Under the proposed bill, each Federal agency would be required to establish a technology utilization program to promote the development and use of technology. The goals of the program would be to shorten the time from conception of an idea to commercialization; to encourage multiple secondary uses of technology in all areas of the private and Government sector and to understand the process by which technology is transferred from the government to the private sector.

In the event the Government determines that a firm has failed to introduce the technology to the private sector within a reasonable time period, the bill provides that the Government retains the right to claim the patent.

In my opinion, the proposed bill would impede, not enhance, the development and dissemination of technology; would hurt small business; would inhibit competition; would promote greater concentration of economic power in the hands of large corporations; and would be costly to the taxpayer.

In private industry, the company that pays for the work generally receives the patent rights. Similarly, companies generally claim title to the inventions of their employees on the basis that the company pays their wages. In doing business with the Government, however, these same companies reverse the standard, contending that the patent rights should belong to the one who comes up with the idea, not the one who foots the bill.

The patent interests have been working behind the scenes for many years to promote, in one way or another, policies and legislation along the lines of S. 1215.

May I interrupt, Mr. Chairman, and say I'm very grateful that Senator Long has arrived. My first testimony on patents was about 20 years ago before Senator Long and his committee. Some people complain about him because he's involved in income taxes. That's a very unfortunate situation to be in because that's a field that people don't like. He gets the blame for income taxes. But knowing Senator Long, I know as far as he's concerned it's like water off a duck's back. He apparently has enough popularity with the people in his State that he keeps on getting elected in spite of what some newspaper people think about him. As a matter of fact, Senator, if I lived in your State, I'd vote for you, too. But anyhow, I do thank you for coming here and for all the previous support you have given to protecting the people's rights. This fact is not known about you and I'd like to get it advertised. I know you and your father shared one thing-you both tried to protect the people. You don't mind my bringing your father in, do you sir?

Senator LONG. No, I don't mind at all.

Admiral RICKOVER. I will continue now from my prepared statement.

Some people claim that by retaining title to publicly funded inventions the Government stifles technology; that the results of the Government's large research and development expenditures are reflected in the approximately 25,000 patents the Government presently owns; that the public is not receiving the benefit of this technology because only a small percentage of these patents are in use. The patent lobby contends that in the absence of patent pro+ection individuals and companies will not invest in the develop

ment and marketing of this technology, but that this could be resolved by giving contractors the exclusive rights to inventions developed at Government expense.

As I see it, those who would benefit most from the proposed legislation are patent lawyers and large corporations who, year after year, receive the lion's share of Government research and development expenditures.

In my view, the importance of patents has been greatly exaggerated. Truly good ideas tend to be used. Even without a patent, many of the worthwhile inventions would be discovered and adopted in the marketplace based on their merits. If one company did not generate the idea, another firm would have because of the nature of the work being done. Often, identical ideas crop up almost simultaneously in different companies, and different countries. Further, many good ideas can be implemented or commercialized without special investment in R. & D. or new facilities. Or, they are sufficiently promising that companies will invest in them without patent protection. In such cases, rather than promoting technology, the patent system becomes a process for determining whether or not someone is entitled to exact a royalty for use of the idea.

It is nonsense to think that our technological growth will suffer unless contractors receive title to patents generated under Government contracts. From what I have seen over many years, the majority of patents are of little or no significance. Many companies seem to file patents defensively; meaning that they file numerous patents for minor details primarily to keep someone else from getting a patent in that area or to discourage potential competitors. Some file patents as status symbols; others simply misjudge the attractiveness of their ideas. The Patent Office itself, when in doubt, tends to patent questionable items on the assumption that, if the patent becomes important, the validity of the patent can be tested in court.

The important factor for an industrial organization is the knowhow developed by it-the trade secrets and the techniques; these are not patentable qualities. They are things which are inherent in a company, in its methods, in its management and trained employees, in the kind of machine tools it has, how it uses these tools, and

so on.

It is often said that unless the Government gives away its patent rights, companies will refuse Government contracts. While many contractors would like to obtain exclusive rights to patents developed under their Government contracts, few value patent rights to the point they are willing to forego Government business.

I have never seen one Government contractor in the many years I have been in this field that has ever refused to take a contract because it wasn't able to get patent rights.

From what I have seen, Government patent policy is rarely the dominant factor in company decisions to accept or reject work. The tangible benefits of profits and technical know-how from Government orders are far more valuable to most contractors than the speculative benefits of patent rights. For more than 30 years I have been able to obtain the R. & D. and manufacturing work needed

for the Naval Nuclear Propulsion Program without having to give away Government patent rights.

Patents are generally incidental to Government research and development work, not its primary purpose. The patents that arise under a Government R. & D. program are not at all indicative of the technology developed. When I place an R. & D. contract for a new design reactor, it is principally to work out the details of a design and to identify and resolve the problems of design, manufacture, and operation. If patentable inventions arise in the course of this work, they generally involve only small design features, not entirely new concepts.

The existence of a large number of Government-owned patents which apparently are not being used does not present an accurate representation of Government-owned patent utilization. It is almost impossible to tell the extent to which patented inventions are being used, particularly in the case of Government-owned patents. Government agencies do not have a reason to search for patent infringement. The Government, unlike private parties, generally has no desire to prevent others from using its inventions.

The proposed bill would place upon each Government agency an obligation to promote the use of patents the Government already owns as if they were predominantly good ideas. Such efforts would tend to divert attention and resources of the Government agencies away from their main functions. Under the proposed bill, Government agencies would be expected to actively promote patents currently held by the Government.

Most agencies have enough trouble doing the job they were established to do; they should not be required to spend their time and resources trying to promote patents, the majority of which are of dubious value. I believe that the decision to use or not use Government financed inventions is one best left for the private sector. In many areas today, the Government is in the forefront of technological development. The public is actually financing development of entire new technologies. The U.S. Government intends to spend in fiscal year 1980 nearly $32 billion for research and development.

The majority of these Federal research and development dollars will go to large contractors. For example, in fiscal year 1978, 64 percent of the total dollar value of research and development contracts placed by the Department of Defense went to only 19 large contractors.

If the rights to publicly financed inventions are given to contractors, the Government itself will be promoting the concentration of economic power in the hands of a few large corporations, mainly conglomerates. As the corporations expand, the problem is exacerbated.

Currently, the President and many members of Congress are calling for the expenditure of unprecedented sums to develop new sources of energy and more efficient ways of using it. By far, the vast majority of these funds will be spent under contracts with large corporations.

Imagine the public furor that would ensue if, under the terms of this bill, a contractor, either large or small, developed at public expense a major breakthrough in energy technology. Is it proper

for that company to be able to exercise monopoly rights over the distribution, use, and pricing of the results for 17 years? I think no. In my view, the rights to inventions developed at public expense should be vested in the Government and made available for use by any U.S. citizen.

Many large corporations patent minor improvements or design features simply to discourage competitors or potential competitors-particularly small firms-from trying to enter the market. To challenge the validity of any of these patents can take hundreds of thousands of dollars and years of litigation. Although a high percentage of patents contested in court are ruled invalid, not many firms can afford the lengthy litigation that is required to challenge a patent. Thus, if the Government were to give its contractors title to inventions developed at public expense, it would be discouraging competition and making it easier for large businesses to freeze out their smaller competitors.

In apparent anticipation of concerns that a contractor might obtain title to publicly financed inventions then not use it, the bill contains a march-in rights provision. Under this provision, the Government retains the right to force widespread licensing if it determines that the contractor who has title to the invention is not satisfactorily developing and promoting it.

This safeguard would be cumbersome, ineffective, and largely cosmetic. The Government has had march-in rights since 1963, but to my knowledge has never, or very, very rarely ever used them. To be in a position to exercise these rights the Government would have to stay involved in the plans and actions of patent holders and check up on them. If the Government ever decided to exercise its march-in rights and the patent holder contested the action, no doubt the dispute could be litigated for years.

This proposed bill is but one of many patent bill introduced in Congress in recent years aimed at giving contractors title or exclusive rights to inventions developed under their Government contracts. The rationale for such legislative proposals has varied over the years. In the past, the proponents have stressed the possibility that companies would not accept Government contracts unless they were guaranteed exclusive patent rights. The issue being promoted today is that innovation will decline unless the Government gives away patent rights to publicly financed inventions.

I have testified numerous times during the last 20 years in opposition to proposals that would give away the Government's patent rights. In recent years, I testified before the Senate Small Business Committee and before the Senate Judiciary Committee. With your permission, Mr. Chairman, I would like to include those statements as part of my testimony today. I would like to include, for the sake of the historical record and to show the part that you and I played, the original testimony to you when you were chair

man.

Senator LONG. We would be happy to have that in the record.1 Admiral RICKOVER. In summary, I believe that inventions paid for by the Government should belong to the public, and all citizens should have an equal opportunity to use these inventions. Private firms, particularly large companies, should not be able to get a 17

1

The National Patent Policy hearing of June 2, 1961 has been placed in the committee files.

year monopoly on inventions they develop with tax dollars. In my opinion, the effects of Government patent policy are continually exaggerated and overemphasized by the patent lawyers and contractors who have a vested interest in the matter. Proposed changes regarding ownership and use of patents developed at Government expense are always presented under the banner of high sounding principles and purposes. Having observed this issue for many years, I am thoroughly convinced that almost all of such proposed changes are contrary to the best interests of the United States.

In my view, Congress should require the Government to retain title to all inventions developed at public expense and make these inventions freely available for use by the public. In this regard, the Commerce Department should be required to publicize for a period of 6 months the availability of each patent to which the Government has title and to grant nonexclusive licenses to those who express an interest in using the invention on this basis. If during this period no one requests a nonexclusive license, the patent rights would be thrown open to competitive bidding with an exclusive license granted to the highest bidder, but not for the entire 17year period for which a patent is valid. At the end of this period, the invention would fall in the public domain. To avoid circumvention of these procedures Government agencies should be prohibited from waiving Government patent rights.

The basic principle embodied in present laws is that the Government should have title to inventions developed with Government funds. The reasons the Government should take title to these inventions are primarily to preclude the establishment of a private monopoly for a publicly financed invention; to insure the public has equal access to these inventions; and to insure the Government is not subsequently barred from using the idea by someone else's patent. These are sound reasons that I fully support. The basic principle of title in Government should be modified, waived, or otherwise tampered with only for compelling reasons-and even then with great care and in the most limited way needed to accomplish the purpose.

That is the end of my statement.

Senator LONG. Admiral Rickover, I appreciate your appearance here today and may I say you have been a compelling witness from my point of view on this subject.

Now you made a point some years ago in testifying on this subject when I was chairman of the Small Business Subcommittee which until now I had forgotten. You said that most of these people who do this research are sophisticated enough to know that their ultimate employer is the U.S. Government. For example, here's some fellow who's working for some company, let's say Westinghouse for lack of a better name, and so the Government pays Westinghouse and Westinghouse hires a scientist. Now the scientist is the fellow who makes the breakthrough. Well, he has a contract with Westinghouse so he's not privileged to have a private monopoly on his brainchild. Westinghouse gets that because Westinghouse hired him. But the Government hired Westinghouse.

Admiral RICKOVER. You know what's wrong with your statement, Senator? You're just talking some ordinary commonsense that any