Patent applications have never been handled by HEW. Until October 1953 the filing and prosecution of patent applications was handled for it by the Department of Justice. In this connection it was said:

At that time the Department of Justice discontinued its service to other agencies of the Government in the filing and prosecution of patent applications, except upon a fixed-fee basis. Since that time special arrangements have had to be made by this Department whenever it has been decided to seek patent protection upon an invention."

The special arrangements referred to above were of two kinds. The first involved the use of patent attorneys in the Department of the Army. This was done as a matter of accommodation where the invention was of interest to a particular military branch. The other arrangement was by contract with a private patent firm in cases where the nature of the invention or special circumstances made this course advisable.

In regard to the percentage distribution of patent matters as between the various constituent agencies of HEW, the following estimates were made, based upon representative samples covering the period 1950 through 1958:

For the 4 years prior to May 1959 all of these invention reports have come from the Public Health Service.

B. POLICY AS TO RETENTION OF TITLE

As a matter of general policy HEW favors dedication to the public through publication of research activities rather than patenting. It believes the former practice assures greater availability to the public of the invented product and avoids the administrative burden and expense involved in securing a patent. The special circumstances which HEW believes justify it in seeking to obtain patents are (1) cases where patenting is necessary to protect against patent rights being acquired by others and restricted in such manner as to impair or defeat HEW's objectives and (2) cases where the nature of the invention necessitates the maintenance of licensing control to further a health purpose, as in a case involving a narcotic drug. A list of inventions made by employees and grantees of the National Institutes of Health and dedicated to the public for the period of 1953-58 appears in the appendix at page 33. A list of the inventions on which patent applications were filed on behalf of HEW appears in the appendix at page 36.

• See note 4 on p. 3.

By regulations issued on December 4, 1957, HEW's general policy as to inventions developed through its resources and activities is stated as follows:

§ 6.1-General Policy. Inventions developed through the resources and activities of the Department are a potential source of great value to the public health and welfare. It is the policy of the Department.

(a) To safeguard the public interest in inventions developed by Department employees, contractors and grantees with the aid of public funds and facilities;

(b) To encourage and recognize individual and cooperative achievement in research and investigations; and

(c) To establish a procedure, consistent with pertinent statutes, Executive Orders and general Government regulations, for the determination of rights and obligations relating to the patenting of inventions.

$ 6.2-Publication or patenting of inventions. It is the general policy of the Department that the results of Department research should be made widely, promptly and freely available to other research workers and to the public. This availability can generally be adequately preserved by the dedication of a Government-owned invention to the public through publication. Determinations to file a domestic patent application on inventions in which the Department has an interest will be made only if the circumstances indicate that this is desirable in the public interest, and if it is practicable to do so. Department determinations not to apply for a domestic patent on employee inventions are subject to review and approval by the Chairman of the Government Patents Board. Except where deemed necessary for protecting the patent claim, the fact that a patent application has been or may be filed will not require any departure from normal policy regarding the dissemination of the results of Department research.

$6.3-Government-owned patents; licensing; dedication to the public. All licenses under patents and pending patent applications for the administration of which the Department is responsible shall be issued by the Secretary. Licenses will be royalty-free, revocable and nonexclusive. Except in unusual cases when determined upon recommendation of the head of the constituent organization that unconditional licensing would be contrary to the public interest, licenses will be issued to all applicants and will contain no limitations or standards relating to the quality of the products to be manufactured, sold, or distributed thereunder. To reduce. the need for individual license applications, patents held for unconditional licensing shall be dedicated to the public as may be feasible."

1. By employees

HEW makes employee patent determinations in accordance with the provisions of Executive Order 10096.

7 These regulations appear in full in the appendix at p. 19.

The procedure for dealing with employee inventions is stated by HEW to be as follows:

With respect to Department employees, the procedure begins with the report by the employee-inventor to the agency of the Department which employs him. Unless the invention appears to the officer receiving the report (with the concurrence of the Department patents officer) not to be patentable, the report is forwarded with appropriate recommendations to the head of the constituent employing agency who makes in writing the following determinations: (1) whether the invention may be patentable; (2) whether circumstances of invention make the Government entitled to all rights therein; and (3) whether publication in lieu of patenting is adequate to serve the public interest. This determination constitutes the determination of the Department unless it is referred to the Department Patents Board because of questions of consistency with law or Department regulations or policy regarding patents. Notice of the determination is given the employee (unless he has previously agreed to the determination that is made), and if he is aggrieved, he has a right to appeal to the Government Patents Board pursuant to Executive Order 10096.8

2. By contractors and grantees

HEW believes that essentially the same basic policy should be applied to its employees as is applied to inventions arising out of research supported by grants or contracts. Thus HEW considers the public interest is in general best served if inventive advances arising from its grants or contracts are made freely available to the Government, to science, to industry, and to the general public. There are certain differences, however, between grants and contracts in the implementing methods and procedures.

a. By contractors. The patent regulations applicable generally to contracts for research provide that the head of the HEW organization responsible for the contract shall determine the disposition of all inventions "first conceived or actually reduced to practice in the course of the performance of the contract." The reasons for this policy were stated in the following language:

The Department of Health, Education, and Welfare as a matter of overall policy takes the position that the results of research which are developed with the aid of public funds in the field of its programs should be utilized in a manner which will best serve the public interest. It considers that the public interest will in general be best served if advances resulting therefrom are made freely available to the Government, to science, to industry, and to the general public. *** Contracts for research, whether or not with nonprofit organizations, will be required to conform to the same departmental policy, under standard clauses adopted to provide that any invention first conceived or actually reduced to practice in the course of the performance of the contract shall be promptly and fully reported to the head of the constituent

* See note 5 on p. 4. The regulations on this subject appear in the appendix at p. 22.

organization responsible for the contract, for determination
by him as to the manner of disposition of all rights in and to
such invention, including the right to require assignment of
all rights to the United States or dedication to the public. In
the exercise of this power the organization head will be
guided in general by the policies specified in departmental
regulations with respect to grants.9

This basic policy is implemented by the Department's standard contract patent clause No. 20 which appears in the appendix, page 45. If, however, the contract is with a nonprofit institution, the contract may provide for leaving the ownership and disposition of the rights in inventions to the contractor if it is determined that the nonprofit institution's policies and procedures are acceptable on the same basis as would be those of a grantee as discussed above, pages 10 to 14. (See HEW Regulations, sec. 8.6(b) in the appendix, p. 27.)

Cancer chemotherapy contracts

On September 9, 1957, HEW adopted a special policy applicable only to cancer chemotherapy contracts with industrial profitmaking companies, and under this policy-intended to obtain extensive industrial cooperation in the synthesis and screening of possible anticancer agents the cooperating firms are permitted to patent and exploit inventions as long as the products of such inventions are available to meet the public need with respect to supply, quality, and price. Subsequent to the adoption of this policy

those involved in negotiating drug development contracts on behalf of the Government reported to the Department Patents Board that industry was not participating to an extent needed to meet the demands of the program, apparently due to industry concern that the "march-in" rights reserved to the Surgeon General might be exercised arbitrarily and without due regard to the real public need. It was on this basis that procedural modifications of the September 1957 policy were approved by the Secretary of Health, Education, and Welfare, July 1958. By this modification, the march-in rights were to be exercised only in accord with specified procedural safeguards designed to protect the contractor from arbitrary action.10

The march-in rights referred to above were those rights reserved to the Surgeon General under the special policy adopted in 1957 and applicable only to cancer chemotherapy research contracts with industry. They provided that under certain circumstances the Surgeon General may issue royalty-free licenses when he deems it necessary to assure an adequate supply of the product for health purposes at a reasonable price and of a high quality."

In its latest statement of policy applicable to its cancer chemotherapy industrial research contracts, HEW has added several provisions which restrict procedurally the exercise of the right reserved to the Surgeon General to dedicate the invention or issue licenses on

"HEW Patent Policy Applicable to Research Contracts," dated Sept. 9, 1957. For complete text see the appendix, p. 42.

10 See note 5 on p. 4.

11 See paragraph 1(4) (a) of policy statement adopted as of Sept. 9, 1957, which appears in the appendix, p. 43.

a royalty-free basis when deemed to be in the public interest. Under these provisions the Surgeon General must give the contractor at least 90 days' advance notice that he intends to exercise his rights and if the contractor decides to contest this action he has the right to a hearing and to be represented by counsel. The findings of the Surgeon General must be in writing and are final and binding upon the contractor.12 A copy of a research and development contract between the Upjohn Co. and HEW was submitted as being typical of cancer chemotherapy research contracts made subsequent to July 31, 1958.13 Instead of the so-called standard clause 20, preserving to the Surgeon General the right to determine the disposition of inventions arising in the course of the contract work, it contains substitute provisions giving the contractor the right to take title to such inventions.

Upjohn Co. (Contract No. SA-43–ph-1933)

The basic contract was made on January 1, 1958, for the period from January 1 through December 31, 1958, and provided for "the development of techniques for analysis of antitumor beers and extracts" at an estimated cost of $145,000. The original agreement gave the contractor the right to file a patent application in his own name pending the Surgeon General's determination as to ultimate disposition of the patent only when this was deemed necessary to prevent patenting of the invention by others. By a supplement dated December 1, 1958, the period of time for this research project was extended through December 31, 1959, and an additional $505,000 was obligated, bringing the total amount of this contract to $650,000. In addition, this supplement deleted in its entirety the "standard" patent rights provision and substituted a new provision which permitted the contractor to patent such inventions in his own name for the purpose of commercial exploitation.

The principal departures from the procedures provided by standard clause 20 are as follows:

If the contractor decides to patent an invention in this country and abroad, he may obtain title for himself, but this title would be subject to a royalty-free, nonexclusive license for governmental purposes. However, in the case of a domestic patent, the Surgeon General may, if he deems such action necessary to protect the availability of the invention for health purposes in a foreign country, take over all rights in foreign countries to the invention involved. The Surgeon General also may take over any invention and dedicate it to the public or issue nonassignable, nonexclusive licenses when and if he finds the contractor has not met the public need and that the public dedication or additional licensing by the Surgeon General is necessary in the public interest. However, the rights of the Surgeon General may only be exercised after he has been advised by a body of consultants and has given the contractor notice in writing of the grounds on which he expects to take over control of the invention. The contractor is then given a time specified by the Surgeon General in which to correct the deficiencies relied upon by the Surgeon General. Upon the expiration of that time, if the contractor

For complete text of the patent policy announced Aug. 5, 1958, see the appendix. For the restrictive revisions referred to see paragraph B4 a, b, c, thereof.

This is a cost reimbursement contract which is funded for a specified amount, but payments are made to the contractor only on the basis of actual expenditures plus an agreed upon provisional rate to cover overhead.