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an incentive to come to the bargaining table and make a suitable deal. And I think that if the invention is largely developed with Government money, there is little that the patent owner in those circumstances should be allowed to gain by holding on unreasonably to a product and not licensing others who wish to use it. Senator SCHMITT. Senator Stevenson wanted me to ask if we might take another approach along the following lines. The contractor's exclusive rights would expire after a reasonable opportunity to market an invention unless he requested an extension of time, for example, on the grounds that he had put the invention to use but not yet recouped his investment. The Government would publish lists of the patents in order to inform potential licensees of available inventions. Would-be licensees could enforce the march-in rights by complaining to the Government that they had been refused licenses to available inventions. In other words, the march-in would be both automatic and self-enforcing, but the contractor preparing the marketed invention would be protected. Do you have any comment on that proposal?

Mr. JOHNSON. I think the danger of extinguishing rights is real under that situation. If the rights were extinguished, the Government would either have to license it on an exclusive basis and I don't think the Government is very well adapted to that, frankly, or there would be lost whatever incentive the patent provides to develop that invention.

Also, I do want to comment on a point that is made in that question. I think it is a good one. There must be a method for identifying the inventions that are made under Government contract. Of course, if patented inventions that were developed under Government contract or came into being during the course of a Government contract would be identified as such in the patent disclosure, that could be on the public record. At one time, I toyed with the notion of having a letter G be attached to all patents that were developed with Government funds in one way or another, everybody would have a clear idea. I was told that this idea was impractical because it wouldn't fit into the Patent Office computer. Again, I think it would be desirable that there be a means of identifying to the would-be user what patent was developed with Government funds in one way or another. Providing lists would be a perfectly good idea. The Government does that.

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But I must say in my experience the lists are very uninspiring. If you have ever seen a list of patents owned by the Government, you can see how completely opaque they are, how virtually no one except possibly a few people in Japan have ever taken them and tried to find inventions they could use. I might say that NASA does the best job in this respect, because when it publishes a patents list, it includes oftentimes a picture of the invention disclosure and a copy of the first claim. It tells you at least a little bit more about the invention than just what is its title.

Senator SCHMITT. It is a little bit like trying to find inventors in a telephone book.

Mr. JOHNSON. That is right, exactly right. So providing a better means of informing would-be users about the inventions by providing a little more information would be a good role for the Government. But as for actually administering the licensing program

itself, it would be better if would-be licensees went directly to the patent owner, and they made their arrangements with each other. Senator SCHMITT. You discussed this issue in your testimony, but we do provide in S. 1215 a list of five criteria under which it would be presumed the Government would retain title. The determination as to the Government's rights would initially be made at the time of the contract. I get the impression from your testimony you think that although it may not be unworkable, it is unnecessarily cumbersome. Do you have any other comments on that or on the appropriateness of the five criteria?

Mr. JOHNSON. I think the five criteria have much to commend them. The first refers to a contractor running a Government-owned research facility. This usually means the national laboratories and facilities run by private companies for the Department of Energy, but in practical effect these operations are quite removed from the companies that run them, and they operate very largely as extensions of the Government. Thus it makes a certain amount of sense to acquire title in that case.

I personally think that the second criterion, where title is to be acquired because of the classified nature of the work, is unnecessary because of the Invention Secrecy Act, and it might confuse people because there is a good deal of work performed in the Department of Defense that is classified in nature but as to which there is utterly no need for the Government to acquire title, because the Government would have free use, and the inventions, if they are used for commercial purposes, have got to have a lot of private investment to bring them into an area of use or a level of cost the public can afford.

Criterion number three refers to exceptional circumstances where it is necessary to assure adequate protection of public health, safety, or welfare. The current Presidential patent policy statement in effect uses some of the same language. That is, I think, reassuring to people more than it is actually necessary, my personal opinion.

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Senator SCHMITT. Sometimes reassurance is absolutely necessary. Mr. JOHNSON. I personally think that the march-in procedure would accomplish that, although I know I am in a minority. Whenever you discuss patent policy, you very quickly come up with the question of what do you do with a cure for cancer? Are you going to let one company have that? Obviously, a priceless invention. As I say, you are likely not to have a single patent on that, but you need to have some protection against that possibility.

I think that such a possibility might arise in a contract where the work was expressly at the point of discovering whether there was an answer to cancer. The Government might need to acquire title, because that would be an exceptional circumstance.

I have to correct myself. I said this language in S. 1215 came out of the patent policy statement. Actually it is a direct reverse twist of it, because under the current statement you normally acquire title in any circumstance in which you are concerned with public health, safety, or welfare. Only in exceptional circumstances can you leave the commercial rights with the contractors. The bill would change this around. Only in exceptional circumstances would you acquire title.

In so doing, I think the new language has perhaps enlarged the possibility of more inventions being utilized by their companies that developed them, in other words greater commercialization. Senator SCHMITT. It is an attempt to put the burden of proof on the Government rather than on the contractor.

Mr. JOHNSON. That is a good place for it to fall. At the same time, we have a strong march-in procedure to enable you to deal after the fact with the few cases that really count.

Certainly, the fourth criterion, which refers to the nonprofit organization that doesn't have a technology transfer program-it makes sense for the Government to take title in such a case, because the Government, of course, would have to provide the technology transfer.

And lastly, the fifth criterion, where the purpose of the contract is to develop processes or methods that would be required to be used by Government regulation-that is classically the FAA type of situation, and some others, perhaps the National Highway Traffic Safety Administration. That makes sense, for the act of creating by regulation a demand is enough to obviate the need for the patent incentive.

Senator SCHMITT. Do you think that specific criteria for march-in rights should be specified if we put our emphasis in that direction rather than in the contracting?

Mr. JOHNSON. Yes. I think it is very desirable that that be done, because whoever is going to exercise the march-in procedure should have a set of statutory criteria, which set out the purposes of the Congress in exercising what policy should be adopted in each case. Where somebody else wants to use the invention, there should not be an automatic assumption that that person would get it. I have suggested some criteria that would recognize the need for incentives to bring ideas into commercial utilization, the need to avoid the use of patents in a manner which is inconsistent with he antitrust laws-in other words, a series of criteria which both sides, the would-be licensee and the patent owner, can see and can make some kind of guess as to the way the Patent Board would go. And when you can have a pretty good idea what is going to happen, you give an incentive to both sides to come together and make a contract. And that is the kind of incentive that I would like to see developed.

Also I think that the patent owner should be permitted a chance to get judicial review of the decision of the Patent Control Board, if it is adverse. And in order to provide effective judicial review, you need to have some criteria against which to measure how the Board is acting, and the court can then determine if the Board has acted capriciously or whether it has carried forward a policy which is the congressional policy.

To leave policy on title and license solely, to administrative discretion is undesirable-when you are talking about an agency as small as this one, if it ever comes into existence. One of the main reasons that people take title to inventions when they don't have to, is the fear of coming before a congressional committee 5 years later and being asked, "Why did you give away this right?" But if the criteria――

Senator SCHMITT. It is like the X-ray.

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Mr. JOHNSON. If the criteria are in place and you are carrying out congressional guidance, you are in much better shape.

Senator SCHMITT. We have to get to some other witnesses. We could discuss your experiences and suggestions all morning.

Quickly, could you make a comment on whether we should permit the acquisition of background rights?

Mr. JOHNSON. I don't think there should be a flat prohibition on it, because I think in some circumstances it is desirable that the matter be negotiated. I think setting statutory criteria in this area is dangerous, because it may cause agencies to try to seek background rights more than they should.

This is an area that is even more sensitive to the commercial companies than to take title to inventions they may or may not make. You are talking about their lifeblood. And you also have very little to give them in return for those background rights. Nevertheless, I can visualize circumstances where it may be necessary if we are going to make the research money of the Government pay off. You may, for example, in the energy situation, be working with large companies to develop a demonstration plant. Here you have to make arrangements that when the demonstration plant is complete-your idea of demonstrating is to show it can be done-you can let other people do it as well. You wouldn't want to let that be prevented by the background patent rights that the contractor has.

So you seek to reach an agreement in that case that the contractor will agree to license others on terms that will be reasonable. That may be free, depending on the value.

But it is truly an infrequent situation in which it is necessary to seek background rights. And I think to suggest that it is desirable to enact statutory criteria for taking background in many other situations, I think would be dangerous unless the criteria themselves were very carefully drawn.

Senator SCHMITT. Another question that you might want to make a quick comment on is what should we do with the stockpile, so to speak, of Government-owned patents that already exist?

Mr. JOHNSON. I would put one agency in charge of dealing with that, rather than every procurement agency. I think that agency should borrow on the techniques that NASA has pioneered in this field. I think NASA has been most successful because it has devoted a lot of real time and attention to this and put good people on it. Senator SCHMITT. Could we provide some kind of a surgical means by which the patents on a case-by-case basis could be reviewed when somebody said, I would like to have this patent reviewed, and retrospectively, the criteria of this measure applied to it?

Mr. JOHNSON. That is a very interesting idea. You give criteria to the Department of Commerce or whoever was going to exercise the program, and say-you would have to grant authority to the Government to give away-there is the word "give-away”

Senator SCHMITT. Čan't take you anywhere, can we?

Mr. JOHNSON. To grant title. But it may not be necessary. An exclusive license may be enough. There is a problem in granting exclusive licenses. It is largely a technical problem in the patent law. The Government normally does not enforce patents that it

owns. If you ever enter into an enforcement program, then chaos would result, because you just would be creating a lot of jobs for patent attorneys and little good for the Government.

Senator SCHMITT. I saw a lot of smiles in the audience.
Mr. JOHNSON. I hasten to say I am not a patent attorney.

But the technical problem is, when the Government does grant an exclusive license, there is a question about who can enforce the license. Technically, the patent owner has to be joined in the legal action with the exclusive licensee. This ties the Government up in issues that are truly tangential to its interests. However, I think that is a technical problem that can be worked out without undue difficulty.

Yes, I think some means of better publicizing inventions, a little more salesmanship on the part of the Government by identifying a good invention and-providing more than the bare patent disclosure, but providing the research results that go with it-these things could be quite attractive.

Senator SCHMITT. Thank you, Mr. Johnson.

Mr. JOHNSON. Thank you.

[The statement follows:]

STATEMENT OF R. TENNEY JOHNSON, PARTNER, SULLIVAN & BEAUREGARD

Mr. Chairman, I am honored to respond to your invitation to begin the testimony on Government patent policy before your subcommittee. This is the subject matter of S. 1215, the Science and Technology Research and Development Utilization Policy Act which you, Senator Cannon, and Senator Schmitt have introduced.

Introduction and background.—I will provide some introductory comments on Government patent policy, try to give some idea of its complexity, outline briefly the history of how it has evolved over the past thirty years, and state some personal views on the legislation before the Subcommittee.

I have been concerned with this subject in various roles for the past twenty years, as an attorney in the Department of Defense, Deputy General Counsel in the Army, and General Counsel of NASA and the Energy Research and Development Administration. I assisted in formulating patent policy for those agencies, drafting President Kennedy's Statement of Government Patent Policy in 1963, proposing to the Commission on Government Procurement its "alternative patent policy" in 1972, and guiding the writing of regulations to carry out the patent provisions of the NonNuclear Research and Development Act of 1974.

The issue.-The fundamental issue is, who should get the commercial rights in an invention which is made in the course of performing research and development for the Government?

There are few questions of public policy which arouse more controversy. There are few issues on which agencies' practices vary more widely. And there are few issues on which the factual background for policy making is so sparse or subject to such widely varying interpretations.

Unfortunately, Government patent policy is a subject which appears simple at first glance and which is thus susceptible to sloganeering and demagoguery. Everyone is an expert on the subject, it seems, from the very beginning. And yet, the more you study it, the more complex it becomes, and the more you become aware that there are a multitude of conflicting considerations.

Basics.-Let me start with the basics: inventions will be made in performing R. & D. and that many of these inventions will be patentable. A patent is a right to exclude others from the use of the invention for seventeen years. Patents are granted by the Government under the authority of the Constitution. Their fundamental purpose is to encourage disclosure of ideas in return for an exclusive right to exploit the invention, and thereby in both ways to stimulate development of new ideas. Patents are thus little monopolies, although of course they may be licensed to others by the patent owners.

All agree that when an invention is made in performing Government R. & D. contract, the Government must always receive a comprehensive license to use the invention itself or to authorize others to use the invention in performing work for the Government. The issue thus becomes whether the Government should acquire

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