rights for governmental purposes so that Government needs can be satisfied, with small business participating in Government procurement contracts, any policy which would tend to stifle the incentive of small business to exploit inventions commercially for nongovernmental purposes appears to be contrary to the objectives of this subcommittee. It is submitted, therefore, that the position of the American Bar Association as set forth in the resolution above is the position which should be adopted by this subcommittee insofar as small business is concerned. ANDREW B. BEVERIDGE, Chairman, Committee No. 601-Legislation, Section of Patent, Trademark and Copyright Law, American Bar Association. APPENDIX XV PATENT POLICIES OF LARGE PRIME CONTRACTORS OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE, SENATE SMALL BUSINESS COMMITTEE. SUPPLY AND LOGISTICS, Washington, D.C., January 15, 1960. GENTLEMEN: In regard to Senator Long's inquiry at pages 561 and 5621 pertaining to the patent policies of the 20 largest prime contractors, I enclose the original letters received from the following: The Martin Co. Chrysler Corp. Republic Aviation Corp. United Aircraft Corp. Westinghouse Electric Corp. Boeing Airplane Co. International Business Machines Corp. McDonnell Aircraft Corp. When we receive replies from the following contractors we will furnish them, and this will complete the requirement: Sperry Rand Corp. General Dynamics. North American Aviation, Inc. General Electric Co. Lockheed Aircraft Corp. Douglas Aircraft Co. Hughes Aircraft Co. American Telephone & Telegraph Co. Raytheon Manufacturing Co. Grumman Aircraft Engineering Corp. General Motors Corp. Enclosures: Letters from contractors. G. C. BANNERMAN, Director for Procurement Policy. BOEING AIRPLANE CO., Seattle, Wash., January 7, 1960. Mr. PHILIP LEBOUTILLIER, Jr., DEAR MR. LEBOUTILLIER: This will acknowledge your inquiry of December 22, 1959, concerning our practice in acquiring rights in inventions made by our subcontractors in the course of research, developmental, or experimental subcontracts. Boeing Airplane Co., does not acquire either license rights in, or title to, inventions made by its subcontractors under Defense Department prime contracts. 1 See p. 296. 2 See app. XV (A), p. 453, for copy of letter addressed to these contractors by Defense Department. With minor exceptions, the same is true in the case of other (non-Defense Department) contracts. The principal exception was an arrangement we had with one company in the course of our commercial thrust-reverser-sound-suppressor research; under that contract each party received certain license rights in inventions made by the other. We do acquire title to inventions made by consultants, or by employees of another company under what we call technical assistance or technical services agreemnts, which agreements are closely analogous to consulting agreements, if the agreements are Boeing funded (i.e., not under a Government prime contract). Our practice, which is more liberal than that of the Government, is based upon the beliefs that a master-servant relationship does not exist between Boeing and its subcontractors, and that leaving the patent rights with the originator is an incentive to him to accept the job and do his best. Very truly yours, Mr. PHILIP LEBOUTILLIER, Jr., WILLIAM M. ALLEN, President. CHRYSLER CORP., Detroit, Mich., January 4, 1960. Deputy Assistant Secretary of Defense, Supply and Logistics, DEAR MR. LEBOUTILLIER: Mr. Colbert has received your letter of December 22, 1959, read it, and referred it to me for answer. We are glad to give you the information you desire. You ask for our policy on four items which we enumerate below, together with our answers. 1. Question. Acquiring title to subcontractors' inventions under defense contracts. Answer. Should we have a contract with the Government requiring us to obtain title to inventions made by our manufacturing subcontractors, we will use our best efforts to obtain title. To date, however, none of our contracts have so obligated us except for the broad provision in certain space contracts to comply with the provisions of the Space Act. 2. Question. Acquiring license to such inventions. Answer. Some of our Government contracts require us to attempt to obtain free licenses from subcontractors for the benefit of the Government and in those instances we use our best efforts to obtain such licenses. 3. Question. Acquiring title to contractors' inventions under your own contracts. Answer. When we make research and development nondefense contracts with manufacturing contractors it is not our policy to require conveyance to us of title to inventions made in the performance of the contracts. If we make such contracts with individuals (as distinguished from manufacturing concerns) we are likely to ask for title and we pay a fee to justify that course. 4. Question. Acquiring license to such inventions. Answer. When we make nondefense research and development contracts it is our policy to require conveyance to us of a nonexclusive free license to practice inventions made in the performance of the contracts. If there is any further information we can give you on this subject, please do not hesitate to ask us for it. Yours very truly, J. KING HARNESS. INTERNATIONAL BUSINESS MACHINES CORP., New York, N.Y., January 7, 1960. Mr. PHILIP LEBOUTILLIER, Jr., Deputy Assistant Secretary of Defense, Supply and Logistics, Department of Defense, Washington, D.C. DEAR MR. LEBOUTILLIER: IBM is pleased to cooperate with the Department of Defense by furnishing the information requested in your letter of December 22, 1959, to Mr. Watson. Information provided in the following numbered paragraphs corresponds to similarly numbered categories set forth in your letter. 1. IBM's policy is to not acquire title to research and development subcontractors' inventions under defense contracts. 2. IBM's policy is not to acquire a license to research and development subcontractors' inventions under defense contracts, except under special circumstances; e.g., where IBM has furnished a design upon which the subcontractor's study or development is based. This is a rare occurrence. 3. Where IBM places a commercial contract for research and development work with another company, it is our usual practice to specify that the contractor has the first right to file both domestic and foreign patent applications on his inventions. When the contractor fails to file any patent application in any country on an invention, IBM will receive title to the inventions made by the contractor. Where the contractor is an established research or engineering organization which customarily assigns title to the sponsoring organization, we also receive title. Further, we receive title when the contract calls for joint development and IBM provides a significant amount of technical information, advice, counsel, or other assistance. In each of the above situations when IBM receives title, the contractor is given a worldwide, nonexclusive, royalty-free license with the right to sublicense others without limitation. Where the work of the contractor is likely to result in a design patent, IBM receives title to protect the distinctive design of its equipment. 4. Where IBM places a commercial contract for research and development work with another company, it is our usual practice to specify that the contractor has the first right to file both domestic and foreign patent applications on his inventions. If he files in one or more countries, IBM may request similar filing, at IBM's expense, in additional countries. Under the above situations, the contractor grants IBM a worldwide, nonexclusive, royalty-free license, with the right to sublicense IBM subsidiaries. It is hoped that the above information will be sufficient for your response to the subcommittee. Should you have any questions regarding this information, please let me know. Very truly yours, Mr. PHILIP LEBOUTILLIER, Jr., Deputy Assistant Secretary of Defense, J. W. BIRKENSTOCK, vice president. THE MARTIN CO., Baltimore, Md., December 31, 1959. DEAR MR. LEBOUTILLIER: Your letter of December 22, 1959, requested information with respect to the policy of the Martin Co. in the matter of obtaining rights in inventions made or first reduced to practice by subcontractors when the prime contract is a Defense Department contract for research and development or for experimentation and contains a standard patents clause (ASPR 9-107.2). It is understood that you require this information for use in responding to certain inquiries made by the Subcommittee on Monopoly of the Select Committee on Small Business, U.S. Senate. In the fields of research and development and experimentation for the Department of Defense, the Martin Co. performs generally under cost-type contracts. In subcontracting under such contracts, a general company subcontract patent clause is used under which the subcontractor agrees to grant to the Government an irrevocable, nonexclusive, nontransferable, royalty-free license to practice subject inventions conceived or first actually reduced to practice under the subcontract. The Martin Co. receives neither title to nor a license to use such 'subject inventions. Title remains in the subcontractor. We believe this policy to be consistent with the general philosophy that subcontractors should have commercial rights in their inventions, improvements, and discoveries. On the other hand, when the Martin Co.'s own funds are involved, title to inventions conceived or reduced to practice by subcontractors vests in the company. The same is true with respect to consultants. We trust that the foregoing will assist you in preparing a reply to the subcommittee. Should you or the subcommittee require any additional information, we shall be happy to furnish it. Very truly yours, W. B. BERGEN. MCDONNELL AIRCRAFT CORP., (Attention: Philip LeBoutillier, Jr., Deputy Assistant Secretary of Defense.) Subject: Patent clauses used with subcontractors. Reference: (a) Letter dated December 22, 1959, from Philip LeBoutillier, Jr., Deputy Assistant Secretary of Defense (Supply and Logistics), Washington, D.C. ASSISTANT SECRETARY OF DEFENSE, Washington, D.C. DEAR SIR: 1. In response to your request for information on the subject contained in reference (a), the following procedure is used by McDonnell Aircraft Corp. (M.A.C.) for all subcontracts to suppliers for experimental, research and development work. 2. For all types of R. & D. prime contracts, whether the "cost plus fixed fee" type or the "incentive fixed price" type is used for the subcontract, M.A.C. includes in the subcontract a form which automatically incorporates all Armed Services Procurement Regulations (ASPR) which are in M.A.C.'s price contract. 3. This contractor attempts to obtain from subcontractors, under R. & D. work, the incentive-fixed-price type of subcontract and has been successful in a very high percentage of negotiations. This type of subcontract gives M.A.C. more precise control of the expenditures under our prime contract. In this case we simply use the ASPR clauses, as a royalty-free, nonexclusive, and nontransferable license on all inventions automatically accrues to the Government. 4. In more complicated subcontracts which would call for considerable research, development, and experimentation, M. A. C. submits to the subcontractor an additional form which has the following patent-rights clause in it: PATENT RIGHTS (a) Seller hereby assigns to M.A.C. all patent, design, and reproduction rights under all inventions, improvements, and developments which were first conceived or reduced to practice in connection with the work hereunder, subject to any rights which the Government may have. (b) For all designs, inventions, and development incorporated in the work, M.A.C. is hereby granted a nonexclusive royalty-free license or sublicense by seller under all licenses, patents, and patent applications which seller now owns or may acquire. Under such license or sublicenses, M.A.C. may produce or have produced, for sale or use throughout the world, said designs, inventions, developments, improvements, or devices, and improved forms thereof developed by M.A.C. In many instances paragraph (b) would not be applicable, and therefore it is either deleted entirely or the following clause is substituted in lieu thereof: (b) (alternate) Seller agrees to grant and does hereby grant to M.A.C. any necessary license or right to incorporate in aircraft of similar basic design seller's background patents, design, and proprietary rights on mutually agreeable and reasonable royalties, terms, and conditions, such terms and conditions being at all times no less favorable than granted by seller to any other licensee. Further, when the circumstances warrant, the words "U.S. Government" are substituted for "M.A.C." in paragraph (a). 5. One form or the other of the above clauses, or the variations thereof noted, are sought to be included in our subcontracts only to enable M.A.C. to discharge all of its responsibilities as a prime weapons system contractor of the Government, and to assure delivery of the weapons on schedule in spite of difficulties which might arise at supplier's plant. In all cases our reason for selecting one or another type of clause is explained to the subcontractor and most of them have come to accept the intent and wording used for the particular case involved, Our purchasing and legal departments do not know of any cases where M.A.C. has had to apply these clauses to obtain adequate performance by the subcontractors. We have no knowledge of any licenses or patent assignments made to M.A.C. thereunder. 6. Very little of our work is performed under other than Government contracts; however, the same wording is usually used under nondefense contracts for this type of work. Very truly yours, THOMAS G. RUTLEDGE, Secretary. REPUBLIC AVIATION CORP., Farmingdale, Long Island, N.Y., January 4, 1960. Mr. PHILIP LEBOUTILLIER, Jr., DEAR MR. LEBOUTILLIER: In response to your letter of December 22, the following sets forth the patent policies of Republic Aviation Corp. under research, developmental, or experimental contracts: Under defense contracts calling for research, developmental, or experimental work, and where payment is made for such work in subcontracts issued thereunder, it is Republic's policy not to acquire title to subcontractors' inventions, but to obtain licenses for the Government as required by ASPR 9-107.2. Republic also requires an irrevocable, royalty-free license under such subcontractors' inventions, but withdraws this requirement upon request. Under Republic contracts calling for research, developmental, or experimental work, it is Republic's policy not to acquire title to contractors' inventions, but merely an irrevocable, royalty-free license. We hope this information will be helpful in your considerations. MUNDY I. PEALE. UNITED AIRCRAFT CORP. East Hartford, Conn., January 6, 1960. Subject: Coorporate policy regarding subcontractors' inventions. DEAR MR. LEBOUTILLIER: This is in reply to your letter of December 22, 1959, inquiring about the policy of this corporation with respect to the acquisition of titles or licenses to subcontractors' inventions under Government contracts and non-Government contracts calling for research, development, or experimentation. It has been our consistent policy over the years not to acquire for ourselves titles or licenses to the inventions of subcontractors, and this is so whether the supplier is working as a subcontractor under a Government prime contract or as a direct contractor on a non-Government project. Where required to do so by the terms of a Government prime contract, we do require subcontractors to convey to the Government the license rights in their subject inventions in accordance with the provisions of ASPR 9-107.2, but in such instances we do not acquire from the subcontractor any additional rights on our own behalf. Accordingly, our answers to your four specific questions are as follows: 1. It is the policy of the corporation not to acquire title to subcontractors' inventions under research, developmental, or experimental defense contracts. 2. It is the policy of the corporation not to acquire licenses to such inventions. 3. It is the policy of the corporation not to acquire title to contractors' inventions under our own nondefense contracts. 4. It is the policy of the corporation not to acquire licenses to such inventions. The foregoing assumes that agreements with consultants, universities, and other research organizations not having production facilities are not the kind of contracts to which your inquiry refers and are not within the ambit of the Senate subcommittee's inquiry. However, if they are, we should note that where we enter into contracts for our own account with such consultants, universities, or research organizations not having production facilities, we generally |