inary form, in the Air Force letter contract with Lockheed is not as definitive as the one we use, we consider it a definite step in the right direction.

At the same time, we should like to note that the patent rights clause in the Air Force-Lockheed contract differs from what we require under our policy. It would give the contractor all patent rights in inventions developed as a result of the contract, subject merely to the usual irrevocable, royalty-free, nonexclusive license in favor of the Government to make use and sell the invention for governmental purposes only.

We will offer only a general comment on the two bills presently before you, namely S. 1084 and S. 1176.

We would like to provide much more detailed written comments later, if that is acceptable to the subcommittee.

Of the two bills, we prefer S. 1176 to S. 1084. Both have the same general purpose and effect; but S. 1176 provides, in addition, valuable specific policy direction. It also sets up much-needed administrative machinery for handling the large volume of patent business for the Government that would follow enactment of this legislation, although an independent agency may not be the answer.

As you are probably aware, the substantive provisions of S. 1176 would place in effect, throughout the Government, those patents rights policies and practices which we have already adopted internally in the Federal Aviation Agency.

We cannot, of course, comment for other agencies; nor are we in a position to evaluate special practical problems that enactment of this bill might create for them.

One thing the committee might well wish to keep in mind is the fact that inventions frequently find important applications other than those for which they were originally designed. For example, much of the electronic gear bought by aircraft owners today embody patented inventions developed at public expense, under Government contracts that permitted vesting of patent rights in private firms.

Aircraft owners and operators are now paying these firms prices for the devices which include royalties on the patents.

If the policy provided in S. 1176 had been in effect at that time, the development cost would have been recovered by the Government as a credit against the Government's investment in aeronautical research and development. Alternatively the price to the public could have been reduced by the amount of these royalties, which would have encouraged wider use of the safety devices.

This concludes our prepared statement. As you requested, we have brought with us some of our key people in the areas in which you have expressed interest. We shall be glad to try to answer any questions your committee may wish to ask.

Senator MCCLELLAN. Thank you, sir.

Do either of those gentlemen with you have any brief statement to make?

Mr. HOWARD. I don't believe so, Mr. Chairman.

Senator MCCLELLAN. Mr. Wright, any questions?

Mr. WRIGHT. The only question I have is to be sure it is clear in the record that the clause you are referring to in this Lockheed contract was the one that General Cooper read into the record there at the end of his testimony.

Mr. WRIGHT. As I understand it, the reason that you have that kind of a clause in there instead of the kind today you prefer is that in that case the Air Force is financing it, putting up the money: is that right?

Mr. HOWARD. That is correct.

Mr. WRIGHT. If you were putting up the money the Government would get a greater patent right, is that it?

Mr. HOWARD. Yes, sir.

Mr. WRIGHT. Do you think it is desirable that the question of what rights the Government should get should depend on which particular agencies the money comes from?

Mr. HOWARD. I think that it is a question whether it is desirable. It has, as you recognize, practical considerations. The Air Force administers their funds, and we administer our funds, and under the present situation that is the posture we found ourselves in.

Mr. WRIGHT. But in this case, regardless of who puts up the money, the responsibility for safety considerations at least in commercial aviation is yours rather than theirs, isn't it?

Mr. HOWARD. That is correct.

I should point out in this connection that there has been very, very close coordination between us and the Air Force on the design features of this aircraft. In fact it has been designed from scratch for the first time as an Air Force procurement to comply with our civil air regulations when it is manufactured and sold.

This has been very carefully thought out in advance.

I think I might observe, as to your question, that to my mind when something is originally designed with a great measure of commercial application in mind it would be preferable to have the type of clause that we insist on.

Senator MCCLELLAN. Thank you very much.

Call the next witness.

We have about 20 or 25 minutes left of this afternoon's session. I wonder if we can get through with Mr. Johnson.

Do you think we could get through with you at that length of time? Mr. JOHNSON. I think that depends more upon you than upon us, Mr. Chairman, because we can be very brief.

Senator MCCLELLAN. Well, have a seat, state your name and your position, please, sir.

STATEMENT OF JOHN A. JOHNSON, GENERAL COUNSEL, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION; ACCOMPANIED BY GERALD D. O'BRIEN, ASSISTANT COUNSEL FOR PATENT MATTERS Mr. JOHNSON. I am John A. Johnson, General Counsel of the National Aeronautics and Space Administration, and I have with me today Mr. Gerald D. O'Brien, who is Assistant Counsel for Patent Matters of the National Aeronautics and Space Administration.

Senator MCCLELLAN. Very well. Do you have a prepared statement?

Mr. JOHNSON. Yes, Mr. Chairman. I have filed a prepared statement with the committee. I am perfectly willing to forgo the reading of this statement if the chairman wishes. I might summarize some of the highlights of it, or if you wish simply to question me on it or to go ahead on other areas that you would like to have me testify on, I will conform with your desires.

Senator MCCLELLAN. The prepared statement will be printed in the record in full at this point.

(The statement follows:)

STATEMENT OF JOHN A. JOHNSON, GENERAL COUNSEL NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Mr. Chairman and members of the committee, in connection with the subcommittee's consideration of S. 1084 and S. 1176, it appeared to us that it would be helpful for the subcommittee to have a statement of the patent policies which have been adopted by the National Aeronautics and Space Administration with reference to contractors' inventions under section 305 of the National Aeronautics and Space Act of 1958.

The act provides that whenever the Administrator of NASA determines that an invention made in the performance of work under a NASA contract was made under the conditions specified in subsection 305(a) such invention shall be "the exclusive property of the United States, and if such invention is patentable a patent therefor shall be issued to the United States upon application made by the Administrator, unless the Administrator waives all or any part of the rights of the United States to such invention in conformity with the provisions of subsection (f) of this section." Subsection (f) provides that the Administrator, under such regulations as he shall prescribe, "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 performance of any work required by any contract of the Administration if the Administrator determines that the interests of the United States will be served thereby." Subsection (f) goes on to provide that any such waiver "may be made upon such terms and under such conditions as the Administrator shall determine to be required for the protection of the interests of the United States." It specifically requires, however, that each such waiver "shall be subject to the reservation by the Administrator of an irrevocable, nonexclusive, nontransferable, royalty-free license for the practice of such invention throughout the world by or on behalf of the United States or any foreign government pursuant to any treaty or agreement with the United States."

Before describing the policies which NASA has adopted for the administration of these provisions of section 305, some preliminary observations are in order, since public comment on this section of the act frequently gives the impression that a contract with NASA necessarily entails the loss of patent rights which the contractor would otherwise be entitled to retain. Section 305 definitely does not provide that all inventions made in the course of performing contracts with NASA shall become the property of the Government. Nor does it provide that any particular class of inventions made under NASA contracts shall become the property of the Government. Finally, it does not provide that every invention made under the conditions numerated under subsection 305 (a) of the act shall necessarily become the property of the Government. In all cases, even if the facts relating to the invention and the contract under which it was made are such as to enable NASA to acquire exclusive property rights to it on behalf of the United States, the Administrator may waive "all or any part" of those rights if he determines "that the interests of the United States will be served thereby."

To state it somewhat differently, a NASA contractor may retain property rights to inventions for any of the following reasons:

(a) The invention, although utilized in the performance of a contract with NASA, was made independently of any such contract.

(b) The invention, although made under a NASA contract, was not made under any of the conditions specified under subsection 305 (a) so as to warrant a positive determination pursuant to that subsection.

(c) The Administrator, in the exercise of his discretionary powers, waives the rights of the United States to the invention.

On the other hand, while recognizing the opportunities for NASA contractors to retain private rights to inventions, there is no doubt that the Congress intended the provisions of section 305 to result in some measure of acquisition by the United States of property rights to inventions made in the performanceof NASA contracts. If this were not so, it would have been simpler to omit this section from the act entirely, thus leaving NASA in the same legal posture as the Department of Defense so far as contractors' inventions are concerned. The detailed statutory provisions concerning this subject in section 305 are consistent only with a congressional intent that NASA not follow the patent policies of the Department of Defense but that it discriminate carefully, in the light of "the interests of the United States," between those inventions which should become the property of the Government and those which should remain in private ownership.

In the debate which has been going on for many years between the proponents of the Government's taking title to contractors' inventions and those who favor acquiring only a royalty-free license for Government use, there appears to have been rather general agreement that the Government's patent policies should, in the words of the Constitution, "promote the progress of science and useful arts" by stimulating inventive activity and encouraging the earliest and widest use of inventions for the benefit of the public. One of the fundamental purposes of the patent system is not served unless an invention is given practical application so that the public derives some tangible benefit from it.

It is frequently necessary that a single firm or person either own an invention or have the exclusive license under it in order to be willing to risk the capital required for its speedy development. The monopoly which the patent system provides is intended to make such risk-taking more attractive than would otherwise be the case.

The taking by the Government of title to inventions made in the course of Government-sponsored research and development work may deprive the public of this very real economic benefit from the patent system. The commercial development of certain inventions undoubtedly is retarded by the loss of patent protection through the Government's acquisition of title.

On the other hand, there is a definite public interest in being sure that the retention in private hands of patent rights to inventions resulting from Government-sponsored research and development actually operates in the beneficial way which is claimed for the patent system. The possibility that the patent may be used to suppress, rather than advance, a new line of technological development is certainly a legitimate object for concern, even though the instances of such misuse may be few and far between. As the result of the expenditure of public funds, the Government has a substantial interest in precluding suppression of such inventions and in deriving practical benefits from them for the public at an early date.

NASA's policies concerning retention or waiver of the Government's rights to contractors' inventions have been developed with these considerations in mind. As basic policy, NASA has announced that waiver would be in the interests of the United States "where (a) the stimulus of private ownership of patent rights will encourage the development of the invention to the point of practical application earlier than would otherwise be the case, or (b) there are substantial equities justifying the retention of private rights in the invention."

In carrying out this basic policy, NASA has established criteria by which inventions are grouped into two general classes-first, those inventions not generally eligible for waiver; and, second, those inventions with respect to which a prima facie case for waiver may be established. Concerning the first class, it is NASA's policy that the interests of the United States would not generally be served by waiver of its rights with respect to any invention which is "primarily adapted for and especially useful in the development and operation of vehicles, manned or unmanned, capable of sustained flight without support from or dependence upon the atmosphere," or is "of basic importance in continued research toward the solution of problems of sustained flight without support from or dependence upon the atmosphere." Even with respect to such inventions, however, the Administrator is not precluded from granting a waiver whenever it appears to his satisfaction that waiver would be in the interests of the United States in accordance with the basic policy stated above.

With respect to the second class, NASA considers that the following circumstances establish a prima facie case for waiver of title:

First, where the invention was conceived prior to and independently of, but was first actually reduced to practice in, the performance of work under a NASA contract, and the invention is covered by a U.S. patent issued or application filed prior to the award of the contract; or

Second, where the invention was conceived or first actually reduced to practice in the performance of a NASA contract for research work with a nonprofit organization whose primary purpose is the conduct of scientific research, and the contract does not call for the delivery of models of equipment or the development of practical processes; or

Third, where it appears that the invention has only incidental utility in the conduct of activities with which NASA is particularly concerned and has substantial promise of commercial utility; or

Fourth, where the invention is directed specifically to a line of business of the contractor with respect to which the contractor's previous expenditure of funds in the field of technology to which the invention pertains has been large in comparison to the amount of funds for research or development work in the same field of technology expended under the NASA contract in which the invention was conceived or first actually reduced to practice.

If an invention does not fall within any of the foregoing categories, waiver may nevertheless be granted whenever it appears to the satisfaction of the Administrator that such action would serve to carry out NASA's basic waiver policy.

As mentioned above, NASA has the statutory responsibility for protecting the "public interest" in exercising its waiver authority. It has sought to do this by providing that all waivers, except those granted on inventions developed to the point of practical application prior to the request for waiver, and waivers granted on inventions conceived prior to and independently of, but first actually reduced to practice in, the performance of work under a contract of the Administration, will be voidable at the option of the Administrator unless the recipient of the waiver shall, on or before the end of the fifth year from the grant of a U.S. patent on such invention or the end of the eighth year from the date of acceptance of the waiver, whichever is sooner, demonstrate to the Administrator (1) that the invention has been developed to the point of practical application, or (2) that the invention has been made available for licensing either royalty free or at a reasonable royalty rate, or (3) that there are circumstances justifying failure to comply with either of the foregoing and concurrently justifying continuance of the waiver.

Two other subsections of section 305 deserve mention, I believe, in this summary of NASA's patent policies.

Subsection (b) provides that each NASA contract "for the performance of any work shall contain provisions under which such party shall furnish promptly to the Administrator a written report containing full and complete technical information concerning any invention, discovery, improvement, or innovation which may be made in the performance of any such work." NASA regards this subsection as having the sole purpose of enabling it to acquire such technical information as may be necessary to protect the Government's interest in contractors' inventions. It does not interpret this provision of the act as requiring the furnishing of manufacturing or other technical data of a proprietary nature. To the extent that NASA requires the latter type of data, its needs are derived from the specific subject matter and purpose of the procurement involved, not from the requirements of section 305 of the act.

In accordance with this view of the law, NASA regulations provide that the contractor "may initially furnish to the contracting officer not only such technical information as is required for the purpose of identifying the invention and determining its utility in the conduct of aeronautical and space activities." Such reports must be furnished promptly upon the making of the invention. In addition, as a policing device, the contractor is required to furnish such a report immediately after the execution of the contract with respect to inventions made before award of the contract but upon an understanding in writing that a contract would be awarded. For the same reason, a final report is required prior to final settlement of the contract in which all reportable inventions must be included, whether or not covered in prior reports.

Subsection 305 (g) gives NASA the authority to grant licenses "for the practice by any person (other than an agency of the United States) of any invention for which the Administrator holds a patent on behalf of the United States."

It is NASA policy to grant a nonexclusive, royalty-free license to the NASA contractor responsible for the making of an invention which becomes the prop