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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 QASD (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."

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.

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 75– 3 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. NASA 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.

NASA's Patent Waiver Regulations also take into account the "exceptional circumstances” and “special situations” provisions of the Presidential Memorandum and Statement.

Examples of exceptional circumstances recognized by NASA include: a contract where participation of the contractor may only be secured through the grant of waiver and the contractor is deemed essential to a NASA program; a contract having as a principal objective the application of aerospace-related technology to other uses in accordance with an established NASA technology application program and where the grant of the waiver would materially advance this objective; or, a cooperative endeavor where the contract calls for a significant contribution of funds by the contractor to the work to be performed.

Also, in the case of an individual invention identified prior to contract execution, exceptional circumstances may be found (1) where waiver is a necessary incentive to call forth risk capital and expenditures to bring the invention to the point of practical or commercial application and (2) where either the contractor has established substantial equities at his own expense in the development of the invention or, the grant of an advance waiver will significantly advance availability of the invention to the general public.

Examples of special situations include: a newly formed company having a definite program for establishing a nongovernmental commercial position in the field of the contract or a directly related area; an established company lacking an established nongovernmental commercial position in the field of the contract or a directly related field, but having established plans and programs for achieving such a position; and an educational or nonprofit institution having an established patent policy and an effective program for acquiring rights to inventions and bringing the results of such inventions to commercial application by itself or through others.

For calendar years 1959 through 1978, NASA received 906 petitions for advance waivers. The Administrator granted 463. Contractors reported 216 inventions or classes of inventions (on which they intended to file patent applications) under these contracts.

Individual waivers NASA's ICB will recommend grant of a waiver after identification and reporting where the Board makes the following findings:

(1) The invention is not directly related to a governmental program for creating, developing, or improving products, processes, or methods for use by the general public at home or abroad.

(2) The invention is not likely to be required by governmental regulations for use by the general public at home or abroad.

(3) The invention does not directly concern the public welfare.

(4) The invention is not 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 in the invention would not likely confer on the petitioner a preferred or dominant position.

The Board must also find that, in view of the petitioner's plans to bring the invention to the point of practical application, the incentives provided by waiver will increase the likelihood that the benefits of the invention would be readily available to the public at an early date.

If the Board is unable to make one of the four findings to support a waiver, the Board may still recommend that waiver of rights be granted by the Administrator if it finds that such waiver is a necessary incentive to call forth risk capital and expenditures to bring the invention to the point of practical application, or that the Government's contribution to the invention is small compared to that of the contractor.

NASA contractors reported 31,357 inventions to the agency for calendar years 1959 through 1978. They requested 1,366 waivers and the Administrator granted 1,035. About 3 percent of the inventions reported were waived.

PATENT UTILIZATION NASA believes that one of its objectives under the Space Act is to enhance the leadership of the United States in aeronautical and space activities and make the results of these activities available to the public. Thus, NASA has implemented various programs to promote the commercial development and utilization of aeronautical and space technology. NASA said its patent policies and procedures have been adopted to augment these programs and its decisions regarding the allocation and utilization of patent rights are made with this objective in mind.

Patent utilization/licensing

NASA's program for licensing inventions to which it has acquired title is based on Section 305 of the Space Act and is implemented by NASA Patent Licensing Regulations (14 C.F.R. 1245.2). Both nonexclusive and exclusive licenses are availa

ble.

In order to locate prospective licensees who want to commercialize an invention, NASA uses a variety of methods to inform the public of its technology available for licensing. Abstracts of the agency's inventions appear in its publications. Additionally, NASA inventions available for licensing are listed in the Federal Rgister and the Official Gazette of the U.S. Patent and Trademark Office.

The National Technical Information Service also publishes a weekly journal entitled “Government Inventions for Licensing” which includes NASA abstracts and licensing information. NASA said that it has not been able to identify or relate any licensing inquiries for agency owned inventions to the NTIS journal. NASA also said it holds and participates in licensing conferences and workshops and its Industrial Applications Centers disseminate both abstracts of inventions available for licensing and information on how to obtain licenses.

NASA promotes nonexclusive licenses, but may grant exclusive licenses if it determines that the invention is not likely to be brought to commercialization under a nonexclusive license or by further Government funding and that the exclusive license will provide the necessary risk capital to achieve commercial use of the invention. NASA normally does not require royalties for a nonexclusive license but may for an exclusive license.

Domestic licensing Each application for a domestic license is initially reviewed in NASA's Office of General Counsel. If the application conforms to the regulations and the license requested appears appropriate, the application is forwarded to the Inventions and Contributions Board. The ICB recommends to the Administrator whether a nonexclusive or exclusive license should be granted and any terms and conditions of the license.

If a determination is made to grant a nonexclusive license, the terms and conditions are negotiated by the Office of General Counsel. If the determination is made to grant an exclusive license, notice of this intent, along with the identification of the invention, licensee, and special terms and conditions, are published in the Federal Register. The exclusive license will be granted unless, within 30 days of the notice, a statement is received from any person setting forth reasons why it would not be in the interests of the United States to grant the proposed license, or an application for a nonexclusive license is received which states that the invention is likely to be brought to practical application within a reasonable period of time.

As of December 31, 1978, NASA had 251 licenses in force on 133 of its 3,512 domestic patents and applications. Nine of these licenses were exclusive and 242 nonexclusive.

NASA negotiates a specific date for commercialization with its licensees and requires that the invention be practiced for the term of the license, which usually is less than the term of the patent. Licensees are required to report annually on their progress in commercializing the inventions. NASA recently inquired about commercialization efforts of its 272 nonexclusive licensees; 138 or 57 percent responded. Fifty, or about 20 percent of the total licensees, reported they were pursuing development and marketing efforts.

Foreign licensing Inventions on which NASA obtained patents in foreign countries are available for licensing in those countries. NASA's foreign licensing objectives are to further the interests of U.S. industry, enhance U.S. economic interests, and advance U.S. international relationships.

Foreign licenses can be either exclusive or nonexclusive. In granting foreign licenses, preference is given to the applicant who has previously been granted a license for the invention in the United States. NASA requires royalties or some other consideration under all foreign licenses.

As of December 31, 1978, NASA had 787 foreign patents on 184 inventions. Fiftynine were licensed exclusively to 7 licensees. Patent utilization/waivers

Where NASA waives property rights to inventions made under its contracts, the Inventions and Contributions Board periodically monitors the waiver recipients. Through 1977 NASA waived rights to 1,046 inventions, but subsequently voided 258

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