How important are the patent rights to, particularly, a big company. I am hearing more and more people say that it is not worth it. The rate of exchange is so fast, technological changes so great, that you have to get out there and get a return on your investment and don't worry about the patent. It takes too much time to get it

anyway.

Mr. HARR. We probably each want to take a crack at that. We can't generalize, Senator. Probably that philosophy you are talking about is pretty pervasive as a general proposition, but when patents come along that are important, they are terribly important. Mr. WITT. We looked at a couple of cases that I think really pins it down with specific instances. One I found, for instance, was a new coating that we got into. We feel this could be what we call a next generation high temperature coating which is very important in our business. It could have Government as well as commercial uses. But because we would lose a patent title, we refused to deal with the Government.

So we are going ahead with our own R. & D., but it is at a slightly reduced pace. In another case, we went into an alloy development which we considered very important. Talking with NASA about that, they said they wanted the rights and so forth. We turned them down and said it is not worth it. We were later checked into by the Department of Defense, and they took a different tack, which brings up the difference in policies in the Federal Government.

They essentially said: "We need to get this expertise, and we want you to develop it, but we will not insist on title to it." So we went ahead and dealt with DOD after turning down NASA. I think these are the kinds of problems that you emphasize in your statement to the effect that we ought to have a uniform policy.

Senator SCHMITT. So long as it is a good one.

Mr. WITT. As long as it leans the right way.

Mr. MCCLOSKEY. I think patents are just one factor in the overall weighing of the company's desire to commercialize an invention. It is an important one in the world market where competitive developments are being fostered in other countries, and one has to have the capability of having some protection either in those countries or in his own market.

In addition, there are a number of cross-licenses that exist. That is the trading material that companies use, if you will, the quid pro quo. That is particularly true in the international market.

Mr. HARR. I think their absence would be severely noted in terms of motivation commercially and in investment if you didn't have patent protection.

Senator SCHMITT. There are some companies that because of the delay in obtaining patents just go ahead and market without them. Is that not correct?

Mr. HARR. The evaluation of the timing of the importance against the patent protection.

Mr. MCCLOSKEY. That is true if that company is the potential owner of the patent, or is at least the licensed. They are reluctant to do it when the patent belongs to someone else.

Senator SCHMITT. What about these 28,000 old Governmentowned patents, that are sitting around that only a small percent

age, as we heard this morning, are being utilized. Do you have any guidance to the committee for what we ought to include in the legislation to deal with those? You heard my conversation with Mr. Johnson about working out some mechanism whereby, depending on the interests of some individuals, they could be dealt with on a case-by-case basis under the guidance of the legislation.

Mr. WITT. I certainly agree that there is the one line descriptions of them leave so much to be desired that we can't tell what they are talking about. I was looking at a list the other day, and it is so cryptic that it is very difficult to even develop the basic idea of what they are driving at-which technology you are approaching.

Mr. MCCLOSKEY. There are two options. One is passing the title to the companies that invented them originally and see what they would do with them. The other alternative——

Senator SCHMITT. Let them have the first crack at it, if they still exist and still want them.

Mr. MCCLOSKEY. The other is to let an entrepreneur go out and sell them, and I guess there are companies that do exist that try to handle the research of the product of the universities. Perhaps they could be salesmen for the patents on some form of an equity participation.

Senator SCHMITT. Mr. Lonsdale, would you search through these, if you had access, and try to find some.

Mr. LONSDALE. Our firm is too small to take advantage of them, but I would agree with Mr. McCloskey.

Senator SCHMITT. For the time being you are too small, but I'm sure your incentive is to get to a point where you aren't too small. Mr. LONSDALE. I would say let the companies invent them-Senator SCHMITT. Every small business is a big business way down inside.

Mr. LONSDALE. Probably so. But let the inventors have first crack at them, and I would add with recoupment. I believe in recoup

ment.

Senator SCHMITT. Gentlemen, I have to move on. We appreciate your testimony, and it is an exciting subject, even though not very many people may get excited about it. It is one which we have to come to some conclusion on. It is at the core of many of the problems that we have today.

Thank you.

STATEMENTS OF HOWARD W. BREMER, PATENT COUNSEL, WISCONSIN ALUMNI RESEARCH FOUNDATION; AND DR. WILLARD MARCY, VICE PRESIDENT, RESEARCH CORP.

Senator SCHMITT. Mr. Bremer, will you proceed first, please. Mr. BREMER. Yes. Thank you very much.

I appreciate the opportunity to participate in these hearings and present the views of academia. My remarks today are made on behalf of the University of Wisconsin, the American Council on Education which is the largest association of colleges and universities in the Nation, the Committee on Government Relations of the National Association of College and University Business Officers, and the Society of the University Patent Administrators.

I have been engaged in the transfer of technology from the University of Wisconsin for the past 19 years as patent counsel for the Wisconsin Alumni Research Foundation, which foundation functions as the invention and patent administration arm of the University of Wisconsin, and I have drawn upon that experience and the experience of numerous colleagues of mine who have been similarly engaged for these remarks.

I might add at this point that part of that experience also involved an adamant position by the Department of the Interior on an ore processing invention which discouraged commercial participation.

Fundamental to the position of the university community with regard to the disposition of property rights resulting from research and development activities sponsored and funded in whole or in part by the Federal Government are certain strong beliefs which have been amply reinforced by the experience of many years. Among these are the following:

One, that the patent system, imperfect though it may be, is the key to the conversion of scientific knowledge into production benefiting human welfare;

Two, that, as stated by Chief Judge Markey of the CCPA, no institution has done so much for so many with so little public and judicial understanding as has the American patent system;

Three, that the basic consideration in the disposition of intellectual property rights should not be whether the Government or the contractor should take title to such property when it is generated in whole or in part with Government funding, but, in whose hands will the vestiture of primary rights to an invention serve to transfer the inventive technology most quickly to the public for its use and benefit.

Four, that the absence of a uniform Government patent policy has been a serious disincentive to successful technology transfer from the university to the public and has, in fact, often deprived the public of the fruits of basic research;

Five, that the absence of a uniform Government patent policy which reflects and supports our system of free enterprise has helped to put the United States at peril in the world economic scene;

Six, that science has over the years been made increasingly subservient to politics, with decisions being made not on scientific facts but on political opportunity;

Seven, that the talent of invention must be given the maximum encouragement by providing the inventor and the process of technology transfer all necessary stimuli to inventive and innovative activity in a free enterprise environment;

Eight, that the less restrictive a Government patent policy is, the greater is the transfer of technology under the policy; and

Nine, that a uniform Government patent policy under which the contractor has the first option to acquire title to inventions made in whole or in part with Government funds will provide the maximum stimulus to invention and innovation and will be in the public interest.

It appears to us that the goals of S. 1215 and the university community are essentially the same, and, as an instrument toward

achieving such goals, the university community, as represented by the organizations on behalf of which I speak, supports S. 1215. At the outset it must be presumed that Government research dollars are made available in the expectation of not only developing basic knowledge, but also in the expectation that the funded research will lead to products, processes, and techniques which will be useful and acceptable in all or part of our society to improve the well-being of the society in general.

In the face of this presumption it is apparent that inventions, whether made through the expenditure of private or governmental funds, are of little use to society unless and until they are utilized by society. In order to achieve such utilization it is essential that the invention be placed in a form or condition which will be acceptable and beneficial to the public.

In a free enterprise system, such transfer is normally accomplished as the result of pertinent and appropriate activities of private enterprise. Such activities obviously entail the commitment and expenditure of substantially money-generally estimated at 10 times or more of the amount needed to make the invention. Obviously, adequate and appropriate incentives to such commitment and expenditures must be afforded.

Consequently, and since the patent system provides such incentives and is the most viable vehicle for accomplishing the transfer of technology, full and careful consideration must be given to the making of any patent policy which will affect the transfer of technology that has been generated in whole or in part by Governmentfunded research.

One can truthfully say that at best the Government patent policy has been nonuniform and at worst has been a nonpolicy with the result that some 20 or more agency policies have developed, and even those have not been necessarily uniformly applied. At the one extreme, some of the agencies advocated the title policy. At the other extreme were those agencies advocating the license policy. There were also many and varied policies between these two extremes.

Governmental agencies operating under the title policy insisted on acquiring title to all contractor generated inventions and patents on them, including inventions which were only incidental to the major purpose of the contract, and then dedicated them to the public through publication, or by offering a license on a nonexclusive, royalty-free basis under any patents obtained to all who requested it. The argument was that all these inventions, including the incidental inventions, should be acquired because they had been paid for by the Government and should therefore be owned by the Government.

Agencies which adopted the license policy permitted the contractor to take and keep title to inventions and patents arising under the contract, while reserving a royalty-free license in the Government to practice the inventions for governmental purposes. The theory which these agencies applied was that inventions and patents are only incidental to the specific research or products contracted for and that equity demands nothing more than a royaltyfree right for the Government to use the inventions.

Since within the universities, more often than not, an investigation is carried out with funds acquired under grants and contracts with more than one Government agency, and perhaps also with comingled funds derived from other sources, the uncertainties as to the applicable patent policy militated strongly against the successful transfer of the technology developed. Generally, and most unfortunately, the most restrictive policy was applied and without much attention to the equities of the respective funding parties, again with an adverse effect on possible transfer of the technology to the public. It has been the experience of years within the universities that the more "title" oriented an agency is toward inventions and patents generated under its funding, the less the likelihood exists that the technology will be successfully transferred for the public benefit.

An interesting comparison along these lines was made by Harbridge House in its 1968 study of government-funded patents put into use in 1957 and 1962. It was found that contractor-held inventions were 10.7 times as likely as government-held inventions to be utilized in products or processes employed in the private sector for the benefit of the public. Moreover, based upon experience, particularly under the Institutional Patent Agreements as between universities and nonprofit organizations on the one hand and the Department of Health, Education, and Welfare and the National Science Foundation on the other hand, there is no reason to suspect that a different conclusion would be reached today.

It seems axiomatic that since the patent system was created as an incentive to invent, develop, and exploit new technology-to promote science and useful arts for the public benefit-when the government holds the patent under the aegis that the inventions of the patent should be freely available to all, much the same as if the disclosure of the invention had been merely published, the patent system cannot operate in the manner in which it was intended. The incentives inherent in the right to exclude conferred upon the private owner of a patent, and which are the inducement to development efforts, are simply not available.

Although for some 20 or more years the argument swirling about the ownership of inventions made in whole or in part with Government funds was lodged in rhetoric and not in fact, since 1968, after the first of the new Institutional Patent Agreements were established, a body of evidence has been building which we believe clearly establishes that the universities have been highly successful in transferring technology left with them through licensing under patents while the attempts to license Government-owned inventions has been singularly unsuccessful.

Moreover, and of direct importance to the economic well-being of the United States, is the fact that the Government patent policy has made much of the technology generated with Federal funding available without charge or restriction to foreign countries and companies who have very successfully utilized such technology to capture from their U.S. competitors large segments of various markets. The inevitable result was, of course, an increasing balance of trade deficit.

The university community, in espousing an enlightened uniform government patent policy which will provide an incentive to the