But where we are conducting a hearing the nature of which I described, I think we are authorized to proceed with only one member of the committee present. And, therefore, we will be governed accordingly.

I shall make this brief opening statement as to the purpose of these hearings.

The purpose of this hearing is to provide some needed facts about who gets rights in inventions produced with Government money. By Government money, I mean the more than $8 billion a year that the Government is now spending for scientific research and development.

Actually, I think the new budget calls for more than $9 billion of expenditure in that field.

This subcommittee, under Senator O'Mahoney, who preceded me as chairman, has assembled a good many of these facts and published them. In order that we continue the work that he began, I introduced early in this session of Congress the same bill that he held hearings on during the last session.

This bill is S. 1084. It provides that whenever the Government pays for an invention the Government should take title to any resulting patents. This bill has no exceptions, and I do not at this time pretend to know whether it is a good or bad bill in this form, but it does serve as a basis of inquiry and affords those interested in the subject and who might have knowledge on the subject an opportunity to express their views and submit recommendations with respect to any modifications that they think would be advisable to this proposed legislation.

I do know that this presents a legislative issue in a simple, direct manner, and it is an issue that I am convinced the Congress needs to deal with legislatively.

At this point the record may show that we are pleased to have the Honorable Russell Long, Jr., U.S. Senator from the great State, my neighboring State, of Louisiana. He has just arrived. And I will announce now that we will ask him to be the first witness at these hearings.

We know that our Government is presently acting in the disposition of patent rights in these inventions as if it were several different governments with different objectives. For instance, we find the Defense Department making contracts with a patent clause that gives the contractor title to any resulting inventions while other Government agencies dealing with the same contractors for research in the same fields are using patent clauses that give the Government title to these inventions.

Who gets the title frequently decides who gets the main benefits. from the invention.

Title in the contractor gives him the exclusive right to exploit these inventions commercially in whatever way he chooses. Title in the Government gives everybody equal access to these inventions but does not assure their commercial use.

Speaking for myself, and I believe for most of the members of this subcommittee, the question of what to do with patent rights in inventions coming out of Government research and development contracts is an open one, but I do think that the Government should have

a fixed policy, a Government policy and not an agency policy that may differ from one agency to the other.

The main problem is to find some objective definition of the public interest in these rights that will tell a Government agency when to let a contractor take title to these patents, and when not to. Even where Congress has provided that title to these research patents should vest in the Government, as in the Atomic Energy Act and the Space Act, the right to waive these titles has been granted to, and exercised by the agencies that administer those statutes.

We shall hear about their experience with these waiver provisions and hope to learn from that how to describe the situations where title should be in the contractor instead of the Government.

We are also going to hear from the Defense Department as to why it thinks its contracts should provide for title in the contractor before the inventions themselves are made.

We know from past hearings and reports that the Defense Department thinks that such a patent clause gives the contractor an incentive that he should have to do the work, in addition to the money paid him for doing it. We also know that the Defense contractors themselves like the exclusive rights in the resulting inventions that the Defense Department patent clause gives them. We know that both the Defense Department and its contractors think that a license to use these inventions for governmental purposes is all that the Government needs, or should have.

The trouble is that other Government agencies don't agree with this view. When they contract for research, they use patent clauses that give the Government title to the inventions or impose restrictions on the contractor's use of the patent when he gets title. Yet these other Government agencies that disagree with the Defense Department, and who have a different policy and practice about patent policies are contracting for research in the same fields with the same contractors, as the Defense Department. So a contractor can have a contract with two different agencies of the Government, and one contract would provide for different rights in patents than the other contract provided for.

Now, we think that this should be resolved.

This overlapping research results from the many Defense Department contracts in scientific areas which are important to the general public, as well as to the armed services.

Examples are cited in the subcommittee's last annual report, and one of the matters we shall take up is what, if any, practical difficulties stand in the way of adopting this report's recommendation that this conflict among the Government research agencies should be eliminated by administrative action. This recommendation recognizes that Congress may not immediately enact the comprehensive legislation needed to resolve such conflicts. The goal of this recommendation, that is, a single standard for disposing of rights in inventions, to be used by all Government agencies in dealing with the same contractors in any given field of resarch, seems highly desirable.

But there may be other better ways of achieving this goal. We are going to give interested parties ample opportunity to tell us how, in their judgment, such a result can best be achieved. We shall try to learn and profit from what they tell us.

The other bill that these hearings are concerned with is S. 1176, introduced by the distinguished junior Senator from Louisiana, Senator Long. This bill deals with the question of what the Government should do with its patents after it acquires title, as well as defining the circumstances under which title should be acquired. We have asked Senator Long to be our first witness and to describe the substance and purpose of his bill. He will be followed by witnesses from the Defense Department who will tell us what they think of Senator Long's bill, also of the bill that I have introduced, and the subcommittee's recommendation for administrative action.

That recommendation was made under the direction and leadership of the previous chairman, Senator O'Mahoney, whom I succeeded. Of course the views you will hear today are not the only expert opinions about what to do with these rights in Government-financed inventions. Some feel that the Government should take title and give the contractor an exclusive license conditional upon making the invention available to the public on reasonable terms. Others would accomplish the same end by giving the contractor title and subjecting him to a compulsory licensing procedure.

There are many variations of these proposals.

If we took testimony from everyone with opinions about these matters we could not conclude our hearing.

We would probably run on indefinitely.

But I hope before these hearings end we will have placed in the record the most promising suggestions for an equitable, sound and practical solution of this problem.

It will not be our purpose to deny anyone the right to be heard who wants to be heard. But it obviously may become impossible to actually hear in public hearings everyone who would like to say something or give some testimony. So we are going to urge, not necessarily demand but urge, that many of those who would like to make some comment about it simply submit statements for the record.

Now, we are going to hear in public hearings like this quite a number, certainly those representing various interests, that we hope and think can possibly make some contribution and who have an interest such that they ought to be heard and be given the opportunity to express their opinion about any contemplated action or legislation the Government might take in this field.

Mr. Counsel, I don't believe we have any other member of the committee present. Is there anything you wish to add?

I may let the record show that present on the committee staff is Chief Counsel Mr. Robert L. Wright, Mr. Clesner, and Mr. Green. Senator Long, would you now take the stand please, and let us have your views.

Let the record show that Senator Long is especially welcome. I know that he has given considerable study to this subject. He has introduced this legislation that in my judgment merits very, very serious interest and consideration by the committee and Congress. Senator Long, we are glad to have you, and you may proceed.

STATEMENT OF HON. RUSSELL B. LONG, U.S. SENATOR FROM THE STATE OF LOUISIANA

Senator LONG. Thank you very much, Mr. Chairman.

I appreciate the opportunity to appear before your committee, and I appreciate the fact that, as chairman, you are taking an interest in this matter and conducting hearings on it.

I have a prepared statement that I will try to summarize at some places in order to be somewhat more brief. And I would like to add a few additional remarks to my prepared statement.

Mr. Chairman, I conducted some hearings over a period of a few days last year in about the same capacity that you are in without the benefit of the presence of other members of the committee.

What I heard there caused me to believe that this is one of the most important issues in Government. In fact, I sometimes felt that we had neglected this matter very badly, and that the press had almost imposed on us a conspiracy of secrecy in seeing that this matter becomes available only to those who have an axe to grind and a special interest in continuing the situation the way it is with private patents at public expense.

But the more I look into this, the more I become convinced that this is one of the fields most demanding of congressional action, whether the action is taken consistent with my present views or with others.

I ask unanimous consent that at the conclusion of my statement there might be inserted in the record two speeches that I made on the Senate floor on this subject, because they covered a lot of material I cannot cover here. In addition I would like to have inserted, if possible, a brief recorded conference I had with Admiral Rickover. Senator MCCLELLAN. They may be inserted in the appendix of the record of these hearings.

(The speeches referred to will be found in the appendix to the record on pages 285 and 297, respectively.)

Senator LONG. Since the end of World War II, there has been a tremendous increase in the amount of research and development, there has been a tremendous growth in the application of science to industry.

The changes going on in the areas of electronics, atomic energy, and automation are in many respects different in kind from any that have occurred before, and will change the world much more.

The needs of World War II stimulated organized scientific research. We made an atomic bomb; we replaced natural rubber; and we made great technological achievements in radar and antibiotics.

Many new products, the results of research, helped push the economy upward during 1948-58.1 Transistors, power steering, power brakes, antibiotics, polyethylene, styrene plastics and resins, vitamins, synthetic detergents, grew more than 40 percent per year during that decade. Synthetic fibers, room air conditioners, tape recorders, grew from 30 to 40 percent per year.

1 Leonard S. Silk, "The Research Revolution," New York: McGraw-Hill Book Co., Inc., 1960, pp. 56-57.

This list can be expanded almost indefinitely. The impact of research and development is obvious. Technological progress has been playing a major role in propelling the economy forward, especially since the middle of the 18th century.

The new element in our society is the growing recognition that new products and new processes are the key to a company's growth, an industry's growth, a nation's growth-and these are dependent on the continuous development of innovations to keep the economic system expanding.

As research has grown, its influence on profitability has also grown to the point where it now either determines or strongly influences profit performance of many segments of industry.

One oil company has made as much as $1.45 of annual return per research dollar in some projects and another estimates that each research dollar yields a total return of $15.40.

A paper company estimates a net return of $10 in a typical year from each research dollar.

This should be compared with annual return of 20 cents or less per dollar of investment in certain other kinds of projects.2

3

It should not surprise us to find that there is a good correlation of percentage of sales devoted to research and development and profits as percentage of net worth. In other words, the higher the percentage of gross receipts spent on research, the higher the rate of return on net worth

In 1959, of all the research and development performed in the United States, almost 70 percent was paid for by the U.S. Government. This percentage figure tells only part of the story, for in certain industries the Government pays for the major part of the research performed.

Government expenditures for research and development have an important impact on the creation, development, and allocation of our national resources. Military (this includes DOD, AEC, and NASA) research and development, which in dollar terms is 90 percent of all Government-financed research, is concerned-like all other researchwith obtaining new knowledge and producing new techniques and products.

Although it is concerned with the development of new knowledge, products, and techniques to meet military needs, these actions have civilian counterparts and the results have civilian value.

We must recognize the degree to which military research and development is applied to civilian enterprise, and the degree to which it affects the country's resources and its economic development.

Throughout the years, many civilian products and techniques have been the direct result of military expenditures.

Industrial Laboratories, issue of December 1953, p. 5.

Yale Brozen, "The Future of Industrial Research and Development," paper delivered at the National Bureau of Economic Research, May 12-14, 1960, pp. 13-16. U.S. News & World Report, Apr. 3, 1961, p. 26.