NATIONAL PATENT POLICY

FRIDAY, JUNE 2, 1961

U.S. SENATE,

SUBCOMMITTEE ON PATENTS,

TRADEMARKS, AND COPYRIGHTS OF THE

COMMITTEE ON THE JUDICIARY, Washington, D.C. The subcommittee met, pursuant to notice, at 2:10 p.m., in room 2300, New Senate Office Building, Senator John L. McClellan presiding.

Present: Senators McClellan, Hart, Wiley, and Hruska.

Also present: Senators Anderson, Douglas, Gruening, Pastore, Saltonstall, Engle, Long (Louisiana), and Metcalf.

Staff members present: Robert L. Wright, chief counsel, Patents Subcommittee; Clarence Dinkins, assistant counsel; Herschel F. Clesner, assistant counsel; George Green, professional staff member; and Thomas C. Brennan, investigator.

Senator MCCLELLAN. All right, gentlemen, I think the committes may now come to order.

On behalf of the committee, I wish to welcome our colleagues who are not members of the committee who are here, particularly Senator Long who is the author of one of the bills that the committee has been studying, and the other Senators, Senators Gruening, Pastore, and Metcalf, who are not members of the committee. We are especially glad to have you because the witness we have this morning, Admiral Rickover, is one of the most prominent and most important among the personnel of Government today, particularly in the area of national defense and security, and in the course of studying this subject of patent rights and the Government's equity and interest in patents that arise out of Government contracts with the Government financing the project, we felt that Admiral Rickover had vast experience that would be helpful to this committee, and we sought his presence here today and invited him to come and testify and give us the benefit of his knowledge and of his counsel.

Admiral, we are happy to welcome you, and we appreciate your responding to our invitation. We want you to feel free to give your testimony, make your presentation in a way that appeals to you as being desirable and proper to get the information before us that you can give us.

If you prefer, we will let you just make a general statement without interruption, make such comments as you desire without interruption, and then members and visiting colleagues may ask you questions if you will permit us to do so.

1

TESTIMONY OF VICE ADM. H. G. RICKOVER, ASSISTANT DIRECTOR FOR NAVAL REACTORS, U.S. ATOMIC ENERGY COMMISSION, AND ASSISTANT CHIEF OF BUREAU FOR NUCLEAR PROPULSION, BUREAU OF SHIPS, DEPARTMENT OF THE NAVY

Admiral RICKOVER. Thank you very much for your kind and gracious words, Senator McClellan.

It is a great privilege to be here. It is both a privilege and a duty. I have no prepared statement. I would appreciate that, at your pleasure as chairman and at the pleasure of the other distinguished Senators who are here, you interrupt me at any time and ask questions. I believe the problem can be more clearly developed by giveand-take questioning than by a formal presentation.

if

Senator MCCLELLAN. May I ask you then at this point, Admiral, you have read, if you are familiar with the two bills that the committee has under consideration, a bill by Senator Long, S. 1176, and one by the chairman of the subcommittee, S. 1084?

sir.

Admiral RICKOVER. I am generally familiar with the bills; yes,

Senator MCCLELLAN. You are generally familiar with them?
Admiral RICKOVER. Yes, sir.

I am primarily interested in the subject of patents as it relates to national security, the strength and safety of our country. I hope you will understand that everything I say flows from that concern.

I have not had the problem that contracting companies with whom I deal might refuse to work for the naval reactors program, because, subject to closely controlled exceptions, the law vests in the Government title to inventions made under AEC contracts. The reason is that the law removes the patent issue from our relations with contractors. It has not in any way handicapped us in obtaining from them contracts that are advantageous to the Government. The patent controversy is therefore not a problem in my own work.

But I am greatly disturbed that other agencies-notably the Defense Department which dispenses almost 70 percent of Government research and development funds-follows a policy of giving away inventions paid for by the American people. What disturbs me is not so much the fact-manifestly unjustifiable as it is that individual companies may make a great deal of money out of inventions developed with public funds, but that this overgenerous policy has an adverse effect on our defense program. It is from this standpoint-the effect of patent giveaway policies on our national posture and strength in this period of extreme crisis-that I would like to talk. Senator MCCLELLAN. Let the record show that Senator Anderson is present.

Senator ANDERSON. Thank you, Mr. Chairman, for the invitation. Senator MCCLELLAN. Off the record.

(Discussion off the record.)

Senator MCCLELLAN. You said you had read the bills and were familiar with them?

Admiral RICKOVER. Yes, sir.

Senator MCCLELLAN. All right, proceed.

Admiral RICKOVER. Three years ago I testified before the House of Representatives Select Committee on Astronautics and Space Ex

ploration. Legislation was then being considered for setting up the Space Administration (NASA). I was asked what I thought should be done about patent rights to inventions made with research funds that would be granted by the new Space Agency. I urged that the Space Act follow the rule laid down in the AEC Act, explicitly vesting in the Government title to inventions financed by NASA research funds. It seemed to me then-as it still does-that inventions developed with public money belong to the American public.

As finally passed by Congress, the patent policy laid down for the new Space Agency was in accord with these recommendations; it is essentially the same policy as that contained in the Atomic Energy Act. These two agencies are thus by law required to take title to inventions paid for by the American people unless it can be shown that the public interest requires some other disposition. The title policy is also followed by the Tennessee Valley Authority (TVA) and by the Department of Agriculture. A diametrically opposed patent policy, however, is followed by the Defense Department. Subject only in most instances to license-free use of publicly financed inventions by the Department itself, contracting firms are granted patents which give them a 17-year monopoly against the 183 million Amerimans out of whose pockets come all public funds dispensed by the Defense Department. All of these 183 million people are precluded, for 17 years, from benefiting from inventions for which they have paid with their taxes. The Defense Department does not sell patent rights as any agency should be, of course, permitted to do provided no national security is involved. It does not bargain with contractors, granting patent rights as a quid pro quo for better contract terms. It simply hands over these rights as a matter of agency policy.

It seems to me important to pin point the difference between giveaway of public property by decision of a particular agency and dispensation of public subsidies to ailing sectors of our economy by act of Congress. Analogies are often drawn by defenders of the patent giveaway policy with farm subsidies, subsidies to shipping, other forms of transportation, et cetera. These subsidies are expressly granted by Congress. And Congress, in our form of government, is the only body that has the right to give away public property. In the case of these subsidies, moreover, a public interest in supporting particular segments of the American economy is involved. I do not see how one could make an analogous case for contracting firms obtaining Defense Department research grants. The firms who receive grants are a relatively few huge corporate entities already possessing great concentrated economic power. They are not ailing segments of the economy in need of public aid or subsidy. Nor is there any real need to offer patent giveaways in order to induce them to accept Defense Department research grants or contracts. I think it needs no special proof to say that Government contracts are and always have been highly lucrative and much sought after. To claim that agencies cannot get firms to sign such contracts unless patent rights are given away strikes me as fanciful nonsense.

So fas as I am aware, the only major case in point occurred when the drug industry refused Government grants for cancer chemotherapy and psychopharmacology research unless they were given patent rights to inventions made with public money. There was, I

believe, also the case of a firm refusing a NASA contract but in that case it was playing the Defense Department against the Space Agency. If we had a uniform Government patent policy, corporations could not do this. As I mentioned before, we in the Naval Reactors Group have had no difficulty obtaining contracts that are advantageous to the Government even though under the AEC Act we could not, if we wished, give away patents to AEC financed in

ventions.

The present situation is unsatisfactory. Agencies of the same U.S. Government pursue diametrically opposed policies on patent rights to inventions financed by the Government even when it may concern the same areas of technology, such as medical research where the Defense Department and the Department of Health, Education, and Welfare (HEW) follow different policies. This naturally makes for inequities. It leaves the power of decision on an important public matter that should be regulated by Congress to contracting officers of different agencies. As a result the House Appropriations Committee is insisting that the Defense Department should judge more strictly whether defense-supported medical research is limited to areas peculiar to military requirements. Furthermore, the Appropriations Committee felt that medical problems common to all our people, including those of miltary personnel, should not be investigated with Defense funds. Many people inside and out of Congress feel very strongly that the foundation of all agency patent policies should be the principle that inventions made with public money belong to the public, and that Congress should pass legislation requiring all Government agencies to proceed on that basis, with allowance for waivers in special cases, such as when corporations have contributed their own money to such inventions, or for bargaining purposes, that is, to enable the Government to obtain more favorable contracts. This is my own view. On the other hand, those who presently benefit from the patent giveaway policy of the Defense Department are making strenuous efforts to have that Department's policy made applicable to all Government contracts, most particularly to those of NASA. Leader in the attack against the AEC and NASA patent policy is the patent bar.

When $8, $9, $10 billion of public funds are invested in research, innumerable commercially useful inventions are bound to be made, in addition to those of primary military significance. Obviously, it is in the interest of the patent bar that such commercially useful inventions be privately patented since this will make for a good deal of lucrative patent business. When title to publicly financed inventions is vested in the Government, the patent bar may not derive any special benefit from the Government's vast research program. Hence, their extremely active support of the Defense Department's giveaway patent policy. Senator LONG. Their influence is so pervasive that when last year the Government set up a study group to examine patent policy, this group went to the George Washington Patent Foundation for advice. on what their position should be. The interesting thing is that the George Washington Patent Foundation is supported by the private patent lawyers and by inndustry, and they have an ax to grind. No one has a greater interest in preserving a system of taxing the public for private advantage than do the patent lawyers themselves.

Admiral RICKOVER. It has been my experience that the patent bar is a much stronger advocate of the giveaway patent policy than the contracting firms themselves. Of course, the firms get profits and other benefits from Government contracts whereas the patent bar depends wholly on the giveaway patent policy for extracting a benefit for itself out of public research contracts.

I would like to quote some remarks made by Senator Long before Congress last year which coincide exactly with my own experience: He said

the impression I have gained is that those who demand this unconscionable advantage are not so much those in big business as their patent lawyers. Most big businessmen with whom I have discussed the matter have quite readily conceded to me that what is sauce for the goose is also sauce for the gander; that if they employed someone to do research and development work for them, they would insist on retaining the patent rights for their company; and that it is logical for the Government to proceed on the same basis.

I cannot see how one can make out a convincing case for the right of patent attorneys to have their special interests considered in laying down Government policy on patents for inventions made under public research contracts. It seems to me we have here a clear conflict of interest between some 6,000 patent attorneys and the 183 million Americans who pay for Government contracts and to whose clear interest it is that useful inventions for which they pay should be promptly disclosed so that everyone can utilize them. Of course, advocates of the giveaway patent policy are silent on the advantages this policy bestows on the bar; their arguments proceed on the highest level of the American way of life, the free enterprise system, the Constitution, and so on.

The private interest of those who favor the giveaway patent policy has many advocates and is ably presented. Very few advocates defend the interest of the American people or of the Nation as a whole. I think it important that it be generally known that the principal defenders of the patent giveaway policy-as presently followed by the Defense Department-are members of the patent bar, and that in defending this policy they are defending their own special interest rather than the public interest.

For years the patent bar has very actively pursued the objective of preventing extension of AEC patent policy to other Government agencies. Particularly heavy pressure was exerted 3 years ago when the Space Act was under consideration by Congress. Nevertheless, in the end this act did incorporate the AEC patent policy. The patent bar sees this as merely a temporary setback. Though they were unsuccessful then, they are still in there pitching to reinstate the giveaway patent policy.

Senator LONG. Last year they actually succeeded in obtaining the help of some NASA officials who were advocates of the Defense Department policy, as they had come from there. Two such officials, for instance, were present at an important meeting of the Committee on Government Patent Policies of the American Patent Law Association on April 29, 1960. The meeting resolved once more that

the purpose of the patent system will be best achieved by the vestment of title to all inventions made by contractors in fulfilling research and development contracts, financed in whole or in part by the Government.

74945-61-2