STATEMENT OF WILLIAM H. DAVIS, PATENT ATTORNEY, ON BEHALF OF THE COMMITTEE ON PATENTS OF THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK,1 MADE BEFORE THE HOUSE SUBCOMMITTEE ON PATENTS, COMMITTEE ON SCIENCE AND ASTRONAUTICS, DECEMBER 1, 1959 I have read with interest and with a great deal of satisfaction the proposed substitute section 305 of the act. It seems to me to be a long step in the right direction. I have at this time only one remark to make about it. It invests the Administrator with a great deal of discretion and responsibility. It seems to me that it would be a wise move if the Congress should give the Administrator some guide to the exercise of his discretion in the form of an appropriate declaration of policy to be incorporated in the amended act. I have been bold enough, merely by way of suggestion, to draft what I would regard as a generally appropriate declaration of such policy. I will return to that suggestion at the end of my remarks. If I can add anything of value to the discussion it will be by underscoring and emphasizing that the Administration has to deal with two aspects of inventions (1) the invention itself; i.e., the technological advance that has been achieved and (2) the monopoly, limited in duration, that has been created under the constitutional provision (art. 1, §8) to promote the progress of useful arts. It takes little consideration to realize that the interests of the United States will be protected and advanced by quite different procedures in dealing with these two aspects. As to the technological advance, those interests of the United States which depend upon the availability for use by the Government and its contractors of the technological improvement are amply taken care of by "an irrevocable, nonexclusive, nontransferable, royalty-free license for the practice of such invention throughout the world by or on behalf of the United States or any foreign government pursuant to any treaty or agreement with the United States" (305 (f)). But the situation is quite different as to the monopoly, limited in durationthe right to exclude granted to the inventor or his assignee by the Government under the patent law. This difference is implicitly recognized and pretty well expressed in the new "policy" paragraph 1245.103 of the rules and regulations of NASA. "(a) the stimulus of private ownership of patent rights will encourage the development of the invention to the point of practical application earlier than would otherwise be the case, or (b) there are substantial equities justifying the retention of private rights in the invention." This right to exclude left in the hands of the United States is of no use to anyone because it becomes in fact available to everyone. It no longer retains the incentive value of a patent in competitive private ownership. The United States never has undertaken to exclude and I am convinced that it never will undertake to exclude any citizen of the United States from the use of a Government-owned patent monopoly. There are obvious reasons why this has been so. During the First World War our Government came into possession of patent rights in many valuable inventions, particularly in the chemical industry; most of them in the hands of the Alien Property Custodian. There was a great deal of discussion about exploiting these rights in this country. The need to preserve the incentive, to protect the risked investment of money, time, and skill by a pioneering exploiter, was well understood, and it was recognized that this would involve the discriminatory granting of licenses to favored persons or corporations in important fields of industry. It was seen that the enforcement of the right to exclude on which the licensee or licensees would rely for re 1 Mr. Davis is past president of the New York Patent Law Association. coupment of their investments would entail the setting up-presumably in the Department of Justice-of a patent litigating section to enforce the monopoly by suits in the Federal courts against less favored citizens who might challenge the validity of the patent monopoly or the propriety of the discrimination. The Wilson administration decided, on what I think was very good advice, to keep out of any such mess. Because the development of atomic energy has been primarily a Governmentfinanced enterprise, the United States since 1946 has become the owner of extensive patent rights in that field. The Atomic Energy Commission has granted nonexclusive licenses to all comers without royalty, but it has never granted exclusive licenses to favored persons or corporations, and I am quite sure that it never will. Thus, the vesting of the right to exclude in the U.S. Government does not advance it sets back-the interests of the United States, defeating the purpose of article 1, section 8, of our Constitution, by emasculating the incentive of the patent law to encourage "the development of the invention to the point of practical application earlier than would otherwise be the case" and effectively ignoring the "substantial equities justifying the retention of private rights in the invention" (NASA rules and regulations, sec. 1545.103). What I am saying is that rational consideration of the interests of the United States must recognize (a) that monopoly rights in patents for inventions cannot usefully be vested in the Government; (b) that the Congress should eschew the vesting in the United States of such monopoly rights; and (c) that Congress should leave the monopoly rights in private ownership where they stimulate invention and development of technological innovation. I am not unaware that looking at the matter from the point of view I have stated leads to the same conclusion that has been pressed upon this committee by others a complete condemnation of section 305 of the National Aeronautics and Space Act of 1958. Indeed, as a spokesman before your committee for the Committee on Patents of the Association of the Bar of the City of New York, I am directed to call the attention of this committee to the following resolution adopted by the Committee on Patents and transmitted to the General Counsel of the NASA: "Resolved, That the interests of the United States would be best served if the contractor would retain title to all inventions made under the National Aeronautics and Space Act of 1958 and the Administrator retain for the Government only a nonexclusive, royalty-free license." I think this conclusion is implicit in the fact that we cannot shut our eyes to what would be the practical consequence of replacing the vesting of exclusive rights in the United States called for in section 305 by the vesting of that right in the inventors or their assignees, the contractors. It is only too clear that vesting this monopoly in the United States lays a dead hand upon the incentive to progress in the useful arts for which our Constitution intended it. The procedure is, I suggest, like that of the wicked and slothful servant who went and hid his talent in the earth; whereas vesting the right to exclude is that of the good and faithful servant who receiving the five talents "went and traded with the same." Or should I say that section 305 as it now stands is best compared to the dog in the manger who slept on the hay and kept the cows from eating it? I only wish that I could give to this committee a concrete picture of what the now recommended disposition of the patent monopoly could, if we are to judge by experience, amount to in aeronautics and the exploration of space. To what extent retention of the patent monopoly by the United States under section 305 is an impediment to getting contractors to take on these Government contracts involving research and invention in aeronautics and the exploration of space is a question as to which I have no specific, concrete knowledge or experience. It is certain; however, that the arrangement of section 305 is no enticement to a contractor; whereas the substitute provision now proposed would be a very real enticement. Indeed we would be justified in hoping that it might give rise to competition among contractors to the obvious advantage of the interests of the United States. But beyond the contractors let us take a look at the individuals; because it is individuals not contracting corporations that make inventions. So long as the individual employee knows that his employer can reap no advantage from patent rights he can hardly expect that the employer will extend to him any special compensation for his invention. It is, of course, the common and perhaps necessary practice that the employees in such work |