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and proposed regulations as a sham to cover what was labelled as

"... mere pious puffery to cloak what is frequently the Government's

giveaway policy." The Corporate Accountability Group also asserted that

ERDA's proposed patent regulations give a clear indication of ERDA's move

in a direction which will preserve and strengthen the monopoly powers of

the large firms already sitting astride the entire energy field.

Further, in the view of the Group, any administrative discretion to

grant exclusive rights leads to abuses.

A specific example of such abuse

was cited in this testimony. The incident involved an invention for

handling solutions in kidney machines so that the solution could be reused.

The company which did the research for DHEW applied for and received an

exclusive license even though a second company was interested in obtaining

a nonexclusive license, but was refused it by DHEW.

In essence, it was

alleged that DHEW had an opportunity to increase competition in the field,

but refused to exercise it in preference to the creation or continuance of

a monopoly.

ERDA's Assistant General Counsel for Patents stated at the hearing

that DHEW would be asked to submit the facts of the case for the record.

This was done, and the facts, documented with exhibits of official cor

respondence, etc., were reported to ERDA by letter dated December 5, 1975,

from DHEW's patent counsel, and have been incorporated in the transcript record. 4/ The Dhew record presents a different view which does not,

in

47

The letter from DHEW points out that the Corporate Accountability Research Group previously cited this case in a Congressional hearing

our opinion, provide a sound basis to support the contention advanced that

the mere placement of discretionary powers with a Federal agency to grant

exclusive rights is bound to lead to an abuse of discretion that would be

contrary to the public interest.

In their testimony the Group relied heavily on a 1961 discussion by

Admiral H. G. Rickover on government patent policy. As the Admiral mana

ages a major program at ERDA he was requested to express his present views

on the subject,

In response, Admiral H. G. Rickover expressed concern as

to the implementation of ERDA's legislative patent policy and recommended that:

at:51

4/ continued

which preceded the passage of the Nonnuclear Energy Act, and that the 15-page DHEW document on the background of this case was made available to the Group prior to that hearing. The facts as expressed in the DHEW letter are that DHEW owned an invention involving dialysis of blood to remove excess urea which resulted from impaired renal function, The company which had made the invention under a DHEW contract, was not the leader in the field of blood treatment, volunteered to develop the invention for commercial utilization under an exclusive license. The second company, the recognized leader in the field of blood treatment, upon reading in the Federal Register of DHEW's intention to grant the exclusive license, objected to such grant and indicated its willingness to do so under a nonexclusive license. Based upon briefs and reply briefs, it became evident that only the prospective exclusive licensee was willing to invest large sums of money to produce the desired objective, but in the absence of an exclusive license would drop out of the picture altogether. By DHEW's granting the exclusive license, not only was the desired objective more likely to be attained and at a date much earlier (several years) than that promised by the petitioner for the nonexclusive license, but in doing so there would be established a genuine competitor in this field. See Appendix C.2.

5/ In a January 20, 1976 letter from Admiral H. G. Rickover to R. Tenney

Johnson, ERDA General Counsel, Admiral Rickover stated: "Nothing I have observed in the past 15 years has changed my view [, before the Senate Judiciary Committee in 1961,] that patents developed at Government expense should belong to the Government. The full text of Admiral Rickover's letter is in Appendix C.2.

...the new ERDA patent regulations be revised so as to not en-
courage contractors to request waiver of Government patent rights,
and that ERDA personnel be not encouraged to grant such waivers.
Waiver authority should be reserved for those rare cases where essen-
tial work could not otherwise be obtained or where the Government
elects to participate in an on-going, contractor-funded program in
which the contractor bears a substantial portion of the cost. In
such case the Government's rights to patents should be commensurate
with the amount of the Government investment. The former AEC
policy with regard to rights in inventions developed under allowable
Independent Research and Development projects would be a reasonable
approach. 61

The comments of the many individuals and of various organizations,

which have been made of record in the hearings and by letters present other

facets of the points discussed above and in some cases new points alto

gether.

In a subject so far-reaching in its effects, so complex in its

devolution, so involved with over thirty years of debate in forums in

government, in industry,

in industry, in universities, so amalgamated through the heat

of various forms of social, economic and legal philosophies, it is scarcely

surprising that there is less than complete unanimity on any particular

phase of government patent policy.

In contrast with the above, the participants at the hearing, with

the exception of the public interest group, viewed the treatment of

private patent rights with essential unanimity. They argued against the

desirability of having mandatory licensing, in general, and in particular

with regard to ERDA's patent policies. There also seems to have been

61

Whereas Admiral Rickover recognizes some appropriate waiver situations, such as in certain cost sharing contracts or to gain contractor participation, the Corporate Accountability Group testimony recognized no instances of where waiver would be appropriate. Only exclusive licensing of Government owned patents under strict safeguards (as opposed to waiver of title) was mentioned as a possible avenue of granting exclusive rights by the Group.

uniformity (with one exception) in the concept that exclusivity is, in many

situations, absolutely crucial to attainment of certain objectives.

The

public interest Group testifying proposed some form of exclusivity only

under more stringent safeguards than the present Section 9 of the Non

nuclear Energy Act.

In order to induce desirable contractors to do R&D

considered critical to the attainment of national goals, patent incentives

unencumbered by restrictions such as compulsory licensing or enforced non

exclusive licensing were strongly advocated by industry representatives

and trade associations.?!

In summary, the basic conclusion of the majority of the testimony

presented at the public hearing is that, wherever possible, if R&D in

energy-related fields is to be encouraged and possibly stimulated as never

before, a most liberal interpretation of the patent provisions of the Non

nuclear Energy Act should be applied.

While this Act has some built in

restrictions which would prevent the implementation of a patent policy

expressed by many to be more generally in the public interest, the pro

posed ERDA-PR patent provisions may keep those restrictions to acceptable

tolerances.

ERDA will undoubtedly profit by the constructive criticisms of those

who testified before its panel of officials and thanks them for their par

ticipation.

It is only through such an interchange that the views of all

interested parties can properly be gathered and evaluated for future

action.

71

Admiral Rickover's 1961 testimony and letter state, in essence, that in his experience no potential contractor has refused to do essential R&D for the Government solely because of a Government title patent policy.

VI.

COMPULSORY (OR "MANDATORY") LICENSING OF PATENTS

A.

The Required Report (Study)

During the legislative process which led to the Nonnuclear Energy

Act, compulsory licensing (referred to in the Act as "mandatory li

censing") was proposed as part of the Act.

Mr. Kauper, the Assistant

Attorney General for Antitrust, advanced the rationale that with a

statutory compulsory licensing provision a consistent general policy

for compulsory licensing would be formulated by the administering agency.

ency.11

Dr. Ancker-Johnson, the Assistant Secretary for Science and Technology

of the Department of Commerce, objected to compulsory licensing on the

ground that it would diminish the incentives provided by the patent system to invent in the energy field. These positions were taken

with respect to a compulsory licensing provision which was contained

in Section 113 of s, 1283 and a counterpart House Bill, forerunners of

the Nonnuclear Energy Act, providing:

(c) Whenever the Chairman determines that-

(1)(A) in the implementation of the requirements of this Act a right under any United States patent, which is not otherwise reasonably available, is reasonably necessary to the development or demonstration of an energy system or technology pursuant to this Act, and

(B) there are no reasonably equivalent methods to accomplish such purpose, and

1/

Hearings Before the Subcommittee on the Environment of the House Committee on Interior and Insular Affairs, 93d Cong., 2d Sess. (1974).

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