5 with State and local governments and the private Section 102 (c) states: "(4) Federal patent policies should be developed, Acquisition Policy Finally, as the last item of background is the Federal Acquisition Act of 1977 which has been reported - S. 1264 - out of the Governmental Affairs Committee. 2 (b) states: This Bill in Section "It is the policy of the United States that when acquiring property and services for the use of the Federal Government, the Government shall, whenever practicable rely on the private sector, and shall act so as to --" "(2) maintain the independent character of private (3) encourage innovation and the application of new (4) maintain and expand the available Federal supply ALLOCATION OF RIGHTS - the With the background of these related policies I will now turn to the basic question of Federal patent policy allocation of rights. This question arises because it is the policy of the Federal Government to rely on the private free enterprise system for the goods and services needed by the Government and because it has been determined to be in the public interest to assist and support organizations performing research and working in certain technology areas (such as energy). A primary goal of Federal patent policy is and should be the utilization or commercialization of the technology. Mr. Chairman, I believe that this is the most important aspect of the questions surrounding Federal patent policy it's objectives. In one word it is commercialization. It gets back to the basics of why we have patents in the first place to get commercialization. Commercialization means increased productivity, better and more products, improved standards of living, anti-inflation (such as demonstrated in miniature electronics), improved trade balances (high technology industries continue with positive balances), and employment. Commercialization is clearly in the public interest. But, what about other aspects of public interest. How do we protect the public interest from "windfall" profits and from inventions being suppressed? Such protection must be provided. To protect against "windfall" profits we should 7 continue the use of cost sharing in assistance and recoupment in procurement contracts. Perhaps we should also consider requiring royalty payments to the Government. With respect to suppression of inventions, the Federal Government should have and use march-in rights if utilization of a patent is restrained. Fortunately, the competitors will help the Government monitor possible suppression and can help initiate the march-in process. On the other hand, we must provide incentives to encourage disclosure of inventions so that patents will be filed. Suppression of disclosure must also be protected against. PROCUREMENT Let us examine, in procurement, how the commercialization goal can be met and how the question of allocation of rights might be answered. When the Government enters the commercial marketplace it either accepts normal commercial practices or, through regulations, it modifies the marketplace practices to the Government's end purposes. The enormous problems of regulations lead to the establishment by Congress of the Commission on Government Procurement. The Commission, which recommended and Congress then established the Office of Federal Procurement Policy, also recommended that a uniform patent policy be established which would replace the 19 statutes currently covering patents. The Commission recognized in commercial practice the seller, not the buyer, retains title to all patents resulting from the performance of a contract and that the question of patent rights should be measured against commercial practices to determine its affect on the marketplace. "Promoting fair dealing and equitable relationships among the parties in Government contracting" is another mandate of Public Law 93-400 on OFPP. A question of equity arises when the Federal Government in an R&D contract both obtains title to resulting patents and requires recoupment. Similarly, an assistance transaction which is in the public interest which requires cost sharing by the recipient and does not let the recipient retain title to resulting patents also raises a question of equity. FEDERAL PAPERWORK Another objective we have within OMB is to minimize the differences in administrative requirements between procurement contracts and grants/cooperative agreements. The Commission on Federal Paperwork specifically recommended that this be done for colleges and universities. It appears to me that a uniform Federal patent policy to be applied in both assistance and procurement is desirable. 9 FEDERAL PATENT POLICY IPAS Dr. Baruch has described the efforts underway in the Executive Office of the President and among the executive agencies to make a determination on Federal patent policy. Within the context of these many considerations, we are still examining the final rule on IPAs in the Federal Procurement Regulations published in the Federal Register on February 2, 1978. Mr. Chairman, if you or any members of the Subcommittee have recommendations regarding the rule, we would appreciate receiving them by July 18, 1978. ANSWERS TO QUESTIONS With respect to the questions contained in your letter of invitation of June 12, 1978, Mr. Chairman, HEW and NSF would be required to adopt the IPA in the FPR if it is released, and a comparable amendment is not planned for the Armed Services Procurement Regulation because DOD permits the universities to retain title without the use of an IPA. It is evident Mr. Chairman that concludes my statement. that much work needs to be done before the question of Federal patent policy is resolved. You are to be commended for undertaking this study and holding hearings such as these. The record of these hearings should greatly facilitate the resolution on these questions. I will be pleased to answer any questions. Thank you. |