(b) Each agency head may grant an appropriate exelusive or non-exclusive license for the practice of any invention for which he holds a patent acquired under this Act on behalf of the United States. Any such license shall be granted under such terms and conditions as the agency head shall determine to be in the public interest. Any such license may be granted for the effective period of the patent or for a more limited period of time, and may be granted with or without the payment of royalty to the United States.

REPORTS TO THE CONGRESS

SEC. 9. The head of each agency which awards any contracts of the class described in section 3(a) shall submit semiannual reports to the Congress containing

(a) the number of contracts executed for each of the subsections (a), (b), and (c) of section 4, and the number of inventions disclosed pursuant to such contracts;

(b) the number and general nature of such inventions with respect to which the agency acquired no greater rights than a royalty-free license in accordance with section 4, and a summary of the findings of fact upon which such determinations were made; and

(c) the number and general nature of such inventions with respect to which the agency has acquired greater rights than a royalty-free license in accordance with section 4 and a summary of the findings of fact upon which a determination of the applicability of section 4 was based.

SEVERABILITY CLAUSE

SEC. 10. If any provision of this Act, or the application of such provision to any person or circumstance, is held invalid, the remainder of this Act or the application of such provisions to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

TECHNICAL AMENDMENTS

SEC. 11. (a) Section 10 (a) of the Act of June 29, 1935, as added by section 101 of the Act of August 14, 1946 (60 Stat. 1085, as amended; 7 U.S.C. 4271(a)) is amended by striking out the following language: “Any contracts made pursuant to this authority shall contain requirements making the results of research and investigations available to the public through dedication, assignment to the Government, or such other means as the Secretary shall determine."

(b) The National Science Foundation Act of 1950 is amended by striking out section 12 thereof (42 U.S.C. 1871).

(c) The Atomic Energy Act of 1954 is amended by striking out section 152 thereof (42 U.S.C. 2182).

(d) The National Aeronautics and Space Act of 1958 is amended by— (1) striking out section 305 thereof (42 U.S.C. 2457) ; and

(2) by striking out in section 306 "the Inventions and Contributions Board, established under section 305 of this Act," and inserting in lieu thereof "an Inventions and Contributions Board which shall be established by the Administrator within the Administration."

(e) The Coal Research and Development Act of 1960 (74 Stat. 336) is amended by striking out section 6.

(f) The Helium Act Amendments of 1960 (74 Stat. 918) is amended by striking out the following language in section 4: "Provided, however, That all research contracted for, sponsored, cosponsored, or authorized under authority of this Act shall be provided for in such a manner that all information, uses, products, processes, patents, and other developments resulting from such research developed by Government expenditure will (with such exceptions and limitation, if any, as the Secretary may find to be necessary in the interest of national defense) be available to the general public: And provided further, That nothing contained herein shall be construed as to deprive the owner of any background patent relating thereto to such rights as he may have thereunder."

(g) The Saline Water Conversion Act of 1961 (75 Stat. 628) is amended by striking out section 4 (b).

(h) The Arms Control and Disarmament Act of 1961 (75 Stat. 631) is amended by striking out section 32.

(i) The Water Resources Research Act of 1964 (78 Stat. 329) is amended by striking out section 303.

(j) The Appalachian Regional Development Act of 1965 (79 Stat. 20) is amended by striking out section 302(d).

EFFECTIVE DATE

SEC. 12. This Act shall take effect on the first day of the fourth month beginning after the date of enactment of this Act.

GENTEX CORP.,

Carbondale, Pa., July 23, 1965.

CHAIRMAN, SENATE SUBCOMMITTEE ON PATENTS, TRADEMARKS, AND COPYRIGHTS, Washington, D.C.

DEAR SIR: In reporting prior proceedings of the Patents Subcommittee of the Senate Judiciary Committee remarks were attributed to you which indicated a greater concern on your part for the ethical implications in patent infringement than for possible material losses.

I am in complete accord with your viewpoint, and in a long history of contention with various Government groups, this has been our precise position. The appropriation of data either before or after a patent is issued, when submitted in confidence or when confidence is clearly implied, constitutes, in my belief, an appropriation of intellectual property.

The fact that a material loss may be involved is incidental to the larger issue which you have cited. The practice is not isolated, is not unimportant. We believe that it is a violation of proper business practice.

As president of Gentex Corp., I desire in this context to present to you a brief résumé of some of this corporation's experience with the Department of Defense, particularly in relation to the appropriation of intellectual property.

We make this presentation as responsible citizens and in the belief that the best interests of the country will be served by frank discussion. We believe that there should be sincere evaluation of the impact the appropriation of intellectual property has on technological progress and on the patent system.

During the past quarter of a century the Gentex Corp. has been principally involved in developing products of military interest. All of our developments have been privately funded. No Government moneys have been used.

The Gentex Corp. has over 200 issued and pending patents. Most of these developments have been put to military usage. We have devised and developed the designs, presented the concept or product, and secured very few contracts for our efforts in these developments. This has been particularly so since World War II.

While we present the experience of a single company, it is reasonable that the same experiences could be recited by other companies. Still others may have had their intellectual property appropriated and then, being discouraged, discontinued submitting ideas.

There is no substitute for private and encouraged effort to achieve a high rate of technological progress. Technological progress is most economically obtained by the encouragement of private initiative. This is the foundation of our democratic system and upon which system this country grew strong and great.

The Gentex Corp.'s background is that of a company which has over the years been oriented to meeting military requirements. Corporate policy is that of using its own funds to finance the risks of development with the logical expectation that subsequent production would permit recovery, with profit, for the risked capital.

During World War II, we had the privilege of developing and producing, or only developing, solely with our own funds, the complete parachute assembly on the following assignments: The dropping of mines; the resupply of pigeons; the sonobuoy for locating submarines; drop sonde for securing weather data over inaccessible areas; essential cargo work for the Office of Strategic Services; the atomic bomb as dropped over Nagasaki and Hiroshima.

These were among our assignments. According to the best information available, there was not one single reported failure in a military operation. In accord with our own records, approximately 98 percent of our required raw materials were in the noncritical class.

During the post-World War II period we were the first to develop very high altitude parachutes for meteorological rockets, and proved their feasibility. We have had extensive experience in designing critical helmets for military aviators, as well as shrapnel-resistant helmets as used by tank crewmen. Our work includes the sturdy cross-slot webbing now used for cargo nets, safety equipment such as a carrier for live detonators, advanced heat-reflective clothing material, and other survival equipment.

It is discouraging to have created and developed intellectual property and to then have it appropriated.

We have presented our cases to administrative authorities. It is very unfortunate that the rationale of justification is more important than the determination of right.

We were encouraged, for example, on a crash basis, to develop a survival kit container for the Department of the Navy.

This item fitted into the framework of company policy in that it was for military usage. It was in an area of our technical competence and experience, and we could reasonably hope to produce the item on our present facilities. The Department of Defense was apparently to be the sole customer.

The requirement was urgent and deliveries were stated to be needed within 45 days after the award of a contract. It was agreed that Gentex would act only as a subcontractor, and would not submit a direct proposal as a prime contractor. The Gentex part number or equal was in the specification submitted with the invitation.

The prime contractor proceeded to reverse engineer the item after the award of the contract. The Navy then did three things:

1. The prime contractor was permitted to submit several prototypes, each of which reverse engineered our design. This was in violation of the Armed Services Procurement Regulations covering articles of brand name or equal. The material used was approximately one-fourth as costly as that which we found necessary to use to achieve proper function. The Navy's own specification drawn at a later date confirmed our determination for the use of the same expensive material.

2. The 45-day delivery requirement was extended more than 6 months to accommodate the prime contractor's desire to attempt to reverse engineer.

3. The contract was amended approximately 3 months after its award, without a reduction in price, to include a patent indemnity clause which would protect the Navy against a Gentex patent, should one thereafter be issued. (The clause employed was unusual in that it dealt not with patent indemnity generally, but singled out the Gentex Corp. specifically.)

The rationalization by administrative authorities for this action was that: (1) There was then no valid issued patent.

(2) Gentex had sold a single container to the Department of Defense, which was not in fact so; that the Department therefore had the right to reverse engineer or to permit it to be reverse engineered.

(3) The prime contractor believed that he could make the article at less cost than we had quoted, and he was therefore entitled to reverse engineer it, even though performance under the contract was greatly delayed.

(4) Absence of consideration to the Government, despite the extended delivery and the known substitution of inexpensive material, was not considered relevant. (5) Both the Navy and Gentex had been too informal in detailing of rights to intellectual property which might arise, and without any apparent regard to the extreme urgency and short term for performance of the program.

The correspondence is voluminous. (See exhibit 1.)1

Gentex developed an improved sound attenuating earcup for helmets which would permit the earcup to be oriented to the axis of the ear of the wearer.

The article was first submitted in small experimental quantities as a proprietary item to the Radio Corp. of America. The Radio Corp. of America submitted a drawing to the Air Force clearly marked that it was propietary to Gentex Corp. (General Textile Mills, Inc.)

The Department of the Air Force appropriated the design, transferred it to their own drawings, and asserted that they had a right to it in view of a contract they had with Radio Corp. of America. We protested this action several times verbally at a high administrative level.

1 Contained in committee files.

We also included the earcup in two complete helmets submitted in confidence solely for evaluation to the Department of the Air Force. The special features of which helmets were clearly outlined in writing.

The Air Force subsequently asserted they had procured the design from Protection, Inc. This was, however, 2 years later than our experimental submission to Radio Corp. of America. The Air Force subsequently also asserted that they had secured the design from the Roanwell Corp. The matter is now before the Comptroller General. A copy of the protest to the Comptroller General is attached. (Exhibit 2)1

In the fields of protective helmets, parachutes, cargo nets, heat reflective material, carriers of live detonators, the story seems to be the same creation, submission, acceptance, appropriation.

During the past year, the Department of Defense has issued a series of Defense procurement circulars which attempt to clarify the rights of inventors to intellectual property. There appears to be much confusion and lack of appreciation of these policies at the working level, perhaps in part because of the failure of these circulars to reach the root of the problem.

We have been told that we should not disclose an idea to anyone in the Department of Defense without a contract covering that disclosure. That the disclosure should not even be made to the contracting officer until after such a contract has been signed. This is obviously a condition which is impossible to fulfill.

In the light of this interdiction, however, the Office of General Counsel, Department of Defense, negotiated an agreement with us on behalf of the Department of the Navy, Bureau of Supplies and Accounts. The Bureau would not execute the agreement to effect a contract, despite pressure stated to have been exerted by the Office of General Counsel.

The agreement was to cover the test and evaluation of a superior heat reflective fabric which we had developed. The failure of the Bureau of Supplies and Accounts to enter into the agreement in accordance with the stipulations established by the Department of Defense precluded consideration of the item. The failure did underscore the impracticality of attempting to comply with the procedure regarded as essential to the protection of intellectual property.

We subsequently submitted the same heat reflective fabric to the Department of the Air Force, which they then permitted to be reverse engineered. The garment manufacturer who was the prime contractor under the Defense Clothing and Textile Supply Center, used our pricing, for ours was the only product available to the stated specification at the time of the original and even subsequent openings of the proposal under the invitation.

This reverse engineering, as with the survival kit, produced a product which was inferior. In order to make deliveries under the contract acceptable, the essential performance requirements for resistance to abrasion were lowered by 60 percent on the reverse engineered product. This reduction in quality level was without any apparent material consideration to the Government.

The preceding presentation details our experience in three specific instances. Department of Defense policy with respect to patents and rights in data is, however, reflected in letters dated October 10, 1963, and October 23, 1963, attached hereto as exhibit 3.1 These letters, between Gentex and the Honorable R. Tenney Johnson, then Deputy General Counsel of the Army, crystallize the issues involved. The corespondence is a discussion of a Department of Defense policy statement on matters of patent and intellectual property.

Briefly, there are three basic issues:

(1) That any appropriation of property rights by the Department of Defense is a violation of ethics and of rights guaranteed under the Constitution;

(2) That the purchase of a product resulting from a privately funded development by the Department of Defense does not of itself confer the right to the intellectual property which made such production possible;

(3) That quotations from nonpatent holders were frequently lower than those reecived from patent holders, even when the Department of Defense made allowance for reasonable royalties. It is pointed out that the royalty allowance is arbitrary, as selected by the Department of Defense without an analytical determination of its adequacy. Consideration is not given to the factors of risk, expense of development, or other pertinent elements of cost.

1 Contained in committee files.

The letters also discuss suggested procedural and policy changes.

The National Security Industrial Association recently held a series of nationwide briefing conferences, one of which was in New York on March 16 and 17, 1965. Every speaker for the Department of Defense stressed interest in receiving suggestions for development programs, with the concurrent statement that if the submitted program was of interest it would be funded by the Government. No interest was expressed for the submission of privately funded developments.

It appears self-evident that ideas which were only in the embryonic form would be submitted to the Department. Ideas would not be submitted for Government funding which had already been reduced to practice at the expense of the developer, and where the rights to related intellectual property would be entangled. Economy in development work is obtained by many inventors, each working in his own field, creating progress in a sound, effective, economical, and democratic way. The inventors should be encouraged to present their ideas and products to any or many interested groups with confidence that their right to their intellectual property would be respected.

There is no present court or parajudicial court to review disputes arising out of violation of rights to intellectual property. An administrative settlement is slow and largely ineffective. Our own experiences have been poor and long delayed. The Office of the Comptroller General has little authority if any. The Armed Services Board of Contract Appeals has no authority, for invariably there is no contract existing covering the matter in question. A suit in the Court of Claims is long, involved, expensive, disconcerting, and few can afford the time, the dislocation of their normal effort, and the expense, considering the risk which is involved.

I did suggest to Congressman Emanuel Celler the creation of a parajudicial board patterned after the Armed Services Board of Contract Appeals, to hear matters involving the violation of intellectual property and other matters with the Department of Defense.

The practice of appropriation denies much of the fruits of further independent research and product improvement to the Government. The independent inventor, having once had his property appropriated, is reluctant to make further submissions. Improvements to the basic invention by the inventor who, by basic experience in the project is best qualified to make improvements, are therefore denied the Government.

The reduction of a device or improvement to practice invariably suggests improvements to the inventor. Grounded as he is in the basic elements of the design, these improvements are likely to be much more significant than are those which suggest themselves to one merely interested in appropriating by reverse engineering.

Gentex has continued to make submissions of inventions and product improvements only on a very selective basis. These submissions are made only to agencies where there is an expectation that our rights to the device or improvement will be protected. This is the Gentex experience and practice, but there are undoubtedly many other companies who, faced with the same problem, have either handled it as we have or have followed the policy of complete withholding of information.

Drying up the sources of progress is not the way this country's interests are best served. The country has grown strong by encouraging and rewarding productive effort. The denial of encourgement and reward can only destroy the historic basis of this country's progress. This we believe should be a matter of great concern to responsible legislative and administrative authorities. Very respectfully submitted.

Hon. JOHN L. MCCLELLAN,

LEONARD P. FRIEDER, President.

GENERAL ELECTRIC CO., New York, N.Y., June 18, 1965.

Chairman, Subcommittee on Patents, Trademarks, and Copyrights, Senate Committee on the Judiciary, Washington, D.C.

DEAR SENATOR MCCLELLAN: I am writing you to express my personal views, and those of the General Electric Co., concerning pending legislative proposals respecting Government patent policy. I respectfully request that this letter be included in the record of the current hearings on these matters.

No company has a longer history of successful collaboration with its Government in respect to research and development for the national defense than does