is being played by a multiplicity of corporations on various campuses around the country.

I do not see the theory-the concept-is any different, and I do not see that there is any dealing with the Government as such in this. You are dealing with a research corporation.

Mr. BREMER. I was under the impression he was suggesting a Government-funded corporation. I believe that if you try to establish an organization that will handle inventions from all of the universities, you face the problem, or at least accusation, of giving greater attention and effort to inventions from one university over another.

In other words, as inventions are reported, you are giving more attention to one or the other of inventions. That, obviously, would create dissatisfaction.

I believe Research Corp. effectively has approached and has faced that kind of problem very well. They do, in fact, function very much as Joshua Lederberg suggested, but under contractual arrangements in each case with specific universities.

Chairman NELSON. But it seems to me that, in your testimony, you discussed the question of how difficult it is to market, the question of expertise, and patent attorneys, et cetera. A corporation that is exclusively addressed to managing these kind of problems would seem to me to have a great advantage.

Mr. BREMER. It is possible it may, but the impression-let me phrase that as a question-under Dr. Lederberg's approach to this thing, is he suggesting that all inventions then be mandatorily given to that research foundation?

I do not believe he is very clear about that, but if it is on a voluntary basis, then we would be in no better position than we are today. It would merely be a centralization of the whole operation on a nationwide basis, which I do not think is a very workable solution.

Chairman NELSON. I guess I will put the letter in the record, and let Dr. Lederberg speak for himself on that point.

I just raise it since he is a very distinguished scientist concerned about such matters, who makes this alternative suggestion in the letter he wrote to me a few weeks ago.

I will make this letter a part of the record at this point. [The letter of Prof. Joshua Lederberg follows:]

I am glad to see you are reopening a dialogue on the rights to inventions that derive from federally sponsored research.

My gravest concern is not unjust enrichment, which I think has been exaggerated. Rather, I do not believe the pursuit of proprietary gains to be the proper business of the university. The possibility of profit - especially when other funding is so tight will be a distorting influence on open communication and on the pursuit of basic scholarship.

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On the other hand, the need to protect development investment the exploitation of inventions is absolutely sound, and essential to the nation's economy. Such investments are typically much larger than the costs of the original research, and are comparable to the expected "profits" when there is a payoff.

It should not be so difficult to reconcile these objectives, using the Research Corporation as a model. Set up an accountable, not-for-profit national R&D Foundation, and vest all government owned patents in it. NRDF will then enter the market, at arms length, with licenses, etc., for the inventions it owns. The fees should first of all cover its operating expenses. Then it can use its profits and accumulated reserves to fund grants and contracts that will continue to further the practical applications of scientific discovery.

We do not have good institutions today at the interface of academic science and industrial technology, between the public and private sectors. At least in part, the proper allocation of proprietary rights is an irritating problem; and corporations have good reason to be leery of investing in R&D if they will be challenged and harassed just when their enterprise has paid off. So investment tends to dry up, or to flow to surer avenues of return, like advertising.

Many details would remain to be worked out, but I do offer a few comments:

1) The NRDF receipts should not revert to the federal treasury, but can remain in its revolving fund. In fact its initial funding could well come from a public bond issue secured only by its prospective profits.

This segregation will sustain the visibility of the fruits of public investment in R&D. It will also permit more innovative approaches to responsible marketing of licenses, and to further R&D funding, than is possible from a government bureaucracy. Conversely, it should not receive annual appropriations.

2) Universities (primary grantees) should not share in the license fees except to the extent of their cost-sharing in the research that led to an invention. This should be assumed to be 10% for routine cases, subject to more detailed adjudications where significant amounts are involved.

3) Individuals should not, in principle, be rewarded for the results of work for which they were already receiving an academic salary. I have already indicated how this can distort their academic functions: However, the institution's share, under (2) should be disposed of according to its own lights: its relationship to faculty should not be monitored by outside agencies or government.

The viability of NRDF will be an indirect acknowledgment of the creative contribution of individuals to the national effort in R&D. Nor should individuals be hindered in their private arrangements, for the fruits of time and energy for which they were not on salary, and which are outside their normal academic duties.

You will recognize that my views are not shared by the majority of university people, faculty or administrators. The financial and regulatory stresses on our private institutions are threatening their future existence. But patent-seeking is an inappropriate answer to these financial dilemmas.

Yours sincerely,

Juben.

Joshua Lederberg, Ph.D.

Professor and Chairman of Genetics

JL/gel

Mr. BREMER. I think most importantly Dr. Lederberg's letter emphasizes the very thing that my remarks are addressed to; namely, that the incentive must be present if we are to have technology transfer.

If the incentive is absent, there will be no transfer of the technology at all, and further in my testimony, I point out the incentive must be available to all of the parties involved in the technology transfer process, not to just one of those parties.

Chairman NELSON. Go ahead.

Mr. BREMER. Yes, sir.

Ownership of the invention by the university brings another asset into the technology transfer picture; namely the active participation of the inventor.

It is the inventor who has the best current knowledge of his own invention and who also has the interest in seeing his research endeavors bear fruit in the form of a commercial product or in commercial use. The active participation of the university inventor is a prime ingredient in the successful transfer of an invention to the market and generally, a workable and successful technology transfer function at a university will involve the inventor on either a formal or informal basis.

Although the odds are heavily against a university-generated invention surviving the critical assessment imposed upon it during development by an industrial concern, it is self-evident that the possibility of sharing from the successful commercialization of an invention will be an inducement to the inventor to actively participate with the university and its licensees in the invention development effort.

Even in circumstances, as at the University of Wisconsin, where the individual can dispose of his invention as he wishes, absent obligations resulting from Government funding, the inventor has overwhelmingly elected to assign his invention to WARF for the benefit of the university and more often than not has worked diligently to promote transfer of his technology. There is often an expressed moral obligation or desire by the inventor to benefit the institution which has provided the scholarly atmosphere and other benefits for which they feel indebted. Moreover, most inventors recognize that if they turn entrepreneur they will be faced with time-consuming business and technical commitments which will result in their being unable to keep current in their chosen fields. Then, too, every inventor wants to see his invention in the marketplace.

Chairman NELSON. Is there some established policy, once the inventor assigns his invention, respecting royalties? What is the arrangement? Is it a uniform arrangement, if an inventor assigns the invention?

Mr. BREMER. Yes, the inventor receives 15 percent of the net avails made from any invention.

By net avails we mean the income generated by the patent minus the actual out-of-pocket costs for patenting, or any related activities, but without a charge for overhead. Therefore, once the invention has established itself and those out-of-pocket costs have been recouped, the inventor actually receives pretty close to 15 percent of the gross royalties.

Chairman NELSON. About 15 percent of gross?

Mr. BREMER. It is actually 15 percent of net avails, which, after recoupment of actual expenses, is very close to 15 percent of gross because we charge no operational overhead against any specific invention.

Chairman NELSON. How does that work? You are talking about a case?

Mr. BREMER. Our income on inventions comes through licensing arrangements with industry and the return from royalties.

Chairman NELSON. I was trying to get it straight. The product is marketed by WARF, for example, through the private sector. Is that arrangement 15 percent of gross sales?

Mr. BREMER. No, we are talking about two different things.

The royalty that is returned is generally the reasonable royalty that is prevalent in each industry in which an invention lies.

Chairman NELSON. You are talking about 15 percent of the royalty that comes back to WARF?

Mr. BREMER. Then 15 percent of what comes back to WARF in the form of royalties or other payments under an invention arrangement is given to the inventor, or inventors as a group.

Chairman NELSON. And that is a standard agreement?

Mr. BREMER. That is a standard agreement.

Chairman NELSON. And when you state that "absent obligations resulting from Government funding," what are the general obligations in the Government-funded research program you are talking about?

Mr. BREMER. Well, normally the inventor or principal investigator is required to sign an agreement to the effect he will abide by the contractual arrangements that have been established, or the grant arrangements under which the moneys have been given to him. Where you have the institutional patent agreement, he agrees he will abide by the provisions of such agreement. In that case, the inventor still has two alternatives-he can handle those inventions through the university and WARF, the designee of the university under each of the two IPAs at the University of Wisconsin, or he can take them directly to the agency that has sponsored his research. The control lies in the provisions of the Government contract that is issued to support the particular research or in the grant conditions.

Chairman NELSON. You say to the agency that has sponsored his research?

Mr. BREMER. Yes.

Chairman NELSON. You mean the Federal agency?

Mr. BREMER. Yes. In the absence of those kinds of requirementsthat is, if he has no Federal funding at Wisconsin-the inventor does not have to bring his invention to WARF or the university or to any other designated party. He is free to dispose of his invention as he sees fit.

Chairman NELSON. Even though the research project was under funding by the State government?

Mr. BREMER. Yes, that is right.

Chairman NELSON. It is his invention?

Mr. BREMER. It is his invention-a recognition that the right to an invention, as provided in the Constitution, should reside in the individual.