Mr. CORMAN. Will you please identify yourself for the record? Mr. HOSENBALL. Neil Hosenball, Deputy General Counsel for NASA. I think we would like to place in the record the exact number of times we have issued exclusive licenses.1 (The information supplied follows:) As of June 30, 1967, out of the total 626 patents and 746 applications, NASA had granted 135 nonexclusive royalty-free licenses and three exclusive royaltyfree licenses under these regulations. Mr. CORMAN. Fine. I think you might enter into such arrangement with the greatest of public interest in your heart and find out 5 years later you have given a bonanza at the taxpayers' expense to someone, and I am sure this committee would be interested in sharing with you what the facts are at this moment. Dr. LESHER. I might point out in many cases it has been our experience that a new device which might produce a market of, say, a couple of hundred thousand dollars at best, is not real attractive to many of the larger aerospace corporations because it lies outside of the main thrust of their work, and this is the basic reason for our patent posture, taking title in the agency, and then making the licenses available to companies. In most cases they are small companies that pick up these options and request a license to manufacture the product. Mr. CORMAN. Dr. Lesher, I suspect in the long run your department is going to have a lot more to do with public support for NASA than other department of NASA. When taxpayers try to determine whether they really want to spend $5 billion a year to get to the moon, their immediate response may be negative. But if they are informed fully as to the value in our economy of new technology, they may decide that the investment is worthwhile. Dr. LESHER. We certainly appreciate those remarks, and I agree with you. Mr. CORMAN. If we could have a very brief synopsis on those five exclusive royalty agreements-not royalty, but exclusive agreements you gave just enough so that we can tell whether or not we want to pursue one of them further. I do not know that we will at all, but I do think it is a matter of potentially very grave concern to your department and the Congress. Counsel? (The information supplied follows:) The following is a summary of the three exclusive licenses granted by NASA: (1) The Union Carbide Corporation was granted an exclusive license on December 9, 1963 for U.S. Patent No. 2,971,838 covering a "High Temperature Nickel Base Alloy." Under this license, Union Carbide was granted the exclusive, revocable, royalty-free license to manufacture, use and sell this invention for a period not to exceed seven years. The licensee agreed to expend a minimum of $20,000 per year in testing, perfecting, and developing the said invention, not to exceed three years. Between the third and seventh year of the license, the licensee would attempt to recover its investment after which the license would be terminated and the invention dedicated freely to the public. The licensee decided to terminate the license on September 8, 1965 because "further testing and/or development of the patented alloy was not warranted in view of superior properties reported for other commercial and developmental compositions." (2) The Exactel Instrument Company, Mountain View, California, a small business company having fifteen employees, was granted an exclusive license on October 20, 1964, for U.S. Patent No. 2,837,706 covering a machine tool 1 See p. 342 regarding the information on royalty requirements of sublicenses. called a "Line Following Servosystem." Exactel received the exclusive, revocable, royalty-free right to manufacture, use and sell the invention for a period not to exceed five years. The licensee agreed to expend a minimum of $5,000 per year not to exceed three years in the testing, designing, perfecting, and developing the said invention and in the perfecting of related equipment and materials essential for the fabrication, production and commercial exploitation of the invention. This license is still active. Reports indicate that the licensee has placed the invention on the commercial market. (3) The Avco Corporation, Cincinnati, Ohio, was granted an exclusive, royalty-free license on June 28, 1966 for an invention entitled "Erosion Sensor" covered by U.S. patent application serial No. 183,982, filed by NASA in the United States Patent Office. This license, granted under the special circumstances reserved to the NASA Administrator, was in consideration of the settlement of a patent interference. Briefly, Avco was issued U.S. Patent No. 3,015,950 on January 9, 1962 for an "Erosion Sensor." The Government had no rights under this patent; however, the invention was in a field of technology then being researched by NASA. NASA filed application serial No. 183,982 on March 30, 1962 on similar subject matter. An interference proceeding between the Avco patent and the NASA application was subsequently declared. In settlement of the patent interference, NASA agreed to give the exclusive license to Avco for the NASA invention in exchange for a license from Avco for more extensive coverage under the Avco patent. The license is for the full seventeen year life of both patents. The NASA patent application matured into United States Patent No. 3,340,727 on Septemer 12, 1967. Mr. ROBINSON. Is there any consideration being given to affording small firms, other than the 18 firms enrolled in the technology utilization course that you mentioned in your statement, the opportunity to benefit directly from this program on a no-charge basis, or on a minimal charge basis until the program becomes self-sustaining? Dr. LESHER. We have nine regional dissemination centers, as you know, and the membership is open to any company, large and small. Of the total number of members, about 40 percent are small firms, and they are charged for the services at fees ranging from $250 a year up to the highest, at one center currently, which is $18,000 a year for a very large company. The fees are based, No. 1, on the size of the company with the fees scaled down for the smaller companies. No. 2, the degree of service, the amount of labor that goes into servicing the company. All of our publications are available through the Clearing House and other channels for merely the price of the document-15 cents or $2-whatever it may be, and what the company pays for in a regional dissemination center is for the information and application engineering services to gain access to this ever-growing body of science and technology. Mr. ROBINSON. Do you feel that the program can be enlarged to increase the percentage of small firms? While 40 percent may sound substantial, actually it is not. There are hundreds of thousands of manufacturing small business firms, compared to a relatively very small number of large firms. Dr. LESHER. In my prepared statement, I mention the fact that we have conducted two regional conferences, and we have four more planned in cooperation with the SBA, and the format for all of these conferences is basically divided into two parts. One is an education program for the companies to show them what is available, what kinds of science and technology are coming out of Federal programs. The second part is to show them how they can gain access to them. So the answer to your question is we are doing all we possibly can to get the largest possible membership for those centers, and the centers themselves are likewise pursuing members. So there are no limitations whatsoever on the membership. Mr. ROBINSON. Do these members provide ideas, innovations or new applications of existing technology? Don't they make a contribution to the program in that area, too? Dr. LESHER. No, sir. They are the users on the output end of the system. The input comes from the NASA research centers, and the NASA contractors. It comes through the system, and then it goes out through the Clearing House, through the Government Printing Office, and through the dissemination centers. Mr. ROBINSON. Do these users, the so-called clients, of the program make any contribution by determining, through their resourcefulness and through their experience, the possible applications of these various improvements? Dr. LESHER. In order for the center to service a member, these firms go into what are known as technical interest profiles. Our office has a scientific and technical information division which is adding about 6,000 documents, scientific and technical reports, per month, to our scientific and technical collection. Now, it is virtually impossible for any man or any company to keep abreast of his field of technology unless he has a mechanical service. The computer, in other words, will store the individual or the company technical interest profile and each month will screen out those documents which are relevant to that company's interest. So, in that sense, the company is making an input into the system by sitting down with the university personnel and telling them the nature of its business and the nature of its technical interest. Mr. ROBINSON. And their ideas of how these improvements may be applied? Dr. LESHER. Companies do not generally do that. They talk to themselves about that because they would like to get it on the market before their competitor does. Mr. ROBINSON. But the whole idea of this program is to put these innovations and this technology into the public domain? Dr. LESHER. That is right. Mr. ROBINSON. We have observed that small businessmen, perhaps due to necessity, are particularly inventive, resourceful, and creative in their own business. When they see something that you have, they would think in terms of how they can adapt it to their own use, either as a new product or, perhaps, as an improved process in what they are making. Do you welcome, do you encourage the opportunity for a free exchange of ideas with the small business community? Dr. LESHER. We certainly do. I think we are hung up here on a procedural matter. That is our business in life, to make it available to them. What I was pointing out was that, once they get it inside their firm, this new piece of knowledge, whatever it may be, we do not require them to tell us how they are going to use it. We ask them to, but if they say, "We would rather not do that for fear of disclosing some marketing plans that we have, prematurely," then we do not force them to do that because we recognize that as part of their free enterprise system. Mr. ROBINSON. Thank you, sir. Mr. CORMAN. I would like to say, first, that you have been very, very helpful to us, and second, that we, I think, have been much easier with you than the other Departments. It might be because you are a lot better, or it might be because we do not understand you as well. Thank you very much, gentlemen, for coming. We will stand adjourned until 1:30, when we will hear from the General Services Administration. (Whereupon, at 12:15 p.m., the subcommittee recessed, to reconvene at 1:30 p.m.) GENERAL SERVICES ADMINISTRATION AFTERNOON SESSION Mr. CORMAN. The Subcommittee on Government Procurement will please be in order. Our next witnesses are representatives of the General Services Administration. Without objection, I will place in the record at this point the subcommittee's September 27 letter of invitation to the Administrator of General Services and the Administrator's October 3 response. (The letters follow :) SELECT COMMITTEE ON SMALL BUSINESS Hon. LAWSON B. KNOTT, Jr., Administrator, General Services Administration, DEAR MR. ADMINISTRATOR: Subcommittee No. 2 on Government Procurement and Economic Concentration of the House Select Committee on Small Business has scheduled hearings to review small business procurement practices and programs of military and major civilian procurement agencies. In connection with these hearings, we invite you and such officials as you may designate to testify on October 18 at 11:00 a.m. in Room 2359, Rayburn House Office Building, regarding the following: 1. Prime contract awards in fiscal years 1964-1967 to all business firms for work in the United States, to small business firms in dollars and percentages, and small business set-asides in dollars and percentages. 2. Awards by GSA operating services in the same period to all business firms and to small firms in dollars and percentages. 3. Various existing regulations and policies are designed or can be utilized to encourage and assist small business firms in receiving and performing prime awards and subcontracts. Small business participation depends largely upon the application of such regulations and policies by contracting officers and contract administration officers. Please provide actual cases in fiscal years 1966-1967 showing procedures followed, regulations utilized, procurement and contract administration officers involved, items procured, manner in which small business benefitted, and other details, including the role of the contracting officer and the contract administration officer, regarding each of the following subjects and any others you deem appropriate : (a) Set-asides-class, total and partial. (b) Dividing procurements into smaller lots suitable for small business. (c) Elimination of restrictive specifications. (d) Multiple awards. (e) Procurements from foreign sources. 4. Coordination with Small Business Administration in fiscal years 1966-1967 in furtherance of small business programs. 5. Procedures followed, criteria and guidelines applied, in the same period, to determine each of the following: (a) Goals for awards to small business. (b) Feasibility of small business set-asides. (c) Availability of small business for bidding, decisions not to invite small business to bid, and reasons for failure to award procurements to small business. 84-790-68 -23 |