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Section 7(a)

Section 7(a) specifies the situations in which the Government will take principal rights in any inventions made under a contract. These are limited to two situations. First are those situations in which the purpose of the Government is to fund any invention to the point of practical application. In such case, of course, there is no need to allow contractors to obtain principal rights in order to achieve utilization. The other circumstance in which the Government would take the principal rights initially is where the contract is with a nonprofit organization unless the agency head determines that there is a sufficient basis to believe that reasonable steps will be taken such as will promote the policies and objectives of this Act. Since most universities or nonprofit organizations lack a marketing and manufacturing capability, there is little to be gained by allowing them to obtain rights in inventions they develop under Government contracts. In such circumstances the invention would merely go idle. It is believed that there is a better likelihood that the agencies will have programs to encourage use of inventions. On the other hand, where such a nonprofit organization does have a program for bringing inventions to commercial use, then no reason is seen for not taking advantage of this capability.

Section 7(c)

Section 7(c)(1) is designed to guard against cases where the contractor has failed to take steps to bring the invention to the point where it is available to the public on reasonable terms, where the invention is necessary to fulfill health or safety needs, or where the use of the invention is required by regulations. The Government Patent Review Board is authorized, at any time three years after the patent has been issued (or at any time after the issuance of the patent in the case of inventions necessary to fulfill health or safety needs or when use of the invention is required by regulation), to license or require the licensing of the patent to persons filing applications with the Board on such terms as it deems proper and to otherwise modify and diminish the rights of the contractor. In addition, section 7(c)(3) establishes various criteria to be considered by the Board in making its determinations under section 7(c)(1).

it is recognized that the existence of the provisions at section 7(c)(1) tend to diminish somewhat the incentives for contractors to risk capital to develop an invention. This is especially true where the three-year time limit is unrealistic. Accordingly, section 7(c) also grants the Board authority to extend the period during which Board action may not be taken under section 7(c) or to set a period in the case of inventions necessary to fulfill health or safety needs or required to be used by regulation. The Board in considering such requests is to be guided by the criteria set forth in section 7(c)(3).

It is also recognized that there may be cases where companies with a strong background position in a particular area would refuse to enter into contracts where their commercial rights in inventions are not clear. In such cases, the Government may be forced to go to a less qualified contractor and to pay a higher price since the less qualified contractor will incur costs in attempting to develop the necessary background understanding. To avoid this problem, the Board is authorized, after application by an agency, to extend the exclusive period as to classes of inventions. It might be noted that the Board's decision in such cases, unlike most others of the Board, would be final pursuant to section 9(c) of the Act and would

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Section 7(b)

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Subject to the license to be granted the Government and to the limitations in sections 7(c) and 8, the Act provides that contractors will be given the option to acquire principal rights in inventions made under a contract in all cases not covered by section 7(a) at the time the contract is entered into. Section 7(b) also provides that where the contractor does not exercise his option, the Government will receive principal rights in the invention.

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mechanism over the revoking of contractor rights. If, for instance, this Act had merely provided that the occurrence of any of the four listed events would result in a forfeiture, one could readily foresee this issue being raised in patent litigation between private parties. A difficult question would then arise as to whether the district courts could make independent determinations on these matters.

Section 9

not be subject to the Administrative Procedure Act. This is because such decisions are intimately related to the contracting process itself, and to the orderly functioning of agency procurement activities.

Section 7(c)(2) requires the Board to include a finding as to whether an invention is necessary to fulfill health or safety needs or is required for use for governmental regulations as part of its final disposition of cases before it. Where a positive finding is made, a contractor whose rights had been diminished by the Board would be barred from obtaining injunctive relief against the use of the invention until such time as the Board's decision is fully reviewed and reversed by a court of competent jurisdiction. This section is designed to prevent a contractor who has been initially given principal rights to inventions necessary to fulfill health or safety needs or required for use by governmental regulations from delaying the use of those inventions by others through delaying tactics in court. In large part, it is believed the primary thrust of this provision is to reinforce the general reluctance of the courts to grant injunctive relief in situations involving inventions needed for public health and safety.

Section 9(a) provides that Board proceedings under section 7(c) and 8 are subject to the Administrative Procedure Act and judicial review. An exception is made, however, as discussed previously, for Board decisions regarding agency requests to extend the exclusive period for proposed contractors. In addition, Board approvals of the use of a "title" clause under section 7(a) (1) are not covered by section 9(a).

Section 9(a) also specifies that the Board actions which are subject to the Administrative Procedure Act are to be conducted on the record and with hearings. The APA, itself, does not require hearings, but merely provides procedures where another act requires hearings. Section 9(a) also limits requests for judicial review to a sixty day period so that uncertainties regarding patent rights will not unduly delay the development and utilization of inventions.

Section 9(b) grants finality to Board decisions under section 7(a). Likewise, section 9(c) makes clear that Board decisions on agency applications regarding proposed contracts under section 7(c) (1) are final.

Section 8

Section 10

Section 8 provides for the revoking, by the Board, of the patent rights of a contractor in an invention made under a Government contract under four circumstances. First, it applies where the contractor fails to render a prompt disclosure of an invention made under a Government contract. Second, it applies where he has made material false reports about such an invention. Third, it applies where the patent on the invention has been used in a manner that violates the antitrust laws. And finally, it applies where the statement required by section 11 was false. These safeguards are intended to prevent abuses by contractors and unconscionable use of inventions partly financed by the Government.

Under this section, the Board can act upon an application of an agency head, a private person, or upon its own initiative. The purpose of granting this authority only to the Board, and not also to the courts, is to place a control

Section 10 provides that agency heads may delegate their authorities under this Act.

Section 11

Section 11 requires that applicants for patents file a statement as to whether or not the invention was developed under a Government contract or during the course of their employment with the Government. This will aid in

Section 14

providing a system of easy identification of patents on inventions in which the Government holds an interest.

Section 12

Section 12 provides greater flexibility to the agencies than is currently possible in the promotion of Government-owned patents. Most importantly it clarifies the authority of the agencies to grant exclusive licenses, with or without royalties and for the whole or any part of the unexpired term of the patent. It also provides the necessary authority for Government agencies and grantees of patent rights to act to protect their respective rights. This is needed if a program including exclusive licensing is to succeed.

The language proposed here is merely intended as one way of arriving at the goal of clear cut authority for the issuance of exclusive licenses. No objections are seen to possibly developing more extensive statutory guidelines as to the use of the authority granted or to, perhaps, limiting some aspects of the authority.

Section 14 contains a series of technical amendments repealing various provisions governing the disposition of rights in inventions made under Government contracts which are in conflict with the provisions of this Act. Many of these also impact on policy in the copyrights and technical data areas. A number of these are simply statements that the results of particular research will be made available to the public. Since such language has sometimes been interpreted to require a "title policy” it must be amended. Likewise the repeal of the nonpatent aspects of these statutes is needed to allow flexible but more uniform Government-wide policies with respect to data and copyrights.

Section 15

Section 15 delays the effective date of the Act for about 6 or 7 months after its enactment depending on the time of the month it is enacted. Its purpose is to allow time for the agencies to make appropriate revisions to their clauses and regulations. However, it does allow the setting up of the Board immediately and for the commencement of efforts to develop implementing rules and regulations.

Section 13

Section 13 is a standard severability provision.

APPENDIX B

Draft Patent Infringement, Technical Data, and Copyright Legislation

This appendix is in two parts—a draft bill and a sectional analysis of that bill. The draft bill would implement the Commission's recommendations for legislative changes in the patent infringement, technical data, and copyright areas, except that it does not include the amendment or repeal of legislation impacting on agency policies on rights in technical data

and publishable material. Section 14 of the draft bill at Appendix A includes a series of amendments which would, as a by-product, accomplish the necessary amendments and repeals. However, since the amendments at section 14 also affect patent policy, additional drafting effort would be needed to limit their scope to data and copyright policies.

A Bill

To amend section 1498 of title 28, United States Code, and for other related purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That

SEC. 1. The first paragraph of section 1498(a) of title 28, United States Code, is amended by striking out the following: “in the Court of Claims”.

SEC. 2. The second paragraph of section 1498(a) of title 28, United States Code, is amended by adding at the end thereof the following:

"Except where expressly withheld as to specific patents, the authorization of the Government is hereby granted to each contractor, subcontractor, or any person, firm, or corporation to use or manufacture any invention described in and covered by a patent of the United States in providing property and/or services for the United States."

SEC. 3. The first paragraph of subsection (b) of section 1498 of title 28, United States Code, is amended (a) by striking out the words “And provided further" and the remainder of that proviso and by striking out the colon (:) which appears after the word “used” and substituting therefor a period (.) and (b) by striking out the words "in the Court of Claims”.

SEC. 4. Subsection (d) of section 1498 of title 28, United States Code, is amended by striking out the words “in the Court of Claims”.

SEC. 5. (a) Title 28, United States Code, is amended by adding the following new section in chapter 91 thereof: “$1508. Misuse of Information. The United States shall be liable for any damages to the owner of information for the misuse of such information where such information was submitted to or obtained by the Government in confidence and under conditions

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