committee, Mr. Chairman, it quickly becomes apparent what difficulties the public must face when doing business with the Federal Government. Additional insight to the problem is possible by reviewing section IV of table I that I submitted for the record a moment ago. It shows the numerous types of patent rights clauses used by the Federal agencies in their R. & D. contracts and grants.

After extensive deliberations, the committee adopted the basic policy concepts of the alternate approach as that policy which best responds to all of the competing policy desiderata-namely, maximum participation, competition, and utilization-while at the same time reducing the administrative burden and maintaining, and even strengthening, the safeguards for the public interest.

The policy concepts incorporated in the alternative approach by the Commission on Government Procurement and endorsed by the Committee on Government Patent Policy would permit the contractor to retain title to all patents resulting from Federal contracts and grants, and require the contractor to license others in certain specified situations so as to safeguard the public interest. In particular, the contractor would be required to license others if he fails to commercialize an invention covered by the patent. Even where he commercializes his invention, the contractor would be required to license others to meet specific public interest needs such as health, safety, and welfare, or to correct a situation inconsistent with the antitrust laws. It is expected that, in these licensing situations, the contractor would generally be willing to license third parties without a Federal agency determination requiring him to do so. Should a contractor refuse to license a third party, the Federal agency itself has the right, in appropriate circumstances, to license the third party, subject to the contractor's right to a hearing and an appeal.

The proposed policy would reduce drastically-I can't emphasize that enough-the administrative burden of deciding the type of patent rights clause to be used in the some 30,000 R. & D. contracts executed annually, and would obviate the need for processing waiver petitions.

Now, regarding Federal employee inventions; how should the rights to inventions made by Federal employees be allocated? The committee believes that the basic policy concepts of Executive Order 10096 issued by President Truman in 1950 should be codified.

Briefly, under the proposed policy, the Federal Government would retain ownership to all inventions made by Federal employees where the invention bears a relation to the duties of the employee-inventor or is made in consequence of employment. That is entirely symmetrical with the industrial situation. The policy encourages employees to invent because an incentive awards program is incorporated and income sharing is provided.

The committee believes the draft policy should contain specific provisions for Federal employee inventions, especially since not all Federal employees are covered by the Executive order.

Last, the protection and licensing authority that this policy calls for is concerned with insuring that all Federal agencies obtain adequate domestic and foreign patent protection on inventions owned by them, and that licenses are granted on a uniform basis. Such a policy would enhance the Government's ability to transfer its technology to

the private sector and to commercialize the inventions which it retains, thus providing new jobs.

To recapitulate, currently Federal patent policies are set out in numerous statutes, several Executive orders, and the 1971 Presidential memorandum and statement of Government patent policy. These policies spell out which invention rights are to be acquired by the U.S. Government and which are to be retained by the contractor.

An examination of the Federal patent policies mentioned above discloses a significant diversity in agency practices in this important area. As you have noted, Mr. Chairman, some agencies are obligated because of statutory requirements to use a clause acquiring title to all inventions resulting from the contract. Other agencies are required to use a clause acquiring title to all inventions made under the contract, but may waive title to the contractor under certain circumstances. In addition, other agencies may use any one of several clauses, either acquiring title, acquiring only a license, or deferring the allocation of rights determination until an invention is made under the contract, as provided by the 1971 Presidential statement.

As a result of the diversity in agency practices, there is an enormous and needless administrative burden placed on both the Federal agencies and their contractors as extensive negotiations occur respecting the rights to be granted the contractors and those to be retained by the Government. This administrative burden often deters the most qualified and competent contractors from seeking Federal R. & D. contracts, thus inhibiting competition and curtailing the widespread utilization of inventions resulting from such research.

We believe that a policy which leaves title in the contractor subject to strong "march in" rights in favor of the Government will protect the public interest and reduce substantially the administrative burden of both the Federal agencies and their contractors. In addition, we believe this change will stimulate more qualified and competent contractors to participate in federally sponsored R. & D. contracts. We believe further that this policy will be especially beneficial to individuals and small business concerns since they will no longer be obliged to cope with the existing diversity in agency practices and the uncertainty respecting rights to inventions which may result from the contracts.

In addition, such a single patent rights clause will provide the contractor with a greater incentive to invest his own funds to commercialize an invention resulting from the contract. This incentive is especially important as most inventions require a potential manufacturer to invest substantial development funds before the invention. can be marketed. By granting the contractor a limited period of exclusivity, the Government improves the contractor's ability to recover development costs, thus encouraging him to commercialize his invention. Such commercialization benefits the Government, the contractor, and the general public.

That concludes, Mr. Chairman, my formal statement.

But before the questioning begins, if I may, I would like to submit some information via some charts that I have brought.

Mr. THORNTON. Excellent. We would be pleased to have that information presented.

[The material referred to above follows:]