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Senator SCHMITT. Mr. Denny, you are the chairman of the Federal Coordinating Council Subcommittee on Intellectual Property which has been discussing this issue in a broad way for a couple of years, and have been trying to reach a concensus among the interested agencies. Senator Stevenson and I would like to know if you have reached any agreement. Mr. DENNY. The answer is either "No" or "Yes," several times. It is a difficult issue, and it is debated hotly and continuously.

Senator SCHMITT. Red Skelton would say, "a flock of them flew over that time.”

Mr. DENNY. Right now it is my understanding that the committee representatives, the White House, and the agency are looking at that policy, and they hope to come up with an administration position in the near future, but they do not have one at this time.

Senator SCHMITT. Do you know if the administration, prior to announcing that policy, plans to consult with the Congress on such policy? Mr. DENNY. No, sir, I do not.

Senator SCHMITT. What options do the major R. & D. agencies support?

Mr. DENNY. I don't know. I can tell you the Department of Energy's position, which is also variable. We think in large measure we have the best patent policy Congress has ever produced. It has more guidance and more specialized authority than has been enacted before.

We cherish it, unless something better comes along, and we look with interest on the attempts toward a more uniform-a less burdensome-particularly myself, a less burdensome type of patent policy, along the lines of S. 1215.

Senator SCHMITT. Has the Justice Department expressed a view that you can give this committee? Or should we ask them? Mr. DENNY. I think you better ask them, sir.

Senator SCHMITT. Your executive branch committee is reporting specifically to whom at the next level up?

Mr. DENNY. I am chairman of the Subcommittee on Intellectual Property—that reports to the Committee on Intellectual Property and Information that is chaired by Dr. Jordan Baruch, the Assistant Secretary of Commerce for Science and Technology.

Senator SCHMITT. And eventually the options or the recommendations you develop will be transmitted to whom?

Mr. DENNY. From there, they will either go to the Federal Coordinating Council, or directly to the White House. I think to the President's Science Adviser, who chairs the Federal Coordinating Council, to that office, I believe.

Senator SCHMITT. When do you expect to have options or recommendations presented to the White House? Is there any schedule you are working toward?

Mr. DENNY. The only thing that I have been informed, Senator, is that the options are under consideration and there is hoped to be a solution later this year.

Senator SCHMITT. Is S. 1215 compatible with the options being discussed?

Mr. DENNY. Yes; certainly within the range.

Senator SCHMITT. Mr. Mossinghoff, NASA has participated in these subcommittee efforts, I believe. Does NASA have any specific option that they favor at this time? I am not necessarily looking for an endorsement of S. 1215.

Mr. MOSSINGHOFF. The most recent time NASA took a position on the efforts of the Committee on Intellectual Property and Information was our participation in the drafting of the bill which was published in the 1978 report of the Federal Coordinating Council on Science, Engineering, and Technology.

We would still support that approach as being consistent with the data that I have discussed in terms of getting inventions utilized. We recognize there are some strong views within the administration that also need to be accommodated and are certainly willing to work with any of those—with any of those counterproposals or alternative proposals.

I would characterize your bill, S. 1215, as being midway between the status quo for most agencies—which is the President's policyand the bill that appears in the report of the Federal Coordinating Council for Science, Engineering, and Technology. But we have not taken a specific position on your bill, as Mr. Denny pointed out.

Senator SCHMITT. Mr. Denny, in the modern jargon of this issue, there is a so-called "ERDA/reverse ERDA/Bayh-Dole option.” Can you describe, in 25,000 words or less, what is meant by “ERDA/ reverse ERDA/Bayh-Dole option?Mr. DENNY. Yes. Senator SCHMITT. Hopefully, less. Mr. DENNY. It basically—the concept is to adopt ERDA patent policy where the results of the research program are intended to be used by the general public. That policy is a presumption in favor of the Government taking title with a waiver option. In any research program where the purpose is to develop research for use by the Government, as opposed to the public, it reverses that presumption. That is, the presumption is that the contractor will take title unless situations are found where they should not, very much as in S. 1215. Hence, a “reverse ERDA” policy.

The “Bayh-Dole” concept to the option is added by a presumption across the board in favor of title to small business and nonprofitsa waiver would be assumed in all situations whether the research was intended for use by the public or by the Government.

Senator SCHMITT. And the "Bayh-Dole” bill which relates to universities and small business, is consistent with that policy? Is that correct?

Mr. DENNY. Yes, sir. I think there is one exception, though. I think the “Bayh-Dole" approach in the "ERDA/reverse ERDA/ Bayh-Dole” approach has a requirement for technology transfer programs to be approved, as it is I believe in your bill. And I do not think that is a limitation in the “Bayh-Dole” bill.

Senator SCHMITT. Mr. Denny, are you aware of any specific instances where a potential Government contractor has refused to contract with an agency because of its patent policy? Mr. DENNY. Yes, sir, I am. Senator SCHMITT. You mentioned that in your testimony. Mr. DENNY. It is an extremely difficult thing to document, but from my own experience it has happened. It happens with compa

nies. I have seen it happen with divisions of companies, and I have seen it happen with basically entire industries.

Senator SCHMITT. We have available a General Accounting Office report which I am sure you have seen prepared at the request of Senators Bayh and Dole, related to Department of Energy patent policies and procedures.

This report documents some of the delays that are brought on by the problems that you mentioned in your testimony. One of the more extreme cases was the Texas Instruments, Inc., invention of a material for solar absorption surface panels. It apparently took 41 months to get a waiver from the time it was requested. Do you think that the policy articulated in S. 1215 would improve this situation?

Mr. DENNY. Without question, Senator.

Senator SCHMITT. Would that affect participation in Government contract?

Mr. DENNY. You can't tell. There probably would be an effect in in those cases where the company is lukewarm for Government support in the first place.

You have to understand that DOE is—is dealing with private industry in fields, where they have been operating in many cases without Government support for years, and they have millions of dollars worth of investments. These companies may not deal with the Government under a title policy.

In other cases, the technology to be commercialized is going to take substantial sums, and in those situations I feel quite certain Government moneys are a desirable addition and a title policy may be acceptable. In other cases, they would rather not do business with us.

So I am sure—your question seems to address a gray area-that I mentioned there are cases where they say it is just not worth the trouble. [The material referred to follows:]

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., July 17, 1979. Hon. BIRCH BAYH, U.S. Senate.

DEAR SENATOR BAYH: On September 15, 1978, you and Senator Dole wrote that you had introduced a bill to establish a uniform Federal patent procedure for small business and nonprofit organizations and intended to hold hearings in the 96th Congress. You asked that we provide testimony, including a discussion of the procedures of the Departments of Energy and Health, Education, and Welfare for determining the patent rights for inventions arising from Government supported research and development. The procedures of these departments were to be contrasted with those of other Federal agencies.

As a result of discussions with representatives of your office and Senator Dole's and your letter of January 8, 1979, we also obtained information on the patent policies and procedures of the Department of Defense and the National Aeronautics and Space Administration.

We gave testimony before the Senate Judiciary Committee on May 16. A background paper on Government patent policy and detailed comments on the bill were submitted for the record. Answers to your questions were furnished for the record on June 21.

A summary of the patent policies and practices of the four agencies are included as enclosures to this letter. We obtained this information by working with patent officals of the respective agencies, but we did not ask the agencies for formal review or comment. The material is also being furnished to Senator Dole. This completes our work to safisfy your request. We are pleased to have been able to support your efforts toward a uniform Federal patent policy. Sincerely yours,

ELMER B. STAATS. Enclosures.

ENCLOSURE I.—DEPARTMENT OF ENERGY, PATENT POLICIES AND PROCEDURES The Department of Energy's (DOE) patent policy is based on Section 152 of the Atomic Energy Act of 1954, as amended; Section 9 of the Federal Nonuclear Energy Research and Development Act of 1974; and, to the extent not inconsistent with these statutes, the Presidential Memorandum and Statement of Government Patent Policy as revised August 23, 1971. Title 41 of the Code of Federal Regulations, Part 9-9, implements these statutory and Presidential guidelines.

DOE patent polices require the Government to acquire title to subject inventions made under contracts, grants, and other arrangements for research, development, and demonstration, but also provide for waiver of certain rights. When the Government retains title, the contractor retains a nonexclusive, revocable, paid-up license in the invention and the right to file and retain title in any foreign country in which the Government does not elect to secure patent rights.

The Department's policies provide that the Secretary may waive the patent rights of the Government to any invention made or to be made under contract with DOE if he determines that the interest of the United States and the general public will best be served by such waiver. There are two types of waivers—advance and individual. An advance waiver is requested at the time of contracting. If granted, the waiver results in a contract provision in which DOE waives its patent rights to all inventions made or conceived under the contract. An individual waiver is requested when a particular invention is made or conceived under a contract.

DOE's legislation established four objectives in making waiver determinations: Making the benefits of the energy research, development, and demonstration programs widely available to the public in the shortest practicable time;

Promoting the commercial utilization of such inventions;
Encouraging participation by private persons in DOE's energy programs; and,

Fostering competition and preventing undue market concentration or the creation or maintenance of other situations inconsistent with antitrust laws.

DOE's regulations implementing its legislation also provide 13 specific criteria for the Secretary's consideration in granting advance waivers and 12 specific criteria for individual waivers.

WAIVER OF RIGHTS TO UNIVERSITIES AND SMALL BUSINESSES Specific criteria in DOE's legislation and implementing regulations (issued July 13, 1977) provide for preferential treatment for small businesses and nonprofit education institutions. Waivers are generally granted to small businesses if the contract involves their privately developed technology.

For advnace waivers, DOE considers approved technology programs the equivalent of manufacturing and marketing capabilities, thus providing universities an equal footing with industry in requesting advance waivers. However, an approved program is not sufficient in itself to justify an advance waiver. The waiver request must be considered in light of the four objectives and 13 criteria established by the regulations.

DOE does not usually grant individual waivers to contractors, including small businesses, for identified inventions if DOE continues to fund development. The only basis for considering an exception is the extent to which the contractor will cost share development. DOE places great weight on cost sharing in making its waiver decisions.

For nonprofit educational institutions with technology transfer programs and capabilities that have been approved by DOE, the Department also generally grants individual waivers when it does not continue funding development after an invention is identified

DOE's decision on each waiver request is supported by a “Statement of Considerations” which spells out the reasons for either granting or denying the waiver. Each statement cites at least one objective and the specific criteria mandated by the legislation, and explains the basis for the recommended determination. All waiver determinations are coordinated with and concurred in by the appropriate program division.

INSTITUTIONAL PATENT AGREEMENTS DOE interprets its legislation as prohibiting the use of institutional patent agreements for waiving title to universities having approved technology transfer capabilities. The rationale for the Department's interpretation is founded on its waiver policies which are derived from the legislation discussed above.

However, for universities having DOE approved technology transfer programs, the Department adopted an abbreviated waiver petition in April 1979. This petition was developed to limit the information universities would have to submit when petitioning DOE for waiver of domestic patent rights to an identified invention.

PROCESSING ADVANCE AND INDIVIDUAL WAIVERS As of December 31, 1978, DOE had received 422 petitions for waivers from about 5,600 invention disclosures made on more than 6,000 contracts. The Department granted 216, or 51 percent; denied 46, or 11 percent; and closed or had withdrawn 48, or 11 percent. The remaining 112, or 27 percent, were in process. These consisted of 54 petitions for advanced waivers and 58 for individual waivers.

Three hundred of the 422 petitions received by DOE were for advance waivers and 122 for individual waivers. DOE gives processing priority to advance waiver petitions because they usually are made prior to contracting and, therefore, could affect contract negotiations. Thus, only 18 percent of the advance waiver petitions were in process on December 31, 1978, while 48 percent of the individual petitions were in process. With a caseload of 112 waiver petitions in process at the end of 1978, DOE was about one year behind in processing.

We analyzed processing time on 30 individual waivers which DOE identified as calendar year 1977 cases. The Department's processing time for closed cases ranged from three to twenty-five months, averaging about 13 months. Determinations on seven cases had not been rendered as of December 31, 1978. These petitions had been outstanding from 14 to 29 months, averaging 19 months from the date the petition was received by DOE.

Analysis of DOE's 1977 and 1978 determinations disclosed that 121 waivers were granted and 49, or 40 percent, were to small businesses and universities. During this same period DOE denied 17 requests, of which 5, or 29 percent, were petitions of universities. Two university petitions were denied without prejudice because the Department was continuing to fund the invention. No small business petitions were denied.

CASE STUDIES We reviewed 13 cases where contractors or inventors petitioned DOE for waiver of rights to identified inventions. Two cases were reviewed at the request of the Senate Subcommittee on the Constitution. The other 11 cases were selected because they were the oldest cases open when our review commenced in October 1978. During our review, 10 of the 13 petitions were approved, one was denied without prejudice (the contractor can petition again after DOE ceases project funding) and one was closed because the inventor failed to submit the required information. The remaining case also was closed because the petitioner did not submit required information but was reopened upon request for reconsideration. The time required to make determinations on the cases ranged from 10 to 41 months, averaging about 22 months from the time DOE received a formal petition.

We found the reasons for the delays in making determinations varied from case to case. In three cases the delays were attributable to DOE.

One case involved a vortex gas liquid heat exchanger developed by an employee of Sandia Laboratories. The inventor filed a waiver petition in February 1976. In June 1976, the Division of Military Applications informed the General Counsel's office at headquarters that the invention was not a subject invention conceived with DOE funding and that neither the Department nor Sandia planned to further develop or commercialize it. DOE, however, did not notify the inventor until almost two years later, in February 1978, that it would assert no rights in the invention. DOE personnel attributed the delay to an administrative oversight caused by the press of other business. They also pointed out that the inventor did not pressure DOE to resolve the case.

In another case, Texas Instruments, Inc. invented a material for solar absorption surface panels and petitioned for a waiver in September 1975. In November 1976, the Department's Chicago patent office recommended to the General Counsel's office that a waiver be granted. The Chicago office believed that a waiver would make the invention available to the public in the shortest time and would also promote the commercial utilization of the invention. However, the waiver was not granted until February 1979, or 41 months after it had been requested. A significant

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