Secretary MARGARET M. LAURENCE Treaturer EDWARD J. BRENNER Delegate to ABA House of Delegater V. BROWN MOLTON, JR. Councilmen to NCPLA FRANE L. NEUHAUIZE Immediate Past President Board of Managers Philip G. Read, Director Federal Procurement Regulations Washington, D. C. 20406 Re: Institutional Patent Agreements Dear Mr. Read: Thank you for submitting to the American Patent Law Association (APLA) by your letter of August 3, 1976, the proposed amendments to the Federal Procurement Regulations which would add Institutional Patent Agreement provisions to Chapter 1, Title 41, CFR, Subpart 1-9.1. The American Patent Law Association membership, over 4,000, is made up of judges, law professors, and over one-half of the patent lawyers in the United States, engaged in private, corporate and government practice. After study and recommendation by our Government Executive Director CHARLOTTE E. Gaura 314 Whereas, on page 7, Paragraph IV(a), Now Therefore, it is resolved by the II. Whereas, Federal Procurement Regu- Now Therefore, it is resolved by the selection of the proper patent rights clauses. Our concern in both resolutions is that the proposed regulations in question would remove the incentive for competent organizations to accept 32-634 O - 78 - 39 Research and Development grants or contracts or subcontracts, and that as a result the government will be hampered in carrying out its purposes. Inventions are unlikely to be developed and actually made available to the public without reasonable incentives. Institutional Patent Agreements such as utilized by the Department of Health, Education and Welfare provide adequate safeguards of the public interest, including marchin rights if the patent owner or licensee is not commercializing. We hope our views will be of assistance to you in formulating policy. nh Very truly yours, John D. Upham Chairman NELSON. Do any of you gentlemen have anything to add? We appreciate your coming and taking the time to testify. Chairman NELSON. The next witness this morning is Mr. Norman A. Jacobs, past president, Licensing Executives Soviety, Washington, D.C. STATEMENT OF NORMAN A. JACOBS, ON BEHALF OF THE LICENSING EXECUTIVES SOCIETY, WASHINGTON, D.C. Mr. JACOBS. Thank you, Mr. Chairman. Chairman NELSON. Your statement will be printed in full in the record, and you may present it however you desire. Mr. JACOBS. Thank you. I am very pleased to have the opportunity to present the views of the Licensing Executives Society on Institutional Patent Agree ments. By way of background, the Licensing Executives Society consists of about 1,500 members in the United States, and an equal number in affiliated foreign societies, all of whom have a significant responsibility for licensing and technology transfer. Our members represent both large and small companies, as well as universities, independent invention development organizations, attorneys and consultants. We are gathered together in an organization because we are involved in licensing technology and transferring it on a daily basis on behalf of our employers or clients, and most of us are equally active as licensors and licensees. I am a past president of the society. I am also a business executive who is vitally concerned with the development and commercialization of new technology. I am president of Amicon Corp. in Lexington, Mass., a 15-year-old company, with about 250 employees. We began as a research organization, and we have now built two successful businesses by commercializing inventions made by our scientists in the mid-sixties. By way of background, one business involves the production and sale of unique membrane filtration systems used in medical research and clinical diagnostic applications. The other business produces novel epoxy adhesives and electrical insulating materials for industrial use, such as in automobiles, appliances, and electrical and electronic products. When the Government sponsors research and development, its objective is to further the public interest by planting seeds for new ideas, for new products for new processes. We believe it is then the Government's role to ensure that the environment is created which will bring the results of those seeds to benefit the public at the earliest possible time. The opportunity for reward provided by exclusive rights, as conceived by the fathers of this Nation, and reflected in the Constitution, in our view provides the greatest assurance that new ideas will be brought to the public in useful form as soon as possible. My own company as a small company very much needs those exclusive rights to justify investment in a new product or process. Non-exclusive rights will not protect us from one who could get a "free-ride" by copying our products as soon as we introduce it into the marketplace. Non-exclusive rights may be enough for an established company in an industry, with an existing marketing organization. It just is not enough for a small company, or any company entering a new field, which needs the exclusive protection that is afforded by the patent system. It is a sweeping generality, but I think largely true, that patent rights and technology rights that are available to everyone are of value to no one. Note the limited commercial use that has been made of the many thousands of Government-owned and patented inventions. Despite the billions of dollars being devoted to Government-sponsored research, and the increasing proportion of our national research investment that is being financed that way, I feel that far too little industrial effort right now is devoted to the commercialization of the results of that research. I think there are several reasons for this situation. First of all, and to be expected, commercial inventions are not the object of most academic research. The large proportion of that research is simply a search for basic scientific knowledge. The results of each individual project add to our understanding of chemical, physical and biological principles upon which applied research and engineering may build, but the results do not on their own provide the basis for a new product or process. There are exceptions though, and there are on occasion potentially commercial product or process concepts that do result from academic research. But we must recognize that they are just that, bare concepts in almost all cases that are far-removed from the practical needs of a retail or industrial consumer. Unfortunately, the prevailing view throughout much of industry is that it is either too difficult or impossible to obtain a strong enough proprietary position in those research concepts that come out of Government-sponsored research, to justify the time and money that a company would have to spend to try to commercialize the product. Companies know that all this research is going on, but far too few of them have active programs to search out and utilize the research results. Chairman NELSON. Let me ask: You state that it is difficult or impossible to obtain a strong enough proprietary position. What is your understanding of the proprietary position of Government-sponsored research? What exactly are we talking about? Mr. JACOBS. What I am talking about is the opportunity for a company other than under IPA kind of arrangements to obtain a protected position for some time period. My company needs assurance that if we pick up a research concept, and invest our time and money |