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But for an organization like the NRDC, defense of patents is possible, and it is a very important part of it.
Mr. Bremer mentioned that they are finally in the black. This is true, because one of their inventions happens to be supported primarily by sales of particular products in the United States; the licensee, the Eli Lilly Co., is practically solely responsible for putting NRDC in the black with the inventions that they have. So this kind of thing is something that I think ought to be seriously considered in developing legislation that is directed toward the next step down the road—what do you do with the patents after you get them.
Senator SCHMITT. I presume you would use this as a means of clearing the decks of the 28,000 patents that now exist in the Government?
Dr. MARCY. This would be one task that I would think could be assigned to such an organization. On the other hand, I think that task could be assigned to existing organizations within the United States at present through contracting operations similar to what the Office of Energy Related Inventions is doing and also similar to what the National Technical Information Service is currently doing on a very limited basis.
Senator SCHMITT. You are probably correct in part, at least, that agencies have so many other fish to fry that this issue does tend to get subordinated in contract discussions.
Mr. BREMER. May I add something else to that? When I said the universities were involved, I meant that the support of the Government goes to the universities for research projects and functions, much as it does in this country and they, of course, are required to bring any inventions made back to NRDC. That is the university involvement. I believe you will find an NRDC kind of organization in most of the Commonwealth countries or former British Commonwealth countries.
One of the main objections I have to an NRDC type of organization is that you are in essence, putting all of your eggs in one basket, under which a tremendous bureaucracy can be established. One of the repeatedly voiced criticisms of that kind of an organization, and which is now coming up again, is that the people at the universities conducting the research function do not feel that their inventions are getting adequate attention in each case because of the size of the organization and the manner in which invention evaluation is carried out.
I know Dr. Marcy with his organization, Research Corp., has encountered that same problem because of the very large number of universities for whom they work. I have, in fact, heard criticisms of Research Corp. for those very reasons.
Senator SCHMITT. Do you agree with Mr. Mossinghoff, who earlier said that the person who is most likely to see that something is made of an invention is the inventor?
Mr. BREMER. You need two people when you are in an invention licensing situation. At the universities, where most inventions tend to be embryonic in nature, the ones that have the know-how are the inventor and his immediate colleagues. We think it is imperative therefore, that he participate in any transfer of technology from the university.
The second person needed in a licensing situation is a champion for the invention within the company which is being licensed. In the absence of such a champion, one who really espouses the invention as a product line for the company, or espouses use of the invention by the company in another way, the invention will generally go nowhere.
We speak from and have had considerable experience along those lines and conclude that two people, the inventor and the invention champion are necessary for its successful transfer to the public.
Senator SCHMITT. Is this different from a Dr. Jeckyl-Mr. Hyde personality split within the inventor himself or herself that could be embodied in two people or one person?
Mr. BREMER. Speaking for the universities in general on that point is rather difficult, since there are various kinds of arrangements that are available. In some schools, for example, there is an employment agreement with the professors conducting the research. They then have a direct obligation to the university itself. Other places, as at the University of Wisconsin, they do not. At Wisconsin, absent an obligation to the Government because of Federal funding, the inventor is free to do with his inventions whatever he wishes. In that situation, he can go directly to the industry, participate in the invention development, and also receive some stipend back from any successful transfer of that technology; or he may even sell the invention outright. In other universities he cannot do that.
Also where he is essentially a free agent he is very often employed by the licensed company as a consultant. That is, however, on his own volition and a voluntary act.
Senator SCHMITT. Do you favor that kind of an arrangement? Mr. BREMER. It has been very successful, in our view, at the University of Wisconsin, and I must state that my experience has been primarily limited to that approach. That arrangement has generally been credited as part of the reason that that university has been so successful in technology transfer efforts.
Senator SCHMITT. Section 201(a) of S. 1215 creates a central review authority with power to determine with administrative finality any dispute between a Federal agency and a contractor as to the allocation of rights for an invention made under a Federal contract. Do you believe, Mr. Bremer, that this review authority could meaningfully address the concerns that you raised in this regard?
Mr. BREMER. I think it certainly can. In any situation you have an equity proposition that attaches, and we have found very often, that the old saw about what the Government pays for it should get is not, in equity, applicable. The university often provides physical space, the proper environment, and the principal investigator, who is generally salaried by the State, as well as other ancillary contributions. We have very often found that the equity position of the university vis-a-vis the Government is about 50-50.
As a consequence, a review authority could consider all of those factors in addressing a problem such as this.
Senator SCHMITT. In your statement-and Dr. Marcy may want to comment on this, also you say the present Government patent policy has, in a way, insured that technology generated with Federal funding is available without charge or restriction to foreign competitors, and they have more successfully utilized such technology than we have. Do you think that S. 1215 would treat that problem?
Mr. BREMER. In my view, if we can give the contractor first option to title-he will make a selection to the best of his ability as to the invention disclosures which appear to have the best commercial potential and file patent application on them. We, for example, at the University of Wisconsin, may get 60 disclosures a year. We may file patent applications on about one-third of those. The remaining technology may not lend itself to patentability or is so narrow in scope that it doesn't lend itself to a patent licensing arising at a university however, it a generally disclosed through publication. It must be kept in mind that for a university or a nonprofit, a patent is the fundamental basis upon which a transfer of technology occurs.
The NTIS, of course, publishes—they even have an outlet in Japan, I understand, so they can transfer the technology more quickly to the Japanese, who can't seem to get it fast enough. I think S. 1215, with its basic thrust, would be favorable toward controlling at least some of that free dissemination of technology. Senator SCHMITT. Dr. Marcy?
Dr. MARCY. Well, I think one has to realize that the major funding of scientific research at universities comes from the HEW and from NSF. Therefore, generally speaking, the inventions that come out of this type of research are biological, chemical, pharmaceutical, biomedical devices, diagnostic testing procedures and so on rather than the so-called high technology inventions in electronics.
Now, the situation regarding that type of invention is quite different from the situation in the electronics and mechanical device area. Chemically-oriented inventions are much stronger and much more important to the industrial company that finally manufactures and sells these things.
Our practice at Research Corp., for the past 10 years at least, has been to try to develop patent packages overseas on this type of invention in foreign countries, and to license these things in foreign countries, certainly on terms no more favorable than in the United States, and in many cases even less favorable to the terms in the United States.
So that, in our view, the situation overseas for this type of invention, contrary to the way people say it has been, is that technology does not necessarily get used overseas freely, since we have seen to it that it doesn't get used freely overseas first. Sometimes our licensees overseas get on the market there first before the U.S. companies do here, and then these products finally end up in the States. The point I am trying to make is that, with the university type inventions, using our services, and I think with WARF's services, too, this does not happen in this manner.
Now, in the electronics and the mechanical devices area, where massive support for this type of investigation in the institutional area is centered in just a few institutions, like MIT, Princeton, Brookhaven and so forth, that is a different story. This type of research doesn't make very good patentable inventions. Frequently
the technology gets published and the information gets transferred overseas in a normal way, and science just diffuses around the world. In those cases, what is said is true about the foreign countries getting this technology and bringing it back later to the United States.
I think you have to take that into consideration and keep in mind the type of technology we are talking about.
Senator SCHMITT. Gentlemen, I am sorry to say we've run out of time.
Again, thank you very much for your testimony.
Our next hearing is Friday at 9:30 in this room. We will continue our examination of S. 1215 and related issues. I hope that in the not too distant future we can take into account all of the good suggestions we have had and ignore the bad.
Thank you very much.
(By Peter F. Drucker 1) Science and industry in the United States used to enjoy a relationship of mutual respect based on an unspoken conviction that they depended on one another. That relationship, while distant, was uniquely productive for both science and industry.?
The first change in the traditional American relationship occurred after World War II. Research became fashionable in industry and government alike. These were the years when the stock market valued a company according to the amount of money it spent on research, and which a lavish campuslike research center was considered proof of a management's competence. Similarly in those years—culminating in the space program of the 1960's-science and research increasingly came to be seen as the mark of the effective well-planned and properly progressive government program.
During the years after the war, the ability of America to convert science into industrial application was considered the outstanding strength of both American science and American industry. Treatise after treatise pointed out that the British, for instance, were America's equals in science. But the British failed to convert their own scientific achievements-in electronics, in polymer chemistry, in the computer, in radar, or in aviation-into technology, products, and economics advancement, whereas America did.
Equally, especially during the Truman and the Kennedy years, the willingness, indeed eagerness, of the American politician and government executive to apply science-“hard” as well as “soft”-to both the study of social and political problems and to the design of social and political programs was seen both inside this country and outside as a distinct and great American achievement. The innovating ability of American society was widely explained throughout the world, including the Communist countries, as the result of the sensitivity of the American scientist to political and social needs and opportunities, and to the values and dynamics of the political process.
In quantitative terms, the relationship seems to be as close as ever-and perhaps even closer in computer sciences, solid-state and nuclear physics, the earth sciences, and biochemistry. It might be argued that nothing has really changed despite all the talk of irrelevance of science or of the wickedness of “American Imperialism" by the vocal critics on the New Left, despite Vietnam, despite inflation, and so on. One might indeed assert that the highly publicized and highly visible developments and media events—the headline- and demonstration-makers-are little more than whitecaps on the surface of the ocean.
* The author is Clarke, professor of Social Science and Management at the Claremont Graduate School, Claremont Colleges, Claremont, California 91711. This article is adapted from the text of a letter delivered at the meeting of the AAAS in Houston, Texas, 7 January 1979.
? I know of no comparative study of different models of integration of science and society. The few Marxists analysts, such as George Lukacs or Lancelot Hogben, wore nationalistic blinkers; Lukacs, for instance, assumed the German model to be universal.
Yet there has been a major change, not in the measurable realities of the relationship between science and the decision-makers in industry and government, but in the moods, the values, and the meaning of the relationship. There is today distrust, disenchantment, mutual dislike even, and worse, lack of interest in each other on both sides. American scientists today, in large number, tend to suspect the traditional relationship as being tainted or impure. Industry still professes to honor the relationship and to respect research. But industry's actions no longer fully live up to industry's professions. As to government, there is now a strong tendency to judge science by what is politically expedient or politically fashionable; that is, to attempt to subordinate science, whether pure or applied, to value-judgments that are the reverse of, and largely incompatible with, any criteria one could possibly call scientific.
In both industry and government, there is even increasing doubt whether science and research do indeed lead to results. It is often argued that this reflects lengthening lead times resulting from the increasing complexity and specialization of today's advanced scientific research. But there is no evidence that the lead times have lengthened; the time span between new theoretical knowledge and the first application is the same 30 to 40 years that it has been all along (for example, between Maxwell's theory and Westinghouse, between x-ray diffraction and Carruther's de velopment of nylon and polymerization, or between quantum mechanics and semiconductors). What is changing are not facts but faith. On both sides the mo becoming one of alienation and perhaps even of recrimination. It is a dangerous mood, above all for American science and American scientists. Both sides stand to lose, but science stands to lose far more. Ways of industry
The mind-set values of industry-but equally of the government decision-maker concerned with effective policy-are in danger of becoming hostile to the needs, the values, the goals, and the perception of science. One reason for this is the increasing pressure, especially in an inflationary period, to produce results fast. An inflationary period, by definition, is one that erodes and destroys both industrial and political capital. In an inflationary period the existing value of future results is subject to the exceedingly high discount rate of inflation which, in effect, means that no results more than a year or two ahead have any present value whatever, whether value is defined in economic or in political terms. It is, therefore, not a period in which either industry or the policy-maker can take risks.
Thus both industry and the governmental policy-maker in an inflationary period concentrate on small, but sure and immediate, payoffs; that is, on what can be calculated with high probability. The application of true scientific knowledge is by definition a big gamble in which payoffs are far in the future and thus exceedingly uncertain although very great in the event of success. In an inflationary period, the industrialist or the policy-maker is almost forced into the small but quick payoff of a lot of small and, by themselves, unimportant projects that require very little science altogether and can only be damaged if exposed to too much science. Tax effects and investments
More important perhaps-or at least more insidiously deleterious over a longer period of time—is taxation. The tax system adopted by the United States in the last 20 years or so penalizes basic research and the adaptation of basic research to technology. Worse, through the combined working of corporation income tax and capital gains tax, the system greatly favors short-term, immediate gains and makes long-term investments in an uncertain future unattractive and unrewarding.
Equally inimical to investment in research and innovation is the increasing burden of regulation. It is not primarily that regulation adds cost, but that it creates uncertainty. Whether in respect to the environment, to safety, or to new drugs, regulation makes investment in research irrational, not only increasing the odds against research producing usable results but also making research into a crooked game.
Tax laws and regulations also push industry away from technology focus and toward financial conglomeration. Under the tax laws of the United States-laws which in this form do not exist in many countries—the proceeds of liquidating yesterday are considered profit and are taxed as such both to the company and to the investor. Hence, businesses, instead of liquidating the obsolete, have to find new investments in new businesses for whatever cash is being released by the shrinkage of an old technology, an old product line, or an old market. And this, in effect, imposes conglomeration on them. This policy makes it increasingly difficult to shift resources from low and diminishing areas of productivity to areas of high and increasing productivity and this impedes innovation. It also shifts businesses from a