Hitler to see that this was both an equitable and a practically useful change in patent law.

West Germany has for some years being growing at a faster rate under its free competitive enterprise system than we have, so their retention of this provision and its modification in 1957 has some interest for us. They have another interesting provision. Patentees have to pay a tax on their patent-this is in addition to the regular fee for obtaining the patent. The tax is relatively small to start off with, but after a few years it gets quite onerous so that a patentee who has not been successfully working his patent-thus making it useful to society-will eventually find it advisable to give up the patent and let others have a try at developing it.

England has another procedure designed to stimulate utilization of patents. Here is what the 1959 Encyclopedia Britannica says on this point:

In certain cases the comptroller may grant compulsory licenses. Since the original object of the patent laws was the establishment of new industries, the main grounds for the grant of such licenses are that the patented invention is not being worked within the country to the fullest practicable extent, or that the demand for patented articles is not being met on reasonable terms, or is being met by importation in place of home manufacture. Other grounds are that the existence of the patent monopoly, or the terms imposed on licensees, unfairly prejudice the development of commercial or industrial activities. The owner of a patent of later date may also apply for a license on the ground that the earlier patent precludes the use of his invention, but in such a case the later patentee may be required to give a cross license (Patents, vol. XVII, p. 376).

All these foreign patent provisions attempt to promote production in the respective countries.

The Defense Department patent rules give the contractor commercial and foreign patent rights. The company can then manufacture the patented product developed under Government research and development in a wholly or partially owned foreign subsidiary and then exclusively market it in this country. Such actions could create unfavorable balance-of-payment situations for us. Under the AEC patent rule where the Government takes title to such inventions, other U.S. companies at least can have the opportunity to compete because they can obtain a license from the Government. Now to get back to overall Government research and development contracts.

Of necessity these Government research and development contracts go to a relatively few industrial giants who have the know-how and the facilities. Government contracts to some extent contribute to the undesirable concentration of industrial power in a small number of companies. If you are interested in helping small and middling business, you can't do it by demanding that the Government give them a larger share of research and development contracts; most of them simply could not meet the necessary standards. But you can help small business and help them immensely by making certain that title to inventions made with Government money belongs to the Government, for then these inventions are made public and can be utilized by everyone, instead of merely by the few large companies who are already being greatly favored by obtaining the major share of R. & D.

contracts.

Senator LONG. I think 10 companies have got 70 percent of all this research and development money.

Admiral RICKOVER. Somewhat like that, sir.

Senator ENGLE. May I ask something?

I had a small research outfit come in to see me last week. They have, I think, about 65 people. They had a small contract with the Federal Government to do some research and development work which involved about $85,000, and it was only a little chunk of their business. And they came up with something which might have fitted into the particular research but which had been developed over their general operation. It had some relevancy, however, to this particular

contract.

They disputed that it was directly involved. Nevertheless, the Government grabbed it off and asserted a proprietary right to that idea, and it ended up with some big company producing it. So what this fellow said to me from Los Angeles was, he said, "We have got to find a way to get clear in or get clear out because here we sit with a little old ragtag of a contract and we have developed something through our other resources which has some bearing, but not a significant bearing, and we lose these rights."

He said, "We are going to go in head over heels or we are going to get clear out." That is what he said to me.

Now that bears on the point you are talking about. I would like to think of some way to help these small outfits out in southern California-and we just have them by the dozens out there-that are in this research and development field-many of them on their own money; very few of them in the Government field-to get the benefit of what they develop. And they are the ones that bring up this type of complaint that I have heard, that they lose the proprietary rights to these ideas, and all of a sudden the research and development show up being produced by big companies.

Admiral RICKOVER. Senator, I would doubt that they would lose anything they had developed on their own. I am, of course, not familiar with the details of this particular case.

Senator ENGLE. These things do overlap a good deal.

Admiral RICKOVER. Yes, and you could make a policy. You might, in any law you enact giving benefits to small business, include a provision that gives them special patent rights. But then you will be up against the dilemma of defining small business. There are all sorts of definitions. One is 500 people.

What is it? 500 scientists or 500 ditchdiggers?

This is a dilemma you get into when you start making a law where you try to define these things. In my opinion, we should make sure that anything that is developed under Government contract is immediately made available to the public. I think the case you cited is not a matter of patent policy but rather a bad mistake made by a contracting officer who for some reason or other wholly disregarded the small company's rights.

Take another example. The Post Office Department made a contract with Food Machinery & Chemical Co. to develop a new post office. The contract provided that if some other Government agency or department wanted to use it or any patented inventions, they couldn't. If the Navy Department, for example, wanted to build the same type of office using inventions developed under this contract, they would have to make a special contract with Food Machinery or with one of their licensees, and pay royalties to them.

You get yourself into a situation like that which is nonsensical. This sort of situation shows we certainly ought to have a uniform patent policy in the Government. I always thought the Post Office and the Navy and the Air Force were all in the same Government although I am beginning to doubt that now.

The Constitution expressly vests the duty of making patent laws in the Congress, not in the Department of Defense or any other executive department. If you let every agency or branch of the Government make its own rules you are going to have a number of different sets of Federal patent laws. Once you set up these different rules it gets progressively harder to establish a uniform principle because the different agencies and their contractors get a vested interest in the way things have been done. It is easier to go along with these vested interests than to do a little thinking about what are actually the basic principles underlying patent law.

Also, letting each agency set its own policy leaves protection of the public, the taxpayer, to agency contracting officers who have no direct interest in the matter. A contracting officer is mostly interested in getting a particular contract signed and the material delivered. He isn't interested in seeing that some national policy is carried out. Anyway, this shouldn't be left up to him.

Senator LONG. Let me ask a question, if I might, Mr. Chairman, that has been going through and through these hearings.

I have heard a dozen witnesses say this kind of thing to me when I have conducted hearings for small business, and I hear them telling the Judiciary Committee this. We keep hearing this allegation that a company must have a patent monopoly in order to put out a new product, that if you don't give them a patent monopoly and they are going to have to compete with somebody, that they just won't develop and won't put out a new product. We have challenged the representatives of the National Association of Manufacturers-at least this committee challenged representatives of the National Association of Manufacturers.

I have challenged a number of witnesses who made that statement to produce a single example.

Admiral RICKOVER. Yes, I am familiar with that.

Senator LONG. They have never produced any to me. They made themselves look silly trying to hedge around on that issue.

Do you know in your field of atomic energy responsibility of any commercial application of something you have for which there would logically appear to be a present-day commercial market which is not being developed?

Admiral RICKOVER. No, sir. I don't know of a single instance. Incidentally, I have heard these statements, too, but I have never had them substantiated.

I have not experienced a single instance where a company has refused to take business because of the AEC patent law. I have only had one instance of a company refusing to take business at all, and this was because I insisted that they agree not to divulge what they were doing to foreign countries. That is the only case. It had nothing to do with patents.

Senator LONG. I have a different point. I think you somewhat mis-· understood my question. What I had particularly in mind was this: Do you-for example, suppose you have some idea for a superior battery which would be charged in an atomic oven and put in an automobile. Do you know of any particular product that has been developed under the Atomic Energy Commission contracts for which there would logically appear to be a commercial market but which is not being developed or put out to sell to the public in the absence of a patent monopoly?

Admiral RICKOVER. No, sir. I know of no such case. I do know that people are coming around all the time to get money from the Government to do research to develop new ideas.

You will remember, sir, I told you last year that I was surprised when you asked me about this problem. Until you asked me, I didn't know that any problem existed. I know that TVA and Agriculture have had great success in getting their inventions utilized through nonexclusive royalty free licenses to all. There are maybe 1 in 500 more inventions that possibly might have a commercial market but are not being developed due to the absence of exclusive commercial rights. However, this may be due to the inherent risk of financing and, introducing any new market item.

In my opinion, this problem is largely fabricated in the minds of patent lawyers. I have a specific recommendation to make which might solve this problem.

Why doesn't Congress enact a law to pay each of these several thousand patent lawyers the same pay he is now getting income tax free, and let him retire provided only that he doesn't get a replacement? I think that will solve your problem in a very cheap way.

This may sound funny, but it might be the most economical way to solve the problem.

Senator PASTORE. I take it you are not a lawyer.

Admiral RICKOVER. Sir?

Senator PASTORE. That you are not a lawyer.

Admiral RICKOVER. Well, I wasn't castigating all lawyers because I have a suspicion you are a lawyer, too, sir.

Senator PASTORE. No. I quite agree with you, Admiral.

Admiral RICKOVER. You don't agree on this retirement. Don't express yourself publicly on that, sir.

Senator PASTORE. No. All of the ballyhoo that I ever heard on patents was at the time we were considering the 1954 amendment to the atomic energy law. Before that time there was never, never any doubt in anybody's mind. We were in agreement that everything was secret. All of the contracts were negotiated on a cost-plus basis. All the inventions that were discovered became the exclusive property of the U.S. Government.

Now, for what commercial uses they have been put to I don't know. I know we had quite a squabble in 1954 when we amended the law and allowed private industry to come into the field. At that time the academic discussion came up about the patent law, but since that time we have had no trouble with it at all, and I am very much refreshed by what you say, that this was all news to you until this matter came to your attention.

But I quite agree that you ought to have a definite public policy on this, and I don't think that the problem is as simple as some of us have been trying to state it is. There is a great deal involved. There are a lot of problems. This isn't a simple thing. This isn't a question of killing off all the patent lawyers and solving it. I think the problem still would be with us.

Admiral RICKOVER. I am not so sure you would have so much of a problem if it wasn't fomented and agitated. They don't have the same problem in other countries.

Senator PASTORE. They have a different kind of economy. mentioned Russia. In Russia everything belongs to the state.

You

Admiral RICKOVER. Look, we have a form of government which is dedicated to the greatest benefit for the individual, to preservation of individual rights. That is what we are all here for, and we want to maintain that. Yet we have stopped benefiting the individual inventor and we are giving everything to the corporation that employs him.

The Russians, who believe in state monopoly, turn around and benefit the individual.

For the last 30 to 40 years, all the theorists have been arguing that you can't have a viable Communist system, that it won't work. Meanwhile, it creeps up on us. The Russians now control half the people of the world. That is, the Communist system controls about half the people of the world. They are the second largest industrial power. They are increasing their rate of productivity at 7 percent; we at about 3 percent. And we keep on saying that their system is no good from a production standpoint.

The purpose of the U.S. Government is not just to support production. The purpose is freedom. And individual freedom may not always coincide with maximum production of consumer goods by giant business or with maximum business for the patent bar.

Senator SALTONSTALL. Admiral, if you are going to protect and improve the freedom of the individual citizen in the United States, which you say and which we all want, you have got to stimulate that freedom by the initiative that comes from the imagination and incentive that is given by the patents.

Admiral RICKOVER. I am all for that, sir.

But when you say that we must stimulate the freedom that patents. give to imagination and incentive you are actually speaking of the individual inventor. Nothing is really created by a team or by an organization. Every new idea comes out of a single human mind. You can provide the environment where new ideas best flourish—which may be a group of people with good inventive minds mutually stimulating each other and coordinating their research findings-but in the final analysis it is always the individual who creates. The original purpose of the patent law was to stimulate individual inventive creativeness by means of a temporary monopoly set up and protected by government during which the inventor would have the sole right to use and benefit from his own brainchild. I am all for rewarding the individual inventor. I think he should get a specific reward for coming up with a useful invention; it should not be considered part of his regular duties and be appropriated automatically by his employer.