66 follows: 'Organizations' includes State and local government agencies, corporations, partnerships, nonprofit institutions, and individuals. Patents resulting from such federally financed research and developments by organizations shall likewise be freely dedicated to the public with certain exceptions. One exception, set forth in section 8 (c), may be stated briefly as follows: The above requirements as to dedication, to the extent that they require modification of arrangements already entered into, shall not go into effect until 120 days after enactment of the act. This might result in the arbitrary cancellation of contracts entered into in good faith between the Government and outside agencies. Subsection (d) of section 8 sets forth another exception as follows: "The head of any Government agency financing by contract, or otherwise administering, federally financed research and development activities, may, by stipulation in the contract or by other advance agreements with any organization, provide for the retention by the organization, or by the inventor, or by their assignees of such patent rights based on discoveries, inventions, or findings produced in the course of such research and development as the head of such Government agency deems fair and equitable and consistent with the national interest." This exception is further subject to three provisos applicable to any “organization," and still a further fourth proviso applicable only to any nonprofit organization." Proviso (1) is "that (1) the head of such Government agency shall, before entering into any such contract or agreement, make a finding that the agency has made every reasonable effort to arrange for the conduct of the necessary research and development without entering into a contract containing such provision." This would undoubtedly bar organizations best equipped and qualified for the undertaking if some less qualified or poorly qualified organization made a bid therefor. Condition No. (2) is that “(2) the organization shall contirbute or shall have contributed substantially to the development of the particular inventions, discoveries, or findings for which patent rights are retained through earlier or current research and development activities financed by the organization." Would salaries paid to research scientists be considered as "activities financed by the organization"? Condition No. (3) is that "(3) in every case the contract or agreement shall provide for at least an irrevocable, nonexclusive, royalty-free license for governmental purposes to the United States." If the invention is one which is solely of use to the Government, this third proviso would make the undertaking less attractive to such organization. It. should at least for a certain limited period of time have the exclusive right to manufacture the invention for the Government. Condition No. (4), applicable only to nonprofit organizations, is: "In the case of any nonprofit organization, the head of such Government agency further determines (A) that the research and development is essential in the field of national defense or in such other fields as the President may specify for such purpose, and (B) that the patent rights retained will not be used to serve the special benefit of any organization conducted for profit or of any individual, and will be made available or licensed to applicants on a nonexclusive, uniform, and reasonable royalty basis." This proviso, which provides for compulsory licensing, would discriminate unduly against nonprofit organizations, and, added to the three other objectional provisos, might well discourage nonprofit organizations from undertaking federally financed research and development, especially in the case of partly financed undertakings. The above referred to subsections of section 8 are rendered even more uncertain by subsection (f), which reads: * * "Notwithstanding any other provision of this Act, the President, or any person designated for that purpose by him, may exempt from the requirements of this Act relating to dedication to the public, *, patents, inventions, or discoveries relating to or produced in the course of federally financed research or development or in which the United States holds any rights, if and so long as the President or such designated person determines that such exemption is essential in the interest of national security." "National security" is not defined and might be determined by the whim of the person making the determination. This subsection makes it still more uncertain whether the act is intended to repeal the above quoted act of 1883, as amended in 1928. Perhaps, unintentionally, the bill, in section 11 (c) (5), contains the same objectionable feature with respect to the possible inclusion of patents in the phrase "property of all kinds" which is found in H. R. 1815 and the three other bills already discussed. GENERAL COMMENT ON PATENT POLICIES The above comments, as well as the fact that the Atomic Energy Act of 1946 contains patent provisions conflicting with those in H. R. 942, make it clear, we believe, that general patent legislation on Government-owned patents or patents resulting from federally financed research and development, should not be included in such bills. It represents a wide departure from Dr. Bush's recommendation in his report entitled. "Science and the Endless Frontier," for a National Research Foundation, in which he says: "The success of the National Research Foundation in promoting scientific research in this country will depend to a very large degree upon the cooperation. of organizations outside the Government. In making contract with or grants to such organizations the Foundation should protect the public interest adequately and at the same time leave the cooperating organization with adequate freedom and incentive to conduct scientific research. The public interest will normally be adequately protected if the Government receives a royalty-free license for governmental purposes under any patents resulting from work financed by the Foundation. There should be no obligation on the research institution to patent discoveries made as a result of support from the Foundation. There should certainly not be any absolute requirement that all rights in such discoveries be assigned to the Government, but it should be left to the discretion of the director and the interested division whether in special cases the public interest requires such an assignment. Legislation on this point should leave to the members of the Foundation discretion as to its patent policy in order that patent arrangements may be adjusted as circumstances and the public interest require." CONCLUSIONS Consequently, the National Association of Manufacturers cannot view with approval the Celler bill, H. R. 942, since it departs to such an extent from the original concepts of what was deemed necessary to carry out the fine objectives of Dr. Vannevar Bush. This is because the new measure contemplates 1. A large organization imposed, in part, upon advisory boards-a large organization which has implications of political patronage. 2. A foundation dominated by a politically appointed administrator, who would have broad powers to carry out the very broad objectives of the foundation by Executive order. 3. A board of scientists with only advisory powers and without authority which would not attract the top scientists of the country. 4. Giving the President of the United States very broad powers, under which he could, if he so desired, interpret the broad objectives of the bill as he wished. The political implications of this and the possible danger to the school system, science, business, and our economic system in general are obvious. 5. The danger of channeling research through the determination by a director of this important body of what in his estimation should or should not be undertaken for, as the Reverend J. Hugh O'Donnell, president of the University of Notre Dame, has so well stated: "These men (scientists) have a natural-and historically by no means groundless-apprehension that Federal subsidy can be a serious threat to the academic independence that higher education has always guarded so jealously." 6. A formula for the distribution of research funds which is unduly restrictive. 7. Patent provision's which do not belong in a measure of this nature. 8. Patent provisions which because of their nature virtually might confiscate a form of private property. 9. Patent provisions which because of their complex language provide much uncertainty as to what the law might be. 10. Patent provisions which because of their tenor might well tend to discourage rather than encourage private initiative. SUMMARY OF STATEMENT SUBMITTED BY GEORGE E. FOLK, SPECIAL ADVISER TO THE NATIONAL ASSOCIATION OF MANUFACTURERS' COMMITTEE ON PATENTS AND RE SEARCH, BEFORE THE HOUSE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE ON SIMILAR BILLS H. R. 1815, 1830, 1834, 2027, AND THE CELLER BILL, H. R. 942, FOR THE ESTABLISHMENT OF A NATIONAL SCIENCE FOUNDATION The NAM favors in principle legislation for creating a National Science Foundation along the lines recommended by Dr. Vannevar Bush in his report entitled "Science, the Endless Frontier." It believes that the Foundation should have certain characteristics found in the four identical bills, H. R. 1815, 1830, 1834, and 2027. Those features especially approved are— (1) A relatively simple organization consisting of persons well versed in the specified fields which are included in the Foundation's activities. (2) The selection of such members of the Foundation solely on the basis of established records of distinguished service. (3) That in the selection of members of the Foundation due consideration shall be given to recommendations for nominations made by the National Academy of Science or by other scientific organizations. (4) That the chief executive officer of the Foundation shall be a director selected by an executive committee of the Foundation, which shall prescribe the powers and duties of the director and which powers and duties shall be performed under the supervision of the committee. There are certain provisions of these four bills which are open to adverse criticism. They are (1) Including among the possible membership of the Foundation those qualifying merely as leaders in "education or public affairs.” (2) Including “educational organizations,” merely as such, among those organizations whose nominations must be given due consideration. (3) The inclusions of "other sciences" as fields in which the Foundation is authorized to initiate and support scientific research. (4) The broad inclusion of "personal property of all kinds," which would include patents, as subject to condemnation by the Foundation even where such patents results from research by independent inventors. (5) The indefiniteness in section 11 (b) of the phrase "if patented," since the inventions may be patented either in the United States or in foreign countries or in both. (6) In making it possible to ignore the civil-service laws in the appointment of permanent employees of the Foundation. Turning now to the Celler bill, H. R. 942, which is identical with the Kilgore bill, S. 1850, of the Seventy-ninth Congress, introduced on February 21, 1946, the National Association of Manufacturers cannot view H. R. 942 with approval since it departs to such an extent from the original concepts of what was deemed necessary to carry out the fine objectives of Dr. Vannevar Bush. This is because the new measure contemplates— (1) A large organization imposed, in part, upon advisory boards-a large organization which has implications of political patronage. (2) A board of scientists with only advisory powers and without authority which would not attract the top scientists of the country. (3) Giving the President of the United States very broad powers, under which he could, if he so desired, interpret the broad objectives of the bill as he wished. The political implications of this and the possible danger to the school system, science, business, and our economic system in general are obvious. (4) The danger of channeling research through the determination by a director of this important body of what in his estimation should or should not be undertaken for, as the Reverend J. Hugh O'Donnell, President of the University of Notre Dame, has so well stated: "These men (scientists) have a natural—and historically by no means goundless-apprehension that Federal subsidy can be a serious threat to the academic independence that higher education has always guarded so jealously." (5) A formula for the distribution of research funds which is unduly restrictive. (6) Patent provisions which do not belong in a measure of this nature. (7) Patent provisions which because of their nature virtually might confiscate a form of private property. (8) Patent provisions which because of their complex language provide much uncertainty as to what the law might be. (9) Patent provisions which because of their tenor might well tend to discourage rather than encourage private initiative. The reasons for approving certain features and disapproving others, as above enumerated, are set forth in our main statement. The CHAIRMAN. I suggest that at this point in the record reference be made to the page number of the testimony of witnesses given in the previous hearing before this committee in the Seventy-ninth Congress, with reference to the patent provisions of the Science Research Foundation. (The page numbers of testimony previously given with reference to patent provisions are as follows:) TESTIMONY WITH RESPECT TO PATENT PROVISIONS IN NATIONAL SCIENCE FOUNDATION BILL-HEARINGS BEFORE HOUSE INTERSTATE AND FOREIGN COMMERCE COMMITTEE, SEVENTY-NINTH CONGRESS Page Patent provisions in H. R. 6448__ 4 Mr. Folk, NAM_ 19, 22, 23 Mr. Bronk, director, Johnson Re Page 66-67 26 search Foundation Secretary Wallace__ 72 43, 44 49, 53, 54 77, 83 Dr. Condon, Bureau of Standards__ 87 Secretary of War Patterson__. Kenney Dr. Vannevar Bush__ Mr. Victory, National Advisory PATENT PROVISIONS IN H. R. 6448 (Page 4) PATENT RIGHTS SEC. 9. (a) Each contract executed by the Foundation which relates to scientific research or development shall contain provisions governing the disposition of inventions produced thereunder in a manner calculated to protect the public interest and the equities of the individual or organization with which the contract is executed. Such objectives may usually be accomplished, within, the discretion of the Foundation in particular cases, by making freely available to the public or, if patented, by freely dedicating to the public inventions produced in the course of basic or fundamental scientific research or scientific research or development completely financed by the Foundation, and by providing for the United States to receive an irrevocable, nonexclusive, royalty-free license for governmental purposes under inventions produced in the course of applied scientific research or development financed by the Foundation but to which the contractor contributes substantially through past or current research or development activities financed by it. (b) All inventions produced by employees of the Foundation during the course of their assigned activities for the Foundation shall be made freely available to the public or, if patented, shall be freely dedicated to the public. REPRESENTATIVE MILLS The second major difference between the two bills is in the handling of patents. The Kilgore-Magnuson bill contains five pages of complicated and detailed patent provisions that are made applicable to the scientific work of all Government agencies rather than just the Foundation. In general, the policy set forth in that bill is for all Government agencies to obtain title to all inventions made during the course of federally supported research and development except in cases in which detailed findings to the contrary are made by the Government agency concerned. In my opinion those provisions impose an undue administrative burden on Government agencies and fail to recognize that the problems of all agencies conducting scientific activities are not identical. Also, I think that those provisions fail to recognize in an appropriate way the equities of commercial organizations and educational institutions with which the Government does business. On the other hand, H. R. 6448 contains patent provisions that are relatively short and apply only to the work of the Foundation and not to all Government agencies. Those provisions do not go into detailed administrative problems but only attempt to set forth the broad objectives that the Foundation should strive for in negotiating its contracts. Those objectives are stated to be an adequate protection of the public interest and the equities of the individuals or organizations with which the Foundation contracts, and the Foundation is given a great deal of discretion of how those objectives may best be achieved in specific cases. In addition, there is a provision requiring dedication to the public inventions made by employees of the Foundation during the course of their assigned activities. The purpose of such a provision is to give assurance to organizations with which the Foundation does business that they may safely confide the results of their research and development activities to employees of the Foundation without fear that their ideas might become the basis for patent applications by the employee for his personal profit. Inasmuch as the Foundation will not operate any laboratories itself, the policy applicable to the employees of the Foundation in this respect can well be different from that of the Naval Research Laboratory, for example, which for years has allowed scientists working in its laboratories to retain commercial and foreign rights to inventions made by them during the course of their Government activities. (Pages 22, 23) SECTION 9. PATENT RIGHTS The patent provisions recogniz the two separate problems encountered by a Federal agency doing research and development work. Such agencies have to set up policies both with respect to (a) inventions and patents arising out of their contracts with nongovernmental organizations and (b) inventions and patents made or acquired by their own employees. Under section 9 (a) the question of inventions and patents arising out of the Fonudation's contracts is handled by the requirement that each contract relating to scientific research and development shall contain provisions governing the disposition of inventions in a manner calculated to protect the public iterest and equities of the contractor. The Foundation is given discretion as to the ways and means of achieveing those objectives in particular cases, but the legislation provides that such objectives may usually be accompanied by (1) making freely available to the public or, if patented, by freely dedicating to the public, inventions produced in the course of (a) basic or fundamental scientific research or (b) scientific research or development completely financed by the Foundation; and (2) providing for the United States to receive a royalty free license for governmental purposes under inventions produced in the course of applied scientific research or development financed by the Foundation but to which the contractor contributes substantially through past or current research or development activities financed by it. Thus, under the broad limits given the bill would enable the traditional policy followed by scientists of publishing their findings in the basic research field and thereby making such findings available to the public. In the unusual case in which for some reason or other it is considered necessary to file a patent application covering basic research work, steps would then be taken to dedicate the resulting patent to public use. In the field of applied science, however, the Foundation would ordinarily do business with organizations having prior experience and an existing situation in the particular field of work. In some cases the public interest would be recognized by obtaining a license for governmental purposes and the equities of the contractor would be recognized by leaving normal commercial rights with the contractor. In case of employees of the Foundation, however, in all cases inventions produced by them during the course of their assigned activities for the Foundation are to be made freely available to the public or, if patented, are to be freely dedicated to the public. SECRETARY OF WAR PATTERSON With reference to the proposed legislation being considered by you today, I should state that the War Department has heretofore considered other bills relating to the same subject and has found it necessary to make suggestions about |