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Pateent AIn c C e r I ln gPoIc~ies Anid Pr act e s B-761059

BY THE COMPTROLLER GEANERAh;2OF THE UNITED STATES

I~~AG

Su x COMPTROLLER GENERAL OF THE UNITED STATES

WASHINGTON. D.C. 20548

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The Honorable Les AspinHouse of Representatives

Dear Mr. Aspin:

Your letter of March 19, 1974, requested information onDepartment of Defense (DOD) current patent and licensing pol-icies and practices, the extent to which DOD's regulations aresimilar to those of the General Services Administration (GSA)that were declared void in a recent court decision, how DODfeels it is affected by the decision, and whether it intendsto make any changes in those policies and practices.

DOD's allocation of rights to inventions resulting fromresearch and development contracts and its licensing of patentsto which it has acquired title is discussed below in relationto Government patent policies formally issued in 1963 and re-vised in 1971.

ALLOCATION OF RIGHTS IN INVENTIONS

The Armed Services Procurement Regulation (ASPR) permitsthe allocation of rights in inventions resulting fromGovernment-sponsored research and development to either theGovernment or the contractor, depending on the circumstances.Such allocations of rights may consist of ownership of inven-tions as distinguished from licenses which are merely permitsto make, use, or sell the inventions.

The Statement of Government Patent Policy dated Octo-ber 10, 1963, Cenc. 1) quoted in ASPR Section 9-107.3 providesfor the Government to normally acquire or reserve the right toacquire the principal or exclusive rights in and to inventionsmade-in the course of or under a contract where the:

--Principal purpose of the contract is to create, develop,or improve products, processes, or methods which are in-tended for commercial use (or which are otherwise in-tended to be made available for use) by the generalpublic at home or abroad, or which will be required forsuch use by governmental regulations.

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--Principal purpose of the contract is for exploring fieldswhich directly concern the public health or public wel-fare.

--Contract is in a field of science or technology in whichthere has been little significant experience outside ofwork funded by the Government, or where the Governmenthas been the principal developer of the field, and theacquisition of exclusive rights at the time of contract-ing might confer on the contractor a preferred or dominantposition.

-- Services of the contractor are

(1) for operating a Government-owned research or produc-tion facility or

(2) for coordinating and directing the work of others.

The patent policy and the ASPR also provide three situationswhere the contractor may acquire the principal or exclusiverights in inventions, subject to the Government's acquiring anirrevocable nonexclusive royalty-free license for governmentalpurposes. The contractor may acquire:

1. Greater rights than a nonexclusive license at the timeof contracting where the Secretary certifies that suchaction will best serve the public interest or where theinvention is not the primary object of the contract andthe acquisition of such greater rights is consistentwith the intent of the patent policy and a necessary in-centive to call forth private risk capital and expenseto bring the invention to the point of practical applica-tion.

2. Principal or exclusive rights where the purpose of thecontract is to build upon existing knowledge or tech-nology to develop information, products, processes, ormethods for use by the Government, and the work is lI afield of technology in which the contractor has acquiredtechnical competence (demonstrated by such factors as

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know-how, experience and patent position) directlyrelated to an area in which the contractor has anestablished nongovernmental commercial-position.

3. Greater rights than a nonexclusive license in inven-tions at the time of contracting where the commercialinterests of the contractors have not been suffi-ciently established. The final determination ofrights is to be made by the contracting officer afterthe invention is identified, in a manner deemed mostlikely to serve the public interest taking into ac-count the contractor's intentions to bring the in-vention to a point of commercial application.

Other provisions are where the principal or exclusiverights are retained by the contractor, he should agree:

--To provide written reports to the Government when re-quested on the commercial use being made or intended tobe made of inventions made under Government contracts.

--That the Government has the right to require the grant-ing of a license to an applicant on a nonexclusivcroyalty-free basis if he or his assignee has not takeneffective steps within 3 years after patent issues onthe invention to bring the invention to the point ofpractical application, has not made the invention avail-able for license, or cannot show cause why he should re-tain the rights for a further period of time.

--The Government has the right to require the granting ofa license to an applicant if the invention is requiredfor public use by governmental regulations or necessaryto fulfill health needs or other public purposes.

The Government patent policy was revised in 1971 (enc. 2)to give agency heads greater latitude to allocate to contrac-tors additional rights to Government-sponsored inventions asare necessary to encourage commercial use of the inventions orwhere equitable circumstances would justify such allocation ofrights. DOD has drafted new ASPR provisions to incorporate andimplement the revised patent policy but has not made thesechanges final. CSee p. 6.)

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Three possible patent rights clauses are prescribed forinclusion in contracts for procurements involving experimental,development, or research work.

The contracting officer's determination of the patentrights clause used depends on the nature of the research to bedone, the application and public need for the invention, 'thecontractor's commercial expertise in the field of science ortechnology, and the extent of the contractor's prior experi-ence.

The Patent Rights (Title) clause is used if the Governmentis. to acquire the principal or exclusive rights. If the con-tracting officer determines that the Government should not ac-quire these rights, either the license or one of the deferredclauses (see below) is used.

When the title clause is used, the contractor agrees togrant the Government.all right, title, and interest in and toeach subject invention made under the contract, subject to itsreservation of a nonexclusive and royalty-free license. Thecontractor may at the time of disclosing the subject inventionrequest greater rights than a license if the invention is notthe primary object of the contract and the acquisition of suchgreater rights is consistent with the intent of the patent pol-icy and necessary "to call forth private risk capital and ex-pense to bring the invention to the point of practical applica-tion.

The greater rights, if granted, are subject to (1) theGovernment's acquiring an irrevocable, nonexclusive, androyalty-free license for governmental purposes and (2) the Gov-ernment's right to require a license to be granted an appli-cant on a nonexclusive, royalty-free basis if

--the contractor or its assignee has not taken effectivesteps within 3 years after the invention is patented tobring it to the point of practical application,

--the contractor has not made the invention available forlicensing or is unable to show cause why title shouldbe retained for a further period of time, or

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--the invention is required for public use by governmentalregulations, is necessary to fulfill health needs, or isfor other public purposes.

The Patent Rights (licensing) clause provides for the con-tractor to retain title to the subject inventions and for theGovernment to acquire an irrevocable, nonexclusive, and royalty-free license for governmental purposes together with the'rightto require a license to be granted an applicant under the samecircumstances.

The Patent Rights (deferred) clause is the same as thetitle clause except that the circumstances under which the Gov-ernment may permit the contractor to acquire greater rightsthan a license are modified. The clause requires the contrac-tor, when disclosing the subject invention, to supply informa-tion concerning its intention and plan to bring the inventionto the point of commercial application. A decision is then madeas to disposition of the invention.

Thus, by including patent rights clauses in research anddevelopment contracts, contracting officers can dispose ofrights in Government-sponsored inventions before and after theinventions are developed and disclosed by the contractor.

GSA regulations on "Allocation of Rights in Inventions"

To implement the 1971 patent policy statement, GSA promul-gated regulations for allocating or determining rights to in-ventions resulting from Government-sponsored research. Theseregulations permit Government agencies that are not otherwisesubject to specific statutes to dispose of Governiment-sponsoredinventions by either granting a contractor the principal or ex-clusive rights or greater rights than a license in the mannerspecified in the patent policy.

The regulations were published on September 4, 1973, in38 Federal Register 23782, after the original draft of the Tegu-lations was made available to Government agencies, industry as-sociations, and others for review in May 1972. The regulatrl.onswere to become effective on March 4, 1974. However, becaisi of

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a court action filed February 15, 1974,1 challenging the validityof the regulations, the GSA canceled the effective date untilfurther notice.

The GSA regulations provide about the same criteria andguidance to civil agencies required to follow them that the ASPRprovides to military departments for determining and allocatingrights in inventions resulting from Government research and de-velopment contracts. The GSA provisions differ slightly from theASPR inasmuch as they include the 1971 patent policy revisions.

We understand that the proposed revision coincides in manyrespects with the GSA regulations and that the ASPR revision willbe withheld pending the outcome of the court action.

Military departments' statistics on patent practices showthat for the 5-year period ending June 30, 1973, about 38,000DOD research and development procurement actions containing pa-tent rights clauses were issued. Of these clauses, 6 percentprovide for the Government to acquire the principal or exclusiverights; 80 percent for contractors to acquire these rights; and14 percent for the deferral of determinations until after theinvention is reported and identified.

In the same 5-year period, DOD contractors disclosed about15,000 inventions. Of this number, it is estimated that DOD ac-quired title to less than 4 percent of the disclosed inventionspursuant to contract title clauses. DOD also acquired title toabout 62 percent of the disclosed inventions after contractorsdecided not to exercise their options to acquire. Contractorsreceived or reservc'd licenses in inventions to which the Govern-ment acquired title The Government also acquired nonexclusive,royalty-free licerv- to about 34 percent of the inventions pur-suant to contract c ses.

'Public Citizen, et al.. v. Sampson, Administrator, Civil ActionNo. 74-303, filed Feb. 15, 1974, in the U.S. District Court forthe District of Columbia.

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LICENSING REGULATIONS

DOD has no prescribed regulations or procedures governingthe licensing of Government-owned patents. FormaL licensingactivity has been limited.

The 1963 Government Patent Policy provided for makingavailable the scientific and technological advances covered byGovernment-owned patents in the shortest time possible throughdedication or licensing. The ASPR recites this provision butdoes not prescribe procedures for the licensing of patents un-der DOD control. Each military department has regulations or.instructions for licensing patents.

On November 24, 1969, the Assistant Secretary of Defense(Comptroller) issued a memorandum to the Assistant Secretariesof the military departments on promoting public use of DODpatents. The memorandum pointed out the need to generate anongoing program directed toward publicizing DOD-owned patents,vitalizing licensing the patents to business and industrialusers who could and would exploit them and for upgrading theoverall management of DOD patent properties.

Notwithstanding this effort to promote the licensing andpublic use of DOD patents, the military departments have issuedslightly more than 200 nonexclusive licenses since 1963. DODhas not issued any exclusive licenses-.- At the end of fiscalyear 1973, DOD had more than 15,000 patents available for li-censing.

The 1971 revision of the patent policy directed the GSAAdministrator to promulgate and publish regulations for licens-ing Government-owned patents, either exclusive or nonexclusive,and for listing available patents for licensing in officialpublications or otherwise. GSA published such regulations onFebruary 5, 1973. These regulations, effective May 7, 1973,provided guidelines and procedures to Government agencies forthe nonexclusive and exclusive licensing of Government-owncJU.S. patents and inventions for which the Government had fii'redU.S. patent applications.

DOD issued a directive on November 2, 1973, announcing itspolicy on licensing. The directive stated that the public

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interest requires efforts to encourage the expeditiousdevelopment and civilian use of inventions resulting fromwork funded by the Government. The 1971 policy provides forattaining this goal through nonexclusive or exclusive licens-ing of such inventions under regulations prescribed by theGSA Administrator. The directive provided for each militarydepartment and DOD agency having a portfolio of Government-owned inventions to implement licensing programs and proce-dures consistent with the intent of the policy and GSA li-censing regulations, and to submit them for approval.

In an action filed in the United States District Courtfor the District of Columbia, Public Citizen, Inc., and 11Representatives of the Congress challenged the legality ofthe GSA licensing regulations. On January 17, 1974, thecourt declared the regulations void, stating that the Con-stitution prohibits granting exclusive licenses onGovernment-owned patents and inventions without congres-sional authorization. The Congress has not authorized GSA togrant exclusive licenses. The Justice Department notifiedthe court that an appeal to the decision would be filed.

As a result of the court decision, the Deputy Assist-ant Secretary of Defense (Procurement) on February 8, 1974,advised the military departments that, pending final disposi-tion of this case and the issuance of further instructions,no exclusive licenses to Government-owned patents shall beissued nor need the licensing procedures required by the di-rective be submitted for approval.

We trust you will find this information useful. Pleaseadvise if we can be of further help. We plan no further dis-tribution of this letter unless you agree or publiclyannounce its contents.

Sincerely yours,

Comptroller Generalof the United States

Enclosures - 2

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APPENDIX A

PRESIDENTIAL MEMORANDUM AND STATEMENT OFGOVERNMENT PATENT POLICY ISSUED OCTOBER 1o, '

1963

(Published Federal Register, Vol. 28 No. 200, October 12, 1963)

Memorandum for the Heads of Executive Departments and Agencies

Over the years, through Executive and Legislative actions, a variety ofpractices has developed within the Executive Branch affecting the dispositionof rights to inventions made under contracts with outside organizations. It isnot feasible to have complete uniformity of practice throughout the Govern-ment in view of the differing missions and statutory responsibilities of theseveral departments and agencies engaged in research and development. Never-theless, there is need for greater consistency in agency practices in order tofurther the governmental and public interests in promoting the utilization ofFederally-financed inventions and to avoid difficulties caused by different ap-proaches by the agencies when dealing with the same class of organizations incomparable patent situations.

From the extensive and fruitful national discussions of Government patentpractices, significant common ground has come into view. First, a singlepresumption of ownership does not provide a satisfacto-y basis forGovernment-wide policy on the allocation of rights to inventions. Anotlhercommon ground of understanding is that the Government has a responsibilityto foster the fullest exploitation of the inventions for the public bcnenfit.

Attached for your guidance is a statement of Government patent policy,which I have approved, identifying common objectives and criteria and settingforth the n-inimum rights that Government agencies should acquire with regardto inventions made under their grants and contracts. This statement of policyseeks to protect the public interest by encouraging the Government to acquirethe principal rights to inventions in situations where the nature of the work tobe undertaken or the Government's past investment-in-the field of work favorsfull public access to resulting inventions. On the other hand, the policyrecognizes that the public interest might also be served by according exclusivecomnrercial rights to the contractor in situations where the contractor has anestablished nongovernmental commercial position and where there is greaterlikelihood that the invention would be worked and put into civilian use thanwould be the case if the invention were made more freely available.

Wherever the contractor retains more than a nonexclusive license, the policywould guard against failure to practice the invention by requiring that the

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contractor take effective steps within three years after the patent issues tobring the invention to the point of practical application or to make it availablefor licensing on reasonable terns. The Government would also have the right toinsist on the granting of a license to others to the extent that the invention isrequired for public use by Governmental regulations or to fulfill a health need,Irrespective of the purpose of the contract.

The attached statement of policy will be reviewed after a reasonable periodof trial in the light of the facts and experienqe accumulated. Accordingly, thereshould be continuing efforts to monitor, record, and evaluate the practices ofthe agencies pursuant to the policy guidelines.

This memorandum and the statement of policy shall be published in theFederal Register.

JOHN F. KENNEDY

STATEMENT OF GOVE EMSET PATENT POLICY

BASic Condderations

A. The Government expends large sums for the conduct of research anddevelopment which results in a considerable number of inventions anddiscovercs.

D. The inventions in scientific and technological fields resulting froin workperfonr«d under Government contracts constitute a valuable national rC ource.

C. line use and practice of these inventions and discoveries should soimultteinventors, meet the needs of the Government, recognize the equities of thecontractor, and serve the public interest.

D. TIe public interest in a dynamic and cfficient economy requires thatefforts be made to encourage the expeditious development and civliian use ofthese inventions. Both the need for incentives to draw forth private initiativesto this end, and the need to promote healthy competition in industry must beweighed in the disposition of patent rights under Government contracts. Whereexclusive rights are acquired by the contractor, he remains subject to theprovisions of the antitrust laws. -

E. The public interest is also served by sharing of benefits of Government-financed research and development with foreign countries to a degree con-sistent with our international programs and with the objectives of U.S. foreignpolicy.

F. There is growing importance attaching to the acquisition of foreignpatent rights in furtherance of the interests of U.S. industry and the Govern-ment.

G. The prudent administration of Government research and developmentcalls for a Government-wide policy on the disposition of inventions madeuftder Government contracts reflecting common principles and objectives, toextent consistent with the missions of the respective agencies. The policy mustrecognize the need for flexibility to accommodate special situations.

Policy

SECTION 1. Tnc following basic policy is established for all Governmentagencies with respect to inventions or discoveries madc in the course of or

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under any contract of any Government agency, subject to specific statutestbverning the disposition of patent rights of certain Government agencies.

(a) Where(l) a principal purpose of the contract is to create, develop or improve

products, processes, or methods which are intended for comniercialuse (or which are otherwise intended to be made available for use)by the general public at home or abroad, or which will be required,for such use by Governmental regulations; or

(2 a principal purpose of the contract is for exploration into fieldswhich directly concern the public health or public welfare; or

(3) the contract is in a field of science or technology In which there hasbeen little significant experience outside of work funded by theGovernment, or where the Government has been the principaldeveloper of the field, and the acquisition of exclusive rights at thetime of contracting might confer on the contractor a preferred ordominant position; or

(4) the services of the contractor are(i) for the operation of a Government-owned research or production

facility; or(ii) for coordinating and directing the work of others,

the Government shall normally acquire or reserve the right to acquire theprincipal or exclusive rights throughout the world in and to any inventionsmade in the course of or under the contrac] In exceptional circumstances thecontractor may acquire greater rights than a rnonexclusive license at the time ofcontracting, where the head of the department or agency certifies that suchaction will best serve the public irntrest. Greater rights may also be acquired bythe contractor after the inventLr has been identified, where the inventionwhen made in the course of or u;)Jer the contract is not a primary object ofthe contract, provided the acquisition of such greater rights is consistent withthe intent of this Scction 1(a) and is a necessary incentive to call forth privaterisk capital and expense to bring the invention to the point of practical applica-tion.

(b) In other situations, where the purpose of 'the contract is to build uponexisting knowledge or technology, to develop information, products, processes,or methods for use by the Government, and the work called for by thecontract is in a field of technology in which the contractor has acquiredtechnical competence (demonstrated by factors such as know-how, experience,and patent position) directly related to an area in which the contractor has anestablished nongovernmental commercial position, the contractor shall normal-ly acquire the principal or exclusive rights throughout the world in and to anyresulting inventions, subject to the Governrment acquiring at least an ir-revocable nonexclusive royalty-free license. throughout the world forGovernmental purposes.

(c) Where the commercial interests of the contractor are not sufficientlyestablished to be covered by the criteria specified in Section 1(h), above, thedetermination of rights shall be made by the agency after the invention hasbeen identified, in a manner deemed most likely to serve the public interest asexpressed in this policy statement, taking particularly into account theintentions of the contractor to bring the invention to the point of commercialapplication and the guidelines of Section l(a) hereof, provided that the agency

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may prescribe by regulation special situations where the public interest in theavailability of the inventions would best be served by permitting the contractorto acquire at the time of contracting greater rights than a nonexclusive license.In any case the Government shall acquire at least a nonexclusive royalty-freelicense throughout the world for Governmental purposes.

(d) In the situation specified in Sections 1(b) and 1(c), when two or morepotential contractors are judged to have presented proposals of equivalentmerit, willingness to grant the Govermnent principal or exclusive rights inresulting inventions will be an additional factor in the evaluation of theproposals.

(e) Where the principal or exclusive (except as against the Government).rights in an invention remain in the contractor, he should agree to providewritten reports at reasonable intervals, when requested by the Government, onthe commercial use that is being made or is intended to be made of inventionsmade under government contracts.

(f) Where the principal or exclusive (except as against the Government)rights in an invention remain in the contractor, unless the contractor, hislicensee, or his assignee has taken effective steps within three years after apatent issues on the invention to bring the invention to the point of practicalapplication or has made the invention available for licensing royalty-free or onterms that are reasonable in the circumstances, or can show cause why heshould retain the principal or exclusive rights for a further period of time, theGovernment shall have the riglt to require the granting of a license to anapplicant on a nonexclusive royalty-free basis.

(g) Where the principal or exclusive (except the Government) rights to aninvention are acquired by the contractor, the Government shall have the rightto require the granting of a license to an applicant rbyalty-free or on terms thatare reasonable in the circumstances to the extent that the invention is requiredfor public use by Governmental regulations or as may be necessary to fulfillhealth needs, or for other public purposes stipulated in the contract.

(h) Where the Government may acquire the principal rights and does notelect to secure a patent in a foreign country, the contractor may file and retainthe principal or exclusive foreign rights subject to retention by the Governmentof at least a royalty-free license for Governmental purposes and on behalf ofany foreign government pursuant to any existing or future treaty or agreementwith the United States.

SECTION 2. Government-owned patents shall be made available andthe technological advances covered thereby brought into being in the shortesttime possible through dedication or licensing and shall be listed in officialGovernment publications or otherwise.

SECTION 3. The Federal Council for Science and Technology in consulta-tion 'With the Department of Justice shall prepare at least annually a reportconcerning the effectiveness of this policy, including recommendations forrevision or modification as necessary in light of the practices and determina-tions of the agencies in the disposition of patent rights under their contracts. Apatent advisory panel is to be established under the Federal Council for Scienceand Technology to

(a) develop by mutual consultation and coordination with the agenciescommon guidelines for the implementation of this policy, consistent with

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exIsting statutes, and to provide overall guidance as to disposition of inventionsand patents in which the Government has any right or interest; and

(b) encourage the acquisition of data by Government agencies on thedisposition of patent rights to Inventions resulting from Federally-financedresearch and development and on the use and practice of such inventions, toserve as basis for policy review and development; and

(c) make recommendations for advancing the use and exploitation ofGovernment-owned domestic and foreign patents.

SECTION 4. Definitions: As used in this policy statement, the stated termsin singular and plural are defined as follows for the purposes hereof:

(a) Government agency-includes any Executive department, independentcommission, board, office, agency, administration, authority, or other Govern-ment establishment of the Executive Branch of the Government of the UnitedStates of America.

(b) Invention or Invention or discovery-includes any art, machine,manufacture, design, or composition of matter, or any new and useful improve-

ment thereof, or any variety of plant, which is or may be patentable under thePatent Laws of the United States of America or any foreign country.

(c) Contmrcor-means any individual, partnership, public or privatecorporation, association, institution, or other entity which is a party to thecontract.

(d) Contract-means any actual or proposed contract, agreement, grant, orother arrangement, or subcontract entered into with or for the benefit of theGovernment where a purpose of the contract is the conduct of experimental,developmental, or research work.

(e) Made-when used in relation to any Invention or discovery means theconception or first actual reduction to practice of such invention in the courseof or under the contract.

(f) Governmental purpose-means the right of the Government of theUnited States (including any agency thereof, state, or domestic municipalgovernment) to practice and have practiced (make or have made, use or haveused, sell or have sold) throughout the world by or on behalf of the Govern-ment of the United States.

(g) To the point of practical application-means to manufacture in the caseof a composition or product, to practice in the case of a process, or to operateIn the case of a machine and under such conditions as to establish that theinvention is being worked and that its benefits are reasonably accessible to thepublic.

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APPENDIIX F

MEMORANDUM AND STATEMENT OF GOVEF24.sNENT PAQEWPOLICY ISSUED BY PRES9DENT NIXON ON .

AUGUST 23, 1971

(Publithed Federal Register, Vol. 36, No. 166, August 26, 1971)

Memorandum for Heads of Executive Depjrtments and AgenciesOn October 10, 1963, President Kennedy forwarded to the Heads of the

Executive Departments and Agencies a Memorandum and Statement ofGovernment Patent Policy for their guidance in determining the disposition ofrights to inventions made under Government-sponsored grants and contracts,On the basis of the knowledge and experience then available, this Statementfirst established Government-wide objectives and.criteria, within existing Ieghletive constraints, for the allocation of rights to inventions between the Govern.ment and its contractors.

It was recognized that actual experience under the Policy could indicate therieed for revision or modification. Accordingly, a Patent Advisory Panel Wvasestabliched under the Federal Council for Science and Technology for thepurpose of assisting the agencies in implementing the Policy, acquiring data onthe agencies' operations under the Policy, and making recommendationsregarding the utilization of Government-owned patents. In December 1965, theFederal Council established the Committee on Government Patent Policy toassess how this Policy was working in practice, and to acquire and analyzeadditional information that could contribute to the reaffirmation or modifica-tion of the Policy.

The efforts of both the Committee and Panel have provided Increasedknowledge of the effects of Government patent policy on the public interest.More specifically, the studies and experience over the past seven years haveindicated that:

(a) A single presumption of ownership of patent rights to Government-sponsored inventions either in the Government or in its contractors is not asatisfactory basis for Government patent policy, and that a flexible, Govern-ment-wiae policy best serves the public interest;

(b) The commercial utilization of Government-sponsored Inventions, theparticipation of industry in Government research and development programs,and commercial competition can be influenced by the following factors: themission of the contracting agency; the purpose and nature of the contract; thecommercial applicability and market potential of the invention; the extent towhich the invention is developed by the contracting agency; the promotionalactivities of the contracting agency; the commercial orientation of the con-

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tractor and the extent of his privately financed research in the related technol-ogy; And the size, nature and research orientation of the pertinent industry;

(c) In general, the above factors are reflected in the basic principles of the1963 Presidential Policy Statement.

Based on the results of 'he studies and experience gained under the 1963Policy Staternrnt certain improvements in the Policy have been recommeridedwhich would provide (1) agency heads with additional authority to permitcontractors to obtain greater rights to inventions where necessary to achieveutilization or where equitable circumstances would justify such allocation ofrights, (2) additional guidance to the agencies in promoting the utilization ofGovernment-sponsored inventions, (3) clarification of the rights of States andmunicipal governments in inventions in which the Federal Governmentacquires a license, and (4) a more definitive data base for evaluating theadministration and effectiveness of the Policy and the feasibility anddesirability of further refinement or modification of the Policy.

.1 have approved the above recommendations and have attached a revisedStatement of Government Patent Policy for your guidance. As with the 1963Policy Statement, the.Federal Council shall make a continuing effort to record,yonitor and evaluate the effects of this Policy Statement. A Committee onGovernment Patent Policy, operating under the aegis of the Federal Council forScience and Technolofy, shall assist the Federal Council in these matters.

This memorandum and statement of policy shall be published in the FederalRegister.;-

, ,, ,,,. XRICHARD MI. NIXON

STATIE[ M-11I OF GVEMNIMENT PAMMT POLECY. .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4

Dankc Consderations

A. The Government expends large sums for the conduct of research anddevelopment which results in a considerable number of inventions and dis-coveries.

B. The inventions in scientific and technological fields resulting from workperformed under Government contracts constitute a valuable national resource.

C. The use and practice of these inventions and discoveries should stimulateinventors, meet the needs of the Government, recognize the equities of thecontractor, and serve the public interest.

D. The public interest in a dynamic and efficient economy requires thatefforts be made to encourage the expeditious development and civilian usc ofthese inventions. Both the need for incentives to draw forth private initiativesto this end, and the need to promote healthy competition in industry must beweighed in the disposition of patent rights under Government conn acts. Whereexclusive rights are acquired by the contractor, he remains subject to theprovisions of the antitrust laws.

E. The public interest is also served by sharing of benefits of Government-financed research and development with foreign countries to a degree consist-ent with our international programs and with the objectives of U.S. foreignpolicy.

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F. There is growing importance attaching to the acquisition of foreignpatent rights in furtherance of the interests of U.S. industry and the Govern.ment.

G. The prudent administration of Government research and developmentcalls for a Government-wide policy on the disposition of inventions madeunder Government contracts reflecting common principles and objectives, tothe extent consistent with the missions of the respective agencies. Thc-policymust recognize the need for flexibility to accommodate special situations.

Policy

SECTION 1. The following basic policy is established for all Governmentagencies with respect to inventions or discoveries made in the course of orunder any contract of any Government agency, subject to specific statutesgoverning the disposition of patent rights of certain Government agencies.

(a) Where(1) a principal purpose of the contract is to create, develop or improve

products, processes, or methods which are intended for commercial use (orwhich are. otherwise intended to be made available for use) by the generalpublic at home or abroad, or which will be required for such use by govern-mental regulations; or

(2) a principal purpose of the contract is for exploration into fieldswhich directiy concern the public health, public safety, or public welfare; or

(3) the contract is in a field of science or technology in which therehas been little signific,-t experience outside of work funded by the Govern-ment, or where the Go' -nmnent has been the principal developer of the field,and the acquisition of exclusive rights at the time of contracting might conferon the contractor a preferred or dominant position; or

(4) the services of the contractor are(i) for the operation of a Government-owned research or produc-

tion facility; or(ii) for coordinating and directing the work of others,

the Government shall normally acquire or reserve the right to acquire theprincipal or exclusive rights throughout the world in and to any inventionsmade in the course of or under the contract.

In exceptional circumstances the contractor may acquire greater rights thana nonexclusive license at the time of contracting where the head of the depart-ment or agency certifies that such action vill best serve the public interest.Greater rights may also be acquired by the contractor after the invention hasbeen identified where the head of the department or agency determines thatthe acquisition of such greater rights is consistent with the intent of this Sec-tion l(a) and is either a necessary incentive to call forth private risk capital andexpense to bring the invention to the point of practical application or that theGovernment's contribution to the invention is small compared to that of thecontractor. Where an identified invention made in the course of or under thecontract is not a primary object of the contract, greater rights may also beacquired by the contractor under the criteria of Section 1(c).

(b) In other situations, where the purpose of the contract is to build uponexisting knowledge or technology, to develop information, products, processes,

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or methods for use by the Government, and the work called for by thecontract Is in a field of technology in which the contractor has acquired tech-nical competence (demonstrated by factors such as know-how,experience, and patent position) directly related to an area in-which thecontractor has an established nongovernmental commercial position, thecontractor shall normally acaulre the principal or exclusive rights throughoutthe world in and to any resulting inventions.

(c) Where the commercial interests of thecontractor are not sufficientlyestablished to be covered by the criteria specified in Section 1(b) above, thedetermination of rights shall be made by the agency after the invention hasbeen identified, in a manner deemed most likely to serve the public interest asexpressed in this policy statement, taking particularly into account theintentions of the contractor to bring the invention to the point of commercialapplication and the guidelines of Section l(a) hereof, provided that the agencymay prescribe by regulation special situations where the public interest in tileavailability of the inventions would best be served by permitting the contractorto acquire at the time of contracting greater rights than a nonexclusive license.

(d) In the situations specified in Sections l(b) and 1(c), when two or morepotential contractors are judged to have presented proposals of equivalentmerit, willingness to erant the Government principal or exclusive rights inresulting inventions will be an additional factor in the evaluation of theproposals.

(e) Where the principal or exclusive rights in an invention remain in thecontractor, he should agree to provide written reports at reasonable intervals,when requested by the Government, on the commercial use that is being madeor is intended to be made of inventions made under Government contracts.

(f) Where the principal or exclusive rights in an invention remain in thecontractor, unless the contractor, his licenrse, or his assignee has taken ef-fective steps within three years after a patent issues on the invention to bringthe invention to the point of practical application or has made the inventionavailable for licensing royalty-free or on terms that are reasonable in thecircumstances, or can show cause why he should retain the principal orexclusive rights for a further period of time, the Government shall have theright to require the granting of a nonexclusive or exclusive license to a respon-sible app!cant(s) on terms that are reasonable under the circumstances.

(g) Where the principal or exclusive rights to an invention are acquired bythe contractor, the Government shall have the right to require the granting of anonexclusive or exclusive license to a responsible applicant(s) on terms that arereasonable in the circumstances (i) to the extent that the invention is requiredfor public use by governmental regulations, or (ii) as may be necessary to fulfillhealth or safety needs, or (iii) for other public purposes stipulated in thecontract.

(h) Whenever the principal or exclusive rights in an invention remain in thecontractor, the Government shall normally acquire, in addition to the rights setforth in Sections l(e), I(f), and 1(g),

(1) at least a nonexclusive, nontransferable, paid-up license to make,use, and sell the invention throughout the world by or on behalf of the Govern-ment of the United States (including any Government agency) and States anddomestic municipal governments, unless the agency head determines that itwould not be in the public interest to acquire the license for the States anddomestic municipal governments; and

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ENCLOSURE I

(2) the right to sublicense any foreign government pursuant to anyexisting or future treaty or agreement if the agency head determines it wouldbe in the national interest to acquire this right; and

(3) the principal or exclusive rights to the invention in any country inwhich the contractor does not elect to secure a patent.

(i) Whenever the principal or exclusive rights in an invention are acquiredby the Government, there may be reserved to the contractor a revocable orirrevocable nonexclusive royalty-free license for the practice of the inventionthroughout the world; an agency may reserve the right to revoke such licenseso that it might grant an exclusive license when it determines that some degree-of exclusivity may be necessary to encourage further development and com-mercialization of the invention. Where the Government has a right to acquirethe principal or exclusive rights to an invention and does not elect to secure apatent in a foreign countsr!, the Government may permit the contractor toacquire such rights in any foreign country in which he elects to secure a patent,subject to the Government's right set forth in Section 1 (h).

SECTION 2. Under regulations prescribed by the Administrator ofGeneral Services, Government-owned patents shall be made available and thetechnological advances covered thereby brought into being in the shortest timepossible through dedication or licensing, either exclusive or nonexclusive, andshall be listed in official Government publications or otherwise.

SECTION 3. The Federal Council for Science and Technology inconsultation with the Department of Justice shall prepare at least annually areport concerning the effectiveness of this policy, including recommendationsfor revision or modification as necessary in light of the practices and deter-minations of the agencies in the disposition of patent rights under theircontracts. The Federal Council for Science and Technology shall continue to

(a) develop by mutual consultation and coordination with the agenciescommon guidelines for implementation of this policy, consistent with existingstatutes, and to provide overall guidance as to disposition of inventions andpatents in which the Government has any right or interest; and

(b) acquire data from the Government agencies on the disposition of patentrights to inventions resulting from Federally-financed research and develop-ment and on the use and practice of such inventions to serve as bases for policyreview and development; and

(c) make recommendations for advancing the use and exploitation ofGovernment-owned domestic and foreign patents.

Each agency shall record the basis for its actions with re-spect to inventions and appropriate contracts under this statement.

SECTION 4. Definitions: As used in this policy statement, the statedterms in singular and plural are defined as follows for the purposes hereof:

(a) Government agency-includes any executive department, independentcommission, board, office, agency, administration, authority, Governmentcorporation, or other Government establishment of the executive branch of theGovernment of the United States of America.

(b) States-means the States of the United States, the District of Columbia,Pucrto Rico, the Virgin Islands, American Samoa, Guam and the TrustTerritory of the Pacific Islands.

ENCLOSURE II

(c) Invention, or Inveniton or discovery-includes any art, machine,manufacture, design, or composition of matter, or any new and useful improve-ment the'reof, or any variety of plant, which is or may be patentable under thePatent Laws of the United States of America or any foreign country.

(d) Contractor-means -any individual, partnership, public or private cor-poration, association, institution, or other entity which is a party to thecontract.

(e) Contract-means any actual or proposed contract, agreement, grant, orother arrangement, or subcontract entered into with or for the benefit of theGovernment where a purpose of the contract is the conduct of experimental,development, or research work.

(f) Made-when used in relation to any invention or discovery means theconception or first actual reduction to practice of such invention in the courseof or under the contract.

(g) To the point of practical application-means to manufacture in the caseof a composition or product, to practice in the case of a process, or to operatein the case of a machine and under such conditions as to establish that theinvention is being worked and that its benefits are reasonably accessible to thepublic.

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