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of thing as a cure for a disease or an automotive clutch, and I will have something more to say about that.

I was asked to repeat or summarize briefly what I said last time and can I do this or should I?

Senator STEVENSON. Yes.

Mr. RABINOW. First, I'm an electrical engineer. I was born in Kharkov, Russia, but I was educated in New York City. I have been in the United States since I was 11. I've spent one-half my engineering lifetime in government and half in industry. I had two of my own companies and that's how I became eventually vice president of Control Data. They bought one of my companies.

My patents cover ordnance, post office equipment, sound reproduction, electrical equipment, photography, computer equipment and many other things. I have 215 U.S. patents and perhaps something like 100 in foreign countries. These are duplicates. About 60 of my patens were obtained when I was a Government employee, which I still am, part time. I'm rather proud of the work I did, although my experience with those patents could have been be much better as far as utilization of the patents goes.

I agree in general with the proposed bill, S. 1215, because I think that's the correct way to approach the problem. There are things that bother me a little about some of the mechanics, but I believe that the general philosophy that the Government should not take title to patents is correct.

I believe that you need flexibility, that you cannot treat all patents alike, but certainly a patent on a nuclear submarine or a weapon where the Government is the only user and where secrecy or, at least control is important has to be treated differently from a patent on a medicine where development costs may be 1,000 times greater than the cost of the original invention.

I think, for example, that the Government has done well in many of the things it developed and where it gave commercial rights to the inventor or his company. For example, this was done in the computer business. The Univac computer was ordered by the Government from the University of Pennsylvania. It was designed by Eckert and Mauchly. They formed a corporation based on their patent rights and sold the first Univac to Census. The Bureau of Standards helped with the purchasing of the first Univac and I was involved in that. Later their company needed money and eventually it joined Remington Rand or Sperry Rand. The fact here is that if the Government had taken title to the patents that company would not have been formed. It was the patent position that started the computer business of the United States.

I have seen comparison between agricultural patents and patents on weapons, and again you can't make comparisons like this. Agriculture is a different kind of business entirely from manufacturing done in a factory. A farmer cannot monopolize a market.

The bill proposes that the Government can, if it wishes, receive royalties and fees for patents. To this, I object most violently, not because of any unfairness or because the Government doesn't have the right; it's just that the mechanics are silly. The Government is a 50-percent partner in any business that I have or any business that I hope to have. It collects income taxes on the profits of the corporation. It collects taxes on the dividends. It collects social

security taxes on the wages, State taxes are also collected, and so on. For the Government to say it deserves a 2- or 3-percent royalty on an invention that stems from Government R. & D. is nonsense. I would be very happy, any time I license anything under my patents, to take 50 percent of the profits in lieu of royalties. Also, it should be remembered that the Government taxes go on, not for the life of the patent, but forever, and they also are levied not only against the patent itself but on all subsequent patents, all future developments made by the same company or any other company. So for people to worry, as Admiral Rickover worries, that the Government should collect royalties, or have some interest in the patent, is nonsense and I believe that this bill says this, partly. I think the political pressure is put upon you gentlemen that you shouldn't "give away" anything is unfortunate. I object to this giveaway nonsense. It seems perfectly proper for the Government to give me a free education, but for some reason it's improper to give me the rights to my own inventions and collect 50 percent royalties on it later, forever.

The fact is, today, contrary to the evidence that Admiral Rickover will give-and I'm using the evidence that I have in front of me in his written statement-that many corporations refuse, perfectly correctly, to take Government contracts in fields in which they are experts. They are perfectly willing to do Government research in new fields where they have no vested interest, but large corporations who are good in specific fields very often will refuse to do Government R. & D. work or take any Government contracts because of the fact that they don't want to lose their patent rights.

The other thing that happens with Government contracts under present rules is the tendency to follow questionable ethics. Companies will make sure that parallel with Government R. & D. they have a program in the back, someplace, where the really important developments take place so that the Government never gets the patent rights that Admiral Rickover thinks it would get.

What happens is that the great inventions are made just accidentally at the time when the employees are on company salaries, and the minor developments, technically speaking, during the large production contracts are happening to be done on the Government contract. This is a fact of life; that if I were working as a contractor for the Government I would make sure that my basic inventions were made on my own money.

The other thing that happens is that because of the patent policy of the Government most large industries today use the two-platoon system for Government research and development. They have a first platoon of very brilliant people who write the proposals and negotiate the contracts. When the contracts are let, the second platoon, which has much less technical skill, does the work. A friend of mine who was a proposal writer for one of our largest corporations many years ago, told me-and I don't know whether it's still true, but I suspect it's true in most companies-that he only wrote the proposals. He's a brilliant inventor. When I asked him, "Larry, who does the work after you get the contract," he said, "I haven't the vaguest idea."

I once mentioned this to the president of a very large corporation and he said, "We have a third platoon to explain to the Government later why the gadget didn't work."

I think that if the patents were left with the corporations so the benefits of this brilliance could be their own, these two platoons would not exist. They would be perfectly happy to do Government research with the same quality people they use on their own research. This is not true today.

Let me tell you about the Government experience when it owns good patents. During the war we confiscated all the patents belonging to enemy aliens that is, patents belonging to Germany, Italy, Austria, and many others. There were about 15,000 such patents. These were not Government patents. These were patents which were applied for in the United States by the industries of the world. These patents were administered after the war by John Green, who was then Chief of the Office of Technical Services. These patents died. Nobody asked for a license. They were available on a nonexclusive basis for the payment of $7 and I can assure you that if you didn't pay the $7, you certainly could use the patents. And John Green told me that the patents "died on the vine." These were his words because, he said, "Nobody wants to develop and put into production something his competitor will do after him for less money and do it better." The reason the competitor can do it for less money is because the market is established; he knows what people are buying; he therefore can do it without the usual market risks. The reason he can do it better is because he's second, and the second model is always better than the first.

People have asked me, as an inventor, why don't I invent the second model first? I'd like to do that but I don't know how. The experience with Government patents, besides these 15,000, has been very informative. As mentioned by Senator Schmitt, the Government owns more than 20,000-nobody knows exactly how many-and these patents are doing very badly. I'll give you some cases from my own experience.

In 1947, I invented the magnetic particle clutch. It consisted of two metal plates and some iron dust. The patent was basic. This contradicts the testimony of Admiral Rickover that everything that needs to be done will be done anyway. I have also heard this from the Department of Justice people many years ago, that "anything that needs to be done will be done." Here's a clutch that could have been done by any kid in 1850. There was no principle of physics that wasn't known for 200 years, except it just didn't happen. I invented this clutch and it started a new subclass in the Patent Office. The Government issued no exclusive licenses so no one wanted to spend the millions of dollars it would have taken to get rid of the problems that arose, problems of the heat dissipation, shielding of shafts, settling of the powder, and many other problems that arise in industrial applications. I was given the foreign rights, however, and I sold these to Eaton and Eaton licensed many European companies. It was developed in Europe to a much higher extent than here. It was used in four European automobiles. It was never used in a car in the United States. It's used in airplanes only when absolutely necessary. This was a basic invention, simple, but

because it was a free patent to everybody nobody spent the money it would have taken to develop it fully.

The question of whether the royalties would have come to me if I had given the patent rights is really immaterial. It's not whether Jack Rabinow makes money. The question is whether the invention is used by the public to create jobs and create exports.

All these arguments about "why should the Government give somebody the right to make some money" should never be asked about a patent. The question is, does it get used? Do people produce it? Do people use it? Does it help our export business and does it help create jobs? And whether somebody does or doesn't make money for a few years is completely besides the point. I had no objection assigning it to the Government. I received a gold medal for it and it raised my salary $250 a year. This is not the point. But the Government should have given somebody an exclusive license so the couple of million dollars it would have taken to get it on the market could have been spent. It wasn't.

I'd like to contrast this with another one of my experiences. While in the Government I invented a reading machine. It's now in the Smithsonian at the Museum of History and Technology. The reading machine read the print of a portable typewriter. This was done in 1952 through 1954. In that case the Government did give me the commercial rights because it was done when I was a member of the Harry Diamond Laboratories. Under Department of Defense rules the commercial rights were given to the inventor.

I did start a company with that basic patent and the company was sold to Control Data for more money than I would like to mention in public. The fact is that the basic patent was the basis for many inventions that followed, made by myself and by my staff. We did have an incentive and I could and did get Wall Street money and the business was quite prosperous. Here's the same guy, the same Government. In one case the patent rights belonged to the Government and I have no rights and nobody spends any money. In the other case, I do have the rights and the money is spent and an effort is put into it and the thing becomes great commercial success and today nearly all reading machines are based on that first patent on a reading machine.

Questions come up like, "What about things like cures for cancer; suppose the Government contractor develops a cure for cancer. Should he be given commercial rights?" My feeling about this is that this is one of these questions like "Do you beat your wife every Friday?" The cure for cancer would have enough moral controls on it, enough social pressures, so that I wouldn't worry about it. Besides, if a company did cure cancer and did make a billion dollars, I think society would well make that deal. But I think these are academic questions and I think that there would be enough other ways that the company would benefit from a cure for cancer so that we don't have to worry about the operation of the patent system of the United States because somebody may invent a cure for cancer.

I have been asked by Bill Gibb in a telephone conversation a few days ago about what I thought about mandatory licensing. This is a policy where the Government would require the exclusive licensee or licensor to license others. I don't like mandatory licensing,

which often destroys the value of a patent. If a patent is valuable, it is valuable because of the control it gives the owner. Mandatory licensing reduces this control. The fact that a company could make some money out of mandatory licensing is academic. The question is, will it use the money to develop the invention further. I have many doubts.

One of the interesting things about the patent system-and Admiral Rickover's testimony is basically directed not only against the Government policies but against all patent systems-is the belief that people will extort money and the inventor will get rich and his company will get rich and monopolies will be set up and so on. This is the basis of the general philosophy that patents are really not necessary-I have heard these arguments most of my life. I have heard this from the Department of Justice, which used to be opposed to patents, but which is much less so now. "Why should we pay inventors to invent? They have so much fun doing it that they will do it anyway."

I invent things and I often find them in the Patent Office files and I drop them. It's fun to invent, but it's not fun to develop the invention. If I cannot make it commercial for myself or my employer, I certainly do not follow it. There's no point in developing something that's available to everybody else. Development is very expensive and very difficult.

One of the most interesting things about the patent system that you gentlemen should remember is that the original system was invented in Venice in 1474, and since that time all the countries of the world, including the Communist countries, have adopted patent systems; and yet I once heard a Department of Justice attorney tell me-and Admiral Rickover would probably agree-"patents are unnecessary." And I said, "Then how come all the countries of the world, with the exception of China, have adopted a patent system?" His answer was, "Everybody is crazy." This does not deserve any comment. The fact is that Russia has a patent system and their inventors who all work for the Government nevertheless collect royalties. The chief of the patent system of Russia once told me that they have one inventor who so far has over 100 patents and he's earned 1 million Russian rubles in royalties. A million Russian rubles is not hay even in Russia. They also reward him with honors. They have found it does promote invention. China is now studying our patent system with a view of setting up their own. patent system.

I think our laws should be quite clear in that the normal procedures should be that in nearly all cases the patent should be given to the company that invented it. If you're concerned about the fact that very large corporations would have too much power-this should be true not only of government patents but of all patentslet the antitrust laws take care of this matter. Most of our large corporations do not sue small companies. I never was sued by IBM. I'm sure GM would not sue me if I wanted to make an automobile. This fear that large corporations ride roughshod over small companies is essentially nonsense.

Nevertheless I would like to see the power of large corporations curtailed. I agree with Admiral Rickover when he says that our conglomerates are an evil. I think they are. This is not the subie

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