anything in its charter or act of incorporation, to accept, administer and control government-owned inventions and patents assigned to it, as well as the proceeds from their exploitation.

Previous to the passage of the Public Servants Inventions Act, the Canadian patent law contained specific provisions for the disposition of inventions made by government employees, other than those of the National Research Council. Although few patents on such inventions were being taken out in the government, a statute was enacted in 1923 which in effect gave the government full control over the Canadian rights in and to those inventions, with provision for a portion of any royalties received from the commercial or government exploitation of the inventions being paid to the inventors and the remainder being used for the advancement of research. The Commissioner of Patents licensed the patented inventions and, in fixing the terms of the licenses, apportioned the royalties according to the interests of the Government but not less than half the royalties received went to the inventors.

Because of the National Research Council's close connection with the Canadian universities, the services of Canadian Patents and Development Limited were made available to the universities shortly after its establishment by the Council in 1948. Since then many of the universities have taken advantage of those services and have entered into agreements with Canadian Patents and Development Limited for that crown company to handle patentable discoveries and inventions originating within those institutions. In addition, three of the provincial research councils in Alberta, British Columbia and Saskatchewan have entered into similar agreements. The United Kingdom and Commonwealth research organizations in Australia, New Zealand, India and South Africa have also entered into agreements with respect to the exploitation of their patent property in Canada and the United States by Canadian Patents and Development Limited.

Functions of the Company

-

The Research Council Act, as amended, provides that in addition to its other functions' the Council may exercise the power:

"to license, sell or otherwise grant or make available to
others, Canadian or other patent rights or any other rights,
vested in or owned or controlled by the Council, to or in
respect of any discovery, invention or improvement in any
art, process, apparatus, machine, manufacture or composi-
tion of matter, and to receive royalties, fees and payments
therefor."

Under its charter Canadian Patents and Development Limited performs these functions for the National Research Council and makes an annual report to the Council and to Parliament on its operations and financial condition. In the performance of these functions the company acquires the patent rights in inventions made in the laboratories of the Council and promotes the use of those inventions through licensing agreements. The company also has, under the Public Servants Inventions Act, "the capacity and power to receive, hold, administer, control, develop and exploit" inventions and patent rights assigned to it by any of the departments and agencies of the Canadian Government. In addition, the company

may acquire and exploit inventions and patent rights voluntarily assigned to
it by Canadian universities, provincial research councils and Commonwealth
research organizations under the agreements entered into with those institutions.

Out of the revenue received from its exploitation of inventions and patent rights the company may and does make awards to the inventors. In the case of an invention made by an employee of a government department or agency, to which the Public Servants Inventions Act applies, the payment of an award may be authorized pursuant to the said Act and the amount of the award is determined in accordance with a formula contained in the Public Servants Inventions Regulations. Under the terms of the institutional agreements with Canadian Patents and Development Limited, inventors in the Canadian universities and the provincial research councils may share equitably in the proceeds from the sale or exploitation of patents obtained on their inventions, which are assigned to and managed by the company, in accordance with the scale of payments provided in those agreements.

Organization and Operation

Canadian Patents and Development Limited is organized and operates as an ordinary business company under the Government Companies Operation Act. It is not a government department, although its powers are exercised only as an agency of the Canadian Government and, as a wholly-owned subsidiary of the National Research Council, all its capital stock is held by the Council, except the qualifying shares held by the directors. The officers and directors of the company are drawn from the government, universities and industry.

The direct operations of the company are handled by a full-time staff of ten persons all of whom are employed by the National Research Council and, in addition, a considerable amount of professional and administrative assistance is provided by the Council. Since the company performs a great deal of work for the Council by agreement, a fraction of the cost of the salaries is recovered by the Council and this amount is included in the company's budget. Under an agreement with National Research Development Corporation, that organization acts as agent for Canadian Patents and Development Limited in the exploitation in the United Kingdom of its British patent holdings.

The company maintains no patent staff of its own, but uses the services of patent agents in private practice, when necessary, to prepare and prosecute patent applications in Canada and in other countries. On patent property transferred to the company by the various government departments and agencies, in some cases the patents are applied for and obtained by the patent sections of those departments and agencies. The patent rights so transferred are assigned to the company which then undertakes the commercial and industrial exploitation of the inventions.

After assessing the merits of an invention, the company brings its availability for licensing, not only after the patent issues but also during the patent application period, to the attention of industry, both in Canada and in the United States, through various publicity media. This is accomplished mainly through the publication and distribution of a patents handbook, with a world-wide circulation currently of about 2,000 copies. The inventions in the company's portfolio are briefly described in the handbook, to which periodic supplements

are issued, and are grouped under general fields of usage, such as electrical processes and products, chemical processes and products, electronics, nuclear processes and products, scientific and control instruments, and gas turbines.

In licensing the inventions in its portfolio the company grants both exclusive and nonexclusive licenses at varying rates of royalty, depending upon the nature and value of the invention and the commercial practice of the industry concerned. In one instance a paid-up license was issued; in another a down payment was made and no royalty charged; in others the royalty was on a graduated scale, either increasing or decreasing in relation to the volume of the endproducts manufactured. Some licenses are granted for the life of the patent, others for limited periods. In general, the establishment of the royalty rates and the determination of the other terms of the license agreements are subject to negotiation and the company considers its freedom of action in this respect essential to the success of its licensing program.

Patent Portfolio

By the end of its twelfth year of active operation (the fiscal year ending 31 March 1960) Canadian Patents and Development Limited had, since its inception in 1948, processed 717 patents; 384 of these were for the inventions of workers in the National Research Council laboratories; 248 were on behalf of other government departments and agencies; and 85 were for the Canadian universities that had entered into agreements with the company whereby the company obtains and exploits patents on the inventions of their staff members. In addition, Canadian Patents and Development Limited had acquired licensing rights on 833 patents from other government departments and agencies and from foreign government organizations. Altogether, 310 patents had been licensed to industrial companies.

During the previous year 82 new patent proposals were received and also investigated; patent applications were filed on 22 of them. During the year a total of 196 patents issued in several countries, largely on applications filed in previous years. In addition, 109 patent applications were received by the Canadian Government from the United States Atomic Energy Commission and from the United Kingdom Atomic Energy Authority under a tripartite agreement relating to the disposition of atomic energy inventions. Under this agreement 45 issued Canadian patents were obtained and these were transferred to the Canadian Patents and Development Limited for commercial exploitation.

The company received during the year 48 new cases for exploitation: 30 from the National Research Council and 18 from outside sources responsible for their own patent work. In addition, Canadian Patents and patent applications on approximately 400 cases relating to atomic energy were released to the company and made available for licensing.

As of 17 August, 1960 there were 539 inventions being actively exploited by the company and the number was being increased at the rate of approximately fifty per year. At that time 150 license agreements were in effect, some of which included several patented inventions. On one invention 12 licenses had been granted, while on a number of others more than one license had been granted.

Income and Expenditures

During the fiscal year ending 31 March 1960 Canadian Patents and Development Limited received $179,893 in royalties, licensing fees and other payments, out of which costs of licensing rights and related technical assistance amounting to $118,236 were paid, leaving a net income from patent revenues of $61,657. In addition, the company paid out $26,522 in patent attorneys' fees and other patent expenses and made awards totalling $4,962 to inventors. Its statement of total income and expense for the year showed a net profit of $21,989.

During the previous year the company received $166,803 in royalties, licensing fees and other payments, out of which costs of licensing rights and related technical assistance amounting to $86,077 were paid, leaving a net income from patent revenues of $80,726. In addition, the company paid out $45,459 in patent attorneys' fees and other patent expenses and made awards totalling $10,476 to inventors. Its statement of total income and expense for the year showed a net profit of $12,290.

Footnote

1

Based upon review and analysis of annual reports of Canadian Patents and Development Limited, included with annual reports of National Research Council of Canada; Research Council Act, R.S. 1952, ch. 239 as amended; company's Patents Handbook and Supplements Nos. 1-7 thereto; Public Servants Inventions Act, 2-3 Eliz. II, ch. 40; and other information and material obtained during course of conferences with representatives of company in Ottawa, Canada, and subsequently in Washington. This description of the historical background, organization, operation and patent licensing experience of Canadian Patents and Development Limited was submitted to Ottawa office of company for approval of the factual statements contained therein, which have been approved by the general secretary of company.

APPENDIX C

BIBLIOGRAPHY

Administration and Disposition of Government-Owned Inventive Subject-Matter, an interim report submitted to Chairman of Government Patents Board (1953).

Alien Property Custodian: annual reports; also Patents at Work, a Statement of Policy (1943).

Atomic Energy Act of 1954, 42 U.S.C. 2181-2190.

Atomic Energy Patents, Hearings before Subcom. on Legislation of Joint Com. on Atomic Energy, 86th Cong., 1st sess. (1959).

Boyle: Exploitation of Government-Owned Patents, 35 J. Pat. Off. Soc., pp. 188213 (1953).

Broder: Government Ownership of Inventions, 18 J. Pat. Off. Soc., pp. 697-708 (1936).

Canadian Patents and Development Limited, annual reports, included with annual reports of National Research Council of Canada.

Patents Handbook; also Supplements Nos. 1-7.

Development of Inventions Acts of 1948 (11 & 12 Geo. 6, ch. 60), of 1954 (2 & 3 Eliz. 2, ch. 20) and of 1958 (7 Eliz. 2, ch. 3).

Dienner: Government Policies Relating to Research and Patents, 13 Law and Contemp. Problems, pp. 321-ff (1948).

Ewing: Government-Owned Patents, 10 J. Pat. Off. Soc., pp. 149-156 (1928).

Forman: Government Ownership of Patents and the Administration Thereof, 28 Temple Law Qtly., pp. 31-49 (1954).

..... Government Patents Board

Determination of Patent Rights in Inventions

Made by Government Employees, 35 J. Pat. Off. Soc., pp. 95-127 (1953).

Patents, Their Ownership and Administration by the United States Government (Central Book Company, New York, 1957).

Government Patent Practices, Hearings before Senate Subcom. on Patents, Copyrights and Trademarks, 86th Cong., 2nd sess. (1960).

Government Patents Board: Rpt. of Chairman through 30 June 1953.