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strong beliefs which have been amply reinforced by the experience of many years. Among these are the following:
1. that the patent system, imperfect though if may be, is the key to the conversion of scientific knowledge into production benefitting human welfare;
2. 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;
3. 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 invention serve to transfer the inventive technology most quickly to the public for its use and benefit;
4. 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;
5. that the absence of a uniform government patent policy which reflects and supports our system of free enterprise has helped to put the U.S. at peril in the world economic scene;
6. that science has over the years been made increasingly subservient to politics, with decisions being made not on scientific facts but on political opportunity;
7. 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 innovation activity in a free enterprise environment;
8. that the less restrictive a Government patent policy is, the greater is the transfer of technology under the policy; and
9. 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 the Government funds will provide the maximum stimulus to invention and innovation and will be in the public interest.
It appears 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 organization on behalf of which this testimony is given, 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 wellbeing 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 value 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 other words, the technology must somehow be transferred to the public sector.
In a free enterprise system such transfer is normally accomplished as the result of pertinent and appropriate activities of private enterprise. Since such activities obviously entail the commitment and expenditure of substantial monies-it has been estimated at 10 times or more of the amount needed to make the inventionadequate 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 Government funded research.
One can truthfully say that at best the Government patent policy has been nonuniform and at worst has been a non-policy with the result that some 20 or more policies have developed, generally on an Agency-by-Agency basis and which have not been even necessarily uniformly applied. At the one extreme, some of the Agencies advocated the "title" policy. At the other extreme was those Agencies advocating the “license” policy. There were also many and varied policies between those two extremes.
Governmental agencies operating under the "title" policy insisted on acquiring title to all contract-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 ac
quired because they had been “paid for” by the Government and should therefore be owned by the Government."
keep title to inventions and patents arising under the contract, while reserving a royalty-free license in the Government to practice the invention 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 royalty-free 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 or contracts with more than one Government Agency, and perhaps also with co-mingled 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 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 non-profit 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 was made with the Department of Health, Education, and Welfare, 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 transfer of technology, philosophically believes that such policy should apply to all Government contracts. As a practical matter, however, the greater need for the patent incentive lies primarily with the universities, nonprofit organizations and small business. Technology transfer by universities and nonprofits depends entirely on the underlying patent position, and for small business the patent right is an important element in its ability to compete. Nor should such a policy differentiate as between research and develop
See, Public Citizen v. Sampson, 379F Supp. 662 (D.D.C. 1924) affd, 515 F. 2d 1018 (D.C. Cir. 1975); Press release by Senator Gaylord Nelson (Wis.) of the Senate Monopoly Subcommittee of the Senate Small Business Committee on Dec. 9, 1977 re the Government giving rights to inventions to contractors; Also, hearings held by Senator Nelson on GSA proposed changes in the FPR issued March 18, 1978; Hearings before the Subcommittee on Monopoly and anticompetitive Activities of the Select Committee on Small Business United States Senate, 95th Congress, 2nd Session on Government Patent Policies, May 22, 23, June 20, 21, and 26, 1978.
? Harbridge House Inc., Government Patent Policy Study for the FCST Committee on Government Patent Policy, May 15, 1968.
ment results which are intended for the Government's own use and those which are intended for civilian purposes. It must be presumed in both situations, as pointed out earlier, that the goal of research and development is to generate processes, products and techniques which will become available to and benefit society in general.
In the light of the performance data and information available from experience with the Institutional Patent Agreements there is little doubt in the university community 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 be in the best interest of the public and of the United States.
We also firmly believe that such a bill should contain appropriate provisions which will protect the contractor against arbitrary acts by Agency individuals which might deny the rights in the contractor or delay the effort to transfer the technology. To that end it should not provide for the surrender of background patents and should not have compulsory licensing provisions. Also, from the university viewpoint, given the facts that most university-generated inventions are embryonic in nature and require a great deal of development and further, that they are often ahead of their time in a commercial sense, and given the absence of evidence of abuses in the administration of inventions generated in whole or in part with Government funds, and the need for exclusivity in order to convey some exclusivity as an incentive to development, the university community does not favor a limitation on the contractor's exclusive rights in an invention.
The inclusion of a reasonable payback provision in such a bill would be acceptable to the universities, although the return to the public and the country from a successful technology transfer in terms of tangible monies from taxes, such as corporate and individual income taxes, and from foreign sources in licensing and know-how fees, and in intangible benefits, such as in the successful treatment or prevention of disease or improvements in the quality of life, makes the concern about payback rather insignificant. Moreover, and as was mentioned before, the cost of development of an invention to the market is many times the cost of making the invention originally and any payback should reflect the relative risk dollar equities involved and also reflect the fact that inventions are almost always incidental to the Federally funded research objective.
Turning now to the specific provisions of S. 1215, the university community has some recommendations which, based upon many years of experience with the technology transfer process and the interrelationship with the Government, will improve the bill. These are set out below. Section 103 definitions
The definition of a "qualified technology transfer program” in Section 103(13) is drafted so that it is intended to include the five separate requirements listed. If the technology transfer program responds to the five criteria listed (with the revisions suggested below), the program should be considered to be qualified. The word "includes” leaves the requirement for a qualified program open-ended and susceptible to inclusion of a number of other qualifications, perhaps even an agency-byagency determination of such qualifications. This could easily frustrate the desire for uniformity.
We recommend changing the word "procedures” in Section 103(13)(iii) and (iv) to "provisions” and in (v) delete the words “an active and effective promotional” and insert “a viable.” Section 201 implementation and section 202 agency technology utilization program
Reservation were expressed about the provisions of Section 201 with all the indicated functions to be performed by the Secretary of Commerce. This along with the provisions of Section 202, relating to development and implementation of Technology Utilization Programs within each agency would likely result in building an unnecessary bureaucracy with all of its attendant paperwork and administrative problems. Notwithstanding the provisions of Section 301(b), the provisions of Sections 201 and 202 may promote a greater tendency by an agency to except inventions under the provisions of Section 201(3) at the time of contracting, with a view of later utilizing Section 303 after an invention has been identified. It is our opinion that this could be construed to permit a case-by-case determination of patent title in each agency that establishes a technology transfer program. We know from the experience that case-by-case determination procedures are unworkable.
These sections should be either deleted or carefully circumscribed to prevent use not anticipated by the bill.
Section 301 right of the government
We recommend that Section 301 state a positive presumption of title to the contractor and then list the exemptions.
Throughout our consideration of the provisions of S. 1215 we have had in mind the words of Adam Smith: “The uniform, constant, and uninterrupted effort of every man to better his condition *** is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government and of the greatest errors of administration.”—Wealth of Nations, 1776.
We look upon S. 1215 as an effort and perhaps means to curb both the extravagance of Government and its errors of administration in addressing technological innovation.
Thank you for the opportunity to express these views. Mr. Chairman, with your permission I would like to submit an additional document for inclusion in the record. This is a paper entitled: “Public Patents—Public Benefit Synonyms or Antonyms?” which I prepared for a meeting of the State Bar of Wisconsin and which discusses the impact of Government patent policy on competition, innovation, public health, economic growth and jobs, and foreign competition.
PUBLIC PATENTS-PUBLIC BENEFIT SYNONYMS OR ANONYMS? Since the term “Public Patents” used in the title of this paper can mean different things to different people, it is to be understood that for purposes of this paper it means those patents to which title resides in the United States Government and under which a royalty-free nonexclusive license is generally available. Introduction
To enable us to consider the question posed by the title to this paper we must look at the constitutional basis for patents and the development and impact of Government patent policy with regard to the allocation and disposition of property rights resulting from research and development activities sponsored and funded in whole or in part by the Government operating through various of its Agencies.
Of all the controversial subjects which have been addressed by members of Congress and discussed by newspaper editors and columnists over the years, none appears to be less understood than the policy governing the allocation and disposition of rights to inventions arising out of Government-financed research and development.
The basic issue is whether the Government should always take the commerical rights to patentable inventions generated under a Government sponsored contract or from Government-funded research or whether such rights would better be left with the contractor or fund recipient to permit him to utilize the patent system in transferring the technology developed to the public sector for its benefit.
The talent of invention-an expression of intellectual originality-must be given the maximum encouragement by providing the inventor with all necessary stimuli to inventive activity. The patent laws provide the major stimulus to such activity for they are intended to afford the inventor protection for his intellectual property.
Technological advance is essential to this country maintaining its international leadership and there can be little such advance without adequate reward for the inventive mind. Therefore, a viable and sound system of patent laws is essential to the economic well-being of this country. As Abraham Lincoln said “The patent system added the fuel of interest to the fire of genius.” Constitutional basis
As we all know, the Constitution was drafted in the context of a struggle with a Government which had abused its obligations to defend the rights of its citizens. It was no accident, therefore, that the salient portion of the Constitution drafted for the purpose of protecting your liberties, the fifth amendment, made the Government the servant and protector and not the master of your individual rights.
The fifth amendment of the Bill of Rights provides that: “No person shall —be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation.”
Thus, the fifth amendment provides generic protection for all individual property. Since there is little doubt than the term “property"; as used in the fifth amendment includes intellectual property, it would seem that the protection afforded the individual by that amendment would be adequate. Yet the framers of the Constitution felt compelled to be even more explicit about intellectual property and provided the following language in Article 1, Section 8: “The Congress shall have Power -- To promote the Progress of Science and useful arts, by securing for limited Times to Authors and Inventor the exclusive Right to their respective Writings and Discoveries." Why this special handling of intellectual property?
There was no recorded debate in the Constitutional Convention on September 5, 1787, when Article I, Section 8, was presented and it was approved unanimously. That the products of the mind should prospectively receive legal protection, even from a centralized Government to be formed, was a principle upon which no one disagreed.
As evidenced by subsequent statement by Madison, the chief architect of the Constitution, his interest in intellectual property did not end with the Constitutional Convention. For example, in the Federalist on January 23, 1788: "The utility of this power will scarcely be questioned. The copyright of authors has been solemnly adjudged, in Great Britain, to be a right of common law. The right to useful inventions seems with equal reason to belong to the inventors. The public good fully coincides in both cases with the claims of individuals. The States cannot separately make effectual provision for either of the cases, and most of them have anticipated the decision of this point by laws passed at the instance of Congress.”
Then later, in a letter to Thomas Jefferson on October 17, 1788, he made a more important insight: “With regard to monopolies, they are justly classed among the greatest nusiances in Government, but is it clear that as encouragements to literary works and ingenious discoveries they are not too valuable to wholly renounced? 1 Would it not suffice to reserve in all cases a right to the public to abolish the privilege at a price to be specified in the grant of it? Monopolies are sacrifices of the many to the few. Where the power is in the few, it is natural for them to sacrifice the many to their own partialities and corruptions. Where the power, as with us is in the many, not in the few, the danger cannot be very great that the few will be thus favored. It is much more to be dreaded that the few will be unnecessarily sacrificed to the many." (Italics added.)
In the above statement, and particularly in the last sentence, the answer to the need for specific protection of intellectual property, notwithstanding its inclusion in the generic term "property in the fifth amendment, seems apparent. By use of the word “monopolies" Madison conveys that he was aware that the nature of an individual piece of intellectual property is such that it could be useful to all people and yet could be owned by one person, while diversity of ownership of all other categories of property precluded the possibility of monopoly. The strong possible argument against an indefinite monopolization of valuable intellectual property and its end product under only the fifth amendment and his recognition that "The States cannot -- make effectual provision”, suggests that Madison was aware that the rights of the creative few would be in danger without clarification in Constitution. Thus, a compromise was struck under which intellectual property was to be owned for only a limited term during which the creator had the right to exclude others.
The power given under this clause is not general. Hence, it expressly appears that Congress is not empowered by the Constitution to pass laws for the benefit of protection of authors and inventors except as a means to “promote the Progress of Science and useful arts.”
Under this specific power the present patent statute, Title 35 of the United States Code, was enacted. It is significant that the face of the patent document contains the following statement: "—these Letters Patent are to grant unto the said claimant(s)—the right to exclude others from making, using, or selling the said invention throughout the United States." and that 35 USC 261 characterizes this right to exclude as a property right.
There is little if anything in the foregoing remarks that would appear subject to question and certainly not among those of you who deal with intellectual property on a day-to-day basis. Even those who have difficulty with the intellectual property clause do not advocate its repeal. Their argument has not been directed against the Government's responsibility for protection of private property and the special reward promised by the intellectual property clause. Rather their thrust has been to erode the concept through efforts to convince that there is an immediate need to limit the reward “in the public interest” or because of some public involvement, e.g. through partial funding by Government, in the difficult and generally imperfectly understood delivery process through which intellectual property must move before reaching the public in usable form. These arguments, used in inappropriate situa
In this sentence Madison appears to distinguish between past monopolies on commodities granted as personal favors and the suggested monopoly for intellectual property.