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 I.)

60

Mr. Chairman, this concludes my detailed statement. I would be pleased to provide any additional information you may want or answer any questions you may have.

APPENDIXES

A. Presidential Memorandum and Statement on Government Patent Policy.

B. NASA Patent Waiver Regulations, 14 C.F.R. 1245.1.

C. Utilization Study on Waived Inventions.

D. Statistics on Overall Waiver Activities.

E. NASA Domestic Patent Licensing Regulations, 14 C.F.R. 1245.2.
F. NASA Foreign Patent Licensing Regulations, 14 C.F.R. 1245.4.

G. Statistics for NASA Patent Licensing Program.

H. Summary of NASA Patent Filing Activities.

I. Statistics for Activities Under Section 305 (c) and (d) of the Space Act.

APPENDIX A

THE WHITE HOUSE, Washington, August 23, 1971.

Memorandum for heads of executive departments and agencies. On October 10, 1963, President Kennedy forwarded to the Heads of Executive Departments and Agencies a Memorandum and Statement of Government Patent Policy for their guidance in determining the disposition of rights to inventions made under Government-sponsored grants and contracts. On the basis of the knowledge and experience then available, this Statement first established Government-wide objectives and criteria, within existing legislative constraints, for the allocation of rights to inventions between Government and its contractors.

It was recognized that actual experience under the Policy could indicate the need for revision or modification. Accordingly, a Patent Advisory Panel was established under the Federal Council for Science and Technology for the purpose of assisting the agencies in implementing the Policy, acquiring data on the agencies' operations under the Policy, and making recommendations regarding the utilization of Government-owned patents. In December 1965, the Federal Council established the Committee on Government Patent Policy to assess how this Policy was working in practice, and to acquire and analyze additional information that could contribute to the reaffirmation or modification of the Policy.

The efforts of both the Committee and Panel have provided increased knowledge of the effects of Government patent policy on the public interest. More specifically, the studies and experience over the past seven years have indicated that:

(a) A single presumption of ownership of patent rights to Government-sponsored inventions either in the Government or in its contractors is not a satisfactory basis for Government patent policy, and that a flexible Government-wide policy best serves the public interest;

(b) The commercial utilization of Government-sponsored inventions, the participation of industry in Government research and development programs, and commercial competition can be influenced by the following factors: the mission of the contracting agency; the purpose and nature of the contract; the commercial applicability and market potential of the invention; the extent to which the invention is developed by the contracting agency; the promotional activities of the contracting agency; the commercial orientation of the contractor and the extent of his privately financed research in the related technology; and the size, nature and research orientation of the pertinent industry;

(c) In general, the above factors are reflected in the basic principles of the 1963 Presidential Policy Statement.

Based on the results of the studies and experience gained under the 1963 Policy Statement certain improvements in the Policy have been recommended which would provide (1) agency heads with additional authority to permit contractors to obtain greater rights to inventions where necessary to achieve utilization or where equitable circumstances would justify such allocation of rights, (2) additional guidance to the agencies in promoting the utilization of Government-sponsored inventions, (3) clarification of the rights of States and municipal governments in inventions in which the Federal Government acquires a license, and (4) a more definitive data base for evaluating the administration and effectiveness of the Policy and the feasibility and desirability of further refinement or modification of the Policy. I have approved the above recommendations and have attached a revised Statement of Government Patent Policy for your guidance. As with the 1963 Policy Statement, the Federal Council shall make a continuing effort to record, monitor and evaluate the effects of this Policy Statement. A Committee on Government

Patent Policy, operating under the aegis of the Federal Council for Science and Technology shall assist the Federal Council in these matters.

This memorandum and statement of policy shall be published in the Federal Register.

Attachment.

STATEMENT OF GOVERNMENT PATENT POLICY

BASIC CONSIDERATIONS

RICHARD NIXON.

A. The Government expends large sums for the conduct of research and development which results in a considerable number of inventions and discoveries.

B. The inventions in scientific and technological fields resulting from work performed under Government contracts constitute a valuable national resource.

C. The use and practice of these inventions and discoveries should stimulate inventors, meet the needs of the Government, recognize the equities of the contractor, and serve the public interest.

D. The public interest in a dynamic and efficient economy requires that efforts be made to encourage the expeditious development and civilian use of these inventions. Both the need for incentives to draw forth private initiatives to this end, and the need to promote healthy competition in industry must be weighed in the disposition of patent rights under Government contracts. Where exclusive rights are acquired by the contractor, he remains subject to the provisions of the antitrust laws.

E. The public interest is also served by sharing of benefits of Governmentfinanced research and development with foreign countries to a degree consistent with our international programs and with the objectives of U.S. foreign policy. F. There is growing importance attaching to the acquisition of foreign patent rights in furtherance of the interests of U.S. industry and the Government.

G. The prudent administration of Government research and development calls for a Government-wide policy on the disposition of inventions made under Government contracts reflecting common principles and agencies. The policy must recognize the need for flexibility to accommodate special situations.

POLICY

Section 1. The following basic policy is established for all Government agencies with respect to inventions or discoveries made in the course of or under any contract of any Government agency, subject to specific statutes governing the disposition of patent rights of certain Government agencies.

(a) Where:

(1) A principal purpose of the contract is to create, develop or improve products, processes, or methods which are intended for commercial use (or which are otherwise intended to be made available for use) by the general public at home or abroad, or which will be required for such use by governmental regulations; or

(2) A principal purpose of the contract is for exploration into fields which directly concern the public health, public safety, or public welfare; or

(3) The contract is in a field of science or technology in which there has been little significant experience outside of work funded by the Government, or where the Government has been the principal developer of the field, and the acquisition of exclusive rights at the time of contracting might confer on the contractor a preferred or dominant position; or

(4) The services of the contractor are: (i) for the operation of a Government-owned research of production facility; or (ii) for coordinating and directing the work of others,

The Government shall normally acquire or reserve the right to acquire the principal or exclusive rights throughout the world in and to any inventions made in the course of or under the contract.

In exceptional circumstances the contractor may acquire greater rights than a nonexclusive license at the time of contracting where the head of the department or agency certifies that such action will best serve the public interest. Greater rights may also be acquired by the contractor after the invention has been identified where the head of the department or agency determines that the acquisition of such greater rights is consistent with the intent of this Section 1(a) and is either a necessary incentive to call forth private risk capital and expense to bring the invention to the point of practical application or that the Government's contribution to the invention is small compared to that of the contractor. Where an identified invention made in the course of or under the contract is not a primary object of the

52-476 - 80-5

62

contract, greater rights may also be acquired by the contractor under the criteria of Section 1(c).

(b) In other situations, where the purpose of the contract is to build upon existing knowledge or technology, to develop information, products, processes, or methods for use by the Government, and the work called for by the contract is in a field of technology in which the contractor has acquired technical competence (demonstrated by factors such as know-how, experience, and patent position) directly related to an area in which the contractor has an established nongovernmental commercial position, the contractor shall normally acquire the principal or exclusive rights throughout the world in and to any resulting inventions.

(c) Where the commercial interests of the contractor are not sufficiently established to be covered by the criteria specified in Section 1(b) above, the determination of rights shall be made by the agency after the invention has been identified, in a manner deemed most likely to serve the public interest as expressed in this policy statement, taking particularly into account the intentions of the contractor to bring the invention to the point of commercial application and the guidelines of Section 1(a) hereof, provided that the agency may prescribe by regulation special situations where the public interest in the availability of the inventions would best be served by permitting the contractor to acquire at the time of contracting greater rights than a nonexclusive license.

(d) In the situations specified in Sections 1(b) and 1(c), when two or more potential contractors are judged to have presented proposals of equivalent merit, willingness to grant the Government principal or exclusive rights in resulting inventions will be an additional factor in the evaluation of the proposals.

(e) Where the principal or exclusive rights in an invention remain in the contractor, he should agree to provide written reports at reasonable intervals, when requested by the Government, on the commercial use that is being made or is intended to be made of inventions made under Government contracts.

(f) Where the principal or exclusive rights in an invention remain in the contractor, unless the contractor, his licensee, or his assignee has taken effective steps within three years after a patent issues on the invention to bring the invention to the point of practical application or has made the invention available for licensing royalty-free or on terms that are reasonable in the circumstances, or can show cause why he should retain the principal or exclusive rights for a further period of time, the Government shall have the right to require the granting of a nonexclusive or exclusive license to a responsible applicant(s) on terms that are reasonable under the circumstances.

(g) Where the principal or exclusive rights to an invention are acquired by the contractor, the Government shall have the right to require the granting of a nonexclusive or exclusive license to a responsible applicant(s) on terms that are reasonable in the circumstances (i) to the extent that the invention is required for public use by governmental regulations, or (ii) as may be necessary to fulfill health or safety needs, or (iii) for other public purposes stipulated in the contract.

(h) Whenever the principal or exclusive rights in an invention remain in the contractor, the Government shall normally acquire, in addition to the rights set forth in Sections 1(e), 1(f), and 1(g),

(1) at least a nonexclusive, nontransferable, paid-up license to make, use, and sell the invention throughout the world by or on behalf of the Government of the United States (including any Government agency) and States and domestic municipal governments, unless the agency head determines that it would not be in the public interest to acquire the license for the States and domestic municipal governments; and

(2) the right to sublicense any foreign government pursuant to any existing or future treaty or agreement if the agency head determines it would be in the national interest to acquire this right; and

(3) the principal or exclusive rights to the invention in any country in which the contractor does not elect to secure a patent.

(i) Whenever the principal or exclusive rights in an invention are acquired by the Government, there may be reserved to the contractor a revocable or irrevocable nonexclusive royalty-free license for the practice of the invention throughout the world; an agency may reserve the right to revoke such license so that it might grant an exclusive license when it determines that some degree of exclusivity may be necessary to encourage further development and commercialization of the invention. Where the Government has a right to acquire the principal or exclusive rights to an invention and does not elect to secure a patent in a foreign country, the Government may permit the contractor to acquire such rights in any foreign coun