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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(H) 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 hearings, 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 (8 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 (8 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 (8 1245.104(0/2)) 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 and to satisfy requirements of governmental regulations. 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. NASA periodically conducts utilization studies on waiver inventions (see Appendix C) in order to monitor contractors' efforts in commercializing waived inventions, and maintains statistics on overall waiver activities (see Appendix D). In addition, all waiver recommendations and findings of the ICB are completely documented and made available to the public. The ICB publishes selected recommendations and findings in a NASA Handbook (NHB 5500.1A) which is updated annually.
NASA also has one of the most active programs of all the agencies to license its inventions for which it has acquired title. As previously noted, the NASA licensing program is based on Section 305(g) of the Act, which is implemented by NASĂ Domestic Patent Licensing Regulations (see Appendix E), and the Foreign Patent Licensing Regulations (see Appendix F). Both nonexclusive and exclusive licenses, where appropriate, are available in any country in which NASA has patent protection, although the policies and guidelines differ for domestic and foreign licenses.
NASA initially issued domestic patent licensing regulations in 1962, and for the first time in Government these provided for exclusive licensing by a Government agency in an effort to foster early commercial utilization of its inventions. During the next ten years, experience was gained in developing techniques necessary to further encourage commercial use through licensing. The early regulations were revised in 1972 to incorporate changes in policies and procedures to accelerate commercial use.
In order to inform the public of NASA technology available for licensing, NASA uses a variety of channels. Abstracts of NASA inventions available for licensing are announced in widely disseminated NASA publications such as NASA Tech Briefs (published by the NASA Technology Utilization Program), the NASA Scientific and Technical Aerospace Reports (STAR), and the NASA Patent Abstracts Bibliography (PAB). The National Technical Information Service (NTIS) also publishes a weekly journal entitled “Government Inventions for Licensing” which include abstracts and licensing information from NASA and other Government agencies. In addition, NASA inventions, together with other Government-owned inventions available for licensing, are listed in the Federal Register and the Official Gazette of the U.S. Patent and Trademark Office.
NASA also holds, or participates in, licensing conferences and workshops throughout the country to explain to interested parties NASA's and the Government's licensing programs. Also, the NASA Industrial Applications Centers under the NASA Technology Utilization Program, provide their client companies with lists and abstracts of NASA technical documents in specific fields of technology and disseminate abstracts of NASA inventions available for licensing and information on how to obtain licenses.
The specific criteria for granting either nonexclusive or exclusive licenses (for domestic patents and patent applications) are specifically set forth in 1245.202 and 1245.203 of the NASA Domestic Patent Licensing Regulations, and are summarized as follows.
Generally, all patent licenses are granted as an incentive to encourage commercialization of NASA inventions. Nonexclusive licenses are encouraged, but exclusive licenses may be granted when the commercialization of the invention requires a substantial investment of risk capital and a private manufacturer is unwilling to take the risk under a nonexclusive license.
In all cases, the licensee is required to achieve commercialization by a specified date (negotiated with the licensee), and thereafter to practice the invention for the term of the license, which is usually less than the term of the patent. Further, before grant of an exclusive license, there must be a determination made to the effect that the invention has not been brought to commercialization under a nonexclusive license, is not likely to occur under a nonexclusive license or by further Government funding, and that the exclusive license will provide the necessary risk capital to achieve commercial use of the invention. Royalties are not normally required for a nonexclusive license, but may be for an exclusive license.
In all situations, both for exclusive and nonexclusive licenses, consideration is given to small businesses, minority enterprises, and economically depressed, lowincome or labor surplus areas.
Each application for a domestic license is initially reviewed in the Office of the General Counsel to determine the conformity and appropriateness of the application for license and the availability of the invention for the license requested. If the application conforms to the regulations and the license requested appears appropriate, the application is forwarded to the Inventions and Contributions Board for further review and formal recommendation. The ICB then recommends to the Administrator whether a nonexclusive or exclusive license should be granted, and any special terms and conditions of the license.
If a determination is made to grant a nonexclusive license, the appropriate terms and conditions are negotiated by the Office of General Counsel. If the determination is made to grant an exclusive license, notice of this intent, along with the identification of the invention, licensee, and special terms and conditions, are published in the Federal Register. The exclusive license will be granted, unless, within 30 days of the notice, a statement is received from any person setting forth reasons why it would not be in the interests of the United States to grant the proposed license, or an application for a nonexclusive license is received which states that the applicant has brought, or, within a reasonable period of time, is likely to bring the invention to practical application.
NASA also obtains patent protection on selected, significant inventions in various foreign countries. These inventions are available for licensing from NASA in these countries. The basic objectives of the NASA foreign licensing program are to further the interests of the United States industry, enhance the economic interests of the United States, and advance the international relationships of the United States. Foreign licenses may be either exclusive or nonexclusive. When more than one applicant applies for a foreign license, preference is given to an applicant who has previously been granted a license for the invention in the United States. Also, foreign licenses require royalties or some other consideration deemed to be in the interests of the United States. (The overall statistics for the NASA Patent Licensing Program, including report on the commercialization of licensed inventions, are set forth in Appendix G.)
NASA evaluates all inventions for which it has the right, or may acquire the right, to file for a patent (as described in the NASA Patent Soliciting Manual, NHB 5109.7). This evaluation is basically a two-step process, and applies to both contractor inventions for which NASA has acquired title under Section 305(a) of the Act, and inventions of NASA's employees the rights to which have been acquired under Executive Order 10096.
The first step of the evaluation (basically a technological evaluation) is to determine the technical significance of the invention, its use by or for the Government, and its commercial potential. If this evaluation justifies further interest in the invention, it is then evaluated in terms of patentable novelty (basically a legal evaluation) to determine whether a patent can be obtained, and if so, its scope. Determinations to file for a patent are based on a composite of these two evaluations and are made by the Patent Counsel of the various NASA field installations. Also, once domestic patent applications are filed there is a review to determine whether or not foreign patent protection should be sought, and if so, in which countries. (Appendix H is a summary of NASA's patent filing activities, including the number of invention disclosures received and patent applications filed.)
As a further incentive to the reporting of inventions NASA also makes monetary awards for each invention on which a patent application has been filed. Such awards are made by the Administrator under the authority of Section 306 of the Act. They are made upon recommendation of the Inventions and Contributions Board, and may be made to either NASA employees or employees of its contractors. The amount of the award is based on an evaluation and the recommendations of the ICB, taking into consideration such factors as the technological significance of the invention, its value to NASA in carrying out its programs, and commercial use or potential of the invention. At least a minimum award is normally made for each filed patent application, but often greater awards are made based on the Board's evaluation and recommendation.
An additional unique feature of NASA's patent policy is provided by Section 305 (c), (d) and (e) of the Act. These provisions establish a procedure under which NASA reviews all patent applications pending in the U.S. Patent and Trademark Office on inventions which appear to the Commissioner “to have significant utility in the conduct of aeronautical and space activities," and also provides procedures for a hearing to establish title before the Board of Patent Interferences whenever the Administrator fo NASA believes that an invention not reported to NASA by a contractor was made under a NASA contract. This procedure has in the past provided NASA with an opportunity to identify and contest rights to significant aeronautical and space inventions not reported by its contractors. (A summary of the number of patent applications contested and the results is provided in Appendix