competent firms to compete for Government contracts and to commercialize the new technology and inventions which may result from such efforts.

This raises the question of whether the Government or the contractor is in a better position to assure that new technology and inventions will be brought to public use. The contractor already has gained experience in the technology in which the invention was made. He already is doing business and has both an existing marketing capability and the profit incentive to commercialize the invention.

On the other hand, unless the Government is prepared to assume a new role in commercial markets, the Government has neither the expertise to determine which of the many inventions have commercial potential nor the capability, but perhaps even the incentive to bring such inventions to the marketplace.

Because it recognizes and balances equities of the bars involved for research and development, the Government parties and contractors, we heartily support S. 1215.

Under the bill, the public would benefit in two ways:

First, by significantly increased responsibility of such inventions being patented;

And, second, by their being made available in the marketplace, the Government would have a royalty-free license and the contractor would, with some exceptions, obtain an option to retain title to inventions made under Government contracts.

Should the contractor fail or be unable to patent or commercialize any such invention, assure the retention of title by contractor to prevent the unlawful monopoly, then the bill has much in it to protect the public.

The bill utilizes incentives for encouraging competition for Government research and development, stimulating private expenditures and research and development efforts, and posture industrial innovations.

S. 1215 is particularly timely in this respect. All of us share the deep concerns of both the Congress and the administration about the sharp decline in industrial innovation in the United States in the resulting adverse impact on our economy and national technological base.

We believe the enactment of S. 1215 would tend to reverse that trend.

In closing, it is worth noting that, for the past 30 years or more, Government contracting has operated under multiple patent policy, most of which is title policy. That is to say, the Government takes title to inventions made under Government research and development contracts.

The title policy has failed to achieve maximum utilization to technology resulting from substantial sums of public funds spent on Government R. & D. The report on public policy issued by the Council on Science and Technology indicates that as of 1976 the U.S. Government had 28,021 unexpired U.S. patents available for licensing, of which only 1,252, or about 42 percent, has been licensed.

Senator, with reference to your questioning of some of the earlier witnesses and to some areas in your opening statement, establish

ing the broad context in which you were placing this bill and considering its purposes, we, too, have been working that vineyard for quite a long time, particularly with respect to trying to get NASA-advances under NASA contracts out-into the public domain from the point of view of convincing the public of the valuable spinoffs of the space program. We have spent years on working that, and NASA has done an excellent-absolutely excellent-job in its technical transfer program. But, here again, I think that this bill would help not just to get the information out, but to make sure that it got utilized by commercial sponsors.

Thank you.

[The statement follows:]

STATEMENT OF Karl G. HARR, JR., PRESIDENT, AEROSPACE INDUSTRIES
ASSOCIATION OF AMERICA, INC.

Mr. Chairman and members of the subcommittee: I am Karl G. Harr, Jr., president of the Aerospace Industries Association of America, Inc. (AIA). I appreciate the opportunity to appear today in support of S. 1215, introduced by Senators Schmitt, Cannon and Stevenson. Because Title IV deals with the allocation of rights to inventions of federal employees, a matter which we believe is between the government and its employees, my statement does not address that part of the bill. AIA is the national trade association representing the manufacturers of aircraft, spacecraft, missiles and related components and equipment. Being at the leading edge of high technology, our member companies have long recognized the incentives contained in the U.S. Patent System and, in particular, the manner in which such incentives have encouraged the development and advancement of our nation's technological base and industrial innovation. It is for these reasons that our Association has supported and continues to support proposed legislation and government policies which maximize such incentives. In the past, we have urged Congress and the Executive Branch to promulgate a single Federal Patent Policy to replace the multiple policies now in existence and one in which a contractor would have the option to retain title to inventions.

The principal objective in establishing a single Federal Patent Policy must be to determine and select that policy which will most benefit the public by providing appropriate incentives to the most competent firms to compete for governmentfunded research and development contracts and to commercialize the new technology and inventions which may result from such efforts. This raises the question of whether the government or the contractor is in the better position to assure that new technology and inventions will be brought to public use. The contractor already has gained experience in the technology in which the invention was made. He already is doing business and has both an existing marketing capability and the profit incentive to commercialize the invention. On the other hand, unless the government is preparing to assume a new role as a competitor to American business in commercial markets, the government has neither the expertise to determine which of the many inventions have commercial potential nor the capability (or perhaps even the incentive) to bring such inventions to the marketplace.

Because it recognizes and balances the equities of the parties involved in government contracting for research and development-the public, the government and the contractors-we heartily support S. 1215. Under the bill, the public would benefit in two ways: first, by a significantly increased possibility of such inventions being disclosed in patents, and, second, by their being made available to the marketplace. The government would obtain a royalty-free license under such inventions. A contractor would, with some exceptions, obtain an option to retain title to inventions made under government contracts. Should the contractor fail or be unable to patent or commercialize any such invention, or should the retention of title by a contractor tend to create an unlawful monopoly, the bill provides for appropriate march-in rights to protect the public's interest.

The bill also recognizes and utilizes the incentives contained in our Patent System which encourage competition for government research and development contracts, stimulate private expenditures in research and development efforts and foster industrial innovation. These incentives were aptly described by a prominent jurist, Judge Giles Rich, in In re John A. Nelson, 126 USPQ 242 (CCPA 1960), to wit: "(The patent system) is not like a system of military awards in which medals are given out by the people to their heroes as expressions of gratitude for their exceptional

services. While the element of reward is one factor in the patent system, it is probably the least important. The patent system is an incentive system calculated to do two things, principally. First, it stimulates work, research, development, invention and discovery by holding out the prospect of profit. Second, in exchange for and as a condition of patent protection, it secures a full disclosure of the invention. Promotion of the useful arts takes place through the combination of these two factors, the doing of the work and the disclosure of the results thereof."

Moreover, S. 1215 is particularly timely in this respect. All of us share the deep concerns of both the Congress and the Administration about the sharp decline in industrial innovation in the United States and the resulting adverse impact on our economy and national technological base. We believe the enactment of S. 1215 into law would tend to reverse that trend.

In closing, it is worth noting that for the past thirty years or more, government contracting has operated under multiple patent policies, most of which are title policies-that is to say, the government takes title to inventions made under government research and development contracts. The title policy has failed to achieve maximum utilization of the technology resulting from the substantial sums of public funds spent on government R&D. For example, the "Report on Government Policy" issued by the Federal Council for Science and Technology, indicates that as of 1976 the U.S. government had 28,021 unexpired U.S. Patents available for licensing, of which only 1,252 or about 4.5% had been licensed. The time has come to try a policy, such as proposed in S. 1215, under which a contractor would have the option to retain title to inventions made under government R&D contracts.

That concludes my statement. I shall be pleased to answer any questions you might have.

Mr. WITT. I'm with the United Technologies Corp. from Hartford, Conn.

We design, develop, manufacture, and market a variety of technological products for industrial, commercial, and government needs, worldwide.

The corporation employs more than 189,000 people, operates more than 280 plants and maintains marketing and service representation throughout the world.

It serves its markets with diverse products in three principal lines of business:

Power: Aircraft jet engines, industrial gas turbines; and rocket engines, motors and boosters.

Flight systems: Aeronautical and space systems and equipment; and commercial and military helicopters.

Industrial products and services: Elevators and escalators; automotive products and systems; conductors, controls and devices for the transmission and application of electricity; automotive diagnostic and test systems; and air conditioning and related equipment. Our company funded research and development program is a balanced mix of short-term and long-term projects.

Some of them are aimed at developing new technology; others at creating new products; still others at improving existing products. Our purpose-really our R. & D. strategy is to put the corporation in a competitive position with new and improved products long before we have to compete in the marketplace. Our R. & D. commitment is a cornerstone of our future growth. Only a handful of companies-all of them substantially larger than United Technologies-spend more on R. & D.

As a company we have a deep-rooted commitment to industrial innovation. However, the generation of new technology, new products, and their commercialization are each enormous undertakings. It is always necessary for us to apportion the company commitment in time, talent, and physical resources to insure that we

make the best use of these resources. We do view research and development as an investment in our future.

We would not tell you, nor in fact is it the case, that the "patent situation" is always the crucial factor in our R. & D. decisions, whether company or Government-sponsored, but it is often a factor.

The decisions are frequently impacted by the question whether or not "the path trod by us may soon be trod by others who have saved their energies," as one writer has phrased it.

We can tell you that the likelihood of significant patent rights is viewed as a positive factor in our R. & D. decisions-an incentive. We, as is true of most companies, are in the business of selling products and our R. & D. commitment is directed toward that end. Neither we nor the public benefit from the results of our inventions which never reach the marketplace.

In connection with our company programs, we utilize the patent system and benefit from the rights which that system provides, and we believe the public benefits as well. But the patent incentive exists only when the rights are in the hands of the party seeking to utilize the invention.

The Government does not require the patent incentive, for the Government is seldom, if ever, the commercializing party.

Our experience indicates that commercial ventures are seldom successful on the basis of patent rights alone-I emphasize that "alone."

Most of our licensees, for example, are not interested in bare patent licenses but require other assistance from us as well. Normally this assistance simply cannot be provided by the Government.

It explains, in many cases, why the Government is singularly unsuccessful in its license programs. It is usually the party making the invention that has the expertise necessary to commercialize the innovation by its own further efforts or by licensing. I think Tenney Johnson emphasized that in his testimony.

It is also usually the party making the invention that is best able to recognize the commercial potential.

The process of obtaining a patent itself involves an investment of time, talent, and financial resources-and a not inconsiderable one. At United Technologies the decision whether or not to seek patent protection is itself a business decision. If the existence of a patent is or may be of assistance in fostering the return on investment, then we would see the pursuit of patent rights as appropriate.

Of course, the reverse is also true. When we see no use of a patent in connection with a given innovation in the marketplace, we typically do not seek patent protection on that invention.

In a case where the patent rights to inventions are vested in the Government, as is the case when the Government acquires title to those inventions, the patent incentive simply cannot enter into our business decision.

In fact, not only is there no patent incentive relevant to the commercialization question, there is no business justification for the filing of a patent application. For this reason, we seldom can

justify the filing of patent applications on inventions where the Government acquires title.

In considering participation in Government R. & D. contracts, a title in the Government policy often has its greatest adverse impact in those areas where we have the greatest private investment. In those cases, not only are we looking at those investments that may be required of us in the future, but we necessarily must consider the impact on those investments that we have made in the past.

Parties coming to the contract table with the greatest expertise should be those able to solve the particular problem at hand in the shortest possible time and at the least cost. It is indeed an anomaly that in many cases agency policy is such as to provide the greatest lack of patent incentive, or even disincentive, in such circumstances.

Federal patent policy, if it is to maximize the R. & D. investment of the Government, simply must be such as to enlist the services of the most qualified parties and to promote commercialization.

And I think, sir, that is the thrust of your proposed legislation. Title in the Government simply does not do that. We believe that restoration of the patent incentives to the private sector is essential. And because S. 1215 restores those incentives, it is our belief that it will foster "the progress of science and the useful arts," which is the basic thrust of the whole patent concept.

Retention of a license by the Government insures that there would be no impact of patents resulting from Government-sponsored inventions in the products that Government is buying. The patent incentives would be important in the development of those incentives for non-Government products.

We have long been a major participant in Government R. & D. programs and, regardless of the Federal patent policy ultimately adopted, we will continue to participate in and have an interest in such programs.

At the present time we are participating in Government contracts where title to inventions made in the performance thereof will reside in the Government.

As we have mentioned, there are many factors that enter into participation decisions and a "patent situation,” as I said earlier, it is only one factor that we consider.

In such cases we have determined that other factors outweigh the lack of patent incentive. However, we do believe that a policy of acquisition of title by the Government is a deterrent to participation and to commercialization in many cases.

We believe that the disposition of patent rights must be clearly established at the time of contracting, as would be the case if this bill is adopted. It is difficult to base R. & D. decisions on uncertain possibilities of later acquisition of rights, as by waiver procedures, after contracting.

It is also our experience that such procedures involve tedious administrative endeavors in which we participate only with great reluctance.

Adoption of this bill will not only provide uniformity and certainty to the Federal R. & D. arena, but will also restore the incentive of the patent system to the process of industrial innovation and