Mr. Chairman, this concludes my statement. I would be happy to discuss any matter in more detail or respond to any questions. I commend the Subcommittee for focusing attention on this difficult problem in a most constructive way.

Senator SCHMITT. The next two witnesses, will come forward together: Mr. Gerald Mossinghoff, Deputy General Counsel of NASA, and James E. Denny, Assistant General Counsel for Patents, Department of Energy.

If it is possible, please summarize your testimony. Your entire testimony will be made part of the committee record.

Mr. Mossinghoff?

STATEMENTS OF GERALD J. MOSSINGHOFF, DEPUTY GENERAL COUNSEL, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION; AND JAMES E. DENNY, ASSISTANT GENERAL COUNSEL FOR PATENTS, DEPARTMENT OF ENERGY

Mr. MOSSINGHOFF. Senator Schmitt, I appreciate very much this opportunity to appear before the subcommittee to report to you on the patent policies of the National Aeronautics and Space Administration, on how these policies evolved and how they are carried out, and on the results they have produced. I hope that my report will be helpful to the subcommittee in its consideration of Federal patent policy and of S. 1215, the Science and Technology Research and Development Utilization Policy Act. I have provided to the subcommittee a more detailed statement on NASA's patent policies, which includes for the record a number of appendices.

Since early in NASA's history, our patent program has been viewed as an integral part of NASA's overall efforts to stimulate the creation and identification of new technology in our programs and to foster the utilization of this new technology in commercial applications.

The statutory basis of NASA's patent policies with respect to contractor inventions is section 305 of the National Aeronautics and Space Act of 1958, a provision which is unique among the various Federal statutes dealing with patent policy. Essentially, under that provision, NASA acquires title to all inventions made under its contracts unless the Administrator decides that the public interest would be served by waiving title to the contractor. No congressional guidelines were provided for the exercise of the broad waiver authority included in NASA's act.

NASA is required under section 305 to retain a broad royaltyfree license to all inventions under contract, so waiver of title really amounts to a waiver of commercial rights only.

In implementing section 305, NASA's policies have evolved from an early approach, patterned closely after that of the former Atomic Energy Commission, to our present policies, which apply the criteria of the 1963 and 1971 presidential policy statements in determining when the public interest will be served by a waiver of commercial rights to the contractor.

Whenever NASA waives commercial rights to the contractor, as Mr. Johnson discussed, we retain what are referred to as "march-in rights" which assure that the invention is not suppressed and that the invention will be reasonably available to serve public health and safety needs. These march-in rights are in addition to the royalty-free Government license I referred to. NASA also retains

the right to void a waiver if the contractor fails to report to NASA on the efforts it is undertaking to commercialize the invention. Although NASA has granted approximately 75 percent of the requests for waivers, the total number of requests for waivers is comparatively low, and thus, from a statistical viewpoint, I believe it is fair to characterize NASA as being essentially a "title in the Government" agency. As pointed out in the statistics included with my detailed statement, through 1978, 31,357 contractor inventions have been reported to NASA; title has been waived to 1,254 of those inventions, less than 4 percent.

Rights to inventions made by NASA employees are allocated in accordance with the criteria of Executive Order 10096, issued by President Truman in 1950. Those criteria take into account the relationship of the invention to the employee's job, the contribution by the Government to the making of the invention, and the Government's interest in the invention.

I believe there is general agreement both in and out of Government that the allocation of rights under the Executive order is fair and that the procedures, which include review of agency decisions by the Commissioner of Patents and Trademarks, work well.

One of the unique aspects of NASA's statutory authority regarding patents is the specific grant of authority to the Administrator to issue patent licensing regulations. In part because of that authority, NASA has been one of the leaders in Government over the past several years in developing and refining a patent licensing program.

Although the resources that the Office of General Counsel applies to the licensing program are limited in comparison with commercial patent licensing programs, the NASA patent licensing program is able to rely upon our extensive technology utilization program, which disseminates information regarding NASA inventions in many ways. The detailed procedures under which we grant licenses are described in my more detailed statement.

Our preference is to grant nonexclusive licenses under NASA patents unless we become convinced that limited exclusivity is required to stimulate investment in commercializing the invention. Exclusive licenses are granted only after public notice, and only after we can negotiate with the licensee a firm plan for the licensee's investment in and commercialization of the invention.

Notwithstanding the efforts of both the technology utilization program and the Office of General Counsel, the results of our licensing program have been disappointing, particularly with respect to NASA-owned inventions which were made under contract. As documented in the statistics appended to my more detailed statement, 1,134 NASA-owned patents and patent applications on contractor inventions are available for licensing. We have recently requested reports on commercial use under each of NASA's patent licenses in effect at the end of last year. The results of the reports we received are set forth in appendix G to my detailed statement. Based on the reports we have received to date and on a review of patent licenses no longer in effect, we have documented commercial use of 13 NASA-owned contractor inventions under patent licenses, 11 under nonexclusive licenses, and 2 under exclusive licenses. This amounts to a commercialization rate of slightly more

than 1 percent of these patented contractor inventions under NASA licenses. We are confident that many more of these are being commercialized, but not through the mechanism of a patent license from NASA.

Senator SCHMITT. What mechanism? Would you insert here what you think the mechanism is? Osmosis or what?

Mr. MOSSINGHOFF. I think, Senator, it depends heavily upon the efforts of the NASA technology utilization program, which, as you know, in many ways disseminates information regarding inventions made in the program-inventions and innovations made in the program.

There were studies done by Denver Research Institute, I believe, in 1977, which documented any number of inventions actually being used. The users commercialized the inventions, but did not use the NASA patent program. I do not think our patent program could be viewed fairly as a stimulus to getting the inventions used. With respect to NASA employees' inventions on which NASA owns patents or patent applications, the results are similar, but somewhat more encouraging. With respect to 2,378 such patents or patent applications available for licensing, we are able to document 47 inventions which are being commercialized under licenses, for a rate of about 2 percent.

We believe, however, that several of the NASA employee inventions will prove to be quite significant, including, for example, the energy-saving power factor control system invented by Mr. Frank J. Nola of the Marshall Space Flight Center. Also, we are now in the process of granting licenses under NASA's patent on Ms. Barbara S. Askins' method of intensifying faint photographic images. Because of that invention, Ms. Askins, who is also from the Marshall Space Flight Center, was named the 1978 Inventor of the Year by the Association for the Advancement of Invention and Innovation.

The data which I have discussed refer to the number of inventions which have been commercialized under licenses. In many cases one invention is licensed to more than one company. There are, for example, 22 companies which have been licensed to practice Frank Nola's power factor controller. Through 1978, a total of 94 licensees have reported commercial use of 60 NASA-owned patented inventions.

As pointed out in appendix C to my more detailed statement, the commercialization rate of waived patented inventions-where the contractor has acquired title, commercial rights, to patents-is much higher than that of NASA-owned patented inventions and has been running at a consistent rate of about 18 to 20 percent. Senator Schmitt, this concludes my summary statement. I would be pleased to respond to any questions you and the subcommittee may have.

[The statement follows:]

STATEMENT OF GERALD J. MOSSINGHOFF, DEPUTY GENERAL COUNSEL, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Mr. Chairman and members of the subcommittee, I appreciate this opportunity to appear before the Subcommittee to report to you on the patent policies of the National Aeronautics and Space Administration, on how these policies evolved and how they are now carried out, and on the results they have produced. I hope that

my report will be helpful to the Subcommittee in its consideration of Federal Patent Policy and of S. 1215, the "Science and Technology Research and Development Utilization Policy Act."

Since early in NASA's history, our patent program has been viewed as an integral part of NASA's overall efforts to stimulate the creation and identification of new technology in our programs and to foster the utilization of this new technology in commercial applications.

The NASA patent policies and the procedures implementing those policies are based on Section 305 of the National Aeronautics and Space Act of 1958 (the “Act”) and to the extent not inconsistent with that section, on the Presidential Memorandum and Statement on Government Patent Policy (Appendix A) and Executive Order 10096.

Essentially, Section 305(a) of the Act provides that any invention conceived or first actually reduced to practice in the performance of any work under any NASA contract, upon prescribed determinations by the Administrator of NASA, becomes the exclusive property of the Government unless the Administrator determines that the interests of the United States will be served by waiving all or any part of the Government's rights under the provisions of Section 305(f) of the Act. Rights to inventions made by NASA employees are determined pursuant to Executive Order 10096, January 23, 1950, applied and administered by NASA in the same manner as other agencies covered by its provisions.

Other important sections of the Act include Section 305(b), which provides that each contract of NASA for the performance of any work shall contain effective provisions for the reporting of any invention, discovery, improvement or innovation made under the contract. This is the basis for the contract clauses (principally the "New Technology Clause") which specify the rights to inventions made under NASA contracts. Such clauses also include the reporting requirements for inventions and innovations made under contract to provide an input to NASA's patent and technology utilization programs.

NASA is also authorized, under Section 305(h) of the Act, to take all suitable and necessary steps to protect any invention or discovery for which it holds title, and to require contractors and persons who retain title to protect any license_rights retained by NASA. Further, under Section 305(g) of the Act, NASA is authorized to license, pursuant to regulation, any invention which the Administrator holds title on behalf of the United States. Because this was one of the earliest grants of specific licensing authority, NASA has been one of the leading Government agencies in developing a patent licensing program.

NASA's waiver policy under Section 305(f) of the Act is implemented by the NASA Patent Waiver Regulations (Appendix B) which adopt the objectives and criteria set forth in the Presidential Memorandum and Statement. Among the important goals of our waiver policy are to provide an incentive to foster inventiveness and encourage reporting of inventions made under NASA contracts, to provide for the widest practicable dissemination of new technology resulting from NASA contracts, and to encourage the expeditious development of this new technology for commercial purposes.

Waiver of rights by the Administrator, which may be to an individual invention or a class of inventions, is granted upon recommendations of an Inventions and Contributions Board (ICB) established by the Administrator under Section 305(f) of the Act. The ICB consists of a Chairman and no less than six members appointed by the Administrator from within NASA. The ICB members are senior program officials, with background knowledge and experience in various scientific and technical disciplines. The ICB meets on a regular basis, at least monthly, to formulate recommendations on waivers, on the licensing of NASA inventions, and on monetary awards under Section 306 of the Act.

Historically, the first NASA waiver regulations, issued in 1959, were patterned to some extent after the approach followed by the former Atomic Energy Commission, which also was subject to similar statutory provisions in the nuclear energy field. In line with this approach, NASA's initial regulations provided generally that the Government would take title to inventions closely related to the new field of space technology.

As experience was gained, and NASA's concepts of how to best transfer technology emanating from its programs matured, the waiver criteria were reevaluated. For example, it became obvious that the fields of technology involved in the space program are of great breadth and diversity, involving the entire spectrum of science and technology. It also became apparent that, unlike the nuclear field, many of these fields of technology were not primarily funded or developed by the Government. Consequently, NASA initiated steps in 1962, including holding public hear

ings, to revise its waiver regulations to provide more positive incentives for commercial utilization of inventions made under its contract. About the same time, however, efforts were undertaken to develop a Government-wide policy (which was ultimately announced in the 1963 Presidential Memorandum and Statement), and NASA decided to postpone revision to its waiver regulations to be able to assess the outcome of such efforts. In 1964, after determining that it had the authority under the waiver provisions of the Act, NASA issued regulations which adopted the criteria of the Presidential Memorandum and Statement. Similarly, when the Presidential Memorandum and Statement was revised in 1971, NASA also revised its waiver regulations.

All requests for waivers are considered by the NASA Inventions and Contributions Board and the ICB's findings and recommendations to grant or deny the waiver request are made for the Administrator, NASA. Two types of domestic waivers are possible: advance waivers, applicable to any or all inventions which may be made under a given contract (§ 1245.104 of the Patent Waiver Regulations); or waivers for individually identified inventions subsequently reported under a contract (§ 1245.105 of the Patent Waiver Regulations).

In general, the ICB will recommend grant of an advance waiver unless the contract work falls in one of the four areas proscribed by Section 1(a) of the Presidential Memorandum and Statement, and there is also a finding that the work called for under the contract is of the nature set forth in Section 1(b) of the Presidential Memorandum and Statement. The critieria for advance waivers also take into account the "exceptional circumstances" and "special situations" provisions of Sections 1(a) and 1(c), respectively, of the Presidential Memorandum and Statement.

The following examples of exceptional circumstances are further delineated in the NASA Patent Waiver Regulations (§ 1245.104(b)(2)): a contract where participation of the contractor may only be secured through the grant of waiver and such contractor is deemed essential to a NASA program; a contract having as a principal objective the application of aerospace related technology to other uses in accordance with an established NASA technology application program and where the grant of the waiver would materially advance this objective; or, a cooperative endeavor where the contract calls for a significant contribution of funds by the contractor to the work to be performed. Also, in the case of an individual invention identified prior to contract execution, exceptional circumstances may be found where waiver is a necessary incentive to call forth risk capital and expenditures to bring the invention to the point of practical or commercial application and where either the contractor has established substantial equities at his own expense in the development of the invention; or, the grant of an advance waiver will significantly advance availability of the invention to the general public.

Examples of special situations set forth in the Patent Waiver Regulations (§ 1245.104(d)(2)) include; a newly formed company having a definite program for establishing a nongovernmental commercial position in the field of the contract or an area directly related thereto; an established company lacking an established nongovernmental commercial position in the field of the contract or a directly related field, but having established plans and programs for achieving such a position; and an educational or nonprofit institution having a promulgated policy and an effective program for acquiring rights to inventions and for acting by itself or through others to bring the results of such inventions to commercial application. The ICB will recommend grant of a waiver for an identified invention after reporting, providing it is able to make the specified findings (of § 1245.105 of the Patent Waiver Regulations) which are consistent with the guidelines of Section 1(a) of the Presidential Memorandum and Statement. Where such findings cannot be made, the ICB still may recommend grant for an identified invention where it finds that such waiver is a necessary incentive to call forth risk capital and expenditures to bring the invention to the point of practical or commercial application, or that the Government's contribution to the invention is small compared to that of the contractor.

Also, NASA will normally grant waiver of foreign rights when such waiver is consistent with the economic interests of the United States, and such waiver is either consistent with the grant of waiver of domestic rights or not in conflict with NASA's plans to seek foreign rights. The details of foreign waiver rights are set forth in § 1245.106 of the NASA Patent Waiver Regulations.

All waivers granted by NASA are subject to the retention by the Government of a broad, irrevocable royalty-free license and to what are referred to as "march-in rights." These march-in rights assure that the invention is not suppressed and that the invention will be reasonably available to serve public health and safety needs