The final "march-in" right gives the Administrator the right to require licensing, or terminate the waiver, four years after the waiver is granted if anyone challenges the waiver on the basis that (1) it is tending to violate the antitrust laws or (2) the contractor is not commercializing the invention. As noted before, these "march-in" rights are required by the Nonnuclear Energy Act as to our nonnuclear activities and very similar provisions are a basic part of the Presidential Patent Policy Statement and the FPR and hence would be applicable to our nuclear activities as well. In order to mitigate the harshness of the authority to terminate waivers, the regulations stipulate that in the normal exercise of our "marchin" rights, we will require the licensing of others rather than the termination of the waiver. Termination will be reserved only for cases of substantial abuse of the rights waived to the contractor. Contractors have maintained that the possibility of terminating the waiver will serve as a deterrent for investing risk capital in commercialization. If, however, the contractor is investing money in the development of the invention, he has virtually assured that the waiver cannot be terminated unless there is a violation of the antitrust laws. D. Operating Experience 1. Statutory Interpretation The patent provisions of Section 9 of the Nonnuclear Energy Act apply to all inventions made or conceived in the course of or under any ERDA contract (other than nuclear energy research, development and demonstration pursuant to the Atomic Energy Act). Generally, the Government's patent rights in inventions which are either conceived or first actually reduced to practice during the performance of government funded work have been limited to research and development efforts. In the past, either based on Executive policy or legislative enactment, the Government has not obtained patent rights in inventions which may have been made by contractors during the performance of a supply or service contract. This policy was adhered to even though in actuality the Government's requirements may have caused the supplier to perform some minor modification or engineering in the preparation of the items or services contracted for. Further, the Government has not generally considered that other research and development efforts performed by a contractor, independent of a direct contractual effort, are subject to patent rights in the Government, even though such independent work receives a financial incentive from the Government. There is, however, some concern over whether Section 9 differs in this regard. During the past year in a number of specific situations the applicability of Section 9 and its interpretation have been questioned. These situations are: (a) the extent to which Section 9 applies to all commercial demonstration activities of ERDA; (b) the extent to which proposed incentive programs, such as loans, loan guarantees and price supports require the application of the Section 9 patent policy; (c) the applicability of Section 9 to work performed by other federal agencies for ERDA; (d) the applicability of Section 9 to research and development work performed by ERDA for private parties on a fully reimbursed basis; (e) the criteria for granting waivers to universities and, collaterally, whether Section 9 permits advance waivers to be granted to universities based on the Institutional Patent Agreement procedures; and (f) the procedures for handling monetary incentive awards to inventors and innovators. a. Interpretation of the Word "Demonstration" Subsection 9(m) (2) of the Nonnuclear Energy Act defines the term "contract" as meaning "any contract, grant, agreement, understanding, or other arrangement, which includes research, development, or demonstration work....' Our experience in developing or establishing programs for demonstration indicates that there are two basic types of demonstrations, a situation probably not considered when the word "demonstration" was utilized in the definition of the term "contract". One type of demonstration basically includes an element of research and development in applying a new technology in order to prove its technical or economic feasibility. The particular method, process or technology may have been taken through a pilot or test phase where the concepts have been initially verified. However, an additional technical development effort may be needed during the demonstration phase. The provisions of Section 9 should and were intended to cover "contracts" for this type of demonstration work. On the other hand, there are other demonstrations to which the application of Section 9 seems inherently improper. These generally are a demonstration of state of the art technology whose technical feasibility has been previously demonstrated but has not gained commercial acceptance because of some reluctance to adopt and commercialize the technology. An example of this type of demonstration is found in ERDA's solar heating and cooling program. There are available existing solar systems whose commercial usefulness in various climates and types of buildings has not been fully demonstrated or accepted by the public and whose long range economic benefits are still doubtful. However, in order to expedite the availability of this technology ERDA is undertaking a program to demonstrate the viability and gain experience in the use of 83/ a multiplicity of such systems. There is a need, therefore, to have these systems installed in various types of buildings in different locations, to monitor their operations, and to make this information known to the general public in order that the construction industry may be in a better position to select the most appropriate system for a particular climate or type of building. It is inappropriate, in our view, to apply the patent provisions of Section 9 to such a demonstration as no research and development of any form is required, multiple approaches to the same energy problem are available, and the systems involved have 83/ all been developed and are proprietary products. After consideration of specific demonstration projects, we have determined that some of these fall into this latter category and that Section 9 does not apply to these demonstrations. b. Incentive Programs Subsection 7(a) of the Nonnuclear Energy Act authorizes the Administrator to utilize various forms of Federal assistance and participation in carrying out the objectives of this Act. In implement ing this provision questions arose as to whether all the forms of Federal assistance listed in subsection 7(a) required the patent provisions of Section 9, especially since only one of the incentives listed in subsection 7(a), the joint Federal-industry corporation of subsection 7(b), specifically references the patent provisions of Section 9. Traditionally, the Government has applied its patent rights clauses in contracts and grants calling for the performance of research and development work. Patent rights provisions were generally not applied 84/ 85/ to supply contracts, loans and loan guarantees- or a contractor's independent research and development (IR&D) program which are supported 84/ ASPR §9-107.3 (August 29, 1975); FPR §1-9.107-4; NASA-PR §9.101-2; AEC-PR §§9-9.5003, 9.5004, 9.5005. The NASA-PR requires the use of a patent rights clause in contracts where the performance of research, experimental, design, engineering or developmental work is contemplated. 85/ A number of major loan guarantee and loan programs were reviewed. Patent rights were not acquired in any of these programs. These included the loan and guarantee programs of the Small Business Administration, the Federal Maritime Administration's Ship Loan Guarantees, and the loan guarantee program of the Overseas Private Investment Corporation. |