FOREWORD Would a policy of licensing Government-owned patents for reasonable royalties achieve better results than outright sale or other disposition of Uncle Sam's patent rights? This is one of the issues considered in this report dealing with the patent practices of the General Services Administration. The report was prepared by Herschel F. Clesner, under the supervision of Robert L. Wright, chief counsel of the Subcommittee on Patents, Trademarks and Copyrights, as part of the subcommittee's study of the U.S. patent system, conducted pursuant to Senate Resolution 53 of the 86th Congress, 1st session. It is the fourth of a series dealing with the patent practices of the various agencies of the Federal Government having research and development responsibilities. The purpose and scope of these reports is more fully described in the forewords to the first two reports, the subjects of which are the patent practices of the Tennessee Valley Authority and of the National Science Foundation, respectively, and in the annual report of the subcommittee issued on March 9, 1959. Up to the present time GSA has dealt with patents chiefly in discharging its responsibility for the disposition of Government surpus property. This agency's experience in operating and attempting to dispose of the Government nickel plant, built during World War II at Nicaro, Cuba, illustrates some of the problems which may arise when a defense contractor builds patented processes into a defense facility and retains title to the patents. GSA has recognized that productive physical assets may be unsalable by the Government unless it also has title to intangible assets, such as patents, needed for successful operations. The agency has accordingly negotiated arrangements with the present Nicaro operator which provide that the Government shall have title to all of the patented processes developed in the course of the current operation. Some of the problems presented to GSA in connection with the operation and disposal of defense production facilities are similar to those discussed in Professor Solo's account of the wartime synthetic rubber program, published by this subcommittee as Study No. 18. However, at the present time the agency's dealing with such problems is free from the wartime stresses that plagued its predecessor agencies, Reconstruction Finance Corporation and War Asssets Administration. This report notes that substantial royalties received by the Government from automobile patent rights acquired by the War Assets Administration exceeded the amount of the best private bids that could be obtained for these rights. This experience suggests that there may be other circumstances under which a policy of licensing Government-owned patents for reasonable royalties may be preferable to an outright sale or other disposition of its patent rights. The report also notes that the Administrator of General Services was designated by the President to carry out a Cabinet recommendation for a comprehensive review of Government procurement policies with a view to increasing the participation of small business. For this purpose an interagency task force was established, which included a study group to evaluate the existing agency practices governing the division of patent rights between research and development contractors and the Government. The study group, of which the Commissioner of Patents is Chairman, should eventually produce a report which will provide a valuable supplement to the study of Government patent practices now being made by this subcommittee. However, Commissioner Watson has advised the subcommittee that the study group has not yet received the funds necessary to permit it to do this work. One of the factors that Congress must, of course, consider in any legislation regarding patent rights arising out of Government-sponsored research and development is the extent to which a given policy may increase the concentration of patent rights in the hands of Government contractors who may already dominate certain fields of production. It is hoped that Commissioner Watson's group will ultimately be provided with the funds necessary to complete the extremely important study which was the purpose of its formation. JOSEPH C. O'MAHONEY, Chairman, Subcommittee on Patents, Trademarks, and Copyrights, Committee on the Judiciary, U.S. Senate. OCTOBER 14, 1959. A. Patent rights article contained in contract with Sylvania Electric B. Sale announcement of the Government's limited interest in 71 patents by the War Assets Administration, Railroad Retirement Building, C. Excerpt from statement of Ira D. Beynon, special assistant to the Administrator of the General Services Administration for Nicaro operations, taken from "Disposal Problems of Government-owned Nickel Plant at Nicaro, Cuba," hearings before a subcommittee of the Committee on Government Operations, House of Representa- tives, 85th Congress, 2d session, April 23 and 24, 1958, page 81----- 14 PRELIMINARY REPORT AS TO THE PATENT PRACTICES OF THE GENERAL SERVICES ADMINISTRATION I. LEGAL AUTHORITY AS TO PATENTS The Federal Property and Administrative Services Act of 1949 (63 Stat. 377) created the General Services Administration. It was the intent of this act, among other things, to provide for the Government an economical and efficient system for the procurement and supply of personal property and nonpersonal services, the utilization of available property and the disposal of surplus property (40 U.S.C. 471). be The act provides that the Administrator of General Services shall have supervision and direction over the disposition of surplus property held by executive agencies (40 U.S.C. 484). Such property would include surplus patents or patent rights. In this connection, it may noted that under the act proposed disposals by any executive agency of any patent, process, technique, or invention would have to be submitted to the Attorney General, who would be required to advise whether the proposed disposition would tend to create or maintain a situation inconsistent with the antitrust laws (40 U.S.C. 488). Under section 303 of the Defense Production Act of 1950, the Administrator of General Services has authority to make purchases of or commitments to purchase metals, minerals, and other materials for Government use or resale, in order to expand productive capacity and supply for defense purposes (50 U.S.C. App. 2093; Executive Order 10480, as amended). The word "materials" is defined in said act to include technical information and processes (50 U.S.C. App. 2152(b)). During the course of its operations under the Defense Production Act, GSA has contracted for research and development work in connection with the following metals or minerals: beryl, columbium-tantalum, manganese, natural and synthetic mica, nickel, rutile, selenium, and titanium. Also under section 303 of the Defense Production Act of 1950, the Administrator of General Services has authority, for the purpose of aiding the national defense, to install additional equipment, facilities, processes or improvements to plants, factories, and other industrial facilities owned by the U.S. Government. Under the Strategic and Critical Materials Stock Piling Act (50 U.S.C. 98-98h), the Administrator of General Services is responsible for purchasing strategic and critical materials for the national stockpile and providing for their storage, security, and maintenance. In this connection, GSA has contracted for research with respect to problems involved in the long-term storage of rubber and cordage fiber. |