Government knowing about it. As far as I know, no one has ever surveyed the whole list of Government inventions and made a judgment about the commercial potential of each one. In any event, I doubt whether anyone whose money is not actually at stake could effectively made such a judgment about commercialization.

In my view, therefore, this issue remains an issue of policy whose resolution ultimately reflects your views as to the proper roles and relationships of the Government and the private sector, as well as your views as to the nature of inventions and the proper and beneficial, or destructive and dangerous, role of self-interest in promoting the national economy.

I find in discussing this subject that people who have not thought much about it tend to form opinions quickly on the basis of several unexamined assumptions or preconceptions. I call these preconceptions "myths," because they are usually influential and widely shared, but also because they tend to be wrong.

Thus, a patent is generally thought to cover a wide area of technology, so much so that it will block out that whole area from study by others. Actually, almost every patent by itself covers only an infinitesimal area of technology and generally speaks to but one of several alternative ways of doing things.

Very few patents are seminal. It is highly doubtful, for example, that a cancer cure will be covered by a single patent, yet this possibility is always mentioned in discussion about Government patent policy.

Another related myth is that a patent blocks out development of alternatives. Actually in fact it acts as an incentive to come up with alternatives.

Another myth is that if a patented invention is freely available it will be exploited widely. Actually this tends to be true only when the invention has already been developed pretty well to the point of commercial application so that to exploit it will not require substantial private investment in development.

But for most other inventions, which are not developed to the point of commercial application under a Government contract, it is likely they will not be developed with private capital unless there is some patent protection for the investment.

Any particular company has limited funds, and will tend to choose to develop a product or an idea in which its investment can be protected by exclusivity over one which its competitors can freely copy after the company has developed it.

It is often said that if an idea is good it will be used by all, but this is not necessarily true. It depends on what has to be done to bring the idea into practical reality.

Which brings up another myth-that inventions made under a Government contract are developed under the contract to the point of commercial application. This is the origin of the slogan, "The Government pays all, the Government should own all."

In fact, this is the exceptional case. In most cases the agency is not seeking inventions, per se, it is seeking a product that can do specific defined things. If in the course of developing the product, inventions are made, well and good. If not, also well and good, as long as the product is developed.

Inventions are byproducts. They may or may not be developed in the course of carrying out the contract. And if they are not, probably they cannot be exploited without the investment of private capital. And if they are fully developed, it might well be that further private capital will be needed to put them in a commercial form for the private sector.

Defense or space work, for example, demands products which in terms of both performance and cost are well beyond what the private sector needs or can buy. So when you ask what does it take to get an invention practiced so that the public actually will obtain some benefit of it, one usually cannot say that the Government has paid all.

A related myth is that patents can be used to sit on ideas, simply to prevent any development of them altogether. Actually, it is highly unlikely that courts will grant injunctions against use of a patent when the patent owner or licensee is not exploiting the invention. Equitable remedies are generally not available, in other words, to dogs in the manger.

The last myth I will mention is that companies will readily take contracts under which they give up patent rights to the Government. Some will, it is true, expecially the big firms which are heavily dependent on Government business. But there are companies who will not, particularly if the subject matter of the contract cuts to the heart of their commercial expertise. And these may be just the companies who could do the best job. Even if a company takes the contract, it may save its best people for work with a more protectable payoff for the commercial side of the business.

In the next few pages of my prepared testimony, I summarize the history of Government patent policy. I can more briefly cover that in oral testimony than reading it. Essentially the Government patent policy questions first arose as a major issue after World War II. During the War, the predominant policy of the military departments was to leave commercial rights with the contractors. A notable exception was the work on atomic weapons. The Atomic Energy Act of 1946 and succeeding acts clearly enunciated the policy that the Government should acquire all rights and inventions made in performing Government contracts involving atomic energy.

Only a relatively few companies actually participated in the development of this brandnew technology, and their activities were almost entirely funded by the Government. A clear concern of the statute was to assure that in these circumstances no one company would be permitted to obtain a monopoly over the future commercial exploitation of atomic energy.

In 1947 the Department of Justice performed a substantial study which recommended that the Government take title to all inventions and make the inventions available to everyone.

The Department of Defense resisted this policy largely for the reason that it feared such a policy would deter the most highly skilled contractors-those with commercial positions in the areas of technology of interest to the Department-from pursuing the Department's contracts and thereby jeopardize the success of its R. & D. programs. No statute has ever been enacted to govern Department of Defense patent policy. Its policy-to acquire only a license

of free use-was and is administrative only. Because of the size of the Department's R. & D. programs, however, the great bulk of inventions made in Government contracts have remained in the hands of contractors, at least until recent years.

At the same time, agencies with large in-house programs, such as the Agriculture Department, which had a mission to develop new products and processes for immediate use in the civilian economy, took title to the inventions made in these programs, and many of them by government employees, and offered these inventions free to the public and industry for use. Some were tremendously useful, such as frozen orange juice and the aerosol can, and received widespread application.

Thus, there was established the division which is still observed between the license agencies and the title agencies, based primarily on the difference in agency mission.

NASA was established in 1957, and its patent policies were adopted without much discussion, on the basis that space was going to be a new area of technology like atomic energy. Therefore, NASA was to take title to inventions, but the administrator could waive some rights back to the contractors. In 1959, NASA sought to have its policy changed more like the Department of Defense, and while this was being considered, other voices strongly attacked the license policy of the Department of Defense.

In 1960 and 1961, the Department reexamined its policies and reaffirmed them in the main, but revised its procurement regulations to specify instances in which contracting officers were to consider acquiring title to inventions instead of routinely only acquiring only a license. However, under the influence of the attacks on the license policy, most of the R. & D. programs with civilian applications which were enacted during the 1960's, such as the Saline Water Act or the Coal Research and Development Act, contained broad language requiring that the research results, including patents and inventions be made freely available to the general public. This language was interpreted as requiring a title policy.

The ferment over patent policy culminated in 1963 when President Kennedy issued a statement on patent policy. The statement was the first attempt to achieve a Government-wide patent policy. It is perhaps more accurate to say that the statement was an attempt to state a rationale for the diverse patent policies which were then in existence.

Thus, the statement called for a flexible policy rather than a uniform one. The policy was intended to balance all of the various themes we have noted: to stimulate research and development, attract contractors, avoid monopolization, recognize the equities of both the Government and the contractor.

Its central method was to determine what policy applied to a particular contract by referring to the purpose of the Government in entering into the contract. If the purpose was, for example, to develop a product to the point of commercial application, title to inventions should be taken because private investment will probably not be needed. Or if the contract was in a new field of technology in which the Government was the principal developer

and in which the first contractors might obtain preferred or dominant positions, title should be taken to help avoid that result. On the other hand, if the purpose was to develop a product for the Government's use and the contractor had an established commercial position in the field of technology involved, the Government would take only a license to inventions, leaving ownership and the commercial rights to the contractor, who was thought most likely to develop the inventions for commercial use and practical benefit to the public.

In cases which did not fall into either category, the rights were to be determined only after the invention was made and reported, and the decision was to be based on the extent to which incentives were needed to bring the invention to commercial application. Moreover, if the Government did not obtain title, it was to obtain what were called march-in rights, namely, the power to march in on the patent owner, obtain the title from the patent owner, and license others if, after a certain number of years, the patent owner was not taking active steps to commercialize the invention and if someone else wanted to do so. Thus, the march-in rights were intended to deal with the dog in the manger and prevent it from sitting on a good idea while preventing others from using it.

I have sometimes thought of the Kennedy statement as a treaty of peace. Despite its imperfections, it served that function. The debate on patent policy thereafter became quiet for a period of years. In 1971, President Nixon reaffirmed the Kennedy statement but amplified it to encourage agencies to grant exclusive licenses to Government owned patents where necessary to stimulate commercial applications of these patented inventions. In addition, agencies working in areas of public safety, health, or welfare, which were normally instructed to seek title, were encouraged to consider leaving title to contractors in exceptional circumstances. Thus, for example, the Department of Health, Education, and Welfare felt authorized to enter into a number of institutional patent agreements with universities which had established programs for licensing their inventions for commercial use on reasonable terms.

There was also carried out the Harbridge House study, which other witnesses will be able to discuss in greater detail. Suffice it to say that the results of the study, which is the most extensive ever attempted, did not conclusively resolve to everyone's satisfaction the title-license issue. Each side found something to argue about. However, the study did not identify factual harm to the public interest arising out of the policy to leave commercial rights with contractors and did support, with factual examples, certain benefits in terms of developed inventions.

The most significant recent statutory enactment is section 9 of the Non-nuclear Energy R. & D. Act of 1974. This act governs nonnuclear contracting by the Deapartment of Energy and has also been made to apply to certain other programs like water desalinification as well. Succeeding witnesses will describe this statute in greater detail. Essentially, it requires the Department to acquire title to inventions but permits the Secretary, in accordance with prescribed considerations, to waive commercial rights back to the contractor, either at the time of contracting or when individual inventions are recorded. March-in rights are provided as well as

power to issue exclusive licenses to Department-owned inventions. One of the features of the statute is that it provides detailed criteria for the division of rights between Government and contractor.

In implementing the act, the Energy R. & D. Administration and now the Department, state in the regulations that patent incentives are among the incentives made available to the Government to stimulate commercial development of new energy technologies. The regulations go on to state that it is, "Intended, therefore, that waivers will be provided in appropriate situations to encourage industrial participation and foster rapid commercial utilization in the overall best interest of the United States and the general public."

However, the waiver procedure is necessarily cumbersome, and in practice, waivers have been increasingly difficult to obtain.

In 1970-72, the Commission on Government Procurement considered Government patent policy along with the myriad other aspects of procurement policy. The Commission's judgment was that the Presidential statement of patent policy as modified in 1971 should be given more time to work.

However, the Commission considered an alternative patent policy, and the Commission staff actually drafted a statute to put it into effect. It was generally to allow contractors to retain title to their inventions but a strong Patent Control Board was provided to exercise march-in rights in the interest of assuring usage of the patents and avoidance of situations inconsistent with the antitrust laws.

This alternative was further refined by an interagency committee in 1975 and 1976 but was not introduced as a legislative proposal. Today the Congress is awaiting recommendations which may emerge from the various studies which the President has set in motion on arresting the perceived decline in American technological innovation to which Senator Schmitt has referred. Changes in patent policy may be among such recommendations.

On the basis of my own experience in Government, Senator Schmitt, I very much support the objectives and provisions of S. 1215. It carefully defines the limited instances in which agencies are to acquire title, permits waivers even in these situations, and gives the contractor the option to retain commercial rights in other situations. I would delete the requirement of title in classified situations, since patents related to national security may more properly be protected in the Invention Secrecy Act.

Were S. 1215 to be enacted, I believe the commercialization of new ideas would be stimulated while, at the same time, the public interest in competition could be protected. Needless destruction of patent incentives by taking title for the Government would be avoided, and a greater willingness to participate in Government programs on the part of industry would be promoted.

In some instances, title in the Government may be justified, but I think relatively few. One I would add is when the contractor's job is to guide and direct others. Taking title in this instance assures the other contractors of the lead contractor's disinterestedness toward their ideas.