Mr. O'BRIEN. Yes, there has been an instance, Mr. Chairman. The patent covered the process of ground mica, a process for grinding mica, whatever ground mica is. The exclusive licensee under this patent, which was owned by the Government as represented by TVA, was required to build a mill and develop the patented process so that this could be commercialized. The licensee was granted a period of 5 years exclusively under this patent. In fact, the licensee did build a mill and did practice the invention and, subsequent to the period of exclusivity, nonexclusive licenses were granted. So in this one reported instance the grant of an exclusive did achieve a beneficial result as far as the public interest is concerned. It did induce someone to put the invention on the market, so to speak.

Now, the reported experience of the TVA on the charging of royalties under nonexclusive licenses is that they didn't recover the administrative expenses involved; that is, they weren't very successful with their approach to a licensing program on a royalty bearing basis.

Mr. DADDARIO. Would it be any problem for you to obtain those for us and submit them? Then we could decide whether or not we want them included in the record.

Mr. O'BRIEN. I would be happy to do so.

(The information requested appears on p. 143.)

Mr. DADDARIO. Not to carry this on too much further, but I would like to have, and perhaps you can submit this, the criteria which you established in obtaining contractors for bid participation in your work-and also the criteria established through which you obtain the contractors to participate in cost-plus work, where proposals are submitted, for example, in the solid fuel contract you just established with United Technology Corp.

The reason I would like to have this is so that we might understand what capacities companies have, in the first instance, to participate in NASA work. Then we could determine from some of those companies the effort already expended through our system to put themselves into the condition through which they make it apparent that they have the capacity and the availability to participate with NASA. Mr. JOHNSON. Mr. Chairman, I think we will have to respond to that by giving you the criteria on a few specific cases, because these will vary tremendously, depending upon the research and development that is contemplated; that is, we have to develop a list of prospective companies that is pretty well hand tailored to the particular situation.

Mr. DADDARIO. I understand that, and I do think it will take some time. I think it is important that we get the alternative approaches used, and it will be of extreme help to the committee.

Are there any further questions?

The committee is adjourned subject to the call of the Chair. (Whereupon, at 12:05 p.m., the subcommittee adjourned subject to the call of the Chair.)

PATENT POLICIES RELATING TO AERONAUTICAL AND

SPACE RESEARCH

THURSDAY, JUNE 8, 1961

HOUSE OF REPRESENTATIVES,

COMMITTEE ON SCIENCE AND ASTRONAUTICS,

SUBCOMMITTEE ON PATENTS AND SCIENTIFIC INVENTIONS,

Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 214-B, New House Office Building, Hon. Emilio Q. Daddario (chairman of the subcommittee) presiding.

Mr. DADDARIO. The meeting will come to order.

We are pleased this morning to have as witnesses before the committee representatives of the Department of Defense. We have as our first witness Mr. Bannerman, who has appeared before this committee before. We are pleased to see you again.

Would you proceed?

STATEMENT OF GRAEME C. BANNERMAN, DEPUTY ASSISTANT SECRETARY OF DEFENSE (PROCUREMENT); ACCOMPANIED BY HOWARD WILLIAMSON, PROCUREMENT SPECIALIST, AND R. TENNEY JOHNSON, OFFICE OF THE GENERAL COUNSEL, DEPARTMENT OF DEFENSE

Mr. BANNERMAN. Thank you, Mr. Chairman. I have with me Mr. Howard Williamson, the specialist in patent matters in my office, and Mr. R. Tenney Johnson of the Office of General Counsel, Department of Defense.

It is a pleasure to appear before this subcommittee to discuss the patent policies of the Department of Defense. It will not be necessary, I think, to discuss the historical background of the Department's policy. Those matters were discussed in the statement of the Department of Defense before this subcommittee in December 1959, explaining and supporting Department of Defense policy and practice.

Subject to the changes which we have made in our policies, largely as a result of the work of this committee last year, the Department of Defense continues to support the testimony previously given to this committee.

Further, I wish to call your attention to the letter of the General Counsel of the Department of Defense, dated May 25, 1961, to the Honorable Overton Brooks, chairman, Committee on Science and Astronautics, House of Representatives, stating the views of the Department on H.R. 1934, 87th Congress.

Mr. YEAGER. May we have permission at this point in the record to incorporate the letter?

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173

Mr. DADDARIO. Without objection it may be so incorporated.

(The letter referred to is as follows:)

Hon. OVERTON BROOKS,

Chairman, Committee on Science and Astronautics,

House of Representatives.

DEAR MR. CHAIRMAN: Reference is made to your request for the views of the Department of Defense on H.R. 1934, 87th Congress, a bill to amend the National Aeronautics and Space Act of 1958, and for other purposes.

In its present form, section 305 of this act requires generally that title to inventions made in the performance of contracts of the National Aeronautics and Space Administration (NASA) be vested in the Government unless the Administrator determines that the interests of the United States will be served by waiver of all or any part of this statutory right. H.R. 1934 would replace this provision with language providing that contractual provisions prescribed by the Administrator will govern the disposition of the rights to inventions conceived or first actually reduced to practice in the performance of contracts having experimental, developmental, or research work as one of the purposes "in a manner calculated to protect the public interest and the equities of the contractor." In all cases, NASA would acquire no less than an irrevocable, royalty free license for use throughout the world by or on behalf of the United States, but the Administrator might acquire greater rights as required by other laws of the United States or, in the determination of the Administrator, required in the interest of national security or the general welfare.

The Department of Defense, which has the largest procurement of research contracting in the Government, has consistently maintained the position that, with regard to the areas of its responsibilities, the general policy of taking only a license to inventions made under its contracts is the best way to preserve the incentives of the inventor and industry while obtaining all the rights to Government needs. It is believed that the considerations which support this position in the areas of Department of Defense responsibility also apply in the usual situations confronting NASA.

As stated in the recent revision to the Armed Service Procurement Regulation, the policy of the Department of Defense on the division of property rights and discoveries resulting from research and development work performed under the Department's contracts is founded on a recognition that the American patent system was established as an incentive to invention, disclosure, and commercial exploitation of new ideas.

Therefore, as a matter of policy, the Department generally obtains on behalf of the Government a comprehensive license of free use but does not require that full title to the new inventions be assigned to the Government. This general policy deliberately takes advantage of the incentives provided by the patent system by encouraging independent inventors and innovators to bring their ideas of potential military usefulness to the Department and also by encouraging commercial organizations to devote their best background experience and most promising ideas and approaches to defense work, in each case without jeopardizing any commercial value to them of such ideas or experience.

In addition, it provides the patent protection which may frequently be neces sary to assure the large additional investment and effort required to develop the invention into a form suitable for commercial use. The license policy, which has been pursued since World War II, has proven itself successful in tapping the resources of American industry for rapid technological advance for national defense purposes.

However, the Department does not oppose taking title to contractors' inventions in particular circumstances where some special purpose of the Government may be served thereby. The recent amendment to the regulation requires contracting officers to consider each proposed research and development contract in this light and to recommend to higher authority deviations from the general policy in appropriate circumstances. It is believed that the policy will strike a fair balance between the interests of the contractors and the needs of the Government.

It is appropriate to note that in restudying its policy, the Department of Defense had the assistance of the study of your committee which resulted in the proposal which is identical to H.R. 1934. It is believed that the Department's recent statement of policy substantially adopts most of the guidelines stated in that study.

For clarity, it is suggested that the words "the retention or" and "or reservation to" in line 13 of page 2 of the bill be deleted, and the words "reserve to" and "reservation" in lines 5 and 9, respectively, of page 2 be replaced by "acquire for” and “acquisition," respectively. The Department of Defense defers to NASA with respect to changes necessary in section 306 of the act if H.R. 1934 should be favorably considered.

The Bureau of the Budget advises that, from the standpoint of the administration's program, there is no objection to the presentation of this report for the consideration of the committee.

Sincerely yours,

CYRUS R. VANCE.

Mr. BANNERMAN. There is a basic question as to whether the Government should acquire more than a royalty-free license to its contractors' inventions. If the view of the Department of Defense on this question had to be put in a nutshell, it would be that there is no simple answer to the question. Of course, through the years the Department has found it necessary and desirable to limit its demands to the royalty free license, in the great majority of cases.

At the same time it recognizes that other agencies have different responsibilities and purposes, for which full title to contractors' inventions may sometimes be necessary and appropriate, and it has never tried to get other agencies to adopt its policies or to persuade Congress that the "license policy" should be the only policy for the entire Gov

ernment.

Our purpose today is to lay before this subcommittee the reasons which persuade us that it is the best policy for the Department of Defense.

The question should the Government acquire more than a royaltyfree license to its contractors' inventions-is not new. It is not our purpose to recapitulate the divergent views on the question of whether title or license is the appropriate policy. Today, we wish to restate and endorse the historical position of the Department of Defense in opposition to a rigid policy of taking title to all patents which are conceived or first reduced to practice under our research and development contracts.

At the outset, I wish to make clear that I am talking about the area where substantially all the patentable inventions derived from our contracts occur, that is, in the development of military hardware. It is in this field that our patent policy has the greatest effect.

The national public interest is heavily and most importantly identified with the defense structure. National defense is the responsibility of the Department. To discharge this responsibility, we seek the best scientific and technological resources we can find, and our research and development contracts must necessarily be awarded to the firms-large or small-which have these resources and will freely devote them to military work.

It should be clearly understood that the clear preponderance of all of the money spent by contract in the Department of Defense, which is likely in any way to lead to patentable inventions, is in our major programs for the development of weapons systems or components thereof. These major research and development programs had a net value of contract awards of approximately $4,770 million for fiscal year 1960.

Additionally there was $317 million contracted for research and development to universities and nonprofit institutions; miscellaneous

research and development programs aggregated $219 million; and services in this field required $242 million. The total contract program amounted to $5,551 million in the United States.

I should say the total contract program for research and development of all types.

Our objective in these major programs is the rapid development of constantly improving weapons. We are not seeking patentable inventions, the likelihood of their occurence is unpredictable and not the primary purpose of the effort contracted for. Patentable inventions are thus byproducts of development and our principal concern with them is that these inventions be freely available to us and to our other contractors for use in future Government work. Our present policy assures this.

When patentable inventions do occur during the course of such contracts, it is likely to be with respect to small segments of the complete contract involving specific components frequently at the subcontract level rather than with respect to the end product. It is normally not possible to segregate and evaluate either that portion of the Government's cost which pertains to the specific invention or the cost to the contractor of the specific background work previously performed by the contractor at his own expense which led to the invention.

In selecting contractors for research and development work, it is the expressed policy of the Department of Defense to make awards to those organizations which have the highest competence in the specific field of science or technology involved.

This is done because, by seeking the organization which is most advanced in the field, we avoid repetition of effort and thereby get our weapons developed on a quicker and less costly basis.

We do not wish to pay for having the wheel reinvented each time we contract. It should be recognized that this means that we seek out our development contractors and subcontractors because of their specialized skills and backgrounds which were normally acquired at their own expense for use in their own commercial pursuits. It is essential to the national defense that these specialized firms and their best background ideas and prior investment be freely available for the many phases of weapons development.

To illustrate this point, assume that we require the development of a pump to work at very low temperatures as part of a missile development program. Here we would seek, among the pump manufacturers, that firm which had done the most advanced work at low temperatures. Such a firm may have gone far in specific phases of the development, say in working on a low temperature valve, at its own expense.

Where this had been done, the work would normally have been done in furtherance of its own commercial interests. It is not reasonable, under these circumstances, to suppose that this firm would take on our pump development and devote its most commercially promising ideas, say the valve design, to our work if the result would be that the firm would lose the very commercial advantage which led them to start in this field in the first place, which effort, in turn, was our basis for selecting them.

This, however, would be the result of our regularly seeking title to patents first reduced to practice under our contracts. From this it