We place a large contract with a missile contractor. He may go to someone else for guidance systems. He may go to someone else for some specific electronic component. This we are always seeking at all levels, the highest technical competence. By no means is this question of what you do with patents to inventions made under our contracts important only at the prime contract level. It is my judgment that it is vastly more important at some of these subcontract levels.

Mr. DADDARIO. I think that is a very important statement. It defines in a very clear fashion the depth to which your search for highest technical competence, as you put it, goes, and which gets us then through to the point where in order to have achieved such high technical competence these people or companies with whom you deal must have expended company funds to have achieved that high technical competence which attracts you to them.

Mr. BANNERMAN. That is very true, in a very high percentage of

our cases.

Mr. DADDARIO. Following it one step further. After you weed out the proposals submitted to you and you contract with one company, the Government at this particular point has already received the benefit of the competition which existed in this proposal-with all of these companies participating having actually submitted or presented to the Government their own knowledge at that particular point? Mr. BANNERMAN. That is correct.

Mr. DADDARIO. From that point on if a patent or invention develops, develops as a result of the contract having been made with the company, the fact is, if you start tracing it back, the Department of Defense obtains a patent which really results not just from the proposal submitted to it, but from the competitive position that all of these companies have placed themselves in at the time the proposal was initiated by the Government in the first instance?

Mr. BANNERMAN. The antecedents of inventions, Mr. Chairman, are difficult to trace and are all intertwined with the technical and scientific efforts of the companies involved. It would be a hopeless chore to try to weed out and say so much of this invention is attributable to the company's prior work, so much attributable to what happened after they took on our contract. These things are not that simple. Inventions do not result specifically from our contract. They develop from the laboratory or department or research group that is working on them. Certainly our contracts contribute. The work that is done under them contribute but I think it is completely fallacious to think it is all black and white. It is all mixed up actually.

Mr. DADDARIO. Isn't this one of the reasons submitted in support of the DOD policy?

Mr. BANNERMAN. We have always claimed this as one of the reasons for our policy. We feel very strongly that if you recognize the fact that a scientific effort in a commercial laboratory is a going thing with a great many ramifications and we move in at a particular point, if we want the best of what has gone before in that laboratory devoted to our work, we must not take title away from the contractor. That is the thrust of our argument.

Mr. DADDARIO. We had some testimony submitted before this committee last year in reference to the Mercury capsule. A witness of of the Garrett Corp., as I recall, testified that his company decided to compete in the proposals to be submitted only after they had been able

to determine that they could perform the contract with patents and inventions already obtained and proven out-that they would not go beyond that particular point to add modifications or improvements. If you get back to page 4 in your statement, this is the kind of situation you are in fact attempting to avoid, is it not?

Mr. BANNERMAN. That is correct, Mr. Chairman. I think that when a company makes that statement they are saying in essence "We are selling an existing product, we are not selling research and development."

Mr. DADDARIO. They are selling research and development which has already achieved a definite goal and they are not intending that goal be improved?

Mr. BANNERMAN. If they are really doing research and development they can't be sure there won't be another invention or improvement. To be sure of that they would have to be selling only what they already know.

Mr. DADDARIO. Somewhere in your statement, as I recall it, you used the word "compel" that the Government cannot-it is on page 5: The Government has no power to compel.

Again you are talking about this same idea of the formulation of a policy through which there can be enough flexibility so that whatever improvement which can be obtained, of benefit to the Government will be obtained. There will be no reason not to obtain it and in the final analysis this can work to the financial advantage of the company and the Government will be receiving the best end result from the work being performed?

Mr. BANNERMAN. That is exactly right, Mr. Chairman. That is the point we are making.

Mr. DADDARIO. I think, Mr. Yeager, if we might be able to obtain some exact cases of Government proposals, the form in which the advertising for the proposals has been made, the companies which have participated and the company which finally received the proposal, so that we may see how this actually works out, how this theory actually works out in a practice case, it might be helpful. If you would be kind enough to work with Mr. Yeager on that, Mr. Bannerman, the committee would be appreciative.

Mr. BANNERMAN. I will be glad to give you some examples, Mr. Chairman.

(The information requested will be found in the appendix to part 2.)

Mr. DADDARIO. Are there any other questions?

Mr. RANDALL. Mr. Bannerman mentioned a situation that you said might be useful. You said, "that the Department was sponsoring." Mr. BANNERMAN. We might do this in several ways. I guess the word "sponsor" is perhaps not the right one.

Mr. DADDARIO. If someone came in with an antigravity machine you would sponsor it.

Mr. RANDALL. I know a man that thought he could spot submarines from an airplane. I see a Navy man back there. I think he proved it out in a couple of instances. Go ahead.

have

Mr. BANNERMAN. This occurs in a number of ways. We may a college or university which says, "We would like to undertake a research program in this field in which we think you would be interested." We would look it over and think we would. We would spon

sor it and we might do it by grant. We have a grant program. If you have an individual inventor that came in, and I have seen cases of this

Mr. RANDALL. What do you do with it?

Mr. BANNERMAN. We would give this inventor, if it took additional money to reduce his idea to practice and demonstrate its feasibility to test it, we would give him a contract to accomplish just that. If, while performing that contract, he happened to reduce to practice a patentable invention, we would feel any commercial rights he should have we should take only the governmental rights.

Mr. FULTON. When the inventor comes in to you who does he go to?

Mr. BANNERMAN. Mr. Fulton, there are many offices concerned with many different fields of science and technology within the Department as you know. It would depend on what the nature of the invention was as to what office he should see. If it was a shipboard item-I came out of the Bureau of Ships some years back and I remember an inventor that came in at that stage with a smoke generator for screening purposes which involved a new principle. He came to the Bureau of Ships and saw the people responsible for that.

Mr. RYAN. When the Government does keep title to a patent, then I take it any commercial firm may use this patent or come in and get permission all on an equal basis, isn't that right?

Mr. BANNERMAN. I think that is correct with respect to the Department of Defense.

Mr. RYAN. It would seem to me that by selecting a particular contractor, you then put that contractor in a preferred position to develop inventions.

Mr. BANNERMAN. Are you relating this to your earlier question? Mr. RYAN. No, I am not. I am making an observation.

Mr. BANNERMAN. I think this is correct. I think we are putting him in a preferred position. As a matter of fact, we want inventions, we want innovation and ingenuity to be devoted to our contract. This is a vital part of what we are trying to buy. Obviously, whoever gets the contract does have a preferred position in this respect. However, what we are putting up is money. Money doesn't invent anything by itself. It takes the contractors' efforts to do it. As we pointed out we seek those who we thing are likely to be able to give us the most rewarding efforts in our field. If this happens to have commercial advantage we think that we would be discouraging those people if we sought to reduce the commercial advantages that otherwise would be available.

Mr. RYAN. Do you know of any cases where you have not obtained a contractor because, or where any Government agency has not obtained a contractor, because of the problem of not securing the invention?

Mr. BANNERMAN. You mean because of a policy of insisting on title?

Mr. RYAN. Yes.

Mr. BANNERMAN. It is my recollection in the testimony before this committee I believe in December a year and a half ago some such cases were placed in the record. I would like to point out again as I do on page 5 of my statement that our problem is not really getting companies to take our contracts.

We can get companies to take our contracts. But it doesn't follow that they would always be the best qualified companies and it also doesn't follow that even if they did take our contracts they would devote their most promising commercial ideas to the performance of those contracts. We can't make a contractor take this particular idea and develop our product by the use of that idea. His contract calls for him to develop a product. If he knew that he was going to lose major commercial advantage by using a particular kit of ideas in his portfolio he probably wouldn't do it. At least, it seems to us, that is the way the incentives lie. I can't give you specific cases where contractors have refused to use specific ideas. I think the records of this committee do show cases where contractors have refused contracts because of title policy.

Mr. DADDARIO. I think Mr. Fulton brought out a case in his district of the Koppers Co.

Mr. FULTON. It was a legitimate case.

Mr. DADDARIO. This is a very important point you raise. We are looking into that exact situation to see why other companies which were asked to bid did not submit a bid-to see if perhaps this was the motivation.

Mr. RYAN. No further questions.

Mr. DADDARIO. Any further questions?

Mr. YEAGER. I have one question, if I may, Mr. Chairman. Would you tell us, do you have problems when you contract jointly or on behalf of or through or by the Space Agency? How do you handle work that is done jointly with NASA as far as these patent problems are concerned?

Mr. BANNERMAN. I would like to comment on this and then ask Mr. Williamson to tell me if I am right. I think normally when we do work involving NASA funds we attempt, if possible, to make the work severable, that portion of the work that is done with our funds will be a severable portion of the funds from that being done with the NASA funds and we use two different patent clauses. Where it is not possible to separate the work, and where their money is involved in the contract and we have to use their clause by statute, we do so. The question as to whether this creates problems-it certainly creates administrative problems. It would be easier to contract if we didn't have to do this. As to whether it has caused specific companies to refuse this work I am not prepared to say that I could give you an example.

Mr. YEAGER. Do you have occasion to contract with them jointly? Mr. WILLIAMSON. They will

Mr. YEAGER. As NAŠA has with Atomic Energy, for example, under the Rover program? Do you have anything similar to that where you have to contract jointly with either NASA or the Atomic Energy Commission?

Mr. BANNERMAN. I guess the answer to that depends on what you mean by "jointly." We do make contracts the performance of which depends on other contracts which are made by AEC. For instance, I think in the nuclear submarines, the propulsion systems are provided by contractors under contracts with AEC and then are furnished to us for inclusion in the submarine. I don't think we make

any joint contracts in the sense that we have joint Government signatories to a single contract.

Mr. YEAGER. It would be several contracts in the same program? Mr. BANNERMAN. This is entirely possible.

Mr. YEAGER. That does create some administrative difficulties. Mr. BANNERMAN. Yes. We may have a single contract. The more common situation is where there is a single case that involves both our efforts and NASA efforts and the money of both in one contract but there would be a single contracting agency, usually us, and this does create some administrative problems.

Mr. YEAGER. That is all, Mr. Chairman.

Mr. DADDARIO. Any further questions? The committee will adjourn subject to the call of the Chair.

(Whereupon, at 11:55 a.m., the committee adjourned to reconvene at the call of the chairman.)