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ADDITIONAL ARTICLES, LETTERS, AND STATEMENTS Arnold, Tom, American Patent Law Association, letters of:

May 31, 1979.............................................................................................................

August 8, 1979...
Brennan, Bruce J., Pharmaceutical Manufacturers Association, letter of Sep-

tember 12, 1979......
Doud, Wallace C., International Business Machines Corp., letter of August 6,

1979 .....................
Draft Report on Policy .......
Harbridge House Study of Government Patent Policy, synopsis .....
Industrial Research Institute, position statement on the U.S. patent

Kempf, Robert F., Assistant General Counsel for Patent Matters, NASA, lett ter

of June 19, 1979 ...... Koogle, Herbert G., chairman, National Society of Professional Engineers,

letter of July 31, 1979...
Lemelson, Jerome H., Licensing Management Corp., letter of August 14,

1979 ..............
Letter of July 18, 1979 (name withheld by request) ...........
Manbeck, H. F., Jr., General Electric Co., letter of July 2, 1979
National Association of Manufacturers, statement ....
Rickover, Adm. H. G., statement to the
Monopoly Subcommittee of the Senate Small Business Committee, Decem-

ber 19, 1977 .............
Subcommittee on the Constitution of the Senate Committee on the Judici-

ary, June 6, 1979............
Science and Industry, Challenges of Antagonistic interdependence, article by

Peter Drucker ....
Staats, Elmer B., Comptroller General of the United States, letter of July 17,

1979 ......
Stacy, Gardner W., American Chemical Society, letter of August 17, 1979 ........
Stewart, Charles W., president, Machinery & Allied Products Institute, letter of

August 23, 1979 .......

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MONDAY, JULY 23, 1979


Washington, D.C. The subcommittee met at 9:30 a.m., in room 235, Russell Senate Office Building, Hon. Adlai E. Stevenson (chairman of the subcommittee) presiding.

OPENING STATEMENT BY SENATOR STEVENSON Senator STEVENSON. America's leadership in technology has often resulted from the Government's role as a supporter of research and development and consumer of its results. As distasteful as the notion may be to believers in the omnipotence of free enterprise and the irrelevance of Government, our most innovation and competitive industries are those which have benefited most from Government involvement-aerospace, electronics, telecommunications, and agriculture.

Now with productivity stagnating, inflation accelerating, our competitive position in world markets eroding, and the need for energy development pressing, the Government is uncertain about new technological initiatives and continues to impose barriers to Government-industry collaboration.

In May I introduced with Senator Cannon and Senator Schmitt the National Technology Innovation Act. The subcommittee held hearings in June. Today we begin hearings on the Science and Technology Research and Development Utilization Policy Act, a bill introduced by Senator Schmitt to establish a uniform policy for determining the rights of the Government, its contractors and employees to exploit publicly financed inventions.

The Federal research budget of $29 billion represents half of the Nation's total investment in R. & D. and generates more than 10,000 invention disclosures a year. The Government acquires title to the vast majority of inventions whose ownership and usage rights are determined, but less than 10 percent of the Government's portfolio has been licensed to private producers. Less than 5 percent of Government-owned inventions are used commercially.

For energy development, health care and transportation improvement, civilian applications of military and space R. & D., and a variety of other domestic purposes, the Government depends largely on private markets to commercialize the technology it develops. Government financing of the R. & D. does not eliminate the risks to private investors in turning these inventions into marketable products. The risks are especially high if competitors can legally copy an invention because the Government refuses to allow a producer exclusive rights for the period necessary to recoup his investment in development and marketing. The principle of granting temporary exclusivity in return for public disclosure is the foundation of the patent system. It should be recognized in most Government R. & D. grants and contracts.

By introducing this bill, we intend no giveaway of public property to private monopolists but rather a prudent use of private interests for the public good. The balance we are seeking will not be helped by the rhetoric that for 30 years has prevented achievement of the uniform Government patent policy that numerous commissions, studies, and Members of Congress have recommended. But with the good will of business, labor, public interest groups, and academia, we can make an important contribution, not to innovation for innovation's sake, but to a revival of America's growth, productivity, and competitiveness. Senator Schmitt?


I am pleased to join with you in this opportunity to hold hearings on U.S. patent policy and the patent system in general and its effect on innovation and other aspects of our economy and position in the world.

For the past 2 years, the Commerce Committee has conducted an extensive review of the state of American technology and the role of the Federal Government in promoting technology and its utilization. Mr. Chairman, I think it is important to note that in the last Congress you and I also were able to do this under the auspices of the Banking Committee, because the two issues were closely interrelated; that is, the economy and technology.

The witnesses before those two major committees have repeatedly underscored the need to stimulate the development, application, and diffusion of new products and processes to the marketplace if we are to reverse the alarming downward trend in our economic growth and productivity.

Admittedly, the problems are varied and complex-overburdensome and costly regulations, lack of a strategic capacity for trade policy, counterproductive tax policies, and inadequate funding of basic research-both public and private, to name just a few. Yet the solution seems not so much a need for new policies or expensive programs as it is a need to reexamine and adjust existing policies which have been ineffective and oftentimes counterproductive. The one exception may well be the need to completely rethink how this country conducts its overall trade policy.

Today's hearing is intended to focus on the Federal Government's policy for handling the billions of dollars of national expenditures on science and technology, and on research and development.

For more than a decade, Federal agencies have funded nearly two-thirds of this Nation's expenditures on research and development and related activities. During this past fiscal year alone, the

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Federal Government provide more than $29 billion in research and development support.

As a result of this huge national investment, thousands of inventions are identified each year which form a valuable source of new products and technology development. Unfortunately, Government policies have inhibited the process by which such benefits are made available to the American consumer. Federal patent policies which were originally designed to protect the public interest by preventing the so-called give away, have in fact operated to discourage contractor bidding, eliminating incentives to innovate or disclose new ideas, and to delay the commercialization of inventions developed under Federal contract. It is ultimately the American public that suffers from these misguided policies through the failure of potentially significant inventions to reach the marketplace.

Together with Senators Stevenson and Cannon, I have introduced the bill referred to by Senator Stevenson, S. 1215, entitled “The Science and Technology Research and Development Utilization Policy Act,” which would provide the framework for the establishment and implementation of a comprehensive Government patent policy.

This bill, with its somewhat cumbersome title, was drafted with the following objectives in mind:

First, the Government patent policy as well as the implementing regulations must be uniform in the sense that all agencies operate under the same general rules and procedures;

Second, the policy must permit some flexibility in policy implementation in recognition of the differing missions and statutory responsibilities of the various agencies engaged in research and development activities;

Third, the policy must be as simple as possible and avoid the heavy administrative burden and delay experienced by both the contractor and the Government under current Federal policies;

Fourth, the policy must provide the necessary incentive for private sector participation in Government contracts, and for the rapid development of new technology, in order to maximize the benefits to the public from its R. & D. investment;

Fifth, the policy must foster competition and prevent undue market concentration; and

Finally, the policy must protect the legitimate rights of the taxpayer to any inventions developed under Federal contracts where the specific nature of the research being performed demands full public access to the resulting inventions or precludes granting of exclusive rights of ownership to a private contractor.

S. 1215 is one step this country must take to reverse the national decline in industrial innovation and economic productivity. I firmly believe Americans have lost neither their willingness nor their ability to innovate. Rather, it is the system within which the innovation process functions which must be restructured, providing a more favorable climate for the traditional innovative spirit. The reform of our Government patent policy is the beginning but not the end of that process.

Mr. Chairman, we are indeed fortunate today to have this distinguished group of witnesses, most of whom have considerable practi

cal experience working with the various Government patent policies.

I would also note that today's first witness, Mr. R. Tenney Johnson, is not only a close personal friend of mine, but a distinguished public servant, having served as General Counsel for three different Federal agencies, and Deputy General Counsel for two other agencies. Mr. Johnson's expertise in the area of Government patent policy is highlighted by his role as an advisor to the Commission on Government Procurement, and as a principal draftsman of President Kennedy's patent policy of 1963.

I look forward with great anticipation to his testimony as well as to those of other distinguished experts in this field.

Thank you, Mr. Chairman. [The bill follows:]

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