and 1834, over the complicated provisions of H. R. 942. The desirability of the provisions of the former bills can best be illustrated by anlyzing the impracticality of the provisions of H. R. 942.

Section 8 (c) of H. R. 942 says that [reading]:

Except as provided hereinafter in this section and in subsection (d) any invention, discovery, or finding hereafter produced in the course of federally financed research and development shall, whether patented or not, be made freely available to the public and shall, if patented, be freely dedicated to the public.

I will get to a discussion of those exceptions later, but there are two points in the language already quoted that need analysis first.

The term "any" is broad enough to include collateral or "byproduct" inventions. For example, a private research laboratory might be employed to try to develop a heat-resistant alloy and in the course of the work might develop a patentable new instrument to measure temperatures-an instrument useful to its competitors and to many other industries.

“Any” means any, and under the patent provision quoted an industrial research laboratory (or corporation) would have to content itself with receiving pay only for the job done, but at the same time surrendering all of the patentable byproducts of its work to the public, the "public" being, practically, its competitors.

Now, there can be no question about what "federally financed" means, because it is defined in section 12 of the bill, as follows [reading]:

research and development conducted directly by the Federal Government and all other research and development financed in whole or in part directly by the Federal Government from funds designated for research and development under a contract, grant, or other direct form of financial assistance for research and development.

That certainly shoots the works. It applies wherever Government foots any part of the bill. It applies to the industrial case I suggested. It also applies not only to the activities of the Foundation itself, but also to the activities of all departments of Government, including research and development done under Army or Navy sponsorship on airplanes, trucks, or engines of war or anything else. It applies equally well to the universities and to industrial research institutes of the profit and nonprofit type.

A truck company could not accept pay from the War Department for developing a fancy gear shift needed for a jeep without knowing that at the same time it would be working for all of its competitors to the fullest extent that they might adapt the gear shift invention to passenger cars.

We could not have won the battle of production prior to and during World War II with patent rules like that. No research group, industrial, university, or institutional, could accept any sort of a grantin-aid of any project from any Bureau of the Federal Government without risking patent domination by Government henceforth.

Now, let us look to the so-called exceptions to these harsh rulesthe supposedly mollifying reprieves contained in sections 8 (c) and (d). The exceptions describe sets of conditions under which the Foundation could contract for research, pure or applied, without demanding that the contractor-laboratory dedicate all of its patentable results arising from the work.

As I review them, please bear in mind that they are intended to apply in any case where Federal dollars are used; even if the Federal dollars merely supplement other dollars or years of prior experience on the part of the contractor-laboratory.

Bear in mind also that H. R. 942 is-improperly, I think—drafted to apply to all agencies of Government, including the War and Navy Departments, and if it became law, would apply to applied technology generally and to national-security programs as well as the nurturing of science.

First, the head of the Foundation (or other agency) is not authorized to make any exception unless he first makes a finding (sec. 8 (e)) that the agency has made every reasonable effort to get the work done without agreeing to such exception.

This would undoubtedly bar the use of any expert organization unwilling to knuckle under and assign its technological birthright to its competitors provided any less qualified but more pliable organization would take a chance at the work.

Further, under section 8 (e) he would be obligated to report to Congress and the President at quarterly intervals all contracts in which he had made any exception to the all-out demand for surrender of all patents of whatsoever nature produced in the course of such research; together with a summation of his reasons for making the exceptions, the nature of the exception, and the nature of any patent rights or parts of patent rights he permitted the contractor to retain.

This would be a stultifying experience for any administrator who wanted to get the best work done, and it would take a very unusual devotion to science to influence him away from a natural instinct to avoid criticism by merely staying away from any contracts with potent and expert technological organizations.

Even if the administrator mastered his fears he might well find the potential contractor-laboratory equally shy. From the industrial standpoint, the candidate-contractor would know full well that such reports would be read by his shrewdest competitors. The necessity for airing private business and the status of private development work would serve as an additional deterrent to prevent qualified firms from wanting to undertake any development work for Government. The second condition to granting of such exception is that the contractor-laboratory shall contribute or have contributed substantially to the development of the particular patent rights as to which an outright dedication is not to be required. I think that is proper. No wise administrator would grant any exception unless such was the case.

The bill includes a third condition applicable to nonprofit institutions such as universities, and as to these institutions the agency head cannot grant exceptions unless he assures himself that, and I quote: 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.

I surmise that the attempted imposition of this condition had its origin in the critical attitude which the sponsors of the bill in the Seventy-ninth Congress had toward the handling of certain patent rights by certain universities.

However, the effect of the condition, were it to become law, would be to punish all for the alleged sins of one or two. In addition, the

proper remedy for any alleged faults is found in the antitrust laws and should not be attempted by pressuring university managements via the purse-string route. The most outstanding feature of the policy of American universities in handling patents is that there is no one policy for all.

It by no means follows that there should be one policy. It should be noted that the National Research Council is currently expending donated funds through a paid staff of individuals to canvass the separate policies of all universities and nonprofit research institutions and to prepare a composite report and a series of general recommendations.

As to the condition itself, it seems to me to be a captious and unwise one. The provision that the patent rights retained will not be used to serve the special benefit of any organization conducted for profit apparently applies to many of the patent foundations organized under university auspices, and also prevents a university from selling such a patent right to any industrial firm.

The provision requiring the university to license all applicants is an attempt to impose a compulsory licensing system on only a part of our national economy, although all efforts to write such provisions in the patent law itself have properly failed.

Turning now to the patent provisions of H. R. 1815, 1830, and 1834-identical with S. 526-it appears to me that section 11 thereof embodies a vastly more practical treatment of the subject. It says merely that each contract or other arrangement entered into shall contain patent provisions

to protect the public interest and the equities of the individual or organization involved.

In addition, it provides, as it should, that inventions made by employees of the Foundation in the course of their assigned work shall be assigned to the public.

These more desirable bills do not attempt to legislate concerning research and development work done by other agencies of government and hence do not apply in any way to the work done by industry on behalf of the War and Navy Departments or other bureaus.

Both types of bills intend that the Foundation shall be the successor agency to the Office of Scientific Research and Development. The patent policy outlined in the more desirable bills is essentially the policy that the Office of Scientific Research and Development did follow; that is, the patent features of its contracts were designed to protect both the public interest and the interest of the contractorÎaboratory.

In my opinion, there is no simple set of rules that can be written into one law and that will serve to properly protect both the public interest and the private interest with respect to the patentable products and byproducts of all types of research contracts. There are too many kinds of problems, too many kinds of research institutions and individuals, and too many sets of developmental circumstances to permit that.

It is easy enough to define the extreme cases. Certainly, if a contractor is specifically employed by Government to design a radio tower and the tower is patentable, he should have to grant Government the right to use the invention free of any patent claim by him. Cer

tainly also, patentable inventions made by a private laboratory organized from scratch under governmental auspices for the very purpose and sole purpose of contracting to perform research assigned it by the Foundation which will pay all of the bills and provide all of the equipment would have great difficulty in citing any equitable reason why it should not assign the resultant patents outright to the Foundation or the Government. However, these are easy cases, because they are unusual and possibly impracticable. The difficult cases lie in the intermediate area, where a thousand different conditions many have to be taken into account. The Foundation should have the same degree of discretion in handling these practical matters as did'the OSRD.

In support of my views I would like to read in closing a brief quotation from the second report of the National Patent Planning Commission. The Commission said, in referring to Government contracts for research [reading]:

The ownership of inventions resulting from such contracts cannot be fairly determined by an arbitrary or fixed rule but should be established in each situation in accordance with the applicable circumstances.

Thank you.

The CHAIRMAN. Are there any questions by the committee?

Mr. DOLLIVER. Mr. Brown, your organization, the Standard Oil Co. of Indiana, conducts basic research in the field of petroleum and allied fields, does it not?

Mr. BROWN. Most of our research would fall in the applied field. Mr. DOLLIVER. In the applied field?

Mr. BROWN. Yes.

Mr. DOLLIVER. Not in purely the scientific area?

Mr. BROWN. We do maintain some scientists studying the fundamental properties of hydrocarbons and some on thermodynamics. We contribute to fundamental research done by the American Petroleum Institute, and we have granted certain university scholarships and fellowships that have no particular practical application to our busi

ness.

But in the main our research is of the applied type.

Mr. DOLLIVER. That type of research is carried on not only by the Standard Oil Co. of Indiana but by many, many industrial organizations in the country?

Mr. BROWN. That is right, sir.

Mr. DOLLIVER. That is carried out in a manner not unlike that proposed in the bills which you are supporting here, except that funds come from private rather than public sources?

Mr. BROWN. One more thing, Mr. Congressman; you have to get the money back some time.

Mr. DOLLIVER. You don't have any tax sources from which money of that character can be derived?

Mr. BROWN. No, sir. We have to work toward a profit.

Mr. DOLLIVER. And that, of course, is based on your research, whether fundamental or applied?

Mr. BROWN. Yes, sir.

Mr. DOLLIVER. I don't want you to reveal anything you are unwilling to talk about, but would you care to tell the committee the approximate amount of money that Standard Oil of Indiana invests in that kind of research, both applied and fundamental?

Mr. BROWN. I would be happy to, sir.

The figures appear in our annual report, as is true of most corporations. I would like to distinguish very carefully that I am talking only about the Standard Oil Co. of Indiana, which is located in the Middle West. Not the Standard of California or the Standard of New Jersey, or any of the other Standards.

We are spending this year in salaries and expendable items, not capital investment-just the expense of research-about $5,000,000.

I should say that not more than 10 percent of it is what my friends from the institutes and the universities would regard as basic research. Some of it, however, is for that.

Mr. DOLLIVER. Can you give the committee any notion of the amount that is spent in that field by all the oil companies of the United States? Mr. BROWN. Congressman, I could give you a better figure on what is expended by all industry. Would that be all right?

Mr. DOLLIVER. I was coming to that, but I was trying to confine it first-to petroleum.

Mr. BROWN. It is very easy to do, because the National Research Council issues a questionnaire to all industrial research laboratories about every 2 years, and their latest report was edited only July 1946.

So these data are postwar data. There are about 2,500 industrial laboratories. They reported a personnel of something like 151,000 people. We know, by looking at long-past experience, that the dollars expended per worker per year is somewhere between $5,000 and $7,000 a year. This would bring the current industrial research expense by these laboratories-and these are all, almost without exception, profit laboratories, you understand-to something over $700,000,000.

Mr. DOLLIVER. That is nearly three-quarters of a billion dollars. Mr. BROWN. Yes.

Mr. DOLLIVER. Can you make a general statement as to whether the amount that is spent in that field is increasing or decreasing? That is, what is the comparison in the amount for 1947 as to other years! Greater or less?

Mr. BROWN. Substantially double what it was prior to the war. May I mention the Bush report again? It has a tabulation, by years, dividing research by private industry and universities, and so forth, and carries it right up to 1940.

This figure I have given you is the 1946 figure. It is about double what it was in 1940 and 1941.

Mr. DOLLIVER. Would it be your anticipation that industry generally, the petroleum industry specifically, would continue to spend large sums, perhaps increasing sums, for this purpose?

Mr. BROWN. Because the petroleum industry is getting more and more technical, more and more chemical every day, I would think that that would be true.

I think that is true also of other industries. There are some exceptions, of course.

The coal industry has not yet expended any considerable sums on research. It has spent very much less than the steel industry or the oil industry.

I don't believe the railroad industry is very high up in its research expenditures.

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