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in December, AS&E petitioned HEW for foreign patent rights, which the Assistant Secretary for Health granted in January 1977.

In an internal memorandum dated February 1977, the National Institute of Neurological and Communicative Disorders and Stroke questioned the proposed issuance of an exclusive license to AS&E because another company had developed a similar system. The Office of the Assistant Secretary for Health, however, following the recommendation of the National Institutes of Health Inventions and Patents Board, advertised in the Federal Register on April 7, 1977, that it intended to grant AS&E an exclusive license unless, before June 6, 1977, the Department received either statements as to why the license would not be in the best interests of the United States or applications for nonexclusive licenses.

Although statements and/or license applications and notices of interest in filing applications were received from seven firms (none of which were small businesses), the National Institutes of Health Inventions and Patents Board recommended at a meeting on June 10, 1977, that a 3-year limited exclusive license be granted to AS&E. After granting the license on June 17, 1977, the Assistant Secretary for Health cancelled both the license and AS&E's foreign rights on July 21, 1977. Regarding cancellation of the license, the Assistant Secretary wrote: "I am compelled to take this action because the limited exclusive license was granted in violation of the applicable policies and regulations. Under the Presidential Statement on Government Patent Policy (36 F.R. 16887, August 26, 1971) and the Federal Procurement Regulations (41 CFR 1-9.107-3 (a)) which implement that Policy Statement, the Department did not have authority to grant AS&E a limited exclusive license to practice the inventions developed under its contract with the National Cancer Institute unless that license was a necessary incentive to bring the inventions to the point of practical application or unless the Government's contribution to the inventions was small compared to that of AS&E. The responses to the notice of intent to grant an exclusive license to AS&E, which appeared in the Federal Register (42 F.R. 18151, April 7, 1977), established that an exclusive license was not a necessary incentive to bring the inventions to the point of practical application. The contract under which the inventions were made was fully funded by the National Cancer Institute and thus the Government's contribution to the inventions was not small compared to that of AS&E. The exclusive license to AS&E was therefore granted without authority and in violation of the Presidential Statement on Government Patent Policy and the Federal Procurement Regulations.'

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The General Accounting Office believes the AS&E case demonstrates that an agency operating under the Presidential policy can move in almost any direction when determining rights to inventions.

Waiver cases

One case involved two inventions by University of Texas scientists relating to the hormone thymosin used for treatment of malfunctioning immune systems which can make people susceptible to arthritis and several kinds of cancer. These inventions were made with National Institutes of Health (NIH) funding and reported to HEW in September 1977, when the University also petitioned for rights. This was over four months after the University obtained a patent on one invention and over 10 months after it filed a patent application on the second invention.

HEW's Patent Branch received NIH comments in October and November 1977 and sent a determination to the Assistant General Counsel for review in December. This determination granting rights to the University was not acted on by the Assistant General Counsel until August 30, 1978, when it was sent to the Assistant Secretary for Health, who signed it in September.

It appears that development of the inventions was not impaired because the Assistant General Counsel delayed granting rights to the University. In July 1977 the inventor reported that a drug firm's studies of the invention showed that the compounds are not toxic.

In another case a Columbia University scientist with an NIH grant invented a solution for treatment of persons with severe burns. Although the University filed a patent application in December 1974 and the invention was published in International Surgery's June-July 1975 issue, the invention was not reported to HEW until March 1976.

Research Corporation, an invention management firm, together with Columbia petitioned HEW for rights in October 1976. Research Corporation estimated that it would take from 5 to 8 years and an investment of about $850,000 to market the invention. Therefore, a time limited exclusive license would have to be offered before a commercial firm would make such an investment.

NIH informed HEW's Patent Branch in December 1976 that it did not object to Columbia and Research Corporation retaining title, but the Patent Branch did not

send such a determination to the Assistant General Counsel until October 1977. Patent Branch officials could not explain why this delay occurred.

The Assistant General Counsel then delayed the determination another 11 months until September 1978 when it was sent to and signed by the Assistant Secretary for Health.

A third case involved an invention entitled, “Undecapeptide and Tumor Assay.” This invention, discovered by the Weizmann Institute of Science under an NIH contract, could be useful in a follow-up for post-operative diagnosis and prognosis on cancer patients. The Institute first reported the invention to HEW in 1974, when the Department decided that patent protection was not warranted. Subsequently, in June 1976, the full results of the research were published in scientific journals. The following October a drug firm approached the Weizmann Institute indicating it would be willing to prepare, file, and prosecute a U.S. patent application as consideration for an option to an exclusive license for some limited period. The Institute requested HEW's permission to file a U.S. application in November 1976. The Department granted permission on December 1, 1976, and the application was filed later that month. Through Yeda Research and Development Company Ltd., its patent agent, the Institute petitioned HEW for rights in February 1977. In the petition, Yeda stated its intention to grant the drug firm exclusivity as an incentive to market the invention.

In response to a HEW Patent Branch request for additional information, Yeda informed the Department in August 1977 that from two to three years and from one to five million dollars would be required to develop the invention to the point of submission to the Food and Drug Administration. NIH, in its comments to the Patent Branch in September 1977, stated that it was virtually impossible to predict the usefullness of the invention and its role in diagnostic testing. NIH said that it had no objection to permitting Yeda to retain title and that it was unlikely that the invention would be developed without an exclusive license to a potential manufacturer. On November 4, 1977, the Patent Branch sent a determination granting rights to Yeda to the Assistant General Counsel for review.

However, on September 8, 1978, the Assistant General Counsel sent a determination retaining title for the Government to the Assistant Secretary for Health. The Assistant General Counsel found no legal justification for the waiver, noting that Yeda had not promoted the invention and would not supply any of the risk capital needed to develop it. The drug firm had assisted Yeda with the patent application and waiver petition and would develop the invention. The Assistant General Counsel further found that exclusive licensing appeared necessary and recommended retaining title for the Government. On January 24, 1979, the Assistant Secretary denied Yeda's petition.

In the remaining case two University of Arizona scientists invented a potential method for testing the effectiveness of drugs in individual cancer cases without administering the drugs to the patient. The University reported the invention to HEW's Patent Branch and requested a waiver in July 1977. The invention was also published in the July 1977 issue of Science.

NIH in September 1977 informed the Patent Branch that it did not object to the University retaining title to the invention, but added that it had contracts with other institutions for realted research and that commercial interest would be high enough that an exclusive license would not be needed to stimulate development of a marketable product. In reply to a Patent Branch request, the University in October 1977 provided additional information for NIH evaluation, estimating that development would take from 3 to 5 years and would cost a licensee from $2,250,000 to $5,000,000. In November NIH informed the Patent Branch that the University's petition should be granted even though many questions regarding the invention's clinical utility were still unanswered. The Patent Branch on December 29, 1977, sent a determination granting title to the University to the Assistant General Counsel for review.

The Assistant General Counsel's office advised the Patent Branch in April 1978 that the petition would not be favorably considered in the near future and in September 1978 returned the determination to the Patent Branch for further evaluation. Meanwhile, in July 1978 the Patent Branch had learned of a potential licensee's interest in funding development of the invention in return for an exclusive license. The Patent Branch returned the determination to the Assistant General Counsel in November 1978. This determination, granting title to the University, was approved by the Assistant Secretary for Health on March 23, 1979.

ENCLOSURE III.-DEPARTMENT OF DEFENSE PATENT POLICIES AND PROCEDURES The policies and regulations of the Department of Defense (DOD) are based on the Presidential Memorandum and Statement of Government Patent Policy. Most DOD contracts allow contractors with an established commercial position to retain title to their inventions in accordance with Section 1(b) of the Presidential Policy.

Because nonprofit institutions lacked an established commercial position, DOD interpreted the Presidential Policy as requiring the use of a deferred determination clause-where rights are determined after an invention has been identified. However, for many years the Department got around this by using the "special situations" provision of Section 1(c) of the Policy to put a title-in-the-contractor type of clause (license clause) in contracts with universities on a DOD list of nonprofit organizations with "approved" patent policies.

On August 29, 1975, DOD, with no advance notification, issued Defense Procurement Circular (DPC) 75-3, revising its Armed Services Procurement Regulation (ASPR). This circular terminated the Department's use of its list, and thereby did away with the approved patent policy concept as a special situation under Section 1(c). In lieu thereof, the circular provided that any prospective contractor having an effective program for the transfer of technology, as demonstrated by its licensing of inventions, would be entitled to a license clause in a contract where a deferred patent rights clause would otherwise be appropriate.

Educational and nonprofit institutions were required to demonstrably have such programs in order to be entitled to the license clause, whether or not their patent policies had previously been approved. Additionally, the revision required that the work to be performed under the contract must be in a field of technology directly related to an area of technology in which the university had an effective licensing program.

The Senate Subcommittee on the Constitution asked GAO to examine DOD's decision to discontinue its special situations treatment of nonprofit institutions. We found that the DOD revision was intended to implement the revised Presidential Memorandum and Statement of Government Patent Policy and was the subject of an ASPR case established in March 1975.

At an ASPR Committee meeting in May 1975, the Patents Subcommittee Chairman briefed committee members on the proposed revisions. The case record shows: "The OASD (I&L) Staff Representative present indicated that he no longer objected to the publication of the revised ASPR provision and recommended that the normal requirement for Industry comments be waived. The Subcommittee Chairman then briefly described the differences between the proposed ASPR coverage and the recently published FPR coverage. As a result of the discussion at this meeting, the Committee agreed that the finally approved coverage should be published in the next DPC; that a letter should be prepared by the Subcommittee Chairman to the Industry Associations normally solicited for comment, informing them that their comments were not requested prior to publication because the ASPR coverage parallels the FPR and Industry was provided two opportunities to comment on that coverage. Moreover, DOD representatives were part of the group that developed the FPR coverage and therefore were able to review the Industry comments on that coverage.'

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On July 9, 1975, the Committee approved the ASPR revision, and reviewed and approved the letter to industry. This letter, subsequently dated August 29, 1975, was sent to educational and nonprofit institutions on DOD's list of universities with approved patent policies. The letter, which was signed by the Department's representative serving on the Committee on Government Patent Policy, did not explain DOD's rationale for not obtaining comments prior to publication of DPC 75-3. In September 1975 the Committee on Government Patent Policy adopted the recommendations of its University Patent Policy Ad Hoc Subcommittee. That report basically recommended that all agencies of the Executive Branch provide universities and nonprofit organizations a first option of title retention to substantially all inventions generated by them with Federal support if they are found to have an established technology transfer capability.

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In November 1975 the California Institute of Technology replied to DOD's letter: ** the University community is confused and surprised by the fact the DPC 753 appears to move in substantially the opposite direction to the philosophies of and proposals made in the July 1975 report of the University Patent Policy Ad Hoc Subcommittee ***. It is our understanding that DOD has strong representation on said Ad Hoc Committee."

The Institute also commented on DOD's implementation of the revised ASPR: "We have already had several instances of attempting to qualify for a 'license' clause in connection with individual contracts and grants. Apart from the fact that

these procedures will materially increase the work load of contracting personnel on both sides, it would appear that the criteria being utilized in this area is counterproductive. Specifically, we are being required to indicate successful past licensing in the specific field of technology of each proposal. The net result, particularly in universities engaged in basic research and continually moving into new fields, will be to slowly diminish the areas in which a university contractor might qualify for advance waiver. It should be recognized that a successful licensing activity at a university provides a capability in all fields and that industrial representatives seeking new technology at universities are interested in all fields of technology in which the university may be involved. It is strongly urged that the Department of Defense reconsider the narrow interpretation placed upon the expression 'directly related to the field of technology' as currently applied by Contracting Officers and DOD Patent Counsel, and accept the much more practical proposition that a wellorganized and proven patent licensing program at a university can be effective in all fields of technology.

Because of the additional administrative burden, many research institutions subsequently elected not to submit the information DOD required for the title retention clause. As a result, statistics published in the Federal Council for Science and Technology's Report on Government Patent Policy showed that there was an 80 percent increase in the use of deferred determination clauses by DOD during fiscal year 1976. Our review of cases processed during that year showed that, although contractors' requests for greater rights in identified inventions were approved in all cases, the Department took from 1 to more than 7 months to make those determinations.

The University Patent Policy Ad Hoc Subcommittee of the Committee on Government Patent Policy reported that it appeared that a deferred determination often acts against the expeditious development and utilization of inventions by delaying a decision that could have been made at the time of funding. Administrative costs of both the Government and universities are unnecessarily increased by the need to prepare, review, and respond to requests for rights on a case-by-case basis.

The Navy noted in February 1976 that not only had an additional administrative burden been placed on universities, but that the time necessary for contracting and patent officers to make a determination on the appropriate patent clause had increased drastically. In 1977 the Air Force, after conducting a thorough review of the revised policy, determined that the practice of qualifying institutions for each contract was moving in a direction counter productive to a cost effective, reasonable acceptable policy.

Despite its representation on the Ad Hoc Subcommittee which endorsed them, DOD has not implemented the use of Institutional Patent Agreements.

ENCLOSURE UV.-NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, PATENT POLICIES AND PROCEDURES

NASA patent policies and practices are based on Section 305 of the National Aeronautics and Space Act of 1958, the 1971 Presidential Memorandum and Statement of Government Patent Policy, and Executive Order 10096. Section 305 provides that any invention conceived or first reduced to practice in the performance of work under a NASA contract becomes the exclusive property of the Government, unless the NASA Administrator determines that the interests of the United States will be served by waiving all or part of the Government's rights. Rights to inventions made in-house by NASA employees are determined by the agency pursuant to provisions of Executive Order 10096, dated January 23, 1950.

REPORTING AND EVALUATION INVENTIONS

Section 305 of the Space Act provides that NASA contracts contain provisions requiring reporting of inventions, discoveries, improvements, and innovations. NASA evaluates those for which it has or may acquire the rights to file for a patent. This evaluation is basically a two step process and applies to both contractor inventions and inventions of its own employees.

The first step, basically a technological evaluation, is to determine the technical significance of the invention, its potential use by or for the Government, and its commercial potential. If further interest is justified, it is then evaluated for patentable novelty. This is basically a legal evaluation to determine whether a patent can be obtained, and if so, its scope. The determination to file for a patent is based on a composite of these two evaluations and is made by the NASA Patent Counsel. Once a domestic patent application is filed there is a review to determine whether foreign patent protection should be sought, and if so, in what countries.

As an incentive for the reporting of inventions, NASA makes a monetary award for each invention on which a patent application is filed. The amount of the award is based on consideration of such factors as the technological significance of the invention, its value to NASA in carrying out its programs, and the commercial use or potential of the invention.

For calendar years 1959 through 1978, 37,474 invention disclosures were reported to NASA and 3,302 patents were issued. Excluding the 1,043 invention disclosures still being processed at December 31, 1978, NASA had obtained one patent for about each eleven inventions reported by its employees and contractors.

Section 305 also establishes a procedure for NASA to review all patent applications pending in the U.S. Patent and Trademark Office on inventions which appear to the Commissioner of Patents and Trademarks "to have significant utility in the conduct of aeronautical and space activities." Additionally, Section 305 provides procedures for a Board of Patent Interferences hearing to establish title whenever the NASA Administrator believes that an invention not reported to NASA was made under a NASA contract. From January 1959 through July 1977, NASA reviewed 9,990 applications and contested 174 of them. NASĂ succeeded in obtaining patent rights in 114 of these cases.

OWNERSHIP RIGHTS

NASA obtains rights to inventions reported by its contractors unless its Administrator waives these rights. The agency's waiver policy, established by Section 305 of the Space Act, is implemented by the NASA Patent Waiver Regulations (14 C.F.R. 1245.1). These regulations also incorporate the objectives and criteria set forth in the Presidential Memorandum and Statement of Government Patent Policy.

Rights to inventions made in-house by agency employees are determined by NASA based on provisions of Executive Order 10096, i.e. in the same manner as other agencies covered by this Order.

Inventions and contributions board

The NASA Administrator's waiver of rights may be to an individual invention or to a class of inventions, and is granted upon the recommendations of an Inventions and Contributions Board (ICB). The ICB is appointed by the Administrator and consists of a chairman and no less than six members who are senior NASA program officials. The ICB meets at least monthly and provides recommendations on waiver requests, licensing of inventions, and monetary awards.

NASA waiver policy

NASA's Administrator is empowered to grant two types of domestic waivers. Advance waivers are those granted for any invention which may be made under a given contract. Individual waivers are those granted for inventions identified and reported subsequent to the start of a contract. The Administrator can also grant foreign waivers.

Advance waivers

NASA's ICB will recommend grant of an advance waiver unless:

(1) a principal purpose of the contract is to create, develop or improve products, processes, or methods which are intended for commercial use by the general public at home or abroad, or which will be required for such use by governmental regulations; or

(2) a principal purpose of the contract is for exploration into fields which directly concern the public health, public safety, or public welfare; or

(3) the contract is in a field of science or technology in which there has been little significant experience outside of work funded by the Government, or where the Government has been the principal developer of the field and the acquisition of exclusive rights at the time of contracting might confer on the contractor a preferred or dominant position; or

(4) the services of the contractor are for the operation of a Government-owned research or production facility or for coordinating and directing the work of others. To recommend an advance waiver, the ICB must also find that the work called for under the contract is to build upon existing knowledge or technology; is to develop information, products, processes, or methods for use by the Government; and is in a field of technology in which the contractor has acquired technical competence directly related to an area in which the contractor has an established nongovernmental commercial position. These criteria are prescribed by the Presidential Memorandum and Statement.

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