Page images

tions are likely what Madison considered "to be dreaded” since then indeed “the few will be unnecessarily sacrificed to the many." The issue

The issue presented by the title to this paper has become much more sharply focused because of the apparent loss of technological leadership by the United States ? with its attendant negative effect upon the balance of payments and has been emphasized by the recent attack upon the dollar. How did that issue arise? Historical

During the early history of our country very little technical development work was done by the Government and therefore, as a practical matter, the question of the Government owning a patent never arose. Gradually Federal agencies begun to undertake the practical kind of development work which led to inventions. Since prior to World War II almost all Government-financed research and development work was conducted in Federal laboratories by full-time Government employees, there was a small but recurring problem of what to do with inventions resulting from such work-inventions which, if made by private parties, would have become the subject of patent applications.

This situation changed rapidly during and after World War II when the technological requirements imposed by more and more sophisticated military requirements as well as the increasing complexity of support services made it quickly evident that there were not sufficient resources within the Government to undertake all the scientific projects necessary to a winning war effort. The absolute necessity to utilize the best technical ability available, regardless of its locus, spawn a rapid proliferation of Government-sponsored and -funded research and development contracts.

The proper disposition of rights to patents resulting from this work was theoretically as important then as now but was never seriously addressed as a major problem because of the exigencies of wartime needs.

Post World War II the technological strides made under the impetus of a wartime footing and the obvious necessity for continued technological superiority, at least in defense-oriented efforts, made it imperative to continue to provide public support for science. Nor was this support limited to the military. For example, in 1950 Congress finally provided an annual budget limit of $15 million for the National Science Foundation to conduct basic scientific research at universities.

During this same period, hundreds of millions of dollars were appropriated by the Government in the area of medical research in the beginnings of an all-out attack on disease.

With the rapid expansion of scientific projects being undertaken and supported by the Government, the same shortage of technical ability and facilities continued to prevail as it had done under the pressures of World War II. Because the Government could not do all the necessary work in its own facilities, qualified private companies, universities and non-profit organizations were sought out to perform many of the programs via contractual arrangements. And the same old problem of ownership of patent rights existed in every one of the contracts.

Since there was no single or overriding patent policy which the Government had to rely upon, each governmental Agency which supported a research and/or development effort, through either or both of contractual or grant arrangements, developed its own policy. The obvious result was that many policies evolved. 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

? See Physics Today, Apr. 1978, p. 96—An Editorial by Betsy Ancker-Johnson, former Assistant Secretary of Commerce for Science and Industry; "The Innovation Recession", Time, Oct. 2, 1978; “Something's Happened to Yankee Ingenuity", The Washington Post, Sept. 3, 1978; "Vanishing Innovation”, Business Week, July 3, 1978; “U.S. Losing Ideas Race --Other Nations Chip Away at America's Technology Empire", The Atlanta Journal, The Atlanta Constitution, May 21, 1978.

quired 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 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.

Other theories and contentions made by the advocates of the two policies, each in support of its own position, tended to finally so polarize the two groups that compromise seemed impossible. Memorandum and statement of government patent policy

In 1963, Jerome Wiesner, President Kennedy's Science Adviser, recognizd a need for some guidelines to effect a more uniform Government policy toward inventions and patents on a Government-wide basis. The results of Dr. Wiesner's study culminated in the Policy Statement issued on October 10, 1963 by President Kennedy' to establish Government-wide objectives and criteria, subject to existing statutory requirements, for the allocation of rights to inventions as between the Government and its contractors which would best serve the overall public interest while encouraging development and utilization of the inventions.

Since the policy, as promulgated, would most likely have to be revised after experience had been gained in operating under it, a Patent Advisory Panel was established under the Federal Council for Science and Technology to assist the Agencies in implementing the Policy, acquiring data on the Agencies' operations under the Policy, and making recommendations regarding the utilization of Government-owned patents. In December 1965, the Federal Council established the Committee on Government Patent Policy to assess how the Policy was working.

The studies and experience of the Committee and the Panel culminated in the issuance of a revised Statement of Government Patent Policy by President Nixon on August 23, 1971.5 The changes effected in the Nixon Policy Statement were made as a result of analysis of the effects of the Policy on the public interest over the seven years from the Kennedy Policy Statement. It was stated that the studies and experience over the seven years indicated that:

(a) A single presumption of ownership of patent rights to Government-sponsored inventions either in the Government or its contractors is not a satisfactory basis for Government patent policy, and that a flexible, Government-wide policy best serves the public interest;

(6) The commercial utilization of Government-sponsored inventions, the participation of industry in Government research and development programs, and commercial competition can be influenced by the following factors: the mission of the contracting agency; the purpose and nature of the contract; the commercial applicability and market potential of the invention; the extent to which the invention is developed by the contracting agency; the commercial orientation of the contractor and the extent of his privately financed research in the related technology; and the size, nature and research orientation of the pertinent industry.

(c) In general, the above factors are reflected in the basic principles of the 1963 Presidential Policy Statement.

The considerations basic to the Statement of Government Patent Policy are the following:

(a) The Government expends large sums for the conduct of research and development which results in a considerable number of inventions and discoveries.

(b) The inventions in scientific and technological fields resulting from work performed under Government contracts constitute a valuable national resource.

(c) The use and practice of these inventions and discoveries should stimulate inventors, meet the needs of the Government, recognize the equities of the contractor, and serve the public interest.

• See, Public Citizen v. Sampson, 379 F Supp. 662 (D.D.C. 1924) aff d, 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 Mar. 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.

• Presidential Memorandum and Statement of Government Patent Policy (FR Vol. 28, No. 200, Oct. 12, 1963).

5 Presidental Memorandum and Statement of Government Patent Policy (FR Vol. 66, No. 166, Aug. 26, 1971).

(d) The public interest in a dynamic and efficient economy requires that efforts be made to encourage the expeditious development and civilian use of these inventions. Both the need for incentives to draw forth private initiatives to this end, and the need to promote healthy competition in industry must be weighed in the disposition of patent rights under Government contracts. Where exclusive rights are acquired by the contractor, he remains subject to the provisions of the antitrust laws.

(e) The public interest is also served by sharing of benefits of Governmentfinanced research and development with foreign countries to a degree consistent with our international programs and with the objectives of U.S. foreign policy.

(f) There is growing importance attaching to the acquisition of foreign patent rights in furtherance of the interest of U.S. industry and the Government.

(g) The prudent administration of Government research and development calls for a Government-wide policy on the disposition of inventions made under Government contracts reflecting common principles and objectives, to the extent consistent with the missions of the respective agencies. The policy must recognize the need for flexibility to accommodate special situations.

Although there is evidence that the guidelines did bring the patent practices of the Agencies into greater harmony, divergent policies still exist and there is a strong presumption, if not evidence in terms of the transfer of technology to the public sector, that the more restrictive the policy of the Agency, i.e. the more "title" oriented the Agency is toward inventions and patents generated under its funding, the less the likelihood exists that the technology will be transferred for the public benefit.

Notwithstanding the President's Statement of Patent Policy one must remember that such Policy establishes guidelines only and that today there are as many as 19 variant patent policies among the various Government Agencies, all presumed to exist within those guidelines. Current agency practices

A. General Executive Agencies have traditionally interpreted the provisions of the President's Statement on Government Patent Policy, or applicable statutes, to require the use of patent rights clauses in contracts (and in grants where universities and other non-profit organizations are involved-grants are not available to commercial or profit-making organizations) to provide either title in the Govenment in inventions generated in the performance of such contracts (or under such grants) or a deferred allocation of patent rights, the allocation of the rights taking place after the invention has been identified.

Even when the title clause is used by the Agency, and even where the disposition of patents rights is statutorily controlled as, for example, with the National Aeronautics and Space Administration and with the Energy Research and Development Administration, the clause many times may permit the contractor or grantee to request and obtain the principal rights in the invention with the Agency's agreement after the invention has been indentified.

Thus, there are three clauses which can and are used by the various agencies: (1) The license policy clause; (2) The deferred patent rights clause; (3) The title policy clause with waiver privileges.

Exemplary of patent policies of Government Agencies 6 which provide the bulk of research and development monies are the following:

Department of Health, Education, and Welfare-deferred determination, but permits Institutional Patent Agreements under which certain grantees and contractors are afforded first option on title to inventions made during the course of a grant or contract.?

National Science Foundation-deferred determination, but permits the use of Institutional Patent Agreements with certain contractors and grantees.

National Aeronautics and Space Administration (NASA)-statutorily controlled; has title policy with waiver possibility.

Energy Research and Development Administration (ERDA)-statutorily controlled; has title policy with waiver possibility.

For listing of current statutes, regulations, orders, manuals, memorandums and materials governing allocation of rights to inventions arising from Government-sponsored research on agency-by-agency basis see Report on Government Patent Policy by Federal Council for Science and Technology, U.S. Gov't. Printing Office 1978—281-067-289 available from the Superintendent of Documents.

? For historical interest re Institutional Patent Agreements and early DHEW practice see Report to the Congress on “Problem Areas Affecting Usefulness of Results of GovernmentSponsored Research in Medicinal Chemistry'' by the Comptroller General of the United States, Aug. 12, 1968.

Department of Transportation (DOT)-title policy.
Environmental Protection Agency (EPA)-title policy.

Department of Defense (DOD)-deferred determination (for health-oriented inventions).

Agency for International Development (AID)—title policy with waiver possibility.

Department of Agriculture-title policy (statute interpretation by Department as permitting only the taking of title).

Veteran's Administration (VA)-title policy with waiver possibility (generally a VA employee is involved and waiver therefore difficult).

The expression of patent policy for each of the foregoing Agencies is stated not necessarily in terms of its written policy, but in terms of its practical operation under that policy and the President's Statement.

There is no real consistency among the Agencies, or even within an Agency, or even necessarily from one contract to the next within an Agency, as to what the disposition of patent rights will be. It has become apparent that decisions regarding the disposition of patent rights are often made on an attitudinal or philosophical basis, for the decisions are not a function of law but of men.

Operating under these policies, which in the main has been a royalty-free nonexclusive licensing policy, the Government has accumulated in its patent portfolio about 28,000 patents of which only about 5 percent have been licensed 8 and of this 5 percent only a small portion have resulted in commerical products. Thus, the economic benefits intended to be stimulated by the patent system have not been derived by the Government or the public through such licensing of Government owned patents.

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. Government-owned patent-An anomaly

What is the situation that pertains when the Government takes ownership of a patent? It is in a sense an anomaly. 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.

With regard to Government ownership of patents an interesting bit of history is presented by Marcus B. Finnegano in which he calls attention to the famous case of United States v. Dubilier Condenser Corporation. The court issued its original opinion on April 10, 1933.11 Then on May 8, 1933, the court, on motion of the Solicitor General, struck from its opinion 12 a paragraph which questioned the authority of the Government to hold ownership to a patent thereby giving, by negative implication, judicial sanction to the Government's practice of taking title to patents. Of importance to the issue presented in the title to this paper is the following language from the stricken paragraph with respect to the question of whether title to the patented invention in dispute should be awarded to the Government: “In these circumstances no public policy requires us to deprive the inventor of his exclusive rights as respects the general public and to lodge them in a dead hand incapable of turning the patent to account for the benefit of the public.”

The experience with licensing of Government-owned patents, 13 with the Government in the main espousing a nonexclusive licensing policy, has irrefutably been one of non-use. Indeed, when title to patents are vested in the Government under

See Résumé of U.S. Technology Polices-Dr. Betsy Ancker-Johnson Les Nouvelles (Journel of the Licensing Executives Society) Dec. 1976, Vol. XI, No. 4, p. 186; Statement before the National Commission for the Protection of Human Subjects of Biomedical and Behavioral Research, Dec. 11, 1976. (This latter document also contrasts the experience of universities in licensing patents owned by them some or most of which may have resulted from research supported in whole or part by Federal monies.)

• Harbridge House Inc., Government Patent Policy Study for the FCST Committee on Government Patent Policy, May 15, 1968.

10 “The Folly of Compulsory Licensing" Les Nouvelles (Journal of the Licensing Executives Society) Vol. XII, No. 2, June 1977.

11 289 U.S. 178 (1933).'
12 289 U.S. 706 (1933).
13 Ibid-Resumé of U.S. Technology Policies (Note 8).

52-476 0 - 80 - 17

such a licensing policy one can conclude that they are lodged “in a dead hand incapable of turning the patent to account for the benefit of the public.” Optimum patent policy presumption

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 -- many times the amount needed to make the invention 14-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 policy which will affect the transfer of technology that has been generated in whole or in part by Government-funded research. Objectives of government patent policy

There is general agreement that the primary objectives of Government patent policy should be to (1) promote further private development and utilization of Government-supported inventions, (2) ensure that the Government's interest in practicing inventions resulting from its support is protected, (3) ensure that patent rights in Government-owned inventions are not used for unfair, anticompetitive or suppressive purposes, (4) minimize the cost of administering patent policies through uniform principles, and (5) attract the best qualified contractors.

However, of all of the considerations attendant upon the establishment of a Governmental patent policy only one consideration should be paramount: “In whose hands will the vestiture of primary rights to inventions serve to transfer the inventive technology most quickly to the public for its use and benefit?”

Recognition of this paramount consideration was plainly evident from the provisions of the National Science and Technology Policy, Organization and Priorities Action of 1976 15 which directs OSTP to review current legislation and agency practices with the view of recommending and developing, “Federal patent policies

* * based on uniform principles, which have as their objective the preservation of incentives for technological innovation and the application of procedures which will continue to assure the full use of beneficial technology to serve the public." Alternatives

Three major approaches to Government patent policy are available and all three are currently in use by various of the Agencies of the Government as pointed out above. These are:

1. Strict title in the Government 16 Under this approach, as a condition of receiving a Government research grant or contract, the contractor would have to agree to transfer rights in all inventions made under the contract to the Government. The Government, in turn, would either dedicate the inventions to the public or license them itself.

2. A case-by-case approach Under this approach individual agencies would select the patent clause to be used in each grant or contract on a case-by-case basis, and agencies would also in many cases delay the determination of whether contractors would retain rights until after inventions have been identified. Depending on the exact manner in which the policy

10 Ibid-Harbridge House Inc. Report, May 15, 1968. (Note 9). 15 Title I, Section 101(cX4) of P.L. 94-282.

16 Assistant Attorney General John Shenefield, in advocating a title-in-the-Government approach in his appearance of December 20, 1977, before the Select Committee on Small Business, U.S. Senate, stated, “The competitive risk to the public in transferring title to the contractor may be especially high where transfer carries a danger of further entrenching the already strong market positions of many Government contractors.

« PreviousContinue »