While Bills providing for compulsory licensing of patents have

18/

been proposed from time to time, no general compulsory patent licensing

law has ever been enacted in the United States. To date, only two

compulsory patent licensing provisions are contained in the U.S. Code,

19/ those of the Clean Air Act and the Atomic Energy Act.

20/

Unlike

many of the earlier proposals for compulsory licensing, which emphasized preventing suppression of inventions, the purposes of the compulsory licensing provisions of these Acts relate to preventing market concentration in the specific areas of technology to which they apply, and also to enabling compliance with technical standards in the case of

the Clean Air Act.

D•

The Clean Air and Atomic Energy Acts

A study of the compulsory licensing provisions of the Clean Air Act and the Atomic Energy Act and the data presently available on the use of these provisions has not led to a basis upon which ERDA can recommend the application of similar legislation to the entire field of energy technology.

18/

For examples of some Bills in the 94th Congress which include compulsory licensing, see an early version of S. 622 as reported in S. Rep. No. 516, 94th Cong. 1st Sess. (1975). (APPENDIX E.10) which provided for compulsory licensing in a section dealing with improving automotive efficiency; H. R. 1003 and 1004, providing for compulsory licensing of patents on prescription drugs; and S. 814, providing for general compulsory patent licensing to be administered by the Federal Trade Commission.

The Clean Air Act21/ contains authority for setting emission standards

and has compulsory patent licensing to assure that patents do not prevent

the standards from being met and do not lead to undue market concentration.

The compulsory licensing provision22/ reads as follows:

SEC. 308.

Whenever the Attorney General determines upon

application of the Administrator-

(A) in the implementation of the requirements of Section 111, 112, or 202 of this Act, a right under any United States letters patent, which is being used or intended for public or commercial use and not otherwise reasonably available, is necessary to enable any person required to comply with such limitation to so comply, and

(B) there are no reasonable alternative methods to accomplish such purpose, and

(2) that the unavailability of such right may result
in a substantial lessening of competition or tendency to
create a monopoly in any line of commerce in any section of
the country,

the Attorney General may so certify to a district court of the
United States, which may issue an order requiring the person who
owns such patent to license it on such reasonable terms and conditions
as the court, after hearing, may determine. Such certification may
be made to the district court for the district in which the person
owning the patent resides, does business, or is found.

21/

The present Clean Air Act (42 USC §§1857 et seq.) includes the Clean Air Act of 1963 (Pub. L. 88-206) and amendments made by the Motor Vehicle Air Pollution Control Act (1965) (Pub. L. 89-272), the Clean Air Act Amendments of 1966 (Pub. L. 89-675), the Air Quality Act of 1967 (Pub. L. 90-148), the Clean Air Amendments of 1970 (Pub. L. 91-604), plus technical amendments made by Pub. L. 92-157 (1971); (SEE APPENDIX E.1).

This provision was not in the original Clean Air Act (Pub. L. No. 88-206). It was introduced in the Clean Air Amendments of 1970 after a

question relating to an antitrust exemption had arisen in connection with 23/

meeting the standards of the Act. In a letter- dated August 25, 1970, to the Subcommittee on Air and Water Pollution, Committee on Public Works, U.S. Senate, Senator Hart discussed the tentative proposal to include in a Bill for the National Air Quality Standards Act of 1970 an antitrust exemption which would authorize the automobile and petroleum industries to meet in a public forum to explore action required by the proposed bill for reducing engine emissions by 1975. Senator Hart was against such a proposal and stated, "Absent the incentives of competition, I am not very confident that the management of any of the firms involved in these industries could justify the necessary large research expenditures. If it is feared that one firm may corner the technology through patents, trade secrets, or know-how, your Committee may wish to consider the desirability of mandatory licensing at reasonable royalties of proprietary information which would assist in ultimately achieving the proposed Act's 1975 emission standard."

A number of Senate Bills24/ were considered and culminated in

S. 4358. In the Administration's letter to the Conference Committee

23/

Congressional Research Service of the Library of Congress, A Legislative History of the Clean Air Amendments of 1970 at 791.

24/

S. 3229, S. 3466, and S. 3546, 91st Cong., 2d Sess., (1973).

on that Bill, 25/

Section 309 of the Bill dealing with "Mandatory Licensing"

was discussed in the following manner:

Mandatory Licensing. The Senate bill (S. 4358, Sec. 309) compels
holders of patents, trade secrets, or know-how on pollution
control devices to grant licenses to all applicants for the use
(upon payment of reasonable royalties) of these devices, if the
Secretary of HEW determines that this is necessary to facilitate
compliance with air pollution standards for automobiles, aircraft,
and vessels, for hazardous facilities, or for new stationary
sources. There are no comparable provisions in the House bill.

The constitutionally-recognized protection which patents afford
has been a key element in encouraging innovation and we are
seriously concerned as to what the ultimate effects of this major
change in policy might be. In particular, we are uncertain as to
its possible deterrent effects on the incentive to invent in the
pollution control field, where the need for innovation is so great.
Moreover, we are not aware of the basis for assuming that developers
of essential air pollution control technology would refuse to
make it available either by license or direct sale to the users.

We recognize that this authority is permissive, and that the
report of the Senate Public Works Committee emphasizes that very
restrictive use should be made of it. Despite this, we are not
convinced of the need for such a basic change in policy in light
of its potential adverse effects and in the absence of known
abuses. If in the future a situation arises in which a refusal
to make technology available threatens to jeopardize the national
air pollution control effort, Congress can then legislate to meet
the particular problem.

It is noted that the compulsory licensing provisions were very broad in scope, including patents, trade secrets, and know-how. The Conference Committee considered S. 4358 containing the above-described broad compulsory licensing provision and a House Bill, H.R. 17255, which contained no such provision. The Conference Committee agreed on a compromise Bill containing a compulsory licensing provision limited to patents. The

following comments were made by the House Managers on the effect of

the action agreed upon by the conferees:

SECTION 308. MANDATORY LICENSING

The Senate amendments contained provisions for the mandatory
licensing of patents, trade secrets, and know-how whenever
the Administrator determined that the achievement of standards
established under specified sections of the Senate amendments
required the utilization of such patents, trade secrets or know-
how. The House bill did not contain comparable provisions. The
conference substitute is limited to patents. It would authorize
the Attorney General (rather than the Administrator) to certify
to a U.S. District Court that conditions specified in the section.
(relating to (1) the need for using the patent to achieve emission
limitations required by this Act, (2) the absence of alternative
methods to achieve such emissions, and (3) resulting lessening of
competition or monopolizaton) exist and may seek a court rule
requiring licensing on such reasonable terms and conditions as
the court may determine.

In the Senate summary of the conference report, it was stated:-
Section 308. In order to prevent the stringent standards of
the Act from contributing to monopolist concentrations in any
industries, the conference agreement provides for a limited
mandatory licensing of the technology necessary to meet auto-
mobile emission standards, emission standards for hazardous
air pollutants, or new source standards of performance, if
covered by a U.S. patent. If rights under such a patent are
not reasonably available, or the technology not commercially
available through purchase of control equipment, the Attorney
General may certify to a district court that some lessening of
competition will result and seek a license on reasonable terms

and conditions.

26/

Senator Muskie in submitting the Conference Report to the Senate

stated that mandatory licensing would "make available patents necessary