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power to the public down to 1 percent of what it costs today. And that is conceivable, is it not?

Admiral RICKOVER. The idea that you mentioned has been considered, Senator. But here's the answer to your question. If you were employed by the Government or by a contractor working for the Government, the right to that invention inheres in the Government.

Senator LONG. But here's the point I'm getting at, because a person who once served on the Atomic Energy Commission-incidentally, he was a general manager or had an important position. He mentioned to me that some day we would learn how to put the power directly into the conductor rather than have to use it to produce heat and then use the heat to heat water and the water to turn the turbine and so forth. Then he said, "Such a breakthrough would mean atomic power would just displace much of the power we use today when you heat water as you do in an ordinary generating plant.”

Now let's say a brilliant scientist over there should actually develop such an idea and show you how it could be made to work. Well, if such a proposal was implemented as suggested in this bill, that fellow wouldn't get it, would he? He would be an employee.

Admiral RICKOVER. No, sir, he would not get it. You see, this is another common misconception. The misconception is that the man who gets an idea should get the credit for it. It just isn't so. It's the man who develops it. The idea is easy. For instance, a man has an idea that he should run for Senator. But the idea is not what gets him elected. It's the campaign that does it. Who should receive credit: the man who only has an idea he ought to be a Senator or the man who actually runs for the Senate? That's the analogy I make.

Senator LONG. Here's the point I had in mind. The people who actually did the work would not be the ones who would get the monopoly advantage. They just get their salary.

Admiral RICKOVER. That's right, sir.

Senator LONG. It's the employer who gets the Government contract who gets all this and it's the public who has to pay the price for it-one time for the research and development, and a second time for the next 17 years to have the benefit of what they have already paid for.

Admiral RICKOVER. You're absolutely right, the public would pay the price and the contractor would benefit. Generally, the most an inventor, who is an employee, would receive is an award-not the patent rights.

The basis for Government patent policy should be very simple. A patent to an invention developed under a Government contract should belong to the Government. To refer back to what I mentioned at the very beginning of my testimony, the basis of the present patent laws was to encourage the individual, who, on his own time, with his own money, developed an idea, and even then to limit that monopoly to 17 years. It was not intended to protect large corporations.

If an employee of a Government contractor invents something on his own time that is not connected with his job, that person should receive the patent rights. But any invention developed in connec

burists-almostsiness, academia small businesso have come

tion with his job should belong to the Government and be freely available to the public.

Senator Long. Senator Schmitt.

Senator SCHMITT. Well, Mr. Chairman and Admiral Rickover, my rebuttal is contained in the testimony of all those who have come before you in now 3 days of hearings-small business, large business, medium-sized business, academia, Government patent lawyers, geologists-almost all the witnesses have felt differently than you do, but I do respect your opinion.

Admiral RICKOVER. Don't you think there's a good reason for that, Senator? They want something for themselves. That's the reason. I don't want anything for myself.

Senator SCHMITT. That's the best motivation there-

Admiral RICKOVER. Senator, I want it for the people of this country. That's the difference between me and those people.

Senator SCHMITT. That's the best motivation there is, that is, to see that these inventions produced by the taxpayer in a direct sense in fact benefit the taxpayer, not only because they are consumers and can have access to these inventions which they do not have access to now in any real sense, but also as the chairman well knows, any profits that are made are taxed and the Federal coffers receive the benefits of those taxes.

Admiral RICKOVER. Well, how about any workman who gets paid? He's taxed too. So what's the difference?

Senator SCHMITT. That's absolutely correct, but at the present time these patents that the Government holds are not being utilized. The testimony is extremely precise that they are just not being utilized and we have to ask ourselves why aren't they being utilized.

Admiral RICKOVER. Senator, I addressed the issue of why they aren't being utilized. The reason is probably because they're not worth much. I suggested that if no interest is expressed in a patent after publicly advertising it, the patent could be put up for public bid. I'm all for that.

Senator SCHMITT. The testimony and the facts that we have been presented with in this committee are I think very persuasive that without the exclusive license, or without title more appropriately, the private sector is just not going to do that. .

Admiral RICKOVER. There is a possibility of getting the exclusive rights. If after advertising the availability of nonexclusive licenses to a patent, no interest is expressed, the rights to the patent could be thrown open to competitive bidding. I'm not against that, not at all, sir.

Senator SCHMITT. Well, Admiral, I certainly respect your long involvement in this business and I just think that those of us who are coming along behind you feel that the present system has not worked. The evidence is becoming clearer and clearer there ought to be a system in which both the rights of the public and the Government are protected but at the same time we reap the benefits of the technology.

Admiral RICKOVER. What is the evidence that it's not working, Senator? I would like to see the evidence.

Senator SCHMITT. Well, the evidence, sir, is in 3 days of hearings before this committee.

Admiral RICKOVER. I would very much like to see it.
Senator SCHMITT. And I would strongly recommend that you read

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Admiral RICKOVER. I would like to see the facts supporting the position that a patent is not being used because the Government owns it, sir.

Senator SCHMITT. The facts are clear and they are in the testimony before this committee even today.

Admiral RICKOVER. I have not had the opportunity, but I would like very much to comment on that testimony, sir.

Senator SCHMITT. I hope you will. As a matter of fact, Senator Long had to leave, but he has a set of questions that he would like very much to have you answer for the record, and I would add to those a few more.

Admiral RICKOVER. Yes, sir.

Senator SCHMITT. Plus clearly draw your attention to our record because there is, in my opinion, very persuasive evidence.

Admiral RICKOVER. You made a very provocative remark, sir. I think I owe it to you and to your committee to reply to that.

Senator SCHMITT. I certainly would draw your attention to all of the testimony and particularly that of Mr. Rabinow today and his previous testimony, but also those of the business community, the Government, the Department of Defense who testified earlier today. Almost all of the witnesses have indicated the present system is not working and inventions and ideas that should be in the private sector are not there. As a result, the consumer is not benefiting, as well as the taxpayers aren't benefiting.

Admiral RICKOVER. I agree that I'd like to look at that and comment, because I cannot answer these issues unless I know what they are.

I would like to make the point about the relative reduction in the number of patents. After World War II there were more patents filed made in this country than other countries because they were war weary. But you've got to understand that as the industrialized countries reestablished themselves more foreign patents would be filed. One of the reasons is that taking Europe collectively there are more scientists and engineers. Futhermore, Europeans are better educated. Their top schools are better than most of ours. For instance, the French Ecole Polytechnique turns out some very good people. There are good schools now in all the continental European countries, and since they have a larger number of engineers collectively, you should expect a greater number of patents. The United States turned out more engineers and scientists for a certain period of time because Europe was war weary and beaten. We should have expected an increase in foreign patents.

Senator SCHMITT. Well, thank you, Admiral. I'm sorry that we cannot agree on this because I'm sure we agree on most of the issues that you're directly concerned with in your great efforts with respect to naval nuclear power.

Admiral RICKOVER. Mr. Chairman, you earlier asked if I could look at the volumes of testimony. I would appreciate it if your staff would point out the specific parts that they want my comments on because you know we have our regular work to do. This is not part of my proper work. I do it as a public service.

Senator SCHMITT. We appreciate that. I do not feel it is irrelevant to the ultimate realization of all the benefits of all your work which has been considerable and that, in fact, what the questions we will present will do will present the facts and ask for your comment.

Admiral RICKOVER. Thank you very much for the opportunity for being here and also for permitting me to present quite a frank discussion, because you know I can't do otherwise.

Senator SCHMITT. Nor can I, and I appreciate it very much.

Admiral RICKOVER. That's why I posed that issue about the plot of land that you owned and the Government owned and I wondered why they should be treated different, because I'm sure you're going to look out for the Government's land as much as your own.

Senator SCHMITT. If there weren't Government regulations, the Government land would be physically utilized and the people would be benefiting from the minerals and everything on it, the same as with our present patent law.

Admiral RICKOVER. I hope to persuade you otherwise, sir, although I doubt it because most of us by the time we reach even your age have our minds made up.

Senator SCHMITT. I hope I don't. I have changed it a couple of times in the last few years.

Admiral RICKOVER. You can't stop me from trying.

Senator SCHMITT. No, sir. I wouldn't want you to stop. Thank you.

Admiral RICKOVER. I have always felt people can think anything they please as long as they don't say it.

Senator SCHMITT. That's particularly true in politics.

Admiral RICKOVER. It's particularly true when you're a junior member of a committee.

Senator SCHMITT. Yes, sir. _Admiral RICKOVER. I know something about this political game. That's why I have never run for office.

Senator SCHMITT. Well, I'm glad you didn't run in New Mexico. I might have had problems.

Admiral RICKOVER. Senator, I have been asked whether I would ever run for office, and I have said, no, because I don't think I could be elected dogcatcher in a small community.

Senator SCHMITT. I think you underestimate your persuasive powers.

Admiral RICKOVER. Well, then, I have another answer. I have the same charisma that a recent Secretary of Defense had, one whose name starts with Mc, McNamara. We both have the political charisma of a chipmunk.

Senator SCHMITT. With that, we will recess the hearings. [The statements referred to follow:]

STATEMENT OF ADM. H. G. RICKOVER, U.S. NAVY, TO THE MONOPOLY SUBCOMMITTEE OF THE SENATE SMALL BUSINESS COMMITTEE ON DECEMBER 19, 1977

1977

GOVERNMENT PATENT POLICY Thank you for inviting me to testify. For the past thirty years I have been responsible for the research, development, procurement, production, operation, and maintenance of the nuclear propulsion plants in U.S. Navy warships. During World War II, I was responsible for the design, procurement, and operation of the Navy's

shipboard electrical equipment. My comments today with respect to Government patent policy are, therefore, based on extensive dealings with various segments of American industry for about forty years.

The basic presumption in most laws concerning Government patents is that the Government retains title to patents developed at public expense. But, today, many Government agencies routinely grant contractors exclusive rights to these patents. I do not believe this practice is in the public interest. It promotes greater concentration of economic power in the hands of large corporations; it impedes the development and dissemination of technology; it is costly to the taxpayer; and it hurts small business. 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.

Under our patent laws, the holder of a patent enjoys a 17-year monopoly. During this time, he can prevent others from using the invention; he can license the invention and charge royalties; or he can manufacture and market the invention as a sole source supplier. If the invention is worthwhile, he is in a position to make exorbitant profits.

Patents are a survival of so-called letters patent which were issued in large numbers during the Middle Ages and through the Age of Mercantilism. These were open-hence the word "patent”-royal letters announcing to one and all that the possessor had been given exclusive rights by the monarch to some specified office, privilege, or commercial monopoly.

Originally, the purpose of letters patent granting industrial or trade monopolies was to promote the public interest; that is, to expand the nation's industry and trade-its national economy. It was then believed that the best, if not the only way, to induce people to invest large capital sums in new industries or trading ventures was to guarantee them freedom from competition, that is, to grant them a monopoly.

In time, the public interest came to be disregarded by monarchs. They granted letters patent to court favorites or sold them to the highest bidder in order to enrich themselves. In the reign of James I, the English Parliament finally put an end to the whole system of private monopolies and privileges through the 1624 Statute of Monopolies.

One type of letters patent was allowed to survive, the patent granted to inventors. For a limited time, a monopoly under the patent was allowed in order to encourage inventors to invest their brains, time, and money in research. It was believed that this was the best, if not the only, way to induce people to produce inventions. These basic ideas were subsequently incorporated into our own first patent law of 1790.

While there are flaws in our patent system, I can see why the Government grants patent protection to private interests who invest their own time and money in making inventions. But the patent situation today is quite different from what it was in 1790. At that time, a patent was a matter that concerned the individual primarily; individuals in a preindustrial age were developing single items. Today, the development of patents generally involves large organizations and corporations.

The U.S. Government alone is currently spending-in fiscal year 1978-nearly $26 billion for research and development. To grasp the significance of this sum, bear in mind that the total expenditures of the U.S. Government for the 11-year period, 1789 to 1800, was less than $6 million. It was not until 1917 that the entire Federal budget reached $1 billion.

Over the years I have frequently wondered whether, in this modern industrial age, patents are as important to industrial organizations as would appear from the statements made by the patent lawyers. It is probable that they are overemphasizing the present-day value of patents and it is quite possible our industry might not be hurt much if we restricted the items that could be patented.

I believe that today the important factor for an industrial organization is the know-how 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.

Up to the advent of the Atomic Energy Commission in 1946, and the Space Agency in 1958, most Government research and development consisted essentially of adaptations to existing technology. That is, an industrial organization would be called upon by the Government to take an item that it had already developed over a period of many years and modify it. But today, in many areas, the Government is in the forefront to technological development. As a result, it is actually the public that is financing development of entire new technologies. It is wrong, in my opinion, for the Government to grant a contractor exclusive rights for 17 years to inventions developed with public funds.

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