contracts under such a policy in areas where the contractor has an advanced, highly proprietary, commercial position as presently exists in many portions of the electronics and fossil fuels industries.

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 this Department in contracting situation because of our patent and technical data policies. Companies are concerned that if they deal with the Government under a title in the Government policy, their privately developed technology, proprietary data, trade secrets and know-how will be compromised.

Notwithstanding these problems of administrative burdens and delays associated with DOE legislative and regulatory patent policies, we believe that the policies are sufficiently flexible to enable DOE to accomplish its mission. Conceivably, this same type of policy might be applied with similar results to agencies having equal or small R,D&D programs, to programs limited to more basic type research efforts, or to programs concerning the development of technology specifically intended to solve critical public problems as in the case of DOE. 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&D mission. The most recent data available indicates that over 40,000 contract and grant actions involving R,D&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 going to Government contractors, concerns expressed regarding Government give-aways, suggestions that valuable technology is either being suppressed by industry or utilized in an anti-competitive 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; and

Little, if any, anti-competitive effect resulted from contractor ownership of inventions because contractors normally licensed such technology, and where they did not, alternative technologies were available.

In our effort to complete the report to Congress on the issue of mandatory or compulsory licensing, DOE recently funded an additional study with Harbridge House which is presently under analysis. This study shows that there are few, if any, adverse effects resulting from enforcement of exclusive patent rights, and, in fact, indicates some stimulation of research occurs when exclusive rights are enforced. Accordingly, this data seems to reinforce the original study which found no anti-competition effects when exclusive rights were left with the contractors.

One final comment 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 to competition. In my view, it is because these problems have been primarily theoretical, and not actual, that the "march-in" rights have not been utilized. 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 the invitation extended by the Subcommittee, five questions or policy issues were included with a request that views be expressed on them. I believe that I have

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addressed many, but not all, of those issues. Addressing them all would have extended my prepared testimony will beyond the time permitted. I have, however, given my personal comments regarding these issues in Attachment 3. Also, I have not attempted to comment on the various details of S. 1215, but I have limited my remarks to studies of an experiences gainded under various policy approaches. I would be happy to work with the Subcommittee or its staff in further developing this bill from an operational point of view, particularly regarding its impact on the missions and responsibilities of the various Federal agencies. Working out such details was not intended to be within the scope of this presentation.

In summary, and 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 Government-sponsored research;

insuring that the Government can work cooperatively with those segments of industry having the most advanced technology; and

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

If I can answer any questions, I will be happy to do so.

ATTACHMENT 1

DOE STATUTORY PATENT POLICY-SUMMARY

DOE patent policy is controlled by two statutes: the Atomic Energy Act of 1954, as amended, P.L. 83-703, 68 Stat. 919, 42 U.S.C. 2011 et seq., and the Federal Nonnuclear Energy Research and Development Act of 1974, (hereinafter Nonnuclear Energy Act) P.L. 93-577, 88 Stat. 1878, 42 U.S.C. 5901 et seq.

These two statutes generally require DOE to take title to inventions conceived or made under DOE contracts, grants, agreements, understandings or other arrangements which involve research, development or demonstration work. However, both these statutes provide the Secretary of Energy (hereinafter Secretary) with discretionary authority to waive all or any part of Government rights to such inventions. For example, Section 152 of the Atomic Energy Act, 42 U.S.C. 2182, sets forth DOE policy in the field of nuclear energy by providing:

* *

Any invention or discovery, useful in the production or utilization of special nuclear material or atomic energy, made or conceived in the course of or under any contract, subcontract, or arrangement entered into with or for the benefit of * [DOE] regardless of whether the contract, subcontract, or arrangement involved the expenditure of funds by [DOE], shall be vested in, and be the property of, * [DOE], except that * * [DOE] may waive its claim to any such invention or discovery under such circumstances as [DOE] may deem appropriate, consistent with the policy of this section.

*

*

* * *

This policy is similar to, but less detailed than, that found in the Nonnuclear Energy Act in that it provides broad discretionary powers in the Secretary to waive Government rights to such inventions.

Subsection 9(a) of the Nonnuclear Energy Act, 42 U.S.C. Sec. 5908, sets forth DOE policy in the nonnuclear field by providing:

*

Whenever any invention is made or conceived in the course of or under any [DOE] contract * * other than nuclear energy research, development, and demonstration pursuant to the Atomic Energy Act of 1954 *** title to such invention shall vest in the United States ** unless in particular circumstatnces the *** [Secretary] waives all or any part of the rights of the United States to such invention in conformity with the provisions of this section.

*

Section 9(c) states that the Secretary may waive all or any part of the rights to any invention or class of inventions made or to be made under any contract with DOE if it is determined that the interests of the United States and the general public will best be served by such waiver. In making waiver determinations, the following objectives must be considered:

Making the benefits of the energy research, development and demonstration program widely available to the public in the shortest practicable time; Promoting the commercial utilization of such inventions;

Encouraging participation by private persons in the DOE's energy research, development, and demonstration program; and

Fostering competition and preventing undue market concentration or the creation or maintenance of other situations inconsistent with the antitrust laws.

The Conference Committee on the Nonnuclear Energy Act, H.R. Rep. No. 93-1563, 93d Cong., 2d Sess., at page 27, recognized that in any single waiver situation, all

four of these objectives might not be obtainable, i.e., in some situations participation might be more important than fostering competition, while in others the reverse might be true. Congress did expect, however, that over the long run all four of these objectives must be attained.

Sections 9(d) and 9(j) set forth twelve specific factors which the Secretary should consider in making waiver determinations at the time of contracting. These factors were obtained from experience under the AEC and NASA legislation and from other Federal agencies under the Presidential Patent Policy statement. They concern considerations of:

The willingness of a contractor to participate;

The contractor's background and commercial position;

The contribution that contractor has made or will make to commercialization of contract results;

The contribution that the Government has made or will make to commercialization of the contract results;

The effect of the waiver on public health, safety and welfare, and its effect on competition; and

The extent to which universities have a technology transfer capability and the small business status of the contractor.

Section 9(e) sets forth similar waiver considerations that must be taken into account in waiving individual inventions identified under DOE contracts. Accordingly, with both Sections 9(d) and (e), DOE has the authority to make both advance and identified waivers.

Section 9(h) of the Nonnuclear Energy Act provides for the minimum rights DOE must retain under each waiver which cannot be waived. These include a free Government license plus the following so-called “march-in” rights:

The right to require the contractor to license others at reasonable royalties if the invention is required for use by Government regulations or is necessary to fulfill health, safety, or energy needs;

The right to terminate the waiver in whole or in part if the contractor is not taking effective steps necessary to commercialize the invention, or will not take such steps within a reasonable time; and

The right to require licensing at reasonable royalties, or to terminate the waiver in whole or in part if it is shown at a public hearing held four years after the grant of a waiver that-the waiver has tended to violate the antitrust laws, or the contractor has not taken, and is not expected to take, effective steps to commercialize the invention.

PART 9-9 PATENTS, DATA, AND

COPYRIGHTS

§9-9.000 Scope of part.

(a) This part sets forth policies, instructions, and contract clauses pertaining to patents, data, and copyrights in connection with the procurement of supplies and services.

(b) It is noted that §9-9.107-4(d) entitled “License rights (upon request) to the contractor" pertains to contracts for the operation of Government-owned facilities or special long term, cost-reimbursement Government-funded research, development, or demonstration work. It provides that in such contracts, the paragraph set forth in §9-9.107-5(e) shall be substituted for paragraph (c)(1) of the Patent Rights (long form) clause of §9-9.107-5(a) to provide a revocable, nonexclusive, royalty-free license in inventions only upon request by the contractor for reservation of such license.

(c) Also, §9-9.107-4(g) entitled "Facilities license" covers a contract which has, as a purpose, the design, construction, or operation of a Government-owned research, development, demonstration, or production facility. It states that the paragraph of §9-9.107-5(h) shall be used in all such contracts, in addition to the provisions of the Patent Rights (long form) clause, since it is necessary that the Government be accorded certain rights with respect to further use of the facility by or on behalf of the Government upon termination of the contract, including the right to make, use, transfer, or otherwise dispose of all articles, materials, products, or processes embodying inventions or discoveries used or embodied in the facility, regardless of whether or not conceived or actually reduced to practice under or in the course of such contracts. Further, §9-9.107-4(h) entitled “Subcontracts” states that the withholding of payment provision of the prime contract will not normally be included in a subcontract except upon request of the Contracting Officer except for subcontracts awarded by contractors who operate Government-owned facilities and for other special contracting situations, in which cases the withholding of payment provision may be flowed down to the first-tier subcontractor only.

(d) With respect to technical data and copyrights, §9-9.202-4 applies to contracts for the operation of Government-owned, contractor-operated research or production facilities. This section sets forth the Rights in Technical Data-Facility clause which shall normally be included in such contracts.

§9-9.100 Scope of subpart.

Subpart 9-9.1 Patents

(a) This subpart sets forth policies, procedures, and contract clauses with respect to inventions made, conceived, or utilized in the course of or under any contracts, grants, agreements, understandings or other arrangements entered into with or for the benefit of the DOE. One of DOE's primary missions requires the use of its procurement process to insure the conduct of research, development, and demonstration leading to the ultimate commercial utilization of all efficient sources of energy. Accordingly, DOE's mission is not oriented toward procurement for Government use, except where procurements are involved with special classified programs or the construction or improvement of Government-owned facilities. To accomplish its mission, DOE must work in cooperation with industry in the development of new energy sources and in achieving the ultimate goal of widespread commercial use. To this end, Congress has provided DOE with an array of incentives to secure the adoption of the new technology developed for DOE. An important incentive in commercializing technology is that provided by the

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