This report has been prepared in response to the requirements of
subsection 9(n) of the Federal Nonnuclear Energy Research and Development
Act of 1974, Public Law 93-577. It is devoted to assessing the applica-
bility of existing patent policies affecting the programs under the Act
and making recommendations to the President and the Congress on the
statutory patent policies of the Energy Research and Development Administra-
tion (ERDA), including recommendations on compulsory (or "mandatory")
patent licensing. The report has been prepared by a task force composed
of various ERDA program officials, members of our legal staff and, as
required by law, representatives from the Department of Commerce, the
Department of Justice, and the Office of Federal Procurement Policy of
the Office of Management and Budget, which was designated to assist in
the study.

The primary areas identified for investigation during the study include
the statutory scheme of allocating the rights to inventions made under
ERDA contracts, the acquisition of rights in the contractor's background
patents, the licensing of ERDA-owned patents, and the subject of compulsory
licensing.

The study on the allocation of patent rights and the acquisition of background rights was based on our first year of experience under the patent provisions of the Federal Nonnuclear Energy Research and Development Act of 1974 and the Atomic Energy Act of 1954. In addition, we obtained the public's views on these legislative patent provisions and our proposed implementation thereof and their views on the compulsory licensing of patents in the energy field.

BICENTENNIAL

From our limited experience we have concluded that the statutory requirements concerning the allocation of invention rights, which require title to be vested in ERDA while providing the authority to waive this requirement where appropriate, cannot at this time be said to have significantly impaired our ability to accomplish our program. These requirements appear to be workable. The flexibility provided by the waiver authority has been of value in resolving contractual problems, and we foresee that our implementation of the waiver authority will be an important element of a viable patent posture for our agency. However, the waiver procedures required by the statutes do create an administrative burden on the Government and the contractor and might need to be streamlined in the future.

While we have found it possible to harmonize by regulation the patent provisions of the Atomic Energy Act of 1954 and the Federal Nonnuclear Energy Research and Development Act of 1974, we are concerned whether our patent policy correctly utilizes the incentives of the patent system in a positive way to help the Nation achieve energy independence. Specifically, we have not been able to ascertain with assurance during our first year whether our patent policy will achieve the objectives set forth in Section 9(c) of the Federal Nonnuclear Energy Research and Development 'Act of making the benefits of our research, development and demonstration program available to the public in the shortest time practicable, promoting the utilization of inventions, encouraging participation, and fostering competition. We intend to keep this matter under the closest attention as further experience is gained.

ERDA's proposed policy of requiring contractors to provide to other parties "background patent rights," i.e., rights in the contractor's related patents necessary to practice the contract work or result, is of major concern to industry. The basis of the concern is that this requirement destroys the exclusivity of the contractor's privately financed patent position. While these provisions are not required by statute, we nevertheless have interpreted it to be necessary to negotiate to obtain the contractor ́s agreement to license others to utilize background patent rights under reasonable commercial terms where necessary to assure the public availability of our contract results. It was argued in the public hearings and in written comments that this requirement would tend to discourage participation in our programs by the most technologically advanced industrial firms because of the fear of its impact on their background patent position. We expect that further operating experience will provide a basis for evaluating these concerns as well as the opportunity for us to appropriately modify this policy as circumstances

warrant.