against with respect to Government patent policy. The

full benefits of the incentives of the patent system should be made available to all contractors when they undertake

federally funded R & D contracts.

Finally, it is interesting to note that the

Japanese have indicated a concern that the President's policy and the Dole bill will curtail free access to our publicly funded discoveries. Under present policies, too often federal gencies retain patent ownership and then destroy the domestic value of the invention by offering licenses to all comers. Such policies, along with the reams of technical information routinely made available by our government, has been a valued resource to our foreign competitors. The President's policy and its extension

by Senator Dole's bill will not only encourage the domestic development and commercialization of federally funded technology, but will create a need for foreign competitors to negotiate the use of the technology with its owner. Mr. Chairman, I sincerely appreciate this oppor

tunity to present these comments.

Thank you for offering to receive further written comments for the
hearing record on S. 2171. While your staff was given a copy of
our more detailed comments, I enclose another to be sure that it is
included.

Your letter raises five questions to which I should like to reply one by one. I have done this in the enclosure marked Questions and Answers.

Thank you for your continued interest in this subject.

Sincerely yours,

Mert i Ndan

Robert M. Adams

Senior Vice President

Technology Services

QUESTIONS AND ANSWERS

1. Is there any national interest served when a highly innovative company like 3M is discouraged from bidding on a Government contract for fear of losing patent rights? Would innovative companies in general be afraid to use their best technologies on Government work if they are afraid of losing resulting patents? Why? Answer:

It is not in the national interest to discourage highly qualified companies with large research and development staffs from bidding on appropriate Government contracts. In the case of companies with records of innovation, such as 3M, the principal motivation in a Government contract is the opportunity to learn something new and to adapt that knowledge to the marketplaces they serve. It is in the Government's best interest to afford the protection of the patent system to its contractors during the heavy investment period of commercial introduction.

2. American industry has been very interested in working with universities since the passage of P.L. 96-517. What do you think would be the result if the current licensing restrictions limiting university patent licenses to 5 years to large companies was removed? Would you be encouraged to collaborate with state innovation centers and the labs? Would the public benefit from this interaction?

Answer:

This question makes an assumption that increased industrial interest in working with universities is due to P.L. 96-517. While this may be true in part, I think the closer relationship between industries and universities is more due to the rapid progress of technology and a desire by industry to be closer to the leading edge. Nevertheless, if current licensing restrictions were removed, it would encourage more such interaction.

3. In general, how attractive are Government owned inventions to the private sector? If U.S. companies are reluctant to use Government funded inventions, does that benefit our foreign competition?

Answer:

Government-owned inventions are generally of little appeal to private industry except in aerospace and defence areas. The reason is that licenses are almost always non-exclusive and provide very little

protection during the period of heavy investment in product development, initial manufacturing, and marketing. Since this is the situation, there is little protection against competition, including foreign competition.

4. Have you heard of an invention being discovered in the U.S. and developed overseas by a foreign firm because of lack of patent protection here? How does this impact on the average working American?

Answer:

I have no specific example to cite, but the number of visiting Europeans and Japanese to National Laboratories suggests that they find a lot of useful information from these sources. To the extent that such information is included in the design of commercial products, the United States loses jobs and favorable balance of trade.

5. Could you please respond to the argument that enactment of S. 2171 will create incentives for contractors to withhold information from the Government?

Answer:

On behalf of my company and myself, I express our feeling of insult
at the implication that contractors would withhold information from
the Government on patentable inventions as a result of S. 2171.
Perhaps the people raising this objection know of or participate in
a different ethical climate than most of the companies with which
I am familiar. In addition, the Federal Government is always well
represented by contracting officers and by technical specialists
who are thoroughly familiar with the work being done. This sounds
like an argument aimed at avoiding responsibility.

Perhaps your Committee should recognize that there are differences even among large companies. More importantly, the Committee should recognize that there is a great deal of difference between those companies who depend upon aerospace and defense contracts and those whose interests are much narrower and much smaller.

Thank you for your letter of April 20, asking for my response to the following question submitted by a member of the Subcommittee directed to my testimony on March 27, 1984:

You express concern in your testimony that the
large companies with the most developed facilities
and expertise, may be rejecting Government R&D
work because they do not retain patent rights
in inventions developed under Government contracts.
Currently about 95% of all Government R&D contracts
are granted through NASA, DOE, and DOD. All these
agencies are authorized by law to grant waivers
that give exclusive title to contractors who develop
inventions under Government contracts. Further,
all of them operate under the presidential statement
on patent policy of February 1983, which encourages
them to grant exclusive title to contractors.
According to agency estimates DOE grants advance
waivers to approximately 80% of large businesses
who request them, NASA grants approximately 95%,
and DOD has a policy to prefer waiver over retainment
of title. Given this current situation and the
presidential statement, why do we need S. 2171?

Below is my reply.

Although a contractor might (or even probably will, as the percentages in the question indicate) get the same result by successfully going through the waiver procedure as he would if S. 2171 were enacted namely, the retention of

title in inventions he makes in the course of a federally-funded R&D contract it will be at considerable cost in time and effort. The waiver procedure is a sparkling example of the "bureaucratic maze" and "chaotic and inefficient agency procurement policy" that Senator Dole highlighted in introducing S. 2171, a bill drafted to provide a unified and simplified Federal patent procurement policy.

The problems highlighted by Senator Dole are well-known and of long-standing. The recently promulgated Federal Acquisition Regulation (FAR) represents an attempt in the procurement area to eliminate confusion caused by differing policies among the Federal agencies. Senate bill S. 2171 is an important and forward-looking piece of legislation which, when enacted into law, will go far to eliminate time-consuming and unnecessary confusion from entering into Government R&D contracts. It will also, in my opinion, attract a broader spectrum of contractors from the private sector than that which has sought such contracts in the past.

The waiver procedure of the DOE, with which 3M has had some particular and recent experience, is a case in point. Even if the contractor knows how this red taped, unnecessarily complicated waiver procedure works, the very effort and 80/20 uncertainty of success act as disincentives to contract. If time is of the essense, as it often is in these contract matters, the waiver procedure is especially bothersome in that you either wait until the red tape runs its course or you enter the contract with it being contingent upon the waiver being granted (not a comfortable matter for the contractor or procuring agency).

While the Federal agencies cited in the question may, under
their present waiver regulations or policies, give title
to such inventions to large business contractors under some
circumstances, those agencies may read into the omission
of large firms from the present law an intent by Congress

to preclude large firms from obtaining title to such inventions under any circumstances, or find other similar ways to selectively deny waivers.

We most definitely do need S. 2171. The present bureaucratic red tape of waiver policies and procedures have a chilling effect on Federal R&D contracting by large firms, particularly those firms whose expertise has heretofore been developed independently of significant Government funding.

With the enactment of S. 2171, cooperation between large business and the Federal Government in federally-funded R&D would be enhanced in much the same way as that which resulted from enactment of the University and Small Business Procedures Act (Public Law 96-517).

Very truly your,

Robert M. Adams

Senior Vice President
Technology Services

Senator DOLE. Mr. Riley is from Ohio, so maybe we ought to hear from him.

STATEMENT OF WILLIAM E. RILEY, JR.

Mr. RILEY. Thank you, Mr. Chairman.

Mr. Chairman, the Licensing Executives Society, USA, Canada— LES-strongly supports S. 2171 which is now being considered by this committee. I think your staff is fairly familiar with LES, therefore, I will not go into a lot of background. Basically we are the leading professional organization concerned with technology development and transfer throughout the world.

LES is convinced that a uniform patent policy as proposed in S. 2171 would do much to maintain U.S. innovative leadership, ensure that more Government-sponsored technology is brought to the public, and make available to the Federal Government vast sources of technical talent that it does not now have because companies shun or entirely avoid Government-sponsored R&D. When because of the present Government patent policy-some companies do this, we believe the Government loses and the public also loses. Also, since a truly fair and uniform patent policy will make Government contracting much more attractive to such companies, it would result in more competition for Government R&D. We think this would be a healthy situation.

Our opinion is that the safeguards provided in S. 2171, plus the existing antitrust statutes, fully protect the public against any abuses that may occur.

In summary, we are convinced that the enactment of the legislation will play a significant part in helping the United States maintain its presently threatened world leadership in technical innovation. Thank you.

[The following material was received for the record:]