American Society for Pharmacology and Experimental Therapeutics, Inc. Automobile Manufacturers Association, Inc... American Federation of Labor and Congress of Industrial Organizations__ GOVERNMENT PATENT POLICY TUESDAY, JULY 6, 1965 U.S. SENATE, SUBCOMMITTEE ON PATENTS, TRADEMARKS, AND COPYRIGHTS OF THE COMMITTEE ON THE JUDICIARY, Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 3302, New Senate Office Building, Senator John L. McClellan (chairman of the subcommittee) presiding. Present: Senators McClellan, Scott, and Burdick. Also present: Thomas C. Brennan, chief counsel, Edd N. Williams, Jr., assistant counsel, and Stephen G. Haaser, chief clerk, Subcommittee on Patents, Trademarks, and Copyrights; Horace L. Flurry, representing Senator Hart; and Clyde DuPont, representing Senator Fong. Senator MCCLELLAN (presiding). The subcommittee will come to order. The subcommittee this morning is resuming the public hearing on four bills concerned with various aspects of Government patent policies. These bills are S. 789, introduced by Senator Saltonstall; S. 1047, introduced by Senator Williams of New Jersey; S. 1809, introduced by myself; and S. 1899, introduced by Senator Long of Louisiana. Since these hearings, commenced on June 1, the Senate has considered on the floor amendments relating to the patent policies of the National Aeronautics and Space Administration and the Department of Health, Education, and Welfare. Although both of these amendments were tabled, the debates clearly indicate that many Members favor legislation to establish the uniform Government patent policy. As indicated during those debates I shall do everything possible to expedite the subcommittee's examination of this issue and facilitate the reporting of a bill during the current session of Congress. The subcommittee is fortunate to have as its first witness today Congressman Daddario from Connecticut. We are very happy to welcome you here. Through his services as chairman of the Subcommittee on Patents and Scientific Inventions of the House Committee on Science and Aeronautics he has acquired a deep understanding of the matters being considered by this subcommittee. We welcome you, Congressman Daddario, and we will be very glad to have you give us the benefit of your knowledge and experience in this field. STATEMENT OF HON. EMILIO Q. DADDARIO, A REPRESENTATIVE IN CONGRESS FROM THE FIRST CONGRESSIONAL DISTRICT OF THE STATE OF CONNECTICUT Mr. DADDARIO. Mr. Chairman and members of the committee, I am grateful for the opportunity to appear and present my views on this most important subject. As you, Senator McClellan, have recently been pointing out on the floor of the Senate, anything associated with patents is likely to be a highly complex matter, and a Government-wide patent policy is assuredly so. I wish to compliment this committee for its wisdom in treating the matter accordingly-and not in the simple black-andwhite fashion which some people at both ends of this issue tend to advise. It is not my intent here, today, to recite the history of the Government research patent problem, nor to discuss facts and figures, nor to present you with isolated cases in point designed to prove an argument. You have already been exposed to such discussion, and adequately, I am sure. But I would like to summarize my philosophy on the Governmentowned patent question-a philosophy which I believe is shared by many of our colleagues. It is also a philosophy which has emerged from a good deal of interest and time spent in study and hearings. As you may know, I have chaired a special subcommittee which was charged with the duty of reviewing the Government patent relationship in connection with our national space program. We spent better than 4 years on the subject between 1959 and 1964; we issued three major reports, reported out two bills amending the National Aeronautics and Space Act patent section and passed one of them through the House. So, while I am not a patent lawyer and make no pretense of being an expert in regard to the patent system itself, I am familiar with the issues surrounding Government patent policy. Mr. Chairman, I have three main basic convictions which I should like to submit to you and your committee on this matter. First-it is very clear to me that where federally financed research and development is concerned both the Government and contractor have logical and justifiable equities in the ownership of such patents as may arise in the course of the contract. It is idle to pretend that the Government, at least in its role of representing the public, has no reason for nor interest in the title to such patents. Without the use of the taxpayers' funds the patent might not evolve in the first place and the fact that the United States always has a free and irrevocable license to use the patent item or to have it produced by any party it chooses for governmental purposes is not always sufficient to protect the public interest. By the same token, it is equally unrealistic to assert that the contractor, who may have contributed as much or more than the Government in terms of knowhow and the expenditure of its own money toward the development of the patent, has no claim to ownership nor the exclusive right to utilize the patent for commercial purposes. To take the latter position may be unfair to the large contractor and, in addition, downright disastrous to the small contractor, to whom a patent portfolio is an important asset, both because of the financial support it offers and the protection it gives. This is because, in most cases, doing research for the Federal Government does not of itself assure the contractor of anything like a substantial profit. Our studies showed that in research contracts the profits tend to be 12 up to 212 percent. The profit tends to lie with the procurement and/or commercial marketing. Second-the head of the department or agency which is contracting for research should be given the responsibility for protecting the Government and the public interest in regard to the disposition of patents arising from such research. He should do this, I believe, with the help of guidelines established by the Congressor, at a minimum, with the aid of policy memorandums promulgated by the President, such as President Kennedy's order of October 1963. But he should make the decisions and he should be responsible. I cannot find myself in agreement with those who contend that our Federal administrators are not to be trusted to dispose of patent rights in a proper and judicious way-that they yield to the blandishments of big business or are easily persuaded to "give away" the public's rights, or to take title in all instances without regard to the equities. I have more faith in the ability of our Presidents to find men of ability and integrity to operate the executive branch; and I have faith in the men and women who are now doing so. To my mind this is a peculiarly inept argument for requiring a rigid patent policy by statute. Third-It is most important that the executive administrator be provided with sufficient flexibility in whatever patent policy is adopted to permit him to make the most effective and equitable disposition of patent rights. Only the agency head and his staff are cognizant of all the details; only they have sufficient facts and information; only they are in a position to see the whole picture on any given contract-each of which is different from the others. To tie their hands through unyielding statutory requirements is not only unfair; it is more than likely to result in less effective research at higher cost to the Government. As I have indicated, our administrators need and should have the benefit of policy guidelines by which to make their determinations. On the basis of the information and data which I have thus far been able to acquire, the guidelines set out in S. 1809 would appear both reasonable and effective. I am not suggesting that the bill needs no further attention. Undoubtedly it will require some changes, and, if passed, periodic review after it has become possible to apply the benefits of experience to it. But the bill does possess the spirit of moderation and equity which I find compatible with the realities of our national need. It is my belief that if S. 1809 is adopted, with perhaps some modification, we will have an overriding patent policy which gives due consideration to the rights of Government, to the protection of the public, and to the general interests of our private enterprise system. In situations where it is important and proper for the Government to acquire title to patents arising from federally sponsored research, I believe that our executive agencies-under S. 1809-would do so. In other cases where all the circumstances indicated the propriety of title in the contractor, this, too, could and should be the result. And, finally, in the many "in between" cases, it would be possible to work out an equitable arrangement of exclusive licensing or whatever degree thereof appeared appropriate. I should like to emphasize that the executive agencies which must deal with the patent problem on a day-to-day basis, without exception, have learned the importance of the kind of flexibility which S. 1809 would provide. Even those agencies which have been required or most prone to exert title in the Government, such as the Atomic Energy Commission, the National Aeronautics and Space Administration, and the Department of Health, Education, and Welfare, have found it necessary to alter their practice according to the individual circumstances. You have heard much about the desirability of the practices of the AEC policy from those who favor a rigid Government-ownership position. Yet, if you look at the 1964 annual report of the AEC for the Joint Committee, you will find considerable variation in patent treatment. AEC now holds about 3,000 patents. On these it has granted nonexclusive licenses to over 1,000 private firms; 561 have been retained by contractors; 330 exclusive licenses have been granted in "outfield" cases; and title to 400 patents has gone to contractors, subject only to a Government license. Certainly this, it would appear to me, is persuasive evidence of the need for flexibility in whatever system is adopted. I should like now to turn to several somewhat more specialized aspects of the patent policy problem. One of these is the international phase, which has not been widely discussed. We have heard much about "giveaways." But a most vulnerable "giveaway" condition occurs in regard to foreign rights when our Government takes title to inventions. Let me explain. According to U.S. patent law, an application for patent must be applied for by the inventor himself. The Philippine Republic is the only other country in which this is required. In countries such as England, France, or Germany, or many of the Latin American countries, a patent may be obtained by a person who brings the invention into that country even though he imported it from another country such as the United States. Thus, when inventions are freely available to the public in the United States, we are powerless to stop people in other countries from obtaining patents in other countries of the world on the basis of inventions made in the United States by American inventors. When this happens our own Government cannot use the inventions on which the patents are obtained, and even the American contractors or inventors who were responsible for making the inventions cannot practice them in those countries without infringement or obtaining a license. And this at a time when our balance-of-payments situation is critical and of immense economic importance. Another aspect of the problem concerns the so-called advance waiver. You may and probably have been told that there is no excuse for waiving title on an invention not yet in being. In the main, I tend to agree with this position. And yet there are situations where it is most beneficial to the Government to be able to waive in advance. I refer to cases where a Federal agency, having discovered that some potential contractor has already done considerable private research in an area vital to the interests of the Government, approaches that con |