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Government frequently is not capable of carrying, or has no mission to carry, the development of technology to the marketplace, and (c) the required funding and expertise to perform this function is not in the hands of most Government agencies. The expense necessary to place these capabilities in the various Government agencies will probably not be worth the cost to the taxpayer in most cases. Where these functions can appropriately be carried out by industry, and with little or no anticompetitive effects on the market place, the whole commericalization process is better left to the contractor that created the technology.

A contractor should never be forced to surrender its background patents. However, many Goverment agencies, including DOE, are alleged to force contractors to surrender their background patent when this is not the case. The DOE policy is to require a contractor, if it has background patents that will dominate the results of the research effort, to license such background patents on reasonable terms and conditions. The requirement to license is usually limited to the specific field of technology that was supported by the DOE contract, and is also limited to situations where the contractor cannot supply market demands. DOE policy in this regard would appear to adequately take care of the public interest, and in any event, is subject to negotiation because it is a highly sensitive and emotional issue.

Under DOE's "march-in” rights policies, the Government can retrieve an invention waived to a contractor, or require the contractor to license others, only where it is necessary to do so in the public interest, where the contractor is not adequately commercializing the invention itself, or where the contractor is misusing the invention to the detriment of competitive market forces. In only these situations should "march-in” rights be utilized. Where the contractor is adequately commercializing the invention, and is not abusing such right, the contractor should be left with the exclusive commercial rights.

5. Should the government require a payback, in addition to income taxes, when government-sponsored inventions are developed and marketed under exclusive rights? As an alternative to discretionary march-in rights, would your favor a selfenforcing licensing requirement whereby the contractor's exclusive rights in an invention would expire after a reasonable time, unless the contractor demonstrated a need for an extension?

The issue of whether the Government should require a payback, or a recoupment of its R, D&D investments, is a policy issue of the highest magnitude on which I would prefer not to take a position. I would only comment, however, that if such a policy is adopted, it should be carefully drafted in order that its implementation not cost more money than it has the capability of collecting. In particular, such a policy should not be uniformly applicable to all contracting situations, to all contractors, and to all inventions. For example, distinctions may be appropriate for small businesses, universities, and other non-profit institutions. The policy should only be applied to situations where discrete packages of technology can be identified to which the Government's contribution versus that of private industry can be reasonably apportioned, and where the method of collecting royalties or revenues can be negotiated in a businesslike manner.

As stated in the answer provided in No. 4 above, I do not believe that "march-in" rights should be exercised until there has been shown to be a need to inforce them. A self-enforcing licensing requirement would have the same effect. As long as the contractor is commercializing the invention, it should be allowed to continue to do so for the full term of the patent unless there is a demonstrated reason for shortening the term of exclusivity. Accordingly, I would not favor such an alternative.

THE HARBRIDGE HOUSE STUDY OF GOVERNMENT PATENT POLICY

A Synopsis Prepared For The U.S. Senate Commerce Committee

Richard I. Miller

Vice President
Harbridge House, Inc.

June 21, 1979

ORGANIZATION FOR PATENT POLICY STUDY CONDUCTED FOR THE FEDERAL COUNCIL FOR

SCIENCE AND TECHNOLOGY

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ACQUIRE AND REPORT DATA NEEDED TO EVALUATE THE
PRESIDENT'S PATENT POLICY AND FORMULATE USEFUL
LEGISLATION.

III.

REPORT INFORMATION USEFUL TO EXECUTIVE AGENCIES
IN ADMINISTERING GOVERNMENT-WIDE PATENT POLICY.

STUDY QUESTIONS

1.

WHAT EFFECT DOES PATENT POLICY HAVE ON INDUSTRY
PARTICIPATION IN GOVERNMENT R&D PROGRAMS?

WHAT EFFECT DOES PATENT POLICY HA VE ON COMMERCIAL
UTILIZATION OF GOVERNMENT - SPONSORED INVENTIONS?

WHAT EFFECT DOES PATENT POLICY HAVE ON BUSINESS
COMPETITION IN COMMERCIAL MARKETS?

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Known cases of hesitation or refusal to deal with government.

One hundred NASA waiver requests.

II.

Phase Two: Conduct Utilization Survey of Government-Sponsored

Inventions Patented in 1957 and 1962.

III.

Phase Three: Perform Case Studies of Selected Contractors and

Inventions to Gain Better Understanding of Patent
Decisions.

Study 21 high and low utilizers to determine reasons for their performance.

Study all sample inventions of TVA, Agriculture and Interior to determine effect of agency mission on invention utilization.

Study 16 educational and nonprofit institutions to determine their role in promoting utilization of government-sponsored inventions.

Study all survey inventions involved in infringement suits for effects on business competition.

Study the NIH medicinal chemistry program and drug industry response to determine effect of patent policy on industry participation in, and utilization of the results of the program.

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