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9-9.202-4

U. S. DEPARTMENT OF ENERGY

(ii) The right to inspect technical data first produced or specifically used in the performance of the contract at all reasonable times (for which inspection the proper facilities shall be afforded DOE by the contractor and its subcontractors);

(iii) The right to have all technical data first produced or specifically used in the performance of the contract delivered to the Government or otherwise disposed of by the contractor, either as the Contracting Officer may from time to time direct during the progress of the work or in any event as the Contracting Officer shall direct upon completion or termination of this contract, provided, that nothing contained in this paragraph shall require the contractor to actually deliver any technical data, the delivery of which is excused by this Rights in Technical Data clause;

(iv) Unlimited rights in technical data specifically used in the performance of this contract, except technical data pertaining to items of standard commercial design; the contractor agrees to leave a copy of such technical data at the facility or plant to which such data relate, and to make available for access or to deliver to the Government such data upon request by the Contracting Officer; provided, that if such data are proprietary, the rights of the Government in such data shall be governed solely by the provisions of optional paragraph (e) hereof — "Limited Rights in Proprietary Data;"

(v) The right to remove, cancel, correct, or ignore any marking not authorized by the terms of this contract on any technical data furnished hereunder if, in response to a written inquiry by DOE concerning the propriety of the markings, the contractor fails to respond thereto within 60 days or fails to substantiate the propriety of the markings. In either case DOE will notify the contractor of the action taken.

(2) The contractor shall have:

(i) The right to withhold its proprietary data in accordance with the provisions of this clause; an

(ii) The right to use for its private purposes, subject to patent, security or other provisions of this contract, technical data it first produces in the performance of this contract, provided the data requirements of this contract have been met as of the date of the private use of such data. The contractor agrees that to the extent it receives or is given access to proprietary data or other technical, business or financial data in the form of recorded information from DOE or a DOE contractor or subcontractor, the contractor shall treat such data in accordance with any restrictive legend contained thereon, unless use is specifically authorized by prior written approval of the Contracting Officer.

(3) Nothing contained in this clause shall imply a license to the Government under any patent or be construed as affecting the scope of any licenses or other rights otherwise granted to the Government under any patent.

(c) Copyrighted material.

(1) The contractor shall not, without prior written authorization of the Contracting Officer, establish a claim to statutory copyright in any technical data first produced in the performance of this contract. To the extent such authorization is granted, the Government reserves for itself and others acting on its behalf, a royalty-free, nonexclusive, irrevocable, world-wide license for Governmental purposes to publish, distribute, translate, duplicate, exhibit, and perform any such data copyrighted by the contractor.

(2) The contractor agrees not to include in the technical data delivered under the contract any material copyrighted by the contractor and not to knowingly include any material copyrighted by others without first granting or obtaining at no cost a license therein for the benefit of the Government of the same scope as set forth in paragraph (c)(1) above. If the contractor believes that such copyrighted material for which the license cannot be obtained must be included in the technical data to be delivered, rather than merely incorporated therein by reference, the contractor shall obtain the written authorization of the Contracting Officer to include such material in the technical data prior to its delivery.

(d) Subcontracting.

(1) Unless otherwise directed by the Contracting Officer, the contractor agrees to use in subcontracts having as a purpose the conduct of research, development, and demonstration work or in subcontracts for supplies, the contract clause

PROCUREMENT REGULATIONS

9_9.202-4

provisions in 41 CFR 89-9.202-3(c) and 41 CFR 89-9.202-3(e)(2) in accordance
with the policy and procedures of 41 CFR 89-9.202-1, 2 and 3.

(2) It is the responsibility of the contractor to obtain from its subcontrac-
tors technical data and rights therein, on behalf of the Government, necessary to
fulfill the contractor's obligations to the Government with respect to such data. In
the event of refusal by a subcontractor to accept a clause affording the Government
such rights, the contractor shall:

(i) Promptly submit written notice to the Contracting Officer setting forth reasons for the subcontractor's refusal and other pertinent information which may expedite disposition of the matter; and

(ii) Not proceed with the subcontract without the written authorization of the Contracting Officer. (d) Optional clause - Limited rights in proprietary data. In contracts where it is determined that delivery of proprietary data is necessary with limited rights in the Government, the Rights in Technical Data clause of this section shall be supplemented by the additional paragraph (e), set forth below. Paragraph (e) provides that technical data may be specified in the contract as being excluded froin the delivery requirements thereof. Alternatively, paragraph (e) may be limited or made applicable to only those classes of proprietary data determined as being necessary for delivery with limited rights. In addition, when furnishing proprietary data with the limited rights legend, subparagraphs (a), (b) and (c) thereunder may be modified as follows. When proprietary data is to be furnished only for evaluation, subparagraph (a) of the limited rights legend shall be used, and subparagraphs (b) and (c), if otherwise inapplicable, may be deleted. When there is a programmatic requirement that proprietary data be disclosed to other DOE contractors only for information or use in connection with work performed under their contracts, subparagraph (b) of the limited rights legend shall be used, and subparagraphs (a) and (c) may be deleted if otherwise inapplicable. In either of the foregoing examples, the contractor may, if he can show the possibility of a conflict of interest because of disclosure of such data to certain contractors or evaluators, exclude contractors or evaluators from subparagraphs (a) or (b). If the data is required solely for emergency repair or overhaul, subparagraph (c) of the limited rights legend shall be retained, and subparagraphs (a) and (b) may, unless otherwise applicable, be deleted. In the event that it is determined that all of the subparagraphs (a), (b) and (c) of the limited rights legend are to be deleted, the word "none" shall be inserted in the legend after the colon (:).

(e) Limited rights in proprietary data.

Except as may be otherwise specified in this contract as technical data which are not subject to this paragraph, the contractor agrees to and does hereby grant to the Government an irrevocable, nonexclusive paid-up license and right to use by or for the Government, any proprietary data of the contractor specifically used in the performance of this contract; provided, however, that to the extent that any proprietary data when furnished or delivered is specifically identified by the contractor at the time of initial delivery to the Government or a representative of the Government, such data shall not be used within or outside the Government, except as provided in the “Limited Rights Legend” set forth below. All such proprietary data shall be marked with the following "Limited Rights Legend":

LIMITED RIGHTS LEGEND

This “proprietary data," furnished under Contract No.

with the U.S. Department of Energy (and purchase order No.

if applicable) may be duplicated and used by the Government with the express limitations that the “proprietary data” may not be disclosed outside of the Government or be used for purposes of manufacture without prior permission of the contractor, except that further disclosure or use may be made solely for the following purposes:

(a) This “proprietary data" may be disclosed for evaluation purposes under the restriction that the “proprietary data" be retained in confidence and not be further disclosed;

9-9.202-4

U. S. DEPARTMENT OF ENERGY

(b) This proprietary data" may be disclosed 10 .yther contractors participating in the Government's program of which this contract is a part for information or use in connection with the work performed under their contracts and under the restriction that the “proprietary data" be retained in confidence and not be further disclosed; or

(c) This proprietary data" may be used by the Government or others on its behalf for emergency repair or overhaul work under the restriction that the "proprietary data" be retained in confidence and not be surther disclosed.

This legend shall be marked on any reproduction of this data in whole or in part.

89-9.202-5 Negotiations and deviations.

Contracting Officers shall contact the field Patent Counsel assisting their procuring activity, or the Assistant General Counsel for Patents, for assistance to the Contracting Officer in selecting, negotiating, or approving appropriate data and copyright clauses in accordance with the procedures as set forth in 89-9.107-4(k). In particular, advice of Patent Counsel should be obtained regarding the appropriateness or modification of optional paragraphs (g) and (h) of the Rights in Technical Data (long form) clause, the exclusion of specific items of proprietary data from paragraph (f) in said clause, and the exclusion of the Additional Technical Data Requirements clause of 89-9.202-3(c).

ATTACHMENT 3

ADDITIONAL COMMENTS OF JAMES E. DENNY 1. What have been the effects of federal agency patient policies and practices on participation in government research and development contracts, on the develop ment and commercialization of government-sponsored inventions, and on competition in private markets?

The issue of Government patent policy can and does have a substantial effect on the participation of industry in Government R,D&D contract efforts. The effect will differ depending upon the policy alternatives, agency mission, and the type of contractor involved. The 1968 Harbridge House study reviewed this issue in some depth and concluded that at one extreme there are certain corporations, or divisions of corporations, which make a business of performing R,D&D activities for the Government notwithstanding the patent policies involved. At the other extreme are highly patent conscious, commercially oriented companies that will not work with the Government under a title policy. In between these two extremes are a variety of contracting situations and prospective contractors that in certain contracting situations and in certain fields of technology will not cooperate in Government R,D&D efforts.

In DOE's experience, the more commercially oriented the contractor, and the greater the private investment in a previously existing R,D&D effort, the more likely will be the possibility that a contractor will either not approach the Government in response to a request for cooperation, or will not contract with the Government unless resulting inventions are owned by it.

The effect of patent policies on development and commercialization of Government-sponsored inventions likewise varies considerably with the type of technology and invention involved, the Government agency's mission, the stage of development of the invention, the prospective market, and the particular contractor. Here again, the 1968 Harbridge House study indicated that utilization of Government-sponsored inventions was low, but that the utilization rate increased substantially when exclusive rights were left in the hands of a contractor who had a commercial position in the field of technology of the invention. On the other hand, the report concluded that where the Government had the responsibility and funding to carry an invention all the way to the market place, exclusive rights were not necessary to obtain commercialization. Where the Government takes the responsibility for acquiring title to resulting inventions, the Government should likewise take the responsibility for encouraging the commercial utilization of such technology. Otherwise, inventions are probably more efficiently commercialized in the hands of private parties with exclusive rights to the invention.

Regarding the effect of Government patent policy on competition in private markets, the 1968 Harbridge House study searched for, but could not find, substantial, if any, anti-competitive results from the policy of allowing contactors to retain rights to Government-sponsored inventions. The more recent Harbridge House study supported by DOE confirms this impression. In the last analysis, an adequate set of "march-in" rights would appear to take care of whatever possibility may exist for substantial anti-competitive effects.

2. Is there justification for maintaining a license policy with respect to military and other research and development results intended for the government's own use and a title-in-government policy with respect to research and development intended for civilian purposes?

Any approach to patent policy will have advantages and disadvantages depending upon the selection of the critical issues that are to be addressed. For example, one policy approach is to have a strictly uniform patient policy that is applicable to all Government agencies, to all contracting situations, and to all types of contractors, without the concept of flexibility. Patent policies that deviate from this approach become more flexible, but also become more burdensome to administer. If uniformity is selected as a major policy criteria, then the end use of the technology may not be considered a sufficient justification for distinguishing policy approaches.

However, where flexibility is a major policy criteria, a legitimate and justifiable distinction can be made to applying different patent policy approaches depending upon the end use of the technology receiving Government support. Here the end use is for the Federal Government itself, as in military research and developmemt, the need for the technology is established by the Government, for use by the Government, to satisfy a Government need. Accordingly, commerical utilization of such technology by the general public may not even exist, and if it does, it will frequently be substantially different from the original use intended by the Government. In such cases, it is likely that substantial modification or additional development work will be necessary to convert the technology from governmental to commercial use, for which patient rights in the hands of the contractor generally would be a desirable stimulus.

On the other hand, where the technology is intended for use by the general public, as in much of DOE research, the need for the technology has been established by the public, and the Government's role should be to either create and/or help commercialize technology which will respond to that need. In this case, a market for the technology should already exist, and exclusive rights in the hands of the contractor will be useful or necessary depending upon the extent to which the Government intends to carry the technology to the marketplace. Where the Government intends to be merely a stimulus, exclusive rights may well be necessary to achieve commercialization. Where the Government intends to fully commercialize such technology, exclusive rights will probably not be necessary.

3. Should large and small firms or non-profit and for-profit institutions be treated differently in allocating right to inventions made under Federal grants and contracts?

Here again, distinctions between small and large firms, or profit-making and nonprofit firms makes sense only to the extent that the patent policy approach under which you are working is intended to be uniform, on the one hand, or responsive to individual types of situations on the other. In the latter case, preference is frequently provided to small firms over large in view of the fact that providing exclusivity to small businesses will less likely add to the concentration of economic power. Additionally, small firms are normally believed to require a greater degree of exclusivity in order to be commerically competitive with large firms. The profit versus nonprofit distinction is simply intended to address to "windfall” issue, whereby if substantial sums were to be made from commercializing the invention, such funds in non-profit organizations are normally utilized in what is regarded as “public policy” or eleemosynary types of uses.

4. Under what circumstances, if any, should the government retain title to an invention made in the course of a Federal contract? In what cases should a contractor be forced to surrender background patents? In what situations should the government resume title to an invention or require that it be licensed to other companies?

The Government should retain title to inventions made under Federal contracts in any situation where the exclusive rights provided by title to the invention is not needed to either further develop or commercialize the invention, or in those situations where the free availability of the invention to all that desire to utilize it will provide the necessary incentive to commercialization.

The answer is simple. The problem is determining when such situations exist. In my opinion, most of the available evidence tends to suggest that (a) the Government is generally not a good promoter of commerical utilization of inventions, (b) the Government frequently is not capable of carrying, or has no mission to carry, the development of technology to the marketplace, and (c) the required funding and expertise to perform this function is not in the hands of most Government agencies. The expense necessary to place these capabilities in the various Government agencies will probably not be worth the cost to the taxpayer in most cases. Where these functions can appropriately be carried out by industry, and with little or no anticompetitive effects on the market place, the whole commericalization process is better left to the contractor that created the technology.

A contractor should never be forced to surrender its background patents. However, many Goverment agencies, including DOE, are alleged to force contractors to surrender their background patent when this is not the case. The DOE policy is to require a contractor, if it has background patents that will dominate the results of the research effort, to license such background patents on reasonable terms and conditions. The requirement to license is usually limited to the specific field of technology that was supported by the DOE contract, and is also limited to situations where the contractor cannot supply market demands. DOE policy in this regard would appear to adequately take care of the public interest, and in any event, is subject to negotiation because it is a highly sensitive and emotional issue.

Under. DOE's “march-in” rights policies, the Government can retrieve an invention waived to a contractor, or require the contractor to license others, only where it is necessary to do so in the public interest, where the contractor is not adequately commercializing the invention itself, or where the contractor is misusing the invention to the detriment of competitive market forces. In only these situations should "march-in” rights be utilized. Where the contractor is adequately commercializing the invention, and is not abusing such right, the contractor should be left with the exclusive commercial rights.

5. Should the government require a payback, in addition to income taxes, when government-sponsored inventions are developed and marketed under exclusive rights? As an alternative to discretionary march-in rights, would your favor a selfenforcing licensing requirement whereby the contractor's exclusive rights in an invention would expire after a reasonable time, unless the contractor demonstrated a need for an extension?

The issue of whether the Government should require a payback, or a recoupment of its R, D&D investments, is a policy issue of the highest magnitude on which I would prefer not to take a position. I would only comment, however, that if such a policy is adopted, should be carefully drafted in order that its implementation not cost more money than it has the capability of collecting. In particular, such a policy should not be uniformly applicable to all contracting situations, to all contractors, and to all inventions. For example, distinctions may be appropriate for small businesses, universities, and other non-profit institutions. The policy should only be applied to situations where discrete packages of technology can be identified to which the Government's contribution versus that of private industry can be reasonably apportioned, and where the method of collecting royalties or revenues can be negotiated in a businesslike manner.

As stated in the answer provided in No. 4 above, I do not believe that “march-in” rights should be exercised until there has been shown to be a need to inforce them. A self-enforcing licensing requirement would have the same effect. As long as the contractor is commercializing the invention, it should be allowed to continue to do so for the full term of the patent unless there is a demonstrated reason for shortening the term of exclusivity. Accordingly, I would not favor such an alternative.

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