Our efforts since 1942 have been primarily in the field of propulsion, particularly chemical rocket propulsion. Since that time we have extended our interests into various electronic and optical aspects of space systems, complete military missile or space systems, and the attendant types of activities associated with these.

Mr. YEAGER. Has the source of your support been primarily Government contracts since the time Aerojet began?

Mr. REICHARD. Yes.

Mr. YEAGER. Is it 100 percent that today?

Mr. REICHARD. Virtually 100 percent. It is greater than 98 percent. Mr. YEAGER. But you are going into fields other than propulsion now, branching out?

Mr. REICHARD. Yes.

Mr. YEAGER. Does this mean that you are putting a substantial part of your own earnings into research and development?

Mr. REICHARD. I would say that we are putting some money into our own research and development. However, I think it would only be correct to say that the majority of our earnings are being put back into specialized facilities in order to keep up with the state of the art. I believe that Mr. Brown has a number here that represents our own investment in research and development. And in the last 3 years we have put approximately $2,700,000 into research and development, of our own funds.

Mr. YEAGER. Is most of that devoted to propulsion?

Mr. REICHARD. Not necessarily. Our interests are broader than that. However, I think it is fair to say that most of that is related to chemical propulsion efforts.

I would like to compare that figure of $2,700,000 with approximately $79 million during the same 3-year period for facilities.

Excuse me, that isn't right. From the start of the company, I would like to correct that, $79 million for acquisition of property and specialized facilities and equipment since the beginning of the company. Mr. YEAGER. But the R. & D. figure, the 2 million figure, was that for

Mr. REICHARD. Past 3 years.

Mr. YEAGER. Just the last 3 years?

Mr. REICHARD. That is right.

Mr. YEAGER. Do you know approximately what the profit rate is on R. & D. contracts-in terms of percentage?

Mr. REICHARD. I believe that most of our CPFF contract activities involve an average of from 6 to 7 percent fixed fee, that 6 or 7 percent relating to the estimated costs of the program under consideration.

Our experience has shown that after taxes our earning rate averages about 212 percent of our total sales.

Mr. YEAGER. I think you have brought with you and passed around here something about Aerojet's patent award plan. Would you summarize that?

Mr. REICHARD. I would like to refer that question to Mr. Brown, if you please, sir. He is quite familiar with it.

Mr. BROWN. The plan was conceived to give some personal incentive to the various members of our technical staff.

Mr. DADDARIO. Before you proceed, would you state your full name?

Mr. BROWN. Yes. Robert C. Brown.

The plan is designed primarily to give individuals, throughout the company in all working capacities, incentive to make inventions and improvements. I might mention that there is a parallel to our patent award plan in our suggestion award plan, which has proved quite successful in terms of cost reduction. The patent award plan is set up on the basis that when a disclosure is received in the patent department, and approved for filing, and the application filed, the inventor receives $25. When the application matures into a patent, the inventor will receive an additional $75. In addition to this, there is a formula for participation in any royalties that the company might receive by way of licensing from other companies. We haven't had too much experience with this; in fact, I think our first awards under royalty participation will be paid within probably the next month or two. The formula is, as I recall, 30 percent of the first $10,000 in royalties received by the company, 20 percent

Mr. YEAGER. I don't understand; what happens to that 30 percent? Mr. BROWN. This is paid directly to the inventors under whose patent someone else is licensed.

It is a declining scale. We think a quite favorable one. I might add we surveyed a number of companies throughout our industry and others, and find this is certainly above the median.

Mr. YEAGER. And for the next $50,000 or $100,000 the percentage is correspondingly lower?

Mr. BROWN. Yes.

Mr. DADDARIO. It goes down to 5 percent up to $100,000.

Mr. BROWN. I think that is correct, as I recall it is 30, 20, 10 and in $10,000 gradients, and-well, I could look, that would be easier.

Mr. BELL. Do you have any participation in corporate net profits on this basis, any kind of a basis?

Mr. BROWN. We have an additional compensation program, the exact details of which are a mystery to most everyone, including myself. I can say that inventive productivity is certainly a factor taken into account for additional compensation, for more responsible positions, and for periodic reviews of salaries.

I have the formula now. The formula is of the first $10,000 received by the company, 30 percent is paid the inventor or inventors, as the case may be; of the second $10,000, 20 percent; from $20,000 to $100,000, 10 percent; and in excess of $100,000, 5 percent.

Mr. YEAGER. But you do have a provision that your employees assign titles to these patents over to the company?

Mr. BROWN. Yes. All employees are covered-are required to execute a patent assignment agreement which provides that the employee assign to the company any inventions made by him during the period of his employment which relate to the art and business of the company. I would like to add that we have an extremely liberal policy of releasing inventions back to the employee when the company itself has no desire to promote them.

Mr. YEAGER. Has this been operating long enough so that you have any data or figures to show what the effect may be, as to how many applications may have been filed under this plan, as to what company patents may have been granted, what awards may have been received? Mr. BROWN. Under the patent award plan? I don't think it has

been in effect really long enough to be significant. The plan was adopted January 1 of 1958. We had a previous program and had been receiving disclosures for a good many years. It is very difficult to tell whether the increase in disclosures submitted was the result of the natural growth of the company or added stimulus from the new plan. I can say that in talking with individuals I found that they were favorably impressed by our patent award plan and many strived to come within its purview.

Mr. YEAGER. How did your previous plan differ from this one?

Mr. BROWN. Under the earlier plan we simply paid $25 when an appliaction was filed in the Patent Office. There were no other benefits paid.

Mr. YEAGER. So it was a considerable change?

Mr. BROWN. Yes.

Mr. YEAGER. Mr. Reichard, one question further. You indicated that you felt a uniform patent policy of the Department of Defense type that would be a good thing to put into law. Can you conceive of no instance in which the Government ownership of inventions arising out of research and development contracts for the Space Agency might properly become the property of the Government?

Mr. REICHARD. Speaking strictly from our own experience as a company in this business, we have not encountered what we felt was an exception to our general expression here. We believe that the Department of Defense patent provisions rather fairly cover the ground. And the type of activities that we have going on appear to be suitably covered by those provisions.

Mr. YEAGER. There is a new provision in the Department of Defense which requires the contracting officer at least to consider the possibility of taking title in certain instances. Do you have an particular feeling about the institution of that as a regulation?

Mr. REICHARD. We are aware of it, and I know that we are studying it. I don't think we have any particular expression to make as yet. Our own specific activity in the field of communications is quite minor. And I don't believe we have a consolidated expression to give you on it.

Mr. YEAGER. How would you feel about a royalty-sharing provision of some kind which didn't require title-something like the FAA makes use of, whereby the Government shares in the royalties up to the point where it recovers some of its research costs?

Mr. REICHARD. We sort of think that maybe if we could get the Government to share in the risk, this might merit consideration.

Mr. YEAGER. Aren't they sharing in the risk to some extent when they give you the research contract?

Mr. REICHARD. Well, here, I know that the objective of the Government agencies appears to be one of saying that they do share in the risk by virtue of their agreeing technically to pay the costs of the research. However, many of the costs which a private business incurs are not allowed as costs of doing that business. And also private industry does, certainly in our own experience, our own case, make a considerable investment in highly specialized facilities which are virtually only applicable to the type of research and development we are doing for those costs. This also represents a type of risk of private capital which has no-there is no real assurance of getting that back. In other words, there is no real assurance of continuing to be able to do that kind of work in those facilities.

So from that standpoint, we do feel that it isn't all a one-way street in favor of the contractor under a cost-reimbursable R. & D. contract. Mr. YEAGER. Thank you, Mr. Reichard. That is all I have.

Mr. DADDARIO. Judge Chenoweth ?

Mr. CHENOWETH. Mr. Reichard, you feel there should be a uniform patent policy, do you; you feel a need for that?

Mr. REICHARD. Yes, sir. We feel from our own experience in our company, that the needs of the various Government agencies procuring the types of services and products that we make are sufficiently similar to recommend that they operate under a similar policy.

Mr. CHENOWETH. How many different patent policies do you come in contact with now as far as the Government is concerned?

Mr. REICHARD. Mr. Brown can speak to that. I can name three very quickly.

Mr. BROWN. There is, of course, the Department of Defense patent policy which is fairly uniform throughout the Department of Defense. Mr. CHENOWETH. Talk a little louder.

Mr. BROWN. There is, of course, the Department of Defense policy which we are quite accustomed to dealing with; the Atomic Energy Commission, the National Aeronautics and Space Administration, Post Office Department, and now, I believe, the National Science Foundation is coming into play. But perhaps the best example of the kind of problem that can arise is in our so-called NERVA contract which deals with both the Atomic Energy Commission and the National Aeronautics and Space Administration. To my knowledge, no one has let determined just where you draw the lines between one patent policy and the other.

Mr. CHENOWETH. Of course, I understand your attitude, Mr. Reichard, you feel the Department of Defense policy, then, would be adequate to protect the Government, and also provide the incentive to the industry to participate in R. & D. programs?

Mr. REICHARD. That is correct.

Mr. CHENOWETH. I hold in my hands the copy of the hearings held by a subcommittee of this same committee, these hearings were held in 1959, where we went into this subject exhaustively.

We had the patent attorneys here from every part of the United States, and they unanimously agreed with your position. Now, has there been any substantial change in the situation in the patent field since 1959 when these hearings were held, anything that would warrant a different attitude on the part of industry as far as patent policies are concerned?

Mr. REICHARD. I am not aware of any.

Mr. CHENOWETH. Do you know of any instance, Mr. Reichard, where it would benefit the Government to take title to a patent? Can you give me an instance?

Mr. REICHARD. I am unable to think of one, myself, from the experience in our company.

Mr. CHENOWETH. We had the leading patent lawyers of the country here, and they could not think of an instance, so you are not alone in that position, I might state. Mr. Reichard, I agree with you, we should have some uniform patent policy, but I must confess that I am afraid that the prospects of obtaining it are very remote.

I haven't been able to see whether the Federal Government will benefit in the slightest by continuing this policy of obtaining title to the patent, and I think it is retarding our space program. Do you feel that way?

Mr. REICHARD. I think

Mr. CHENOWETH. Do you feel those who are engaged in research work of that kind are throwing everything they have into this and putting their best men on these jobs when they know there is some question as to what the ownership of the patent is going to be?

Mr. REICHARD. That appears to me to be speculative. Even so, we have considered it, we have talked with some of the smaller companies, and so forth, and it seems to me it might retard their interest and their endeavors, their efforts. Many small businesses depend for their growth and stability on a patent position, and I might add that in our own procurements under prime Government contracts, most of which of ours are Department of Defense, that we do extend the same patent provisions to our subcontractors. So that they might be able to retain their rights in inventions under the standard Department of Defense clauses.

Mr. CHENOWETH. Most of your dealings have been with the Department of Defense, then?

Mr. REICHARD. That is correct.

Mr. CHENOWETH. And how many patents would you say that you have obtained during this period that you have been in the research program?

Just roughly; you don't need to give me the exact number.

Mr. BROWN. As of November 20, 1961, I think this is a fairly accurate count, we had some 254 conventional patents and 13 design patents. I am sure that all of these did not result from Governmentsponsored work. I would estimate that about 80 percent, or probably 200, derive from Government work, a sizable bloc of them being in a very specialized area of chemistry, which was quite new. Mr. CHENOWETH. You have some contracts with NASA? Mr. BROWN. Yes, sir.

Mr. REICHARD. Yes, sir.

Mr. CHENOWETH. What has your experience been with patents in your dealings with that agency?

Mr. BROWN. We have had very few disclosures under our NASA contracts. There is probably one good explanation for it. The field in which we have worked for NASA is one which is not overly productive of invention. These are, generally speaking, liquid-type rockets, and this is, after all

Mr. REICHARD. And some solids which were already designed. Mr. BROWN. Solids which were already designed. And the liquid R. & D.

Mr. CHENOWETH. You have filed no patents under your NASA contracts yet?

Mr. BROWN. No, sir; we have submitted some disclosures, but no patents were filed.

Mr. CHENOWETH. No patents obtained under your NASA contracts?

Mr. BROWN. None at all.