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tion of those specific contracts let during fiscal year 1960 which contained or did not contain a patent rights provision pursuant to ASPR 9-107.6. In view of the fact that allowability in overhead charges of "substantial" independent research or product improvement costs under ASPR 9-107.6, is negotiated on a contract-to-contract basis, each contracting officer would be required to review each of his contracts let during fiscal year 1960 for this information. The large numbers of contracts negotiated and let by Air Force contracting officers would make the assembling of this information extremely time consuming and costly. However, it is believed that under the criteria of ASPR 9-107.6 there have been very few cases under which a determination has been made that there was a basis for requesting patent license rights under a contractor's independent research and development program.

Senator MCCLELLAN. Counsel thinks he needs to interrogate you a little further on another matter, but we have already reached 12 o'clock, so you will just have to come back at 2:30.

That is the best I can do.

(Whereupon, at 12:05 p.m., the committee recessed, to reconvene at 2:30 p.m., the same day.)

AFTERNOON SESSION

Senator MCCLELLAN. The committee will resume.

STATEMENT OF MAJ. GEN. MARCUS F. COOPER-Resumed

Senator MCCLELLAN. Mr. Wright.

Mr. WRIGHT. I have just a few more questions.

I wanted to ask you about this section 9-107.2 of your ASPR regulations which provides for exclusion of inventions to license grants. This is the situation where you do not take even a royalty-free license when you make a contribution to the reduction to practice of an invention already made that is relatively small to what the contractor puts in.

Are you familiar with that?

General COOPER. I am not personally too familiar, but I have people here who are.

Mr. WRIGHT. I did not want to discuss it. But I just wondered if you could tell us what the reason was why you felt you were justified in those circumstances that are set out in this regulation I just referred to, why you are justified in taking no rights in the invention even though you have made some contribution to its reduction to practice.

Mr. SHERWOOD. There are several circumstances set out under which the inventions can be excluded. The particular regulation evolved from specific cases in which the question arose whether we should get rights in the event the invention had progressed far enough by engineering design so that it did not need a working model to show that the invention will work. When the contractor is in a position to get complete information from his own records as to operability of an invention and does not need the Government's contribution to show that the invention would work, the invention may be specifically excluded from the scope of the Government's license.

In another situation exclusion is authorized when the contractor has put a great deal more money than the Government would contribute through a contract in reducing his invention to practice. We felt that it would not be equitable for the Government to seek rights in any such invention.

Mr. WRIGHT. I understand what the regulation provides.

What I am trying to find out is why you think that even though your contribution to this final reduction to practice is small, that you should not get some kind of rights in this invention that you put up this money to finally perfect.

Mr. SHERWOOD. The Government was trying to get the best efforts of the contractor put forth with respect to a specific contract.

As an encouragement to such efforts, and in order that the contractor realizes that we want his best efforts, we provided the means by which he was encouraged to incorporate in the final output toward the contract his best pieces of equipment, even though they might be covered by the patent applications not as yet actually reduced to practice.

Mr. WRIGHT. Could you give us again the number of instances with the detail as to what contractor was involved, what the invention was, and how much you contributed, where under this provision in your regulations you paid money to have the invention reduced to practice but did not get any rights?

Mr. SHERWOOD. This would involve a great deal of investigative work. We would have to look into so many contracts across the country, it would take a great deal of effort and time to find this out.

We can only say this, that every specific case was thoroughly investigated to discover whether or not it was completely equitable in every specific case to eliminate that patent from the scope of the license clause.

Mr. WRIGHT. It would not be very many contracts, would there, where you made this kind of a provision?

Mr. SHERWOOD. The thing I was trying to say was this. The fact that a contractor asks for an exclusion does not automatically entitle him to such an exclusion.

Mr. WRIGHT. I am talking about the cases where he got it; can you not give us a list of the cases where he asked for and got this kind of an exclusion?

Mr. SHERWOOD. We might be able to do this for a period of time. Mr. WRIGHT. I say, just for the year 1960.

Mr. SHERWOOD. We probably could get you that information.

Senator MCCLELLAN. Did we not agree this morning to submit such a list?

Mr. SHERWOOD. This is not the same thing.

Mr. WRIGHT. It is the same kind of situation, but a different subject.

Senator MCCLELLAN. Will you supply that?

Mr. SHERWOOD. Yes.

(The following information was subsequently furnished by the Air Force :)

The following contracts were let by the Air Force during fiscal year 1960 with exclusions of patent application and/or patents in accordance with ASPR 9-107.2(a) from the scope of the license grant to the Government. Each such exclusion was granted subsequent to review by the patent officer of the activity working with the contracting office and the project engineer. In comparing expenditures on development of an invention, prior Government expenditures toward such development and the Government's contributions to the general research work of the contractor, related to the subject matter of the contract, were taken into consideration. (AFPI 9-107.2):

1. Contractor: Avro Aircraft, Ltd., AF 33 (600)-42163 for VTOL aircraft.

Patents or patent applications: S/N 376,320, 502,156, 502,155, 057,098, 507,100, and 507,099. All of these applications for patent cover vertical takeoff and landing aircraft.

Contract price: $485,700 during fiscal year 1960. Total expenditures by Air Force and Army, approximately $25 million in reducing inventions to practice. Contractor's expenditures in reducing inventions to practice: $2.5 million. NOTE. The fiscal year 1960 expenditures by the Air Force and Army represent an addition to expenditures under previous contracts amounting to approximately $4 million. Seven new inventions were made under these contracts under which the Government received license rights pursuant to the patent clauses in the contracts.

2. Contractor: GE, AF 33 (616)-7404 for cryogenic gyro.

Patents or patent applications: S/N 709,118, 802,592, 792,195, and 791,953. These patents cover components of cryogenic gyros.

Contract price: $78,555.

NOTE. These inventions were excluded on the basis that it was proved by the contractor to the satisfaction of the contracting officer (together with his patent counsel and project officer) that the specific inventions were reduced to practice "as by engineering design" and needed no actual reduction to practice to prove that the inventions would work for their intended purposes.

3. Contractor: American Optical Co., AF-33-616-7793, fiber optics. Patents or patent applications: 669,883, 717,035, 727,904, 775,786, 2,770, 7,436, 12,212, 743,631, 772,198, 756,180, 680,308, 43,752, 52,232, 56,746, 719,292, 736,172, 861,984, 8,655, 12,144, 755,769, 770,478, 29,699, 758,845, 17,390, 52,886, 715,406, 739,535, 826,762, 6,136, 12,143, 754,254, and 36,426.

Contractor's expenditures in developing the inventions: $450,000.
Government contract price: $203,000.

NOTE. All of the patent applications listed above represent inventions in the field of fiber optics. This is a cost-sharing contract by the terms of which it was contemplated that the contractor would expend approximately $200,000 over the contract price to the Government of $203,000 in reducing the inventions to practice.

4. Contractor: RCA, AF 33 (616)-7430, molecular tunable and band pass amplifier.

Patents or patent applications: P/N 2,800,617, 2,824,977, 2,851,615, and 2,861,262: S/N 849,341.

Contract price: $59,243.

NOTE. This contract was partially funded by RCA who also reduced their fixed fee by 1 percent. The exclusions were granted on the basis of proof by the contractor that the listed inventions had already been reduced to practice "as by engineering design."

5. Contractor: Food Machinery & Chemical Corp., AF 04 (611) -5689. Exclusions requested by subcontractor, Bell Aerosystems Co.

Patents or patent applications: S/N 753,886, 835,385, 835,386, 835,387, and 864,051. These patent applications cover engineering designs of solid propellants.

Contract price for subcontractor: $109,000.

NOTE. These inventions were excluded on two grounds. The first ground was the expenditure of substantial sums of money by the subcontractor ($109,748) as well as on the ground that the inventions are useful only for military purposes and the contractor does not have facilities for furnishing the item to the Government in production quantities.

Mr. WRIGHT. There is one more area I wanted to ask you about. I notice one instance in your statement where you said you were cooperating with civilian agencies in development-with the Federal Aviation Agency; is that not so?

General COOPER. Yes.

Mr. WRIGHT. And you are presently cooperating with them, are you not, in the development of a transport plane?

General COOPER. Sir, the SOR-182 which resulted in the Lockheed C-141 is being contracted for with Air Force money. SOR-182 established the requirement to develop a commercial type jet aircraft having both military and civilian use and value. The vast majority

of our systems are developed to meet only military requirements. The FAA jointly with the Air Force got together and drew up a common set of specifications to insure that the industry needs as well as the military needs were incorporated in this aircraft. So we had a common product, so to speak, which will result from our get-together on a set of specifications to insure that we have in the military, insofar as possible, that kind of equipment for carrying cargo that will permit the cargo airlines to buy that same kind of equipment, thereby reducing the total unit cost, if we can both buy the same type of aircraft in quantities—that is, the more aircraft you buy the less per unit you pay for it, because you amortize the development cost over the total number of aircraft frames built, not just a total amount for-for instance, if we bought one, we would have to amortize it over one aircraft cost, and it would be prohibitive. If we bought 200, then we would divide the development cost into 200. So each airplane would pay-that is, the purchaser would pay only onetwo hundredth of development cost of each airplane that he bought. Mr. WRIGHT. Now, what did you provide with reference to the disposition of the patent rights in whatever inventions come out of this contract for the development of this transport plane which you say is intended to be equally suitable for commercial and military purposes?

General COOPER. The following clause has been negotiated into the letter contract with Lockheed in connection with the SOR-182 program:

COMMERCIAL SALES

In the event the contractor enters into a commercial sales program as a result of this contract and the work called for herein, the contractor shall negotiate with the Government an equitable adjustment in the contract terms for the provision of R. & D. costs for the use of Government-owned special tooling, facilities, machinery and equipment, for reoccurring program cost, and for learning benefits from marketing production.

This is in the contract.

Mr. WRIGHT. Is that everything that is in the contract with reference to the disposition of patent rights?

I take it the patent right provision in the contract is your regular ASPR provision, is it not?

General COOPER. Yes, that is correct.

Mr. WRIGHT. And the title in those patents

General COOPER. Yes, and that is additionally included in the con

tract.

Mr. WRIGHT. But under the contract Lockheed gets title to any of the resulting patents; is that right?

General COOPER. That is correct.

Mr. WRIGHT. And that is contrary, is it not, to the policy that FAA would normally pursue if it were in it?

General COOPER. Yes. However FAA is not contributing money to this program as of this date.

Mr. WRIGHT. And it is only because FAA was called in, I suppose, that there is any provision for recovery of those development costs; if you were making that kind of a contract on your own, you would not even have that provision in there, would you?

Senator MCCLELLAN. That is what I say.

Where you contribute 25 percent, you figure some way of getting an equitable return for that 25 percent out of this byproduct or, as some others have termed it, this fallout?

Mr. HOWARD. That is correct.

Senator MCCLELLAN. That comes back to this problem, I am not saying you are right or wrong, I am saying, though, that the thing that impresses me is, the Government should find some way to have a uniform policy with regard to these things.

Go ahead.

Mr. HOWARD. This patent rights policy was formally adopted after the Agency's attorneys and contracting staff for research and development had had about 2 years' experience in negotiating with industry. During this period, we found that contractors were willing to accept our present patents rights clauses. None of them has ever based rejection of a contract with us solely on our refusal to vest title in the contractor to patents developed under the contract.

In fact, we were even successful in negotiating a number of our previous contracts, containing the military type of patent clauses, to provide patent terms more favorable to the Government.

Interpreted in its simplest form, our policy is that whoever pays the cost of research and development acquires the patent rights so produced. If costs are shared, rights are shared in fair proportion.

Along these lines, we have developed a variety of patent clauses, some of which are printed in the appendix to your preliminary report. If the Government invests any money at all in a contract, our policy calls for acquiring at least a royalty-free license in any developed patent. If the Government pays all the costs of a particular development effort, we insist on having all the patent rights produced by that effort.

As you know, there is a large body of opinion which holds that giving title in developed patents to contractors is a necessary inducement to get competent firms to do certain kinds of research and development work. Thus far, our experience does not bear this out.

Under our present policy, the most highly qualified firms in the country, which includes some of the largest, have accepted contracts containing our standard patent rights clauses.

The fees paid under these contracts are believed to be no higher than those paid under comparable contracts let by other agencies which do not vest all patent rights in the Government. Whether or not this same policy would work as well for other Government agencies depends on too many factors not known to us for any meaningful judgment on our part. We must leave the answer to that question to persons with better knowledge of the special needs and problems of the other agencies.

In this connection, it might be well to mention that many items developed by the Federal Aviation Agency are designed for use by the flying public. The Agency has authority to require their purchase and use by members of the public, and often exercises this authority for air safety purposes.

We have felt it would be wrong to place members of the public in the position of paying a second time for development costs already paid for on by the public as taxpayers.

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