Computer and Business Equipment Manufacturers Association (CBEMA) 36

OFFICE OF GOVERNMENTAL RELATIONS

ONE DUPONT CIRCLE
WASHINGTON, D. C. 20036

November 13, 1975

Mr. Kenneth L. Cage

Room 92, Eighth Floor

Office of the General Counsel

U.S. Energy Research and Development
Administration

20 Massachusetts Avenue, N.W.

Washington, D. C. 20545

Dear Mr. Cage:

On behalf of the American Council on Education, an association of 179 national and regional education associations and 1,361 institutions of higher education, I am pleased to respond to the notice in the Federal Register of October 15, 1975 inviting comment on the two legislative enactments upon which ERDA patent policy is based, as well as on the desirability of mandatory licensing.

Setion 9 of the Federal Nonnuclear Energy Research and Development
Act of 1974 provides that--

"(a) Whenever any invention is made or conceived in the course of
or under any contract of the Administration, other than Nuclear
Energy research, development, and demonstration pursuant to the
Atomic Energy Act of 1954 (42 USC 2011 et seq.) and the Administrator
determines that--

"(c) Under such regulations in conformity with the provisions of
this section as the Administrator shall prescribe, the Administrator
may waive all or any part of the rights of the United States under
this section with respect to any invention or class of inventions
made or which may be made by any person or class of persons in
the course of or under any contract of the Administration if he
determines that the interests of the United States and the general
public will best be served by such waiver. . .In making such
determinations, the Administrator shall have the following objectives.
"(11) in the case of a nonprofit educational institution, the extent
to which such institution has a technology transfer capability and
program, approved by the Administrator as being consistent with the
applicable policies of this section.'

The Conference Report on the Bill notes that-

"The reference in subsection (d) (11) to nonprofit educational institutions with approved technology transfer capabilities and programs is included, among other reasons, to assure that these institutions would not be disqualified from consideration for a waiver due to a lack of established commercial position or manufacturing capability."

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Thus, it is clear that Congress intended that those educational institutions having technology transfer capability which desire to maintain patent rights in inventions developed under ERDA contracts should be permitted to retain such rights so that they may exercise their abilities in transferring technology.

In Vol. 40, No. 73 of the Federal Register issued on Tuesday, April 15, 1975, ERDA added a new appendix to 41 CFR Part 9 9 relating to Patents and Copyrights. The following statement appears in the section relating

to waivers-

"d. Approval of University technology transfer program. Paragraph (11)
of subsection 9 (d) of the Federal Nonnuclear Energy R&D Act provides
that in waiver determinations, consideration should be given to the
extent to which universities have technology transfer capabilities and
programs approved by the Administrator. Pending the development
of an approval process within ERDA for university capabilities and
programs, consideration may be given to the approval of such programs
of a university [sic] approval by another agency will not meet the
statutory requirement of approval by the Administrator, approval
by other agencies will be relevant information to be considered by the
Administrator.

In spite of the express language of the Bill, the interpretation in the Conference Report and the statement quoted above from the Federal Register, ERDA now proposes a new policy and procedure relating to patents, data and copyrights. Its proposed procedure does not implement section (d) (11) of the Act, although the proposed policy notes the fact that nonprofit educational institutions with technology transfer capabilities may have their programs approved by the Administrator.

It appears from the proposed procedure that the Administrator intends to impose on nonprofit educational institutions not only the requirement that they have an approved program for technology transfer but the further requirement that all other criteria noted in the legislation be met by the institution. This is totally inconsistent with the intent of the Congress to give special treatment to nonprofit educational institutions, in recognition of the fact that they cannot meet many of the other criteria.

A solution to this problem has been proposed by the University Patent Policy Ad Hoc Subcommittee of the Executive Subcommittee of the Committee on Government Patent Policy of the Federal Council for Science and Technology. In July 1975 this Subcommittee issued a Report stating that-

A.

B.

Creation of university technology transfer capabilities should
be encouraged.

Agreements permitting qualified universities to retain title to
inventions would create an incentive to develop university
technology transfer capabilities.

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C. Additional benefits would flow if qualified universities
retain principal rights to resulting inventions.

1.

2.

3.

4.

Recognition of Co-sponsor Equities [The Government often
does not provide the total costs of a research project and
funds from other sources must be used.]

Ease of Administration [Case-by-case decisions would be
eliminated, reducing administrative work for both parties.]

Use of Royalties for Support of Scientific Research and Education
[It would be in the public interest for universities to generate
and retain income to cover their patent administrative costs
and to support education and research from such income.]

Use of Management Capability for All Inventions [Universities
would be able to use their management capabilities to transfer
all their technology, whether Government-supported or not,
thereby expanding utilization of inventions.]

5. Training of Further Technology Transfer Managers [If universities
are permitted to retain rights to inventions, more personnel
in the area of technology transfer will be trained.]

The Subcommittee specifically recommended adoption by all Government agencies of a policy permitting qualified universities to retain title in inventions under institutional patent agreements. The Report of the Subcommittee demonstrates a realistic comprehension of not only the issues at hand but an understanding of all the problems inherent in the licensing of inventions for commercial development. ACE concurs in the findings and urges adoption by ERDA of the Subcommittee's recommendation.

In a related area, it is felt that legislation requiring mandatory licensing of energy-related patents is not needed to carry out the purposes of the Federal Nonnuclear Energy Research and Development Act of 1974. Rather, it is felt that mandatory licensing is at odds with the Energy Reorganization Act of 1974 which states that the objective of ERDA patent policy is to provide an incentive to stimulate commercial industrial development in energy fields, as well as to protect the public's interest. Mandatory licensing would require the owner to grant a license to any party desiring one. It is submitted that, if such legislation were to be enacted, the incentive of the limited monopoly granted by a patent would be destroyed.

It is very often the case that, in order for an industrial organization to invest the time and money necessary to commercialize an invention, there must be the incentive provided by the patent monopoly. In some cases, as when commercial development of the invention requires extraordinary expenditures, an exclusive patent monopoly is necessary, if only for a limited time. If mandatory licensing were required, this incentive would be lost and the public's interest would suffer since worthwhile inventions would not be commercialized. It is, therefore, urged that legislation requiring