Mr. THORNTON. I wish you would. Please go ahead.

Mr. HAUGHEY. I would like to comment that Mr. Ohlson's example on the acceleration under earlier policy is also well illustrated by steam engines, one aspect is that we had a steam engine which had the railroads running all over the country a lot faster than we have nuclear energy right now. One example of private interest is the communications satellite. At the time this concept was thought of in modern times, there was a science fiction writer in England many years ago who thought of it, but didn't know how to do it.

Mr. THORNTON. I'm sorry to be slow on the uptake. I believe the timespan between the development of the steam engine and the widespread use of railroads may have been larger than the timespan between the development of nuclear energy.

Mr. HAUGHEY. Í understand the useful steam engine, by the time it really became a useful device, the railroads picked it up and were running pretty fast. As soon as they got a railroad going, it spread across the country. I don't have the facts before me on this, but my understanding is that it was rapid.

Mr. THORNTON. They did develop rapidly from the time that the first railroad cars were developed but that followed by some years the development of a stationary steam engine.

Mr. HAUGHEY. The basic principles were known long before. The same thing applies to nuclear energy, the basic principles were known. In the case of the satellite, the Government was considering flying a large number of random satellites at low elevation and most people couldn't conceive of the synchronous idea. The first synchronous satellite was built by my company wholly at its own expense. We had it sitting on our library table trying to figure out how to fly it. This occurred at the time of a financial reversal of the cancellation of a major contract program. We couldn't afford to fly it ourselves, to reduce it to practice. We ran what tests we could internally. Eventually, we tried to sell it to NASA, and they explained they were not in the business of testing privately developed technology, so they gave us a contract to develop a new and little bit bigger one, which we did rather successfully. If you want a demonstration of the value of that, pick up a long distance telephone and call England. This technology had been very beneficial. But it was brought about by a company developing something at its own expense. And then attempting, because of the vast complications in financing, to get Government support and the patent policy of the Government, to tell you the honest truth, was somewhat discouraging at the time and has not improved.

In the case of ERDA, we had a nice example where we had a development that included a facility that now exists in the Malibu Plant, or Malibu Research Laboratories facility. It is a research and development oriented operation. Using basic research, they took some technology for an ion engine for propulsion of space vehicles and they conceived of the idea of incorporating this into a vacuum and making a switch that could handle very high voltage and current that is useful for DC current transmission and also have some application in AC. This enables the turning on and off in a short time of high voltage DC current. Without this equipment, the only equipment available is a very expensive and cumbersome system imported

from Europe. We came up with this at private expense. We had several million dollars worth of installations to test it and spent a number of years of additional money to develop it. Then Oak Ridge of the AEC, in its nuclear fusion experiments, discovered this would allow them to increase energy storage because of the switching capability by a factor of 20, and they proceeded to develop a whole new facility to take advantage of it. We tried to sell them a specific piece of equipment on a cooperative basis. We were going to swallow a third of the cost. They were going to pay a third and an institute in Germany was going to pay a third. The business deal was cut and then we tried to solve the patent rights and data rights problems. They fell through. And we were unable to do it. Of course, they proceeded with their work at Oak Ridge in anticipation of this because they knew sooner or later we would solve the problem. But the development problem here was simply the application to a particular problem that they have. We already had the basic switch operating in our laboratories. We completed the modified switch under a development funded by someone else and then we sold it to a subcontractor to the ERDA, so they did get the advantage of it. But on a very small development program we had to send a team of negotiators to Oak Ridge to try to solve the patent and data rights problem. With responsible policy and practice, which we considered the Department of Defense license policy to be, this would have been automatic, no problem.

We just cannot afford, in a normal business operation, to spend the time and effort that we had to spend on that one patent and data policies. We have had some cases where the company has literally refused business with the Government. In one case we had to make a trip to Washington, and I was a part of the team, to renegotiate a brand new clause that one of the agencies came out with before we could continue to accept the contract clauses.

Mr. THORNTON. Which is a major factor in inhibiting a company from entering into an agreement when proprietary rights may be surrendered, the timing, the difficulty of negotiating the paper work, or is it the loss of diminution of the property rights themselves?

Mr. HAUGHEY. The loss of control of your background is obviously a major factor. The expense of negotiation is rather important because you've got to have a mechanically simple system to do it.

One problem that you have is that there is always someone else who hasn't spent the I. R. & D. effort and is not in the position you are who is willing to accept any clause offered, but you are not getting in him the most qualified party to do the work.

Mr. THORNTON. That person presumably has no background to lose, is that what you are saying?

Mr. HAUGHEY. Yes; they have highly competent people. They have read in the journals every patent we publish, every article we publish. They bring them up to date and they haven't done the work. Consider the laser rangefinder which my company first demonstrated. Our Government refused to authorize that project as allowable cost. Nevertheless we did it out of R. & D., and this was incorporated into the tank laser rangefinder for the M-60 tank in production. As I recall, it is the first production item to go into the Government inventory. In this case, a tripod-mounted rangefinder was to be developed

by one of our competitors. Our competitor was offered a cost-plus contract to develop this, at a cost which was less than our cost of the materials to do the job. When we bid on it, they said, you people should do it on a fixed price, which means we should be stuck with the whole cost.

Incidentally, the competitor spent twice the money—under contract-then he had planned to, and was unsuccessful,

Mr. THORNTON. Can you give me an estimate as to the effectiveness with which the expenditures for research and development can be measured? We have been told that the Government share of R. & D. expenditures is 70 percent of expenditures for R. & D. That leaves 30 percent for the private sector..

Do you have any observation with regard to that?

Mr. HAUGHEY. Oh, I sure do.

I asked a question of the man at Hughes who manages I.R. & D. and B. & P. and while I am not allowed to give out specific figures, our company does research and development in the tens of millions of dollars at company expense. We do over ten times that amount of contract R. & D. for the Government; however, if you take the kind of research we do with our own funds, we do a little bit more of that kind than we do for the Government. The balance of the Government effort is usually implementation of something into a production item. The Government's funds have to be spent for this development in many cases, I don't contest that. All I am saying is, when you compare the Government's public R. & D. figures with the company R. & D. budget you are comparing apples and oranges.

Mr. THORNTON. You are saying that the Government is buying more than R. & D. with its investment, that it is buying some product that it needs for development?

Mr. HAUGHEY. They are buying largely on the development side of something that is proven when they get into those large numbers. We don't consider this kind of engineering as research. It is usually called R. & D. I try and point out our effort is largely research oriented. When we get it to the point where it is likely to have a commercial value or a Government value, we try to sell it and it goes under a Government R. & D. program.

Mr. THORNTON. Mr. Ohlson?

Mr. OHLSON. I would be very happy to supply for the record, I don't have the figures here, but I think a 30 to 70 ratio is inaccurate. I think it is a whole lot closer to 50-50 at the present time. I think you will find that industry's private investment research and development nearly matches the Government's. Moreover, the Government investment in R. & D. has steadily declined since 1968 in constant dollars.

Mr. THORNTON. Talking in real dollars.

Mr. OHLSON. There has been a continual decline in Government support of R. & D. over a period of time. I think our last figures were 1974 but I will be very happy to provide them for the record. Mr. THORNTON. I would appreciate your furnishing that information for the record together with, you know, such backup material as you may have.

Mr. OHLSON. We have done several studies. First of all

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Mr. THORNTON. That figure was given to the committee as an approximation and it was not on the basis of

Mr. OHLSON. The figure was good maybe back around 15 or 20 years ago. I don't think currently it is an accurate figure.

I will also provide for the record a study which AIA conducted showing the manner used by various foreign governments in the support of research and development programs.

[Supplemental material for the record follows. Additional material submitted to support statement is in committee files.]