proprietary lines.

Firms which follow this policy even more fully try to assure corporate ownership of patents before initiating work on a government contract or may consciously isolate government work from their commercial operations. In the latter case, there is usually little interchange of technical innovations between the government and commercial activities of the firm and there may be some loss of relevant technical experience and applications to the government work.

Lastly, large diversified firms often follow different patent policies in different divisions of the organization. Accordingly, they may be willing to participate in government programs with small concern for patents in some areas but with great concern for patent rights in others. It is difficult to generalize about these firms except to notice that their policies tend to follow the patterns of the industries in which their divisions participate. Their behavior may, therefore, resemble any of the categories of firms described above if their divisions have similar business profiles.

With respect to educational and nonprofit institutions refusal to

participate for patent reasons is not normally a problem. However, instances were found in Department of Interior programs where patent problems were encountered because of conflicting institutional obligations arising from joint support of a research program or where rights in background patents were sought as a condition of

the project. With the rising interest in nonprofit institutions in patents as a source of revenue, greater concern over patent rights can be expected from institutions with large research programs as financial pressures on these organizations continue to increase.

Viewing the participation problem from the standpoint of individual government agencies, the effect of patent policy varies with the nature of their R&D programs and the contractors that participate in them. Participation problems are not a concern to TVA which performs virtually all its research and development itself and, therefore, has little or no contractual interface with industry. They are also minimal in Agriculture programs since that agency contracts almost all its extramural research and development with educational and nonprofit institutions. In addition, the firms that do participate in its programs do relatively little research and development on their own and tend to be less patent conscious than those participating in defense/aerospace work.

The direct effect of policy on NSF and HEW programs also appears to be small because most of their contract research is either basic in nature, offering limited opportunities to develop patentable inventions, or is performed by nonprofit institutions who, for the most part, are interested in the research for itself. However, some problems may be encountered in instances of joint or overlapping research at nonprofit institutions where the rights of other parties may be involved. And, a significant indirect effect has been noted in an important HEW health program where voluntary

noncontractual participation by a patent sensitive industry was curtailed because of patent considerations.

The Department of Interior, like HEW and NSF, has a number of programs --such as water desalination--which are oriented toward developing basic technologies. The Agency contracts in these areas with research-oriented industrial firms (many of whom are patent conscious), as well as educational and nonprofit institutions, and acquires title to patents arising under its programs. Under some programs, statutes on which they are based have been interpreted to require the agency to acquire rights in existing patents owned by contractors because of their relevance to the contract effort and future utilization of contract results. These factors--patent conscious organizations and acquisition of rights to contract inventions and existing patents--have resulted in several instances of hesitation or refusal to participate in the government program. Insufficient data was available to establish how widespread the reaction was or its overall effect on Interior programs.

The largest number of opportunities for participation problems occur, of course, in DOD, NASA, and AEC programs because of the size and scope of their contract effort. Only a limited amount of data was available on this question for these agencies but a few general observations may be made. At least as to the majority of DOD inventions, to which contractors are normally permitted to retain title, no problem arises. In addition, NASA's policy of waiving title to inventions to promote utilization under appropriate circumstances provides a method for resolving competing government and industry objectives with regard to patents arising under contract. Lastly, interviews with industrial firms in the survey sample indicate that--except where a large investment in private research, know-how, inventions and/or patents considered to be valuable in commercial markets exist--acquisition or improvement of technical skills is sufficiently important to them in most cases to justify participating in government programs in their areas of interest even though patent provisions are not completely suitable to them.

However, this does not mean that either a title or license policy will equally serve the government's interests under all the above circumstances, since the policy selected may also affect industrial decisions to use contract inventions commercially. Here again, a balancing of government objectives appears necessary to ensure that the net effect of the patent policy promotes the government's overall goals.

TABLE 1

CONCENTRATION OF R&D FUNDS (1965) IN RELATION TO AGENCY AND
GOVERNING POLICY CRITERIA AND PATENTS ISSUED (1957, 1962, 1965)

TABLE 5

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