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APPENDIX H NATIONAL AERONAUTICS AND SPACE ADMINISTRATION OFFICE OF GENERAL COUNSEL—SUMMARY OF NASA

PATENT FILING ACTIVITIES

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NASA owns. 2 The first year of the Federal Council on Science and Technology reporting requirements. During 1959–62. 366 inventions were received from NASA employees and 429 from NASA contractors.

APPENDIX I
Statistics on 305(c) and (d) activitiesJune 30, 1979
I. Patent applications and 305(c) affidavits reviewed at NASA headquarters
(1959 through June 30, 1979)...

.... 10,872

Jan. 1, 1979 to June 30, 1979,

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1977 1976 1975 1974 1973 1972 1971. 1970 .. 1969 1968 1967

1966 and 1965

Prior to 1965...
II. Complete file wrappers ordered on basis of 305(c) statements (during

1979)...........................
III. Total number of 305(d) requests to Commissioner of Patents and Trade-

marks as of June 30, 1979 .......

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1976
1975 ...
1974 .......
1973.
1972 ................
1971 ....
1970
1969.
1968
1967
1966 .. .............
1965 ...

Prior to 1965 .....
A. Pending cases before the Patent Office Board of Patent Interferences as of

June 30, 1979.............
B. Completed cases...........

1. NASA obtains rights ....

195

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(a) NASA's withdrawal of request..
(b) NASA's withdrawal upon entry of amendment to cancel claims.....
(c) By decision of Board ....

(d) Failure to request within 90-day period ....... 3. Appealed to the CCPA after board decision

.

(a) NASA obtains rights by decision of CCPA...............

(b) Applicant obtains rights by decision of CCPA. Senator SCHMITT. Thank you, Mr. Mossinghoff.

We will listen to Mr. Denny next, and then ask questions of both of you.

Mr. DENNY. Thank you, Senator.

Senator Schmitt, I am James Denny, Assistant General Counsel for Patents for the Department of Energy.

As I am sure you are aware, the administration is presently reviewing its own position on the issue of Government patent policy and I therefore cannot give you an administration-approved position on S. 1215. But I do hope to give the subcommittee information regarding the patent policy at DOE and our experience under it, and some benefit of my experience on what I believe to be the most critical patent policy issues.

The Department of Energy patent policy is controlled by both the Nuclear and Non-nuclear Acts. These acts both provide for the Government to acquire title to inventions and provide authority to grant waivers. The primary difference is that the Non-nuclear Act is more recent and considerably more detailed. We believe these legislative patent policies are technically sufficient and appropriately flexible to allow DOE to support a wide variety of research activities that it must undertake in every field of technology and with a wide variety of private, industrial and university entities.

Our policies are not without problems, however. DOE has the flexibility to grant waivers and makes use of that flexibility.

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DOE has utilized its ability to grant both advance waivers at the time of contracting and identified waivers to individual inventions on a case-by-case basis.

We have granted waivers to the largest corporations in America, and to firms which employ six people.

We have granted waivers to all inventions to be made under a contract, and only to inventions which fall within a particular field of technology.

We have granted waivers covering both domestic and foreign rights to inventions, and waivers only to foreign rights.

We have granted waivers to individually identified inventions, as well as to all inventions of a class of contractors undertaking a particular type of work.

Our waivers have been limited in fields of technology, fields of use, and period of duration.

We have also denied waivers where it was believed to be in the public interest to do so.

In my more detailed comments, I provide waiver statistics. But I would like to emphasize for the subcommittee our three most relevant pieces of information.

First, we have granted advance waivers to approximately 3 percent of the prime contracts and major subcontracts to which they could have been made applicable.

Second, we have granted identified waivers to less than 1 percent of the individual inventions which are reported under our contracts and subcontracts; and

Third, the whole waiver process is a substantial administrative work load for both DOE and its prospective and actual contractors.

My more detailed remarks provide information about what we have found to be our average delays. We try to place our priority on those waiver decisions that hold up contracts. The rest of them are relegated to a lesser degree of priority and our delays in acting on these waivers run into some months, averaging somewhere between 10 and 20 months.

Although not all delays are caused by DOE, there is concern that in at least some cases the delays may well affect the commercialization efforts on the inventions involved. At present, the delays caused by DOE are simply due to the lack of sufficient personnel to promptly and properly process them.

Our experience under a title plus a waiver policy would be the same for the administration of any policy where the Government acquires title subject to a waiver. It involves substantial burdens for both the Government and the prospective contractor with respect to petitioning for waivers, negotiating, and determining waiver requests. This, in turn, can create delays in the research and development contracting process and may cause delays in the commercialization process because ownership of patent rights is frequently an important issue in both areas.

Additionally, a patent policy that provides for Government ownership of inventions places the burden and responsibilities upon the Government to see that the resulting technology is utilized. These responsibilities include:

The review of inventions to assess their importance, operability, feasibility, and commercial potential.

Obtaining protection on the most important inventions both domestically and in relevant foreign countries.

Advertising their availability, negotiating appropriate agreements for their licensing, and promoting their utilization.

Enforcing the patents obtained on them against unlicensed infringers.

These are part of a policy where the Government acquires title that is frequently forgotten. These responsibilities impose a tremendous and burdensome work load which should not be left to the Government unless there is also provided sufficient funding and staffing to carry out these responsibilities. Otherwise, consideration should be given to allowing industry to assume this primary responsibility, with the Government taking a monitoring or overseeing role.

Additionally, consideration must be given to the question of whether industry will or will not participate fully in Government R. & D. programs under a Government title policy. There is a frequently stated position that there are always companies and corporations standing in line waiting for Government moneys. This, of course, is true.

It does not address the issue, however, of whether those corporations or segments of corporations with the most advanced expertise in the field of technology of interest to the Government agency will accept R. & D. contracts under such a policy in areas where the contractor has an advanced, highly proprietary commercial position.

In view of the DOE mission to assist in the development of commercial energy alternatives, we are working in areas that have the highest commercial sensitivities. We know that there are corporations, or divisions of corporations, which will not work with us or will not even approach DOE in a contracting situation because of our patent policies.

Notwithstanding these problems, DOE believes that its policies are sufficiently flexible to accomplish its mission. Conceivably, this same type of policy might be applied with similar results to agencies having equal or smaller R., D. & D. programs.

The application of such a policy, however, on a Government-wide basis would, in my opinion, be burdensome to the point of becoming a substantial barrier to the Government R. & D. mission. The most recent data available indicate that over 40,000 contract and grant actions involving R. & D. are awarded by the Federal Government each year, and that under these approximately 6,000 invention disclosures are reported on an annual basis. The application of a title in the Government with waiver policy to this volume of contracting and inventing activity would not be possible in any realistic sense.

In any debate on this policy issue, one always hears charges of windfall profits, concerns expressed regarding Government giveaways, suggestions that valuable technology is either being suppressed by industry or utilized in an anticompetitive sense, and beliefs that making inventions available to all through Government ownership will achieve widespread commercial use. Government supported studies, however, have found no basis in fact for these charges, concerns, and beliefs.

Approximately 10 years ago, the Federal Council for Science and Technology supported the most comprehensive study ever conducted on the issue of Government patent policy-commonly referred to as the Harbridge House Report. This report made the following findings:

Government ownership with an offer of free public use does not alone result in commercialization of research results.

The commercial utilization rate of Government-generated inventions was low, approximately 12 percent, but that the rate doubled when contractors with commercial background positions were allowed to keep exclusive commercial rights to the inventions.

Windfall profits do not result from contractors retaining title to such inventions.

Little, if any, anticompetitive effect resulted from contractor ownership of inventions.

One final thought in regard to the concept of march-in rights. There has been considerable discussion that in the 10 years or more that such rights have been acquired by the Government, they have not been utilized. The conclusion is frequently drawn, therefore, that such rights are ineffective. I believe that this is an erroneous conclusion.

The march-in rights were developed to address issues of windfall, suppression, and the detrimental effects of exclusive patent rights on competition. In my opinion, it is because these problems have been primarily theoretical, and not actual, that the "march-in” rights have not been utilized.

I would emphasize what was said before, that the primary benefit to the concept of march-in rights is that the administrative burden to everyone can be limited to those cases, and only those cases, where an invention is commercially important to two or more parties who cannot settle their differences.

In view of this total experience, it is my opinion that any patent policy, whether enacted by Congress or adopted by the executive branch, should concentrate on the following three problems:

Achieving commercial utilization of the results of Governmentsponsored research.

Insuring that the Government can work cooperatively with those segments of industry having the most advanced technology.

Reducing the administrative work load to the extent consistent with the overall public interest.

With that, I would be pleased to answer any questions that I can.

Senator SCHMITT. Thank you, Mr. Denny. And at the end of your statement, without objection, the summary synopsis of the Harbridge House study of Government patent policy prepared for this committee by Mr. Richard Miller, vice president of Harbridge House, will be included.

[The statement and study referred to follows:]

STATEMENT OF JAMES E. DENNY, ASSISTANT GENERAL COUNSEL FOR PATENTS, U.S.

DEPARTMENT OF ENERGY Mr. Chairman, members of the Subcommittee, I am James Denny, Assistant General Counsel for Patents of the Department of Energy (DOE), and I have held that same position for the Energy Research and Development Administration (ERDA) and the Atomic Energy Commission (AEC). As I have been deeply involved in the issue of Government patent policy for over 15 years, I sincerely appreciate

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