policy on this score. Thus we concur strongly with Sec. 101 "Findings" of S. 1215, and particularly with Sec. 101(3), namely: “(3) Scientific and technological developments and discoveries resulting from work performed with Government contracts constitute a valuable national resource which should be developed in a manner consistent with the public interest and the equities of the respective parties.' We would contend that the Federal Government has not administered its contracts in scientific and technological areas as "valuable national resources[s]", nor has it developed the results of those contracts in "a manner consistent with the public interest" or the "equities of the respective parties." To the contrary, it seems that the Federal Government has followed the practice of simply doling out money in the expectation of developing "valuable national resource[s]" without any concomitant effort to promote those resources on behalf of the public interest. The proof of that inadequacy, surely, is in the failure of the various federal agency technology transfer programs, and in the thousands of government patents that are as yet uncommercialized. And we would concur in Sec. 101(6) that "There is a need for the establishment of a flexible Government-wide policy for the management and utilization of the results of federally funded research and development." We would like to comment on some of the specific provisions of the bill: In Sec. 201, "Responsibilities," we are of the view that giving the responsibility to a single agency to coordinate, direct and review the implementation and administration of the Federal policy set forth in S. 1215 with respect to the ownership of inventions resulting from federally sponsored research and development could result in an additional layer of bureaucracy. Both those responsibilities and the promotion of efficient and effective utilization of the results of federally sponsored research and development could be left to each individual agency which best knows and understands the programs of its sponsorship of research and development and can best evaluate where utilization of the results of such programs might be most efficient and effective. For example, concerning Sec. 201(c)(4), we would ask, what will qualify the Commerce Department "to identify those inventions with the greatest commercial potential and to promote the development of inventions so identified"? Although we might suspect that even the individual agencies might encounter some difficulties in fulfilling this responsibility, the agencies are much better qualified to make such identifications and promote them for their commercial potential than is the Secretary of Commerce. In the same area of responsibilities, we would also ask, in Sec. 201(c)(7), how will the Department of Commerce "demonstrate the practicability of the inventions for the purpose of enhancing their marketability"? We can't for a moment comprehend how the individual agencies, let alone the Department of Commerce would have such capabilities. Surely the demonstration of marketability of an invention is best left to those with the experience of the market. The Government is not in marketing. This is a responsibility that only the private sector can carry out, and the private sector will assiduously carry out this responsibility if it determines there is commercial practicability of an invention and there is a market for it. We would say about the entire Sec. 201 (c), that all of its provisions would create an unnecessary additional bureaucracy that we cannot see as being as effective as leaving such responsibilities to the individual agencies working under the umbrella of a government-wide, unified patent policy. Sec. 201 (e) most exemplifies what we are concerned about in this respect. Establishing interagency committees as are necessary to assist in the review and formulation of rules, regulations, and procedures implementing provisions of this Act, makes for more layers of complexity, bureaucratic delay, and regulation. We believe that if a clear unified patent policy were to be enacted, there would be no need for such interagency committees on such a formal basis. If there needs to be some coordination among particular agencies in implementing patent policy, then it can be instituted as needed, and dispersed on completion of the task. In Sec. 202 "Agency Technology Utilization Program," we take a cautious view of expanding the federal bureaucracy through the establishment of technology utilization programs in those federal agencies supporting research and development activities. For example, the Federal Laboratory Consortium for Technology Transfer today numbers in its membership some 200 federal research and development laboratories and centers. Yet, we are not aware, in the five years of the Consortium's existence, of a substantial increase in the transfer of the fruits of research and development in the federal laboratories to innovations beneficial to society. We believe that the key point here is not an expansion of agency technology transfer or utilization programs, but rather a formula by which industry and the private sector can be brought to the inventions so as to evaluate them for their commercial potential. What Sec. 202 provides for is a "push" mechanism for government agencies. Such a mechanism is beset with problems unless there are incentives to bring the "pull" of the innovative industrial community to the inventions. In the matter of "Allocation of Rights" [Sec. 301], we would support the provisions of the "Rights of Government." Similarly, the bill would have our support on "Rights of the Contractor" [Sec. 302]. However, we foresee some problems with some of the provisions of Sec. 303 Waiver. We generally applaud the provisions in this section since it is our view that, in prinicple, this is the way that waiver should work. Nonetheless, we sense that Sec. 303(4) might be rather inappropriate since it seems to us to be beyond the capability of agencies supporting research and development to deal with "situations inconsistent with the antitrust laws." In Sec. 304 "March-in-Rights," in subsection (b), we believe that there is no need for prior approval of the Secretary of Commerce concerning the exercise of marchin-rights by a Federal agency as described in Sec. 304(a). Again, we would prefer that the particular agency be left to determine the exercise of march-in-rights whenever a situation arises in which they are to be invoked. Finally, we would especially applaud Sec. 306 "Background Rights." Such a provision is at the very core of a successful government-wide patent policy and the involvement of the private sector in its implementation. Without such protection, the likelihood of private sector involvement would be poor indeed. SUMMARY In summary, the NAM looks upon S. 1215 with favor and, in general would support passage of this legislation. In some of the specific provisions, we are concerned for those that would create a bureaucratic superstructure to implement a government-wide patent policy or complicate the role of individual government agencies in fulfilling the positive thrust of the bill. AMERICAN PATENT LAW ASSOCIATION, Senator HARRISON SCHMITT, Senator ADLAI STEVENSON, Senate Office Building, Washington, D.C. GENTLEMEN: By coincidence the Board of Managers of the American Patent Law Association had a meeting May 25, immediately after the May 22 introduction of S. 1215. It would be an overstatement to imply that the members of the Board have had a chance properly to study the entire bill. On the other hand, they had theretofore been studying comparable subject matter in the Bayh bill and were in a unique position for instant appreciation of the values in S. 1215. Feeling that you might be interested in the views of the APLA Board promptly, the Board considered and unanimously adopted the following resolution: Resolved, That the American Patent Law Association approves the general intent and principal objective of the Schmitt/Stevenson Bill, S. 1215, 96th Congress of May 22, 1979, to use the patent system to promote commercialization of inventions resulting from work sponsored by the government. APLA believes that the fundamental principle of the Schmitt/Stevenson Bill of retention by government contractors of principal rights to patents based on government-sponsored research (except where exceptional government needs must govern) should be uniformly applied to all government contractors. APLA therefore endorses and supports enactment of the Schmitt/Stevenson Bill. Please let me know if there is anything that APLA can do by way of helping your advocacy of this bill. Yours truly, TOM ARNOLD. GENERAL ELECTRIC CO., Fairfield, Conn., July 2, 1979. Hon. ADLAI STEVENSON, U.S. Senate, Washington, D.C. DEAR MR. STEVENSON: This letter is to record the support of General Electric Company for the "Science and Technology Research and Development Utilization Policy Act", S. 1215, which you have co-sponsored with Senators Cannon and Schmitt. Title III of your Bill is particularly important in its recognition that the ownership of the applicable patents can stimulate Government contractors to commercialize the results of federally sponsored research and development. When an R&D program has commercial possibilities, the contractor is usually in the best position to carry the R&D results to the marketplace. However, this normally requires a substantial investment in time, manpower and private funds, and without the protection afforded by patent ownership, the contractor may be unwilling to make that investment. If the contractor does not do so, it is very unlikely that anyone else will. Thus, although patent ownership afforded the contractor will not guarantee that consumer products will flow to the marketplace, it should provide an effective stimulus to that end. The alternative of the Government keeping the patents works in exactly the opposite direction, providing a disincentive to commercialization. In our opinion, your Bill takes the proper approach in limiting Government ownership to specific situations and then allowing waivers if the controlling conditions no longer exist. In the event that changes in the Bill can be taken up for consideration, we would suggest the following: 1. S. 1215 carries throughout the concept of an inventor "who has made an invention under a contract but who has not agreed to assign his rights in such invention to the contractor". Such an inventor appears in the following sections: 302(a) and 305(a) (1), (3) and (6). The concept of such an inventor, seemingly working on his own, would raise many legal difficulties in respect to ownership of invention rights and we recommend deletion of reference to such an “inventor". 2. Section 201(c)(9) would provide that proceeds from licensing, etc. received by the Government could be used for "purpose of this Act". Such proceeds ought to be transferred to the Federal Treasury so that administration of the Act becomes part of the budgeting process and thereby subject to fiscal controls. As it now stands, the administration of Government inventions could enter a spiral of unchecked growth which would be undesirable for the Country. 3. Section 201(c)(7) directs the Secretary of Commerce to "acquire technical information" to be used in promoting and demonstrating Government-owned inventions. We believe that the quoted language should be deleted because the presence of such a directive may well result in the mounting of a more intensive effort to acquire technology from contractors than would be desirable. Merely leaving the directive in the form of engaging in negotiations and other activities for promoting licensing ought to suffice. 4. Section 305(a)(2) would provide for a mandatory reservation of a non-exclusive license to the States and domestic municipal governments (in addition to the United States) "unless the agency determines that it would not be in the public interest to acquire" such license. We would prefer to have the reference to the States and domestic municipal governments deleted altogether. At the least, it is believed that the "public interest" test should be deleted and something more definitive provided. For example, a non-exclusive license for States and domestic municipal governments should not be reserved when it would tend to substantially negate the usefulness of principal rights retained by the contractor and thereby blunt his incentive to commercialize the patented inventions. One instance of this may be mass transit equipment. Again, we wish to indicate our support for S. 1215, and if comments are desired on any particular issue, we will be glad to work with your staff in getting them to you. Very truly yours, H. F. MANBECK, Jr. JULY 18, 1979. Hon. SENATOR ADLAI STEVENSON, U.S. Senate, Washington, D.C. PERSONAL AND CONFIDENTIAL DEAR SENATOR STEVENSON: Glenn Stephenson requested that I write you and discuss my feelings, perceptions, and experiences in the field of technological innovation, new product development, and product protection. As he explained, due to the sensitive stage of development of our technology, I must request that I remain anonymous at this time. If you should desire to meet with me personally, in private, at some point in the future, this can be arranged. Let me be very frank and state that the ideas, concepts, feelings, and experiences described in this letter are my own, and do not necessarily reflect the opinions of my business associates. Finally, if you should wish to read the body of this letter into the Record, you have my permission, providing you observe my request to remain anonymous. BACKGROUND INFORMATION I am a businessman by profession. I became associated with a development scientist in March of 1976. He is responsible for product research and development. My role is to develop financial backing, product strategy, business feasibility assessment, and arrange for product marketing. Our development scientist currently owns some 60 patents, and owns substantial additional inventions which remain unpatented. While I have reviewed many inventions and new products for investment and marketing, this is my first major experience in the realm of patent protection for advanced energy technologies. I will attempt in the remainder of this letter to explain why our organization has elected to bypass the patent system for a procedure judged to have a higher probability of success given the nature of our technol ogy. SUMMARY OF PERCEPTIONS REGARDING THE PATENT SYSTEM 1. Utilizing the patent system by small inventors, and small organizations involves considerable risk exposure, while the protections afforded by the patent code are minimal. 2. Economic intimidation of the small inventor by the large firm is built into the adjudication procedure. The costs associated with a patent defense can often be substantially greater than the development costs of the basic invention. 3. The legal systems current interpretation of the patent code legitimizes patent challenges and illegal patent infringement by well financed corporations. 4. When the court costs are less than the expected royalty or licensing fees, the legal and economic incentive for a well-capitalized firm is to infringe the patent and play the expected probabilities that the inventor cannot afford to litigate. 5. The patent office exists within an aura of suspicion based upon unethical leakages in the past. 6. With respect to selling our technology, NOT filing a patent offers the purchasing company both security and the element of surprise in the marketplace. 7. Because of the high probability of patent infringement and expensive litigation regarding an innovative new product, it appears that only the marketplace offers true economic protection via a strategy of maximizing market share. PRODUCT INFORMATION The technology which we are currently developing deals with the problem of electrical energy storage and generation. More simply, battery technology. It is our belief that we have developed a significant advance in battery technology. We judge our power-to-weight ratio is approximately 5 times better than currently available conventional lead-acid batteries. For comparison, a good lead-acid battery (6 volt) will store 100 amperes hours of power if discharged at a moderate rate (1-5 amp draw). Current tests of our technology have produced 500 ampere hours of electricity based upon a 10 amp draw. Note: our battery configuration is comparable in size and weight as a regular car battery for the comparison made above. It is our judgment that the technology of commercially feasible, and capable of mass-production within 3-5 years. The materials and components could be manufactured economically and domestically, relying, to a large extent, on domestic re sources. Our current stage of development centers around pre-production planning and experimenting with various construction methods. My assessment is that development is 70-80 percent completed to its introductory commercial form. PRODUCT IMPLICATIONS FOR DOMESTIC ENERGY SUPPLIES If our technology proves in the marketplace as powerful as in a laboratory setting, some major economic opportunities present to the U.S.A. in the near term. 1. Electrical vehicles capable of 200 miles per recharge, and with comparable performance characteristics as conventional autos, would be immediately feasible without significant industry retooling. Various forcasts suggest that an electric car capable of the above performance characteristics would be capable of penetrating 10 percent of the domestic automobile market. The associated petroleum savings are estimated to range between 60 million and 100 million barrels of oil per year. At current OPEC prices, the savings would approach $1.2 to $2.0 billion per year. 2. Solar and wind energy systems, currently lacking an efficient and economical battery storage system, would become more economical, and therefore more attractive as energy alternatives. 3. Other industries currently facing energy-storage constraints include: defense; aeronautical, electric utilities; recreational vehicles; and emergency generation facilities. Estimated fuel savings in these industries have not been defined. 4. Electric utilities may have the opportunity to store considerable quantities of electricity generated during off-peak hours using our technology. If so, it would be possible to minimize and delay the additions of incremental nuclear or petroleumbased generation facilities. Note: our technology is not suggested as a long-term solution or alternative to these forms of power, but rather a postponement mechanism to control oil imports and to provide additional time to assess and solve the problems of nuclear energy. As you can see, it is very difficult for me to assess the full range and impact of this technology on our domestic energy picture. However, I do believe that the technology offers significant opportunity to minimize the severity of our energy crisis and our energy dependence on foreign sources. Needless to say, any improvements in this area would aid in the reduction of political tension in the Middle East and elsewhere. MARKETING AND PATENT PROTECTION Given the nature of our technology (relatively simple, easily copied, made largely from available materials, and significant economic potential) we concluded that filing for a patent exposes us to added and significant risks while offering little real protection. The patent system, and the adjudication procedure, exposes us to new, non-business-related risks (i.e. legal) which are not areas of our expertise, and which add to the probability of theft of our proprietary information. Attempting to protect our technology within the parameters defined by the current patent system and adjudication process appear impossible, and remain the major obstacle to our using the system. The predatory practices of large firms regarding patent infringment and patent challenges force a small organization such as ours to carefully evaluate the risks and rewards of using the system. A long court contest would ruin us financially, and prevent us from selling the technology while in litigation. The apparent anti-patent sentiment of the judicial system indicates that any patent challenge would inherently involve a significant risk of patent denial regardless of the merits of the case. By revoking patents on a more regular basis than upholding them, the court system is forcing people to avoid using the patent system. Further, it must be remembered that a small inventor does not have the luxury of picking and choosing the district court in which he has the most favorable chances, as is common practice for all large corporations. The economic incentive is clearly in favor of the large corporation with respect to contesting patents and even infringing on patents. In the case of the small inventor, it is even more advantageous to contest or infringe, knowing that the inventor probably does not have the resources, expertise, or constitution to wage a long and costly court battle. When it is economically cheaper to contest or infringe a patent than to pay royalty or licensing fees, then it is clear that economics, not ethics shall dictate the results. Unfortunately, the patent system and the legal system support and contribute to this form of economic intimidation. It would certainly be nice to see the system balance the scales by supporting the small, independent inventor, who has basically been responsible for every major invention in America since Colonial times. PATENT AND PRODUCT PROTECTION STRATEGY Having opted not to incur the risks associated with using the patent system, we feel we have finally developed an approach which will offer us manageable risk exposure with a good opportunity for successful marketing of the technology to a major firm. Note: the approach I am about to describe is uniquely tailored to the specific nature of our technology. I would not offer it as a blanket approach because it involves considerable development, testing, marketing, and analytic expense. Many technologies would simply not lend themselves to the "Black Box" analysis central to our approach. |