2. Contractors and grantees

The Government-owned nickel plant at Nicaro, Cuba, was originally built by Freeport Sulphur Co. and Nicaro Nickel Co., its wholly owned subsidiary, in 1942 and was operated by Nicaro Nickel Co. from 1943 to 1947. In its present operation by Nickel Processing Corp., a subsidiary of National Lead Co., a substantial part of the ore used at the plant is taken from properties owned by Nicaro Nickel Co. According to Freeport Sulphur Co., the present operation of the plant is still covered by patents which are owned by Freeport and which were evolved during Freeport's development of the plant. An official of GSA, however, has publicly stated that "none of the [Freeport] patents are valid patents." 8 In any event, the contract under which the Government uses ores belonging to Nicaro Nickel Co. provides that the Government shall have an assignable, nonexclusive, perpetual right to use the processes covered by those patents, but the only payments called for under that contract are based upon the amount of ore used by the Nicaro plant and upon the market price of refined nickel, subject to a minimum payment during any year in which the Government shall operate the plant. Aside from the foregoing case, General Services Administration states that in no instance is it paying royalties or other compensation for the use of the patents owned by others except as such compensation may be paid as a part of the purchase price of supplies. GSA intends to dispose of the Nicaro plant. Freeport claims that any purchaser of the plant would be using Freeport's patented processes, and the right to use such processes carries with it the obligation under the contract to take from Freeport properties a part of the ore required for the plant. Freeport also denies that the contract is freely assignable by the Government. The contract with Nickel Processing Corporation covering the present operation provides that the Government shall have title to all patents arising out of the operation.

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3. Government

a. Directly

One of the patent applications evolving from the Nicaro nickel project covers an invention which is used occasionally in the Nicaro operation when the cobalt content of the nickel product is running above specification limits. This invention involves a method of precipitating cobalt from the product liquor to lower the amount of cobalt in the final product. The other inventions are now used only in experimental work, but the patent applications are being processed with future protection in mind should any of the inventions be permanently adopted.

b. Through licensees

As previously noted, General Services Administration at present owns no patents and therefore has no licensees.

* See app. C.

Statements of Langbourne Williams, president of Freeport Sulphur Co., and Hon. Jack Brooks, "Disposal Problems of Government-Owned Nickel Plant at Nicaro, Cuba," hearings before a subcommittee of the Committee on Government Operations, House of Representatives, 85th Cong., 2d sess., Apr. 23 and 24, 1958.

III. AGENCY VIEWPOINT

A. JUDGMENT AS TO EFFECTIVENESS OF PRESENT POLICY

General Services Administration has informed the subcommittee that it knows of no instances in which a patent policy different from its present policy might have proven useful to the Government or in the public interest.

The President has assigned to the Administrator of General Services the responsibility for carrying out a recommendation of the Cabinet Committee on Small Business that the President arrange for a comprehensive review of procurement policies and procedures of all executive agencies with a view of facilitating and extending the participation of small business in work on Government contracts.10 To accomplish this, there was created an interagency Task Force for Review of Government Procurement Policies and Procedures. part of the contemplated review, this task force has established a study group, of which the Commissioner of Patents is chairman, for the purpose of evaluating existing practices governing the division of patent rights between research and development contractors and the Government under research financed by the Government.

As

General Services Administration has reported that it believes its final answer to the subcommittee's question as to contract patent policy should await the completion of this group's review of the subject. However, Commissioner Watson of the Patent Office, chairman of the group, has advised the subcommittee that the group is presently inactive for lack of funds.

B. FUTURE RECOMMENDATIONS

General Services Administration has made no surveys or studies relating to the feasibility of adopting new patent policies or practices regarding patents owned by GSA with respect to employee inventions. The agency advises that it feels its limited experience does not permit it to make patent policy recommendations.

10 Letter of President Dwight D. Eisenhower to Franklin G. Floete, Administrator of General Services Administration, dated Sept. 26, 1956.

APPENDIXES

APPENDIX A

PATENT RIGHTS ARTICLE CONTAINED IN CONTRACT WITH SYLVANIA ELECTRIC PRODUCTS, INC. (GS-OOP (D)-18144)

ARTICLE XII

(a) As used in this Article, the following terms shall have the meanings set forth below:

(i) The term "Subject Invention" means any invention, improvement or discovery (whether or not patentable) conceived or first actually reduced to practice either:

(A) in the performance of the experimental, developmental, or research work called for or required under this Contract; or

(B) in the performance of any experimental, developmental or research work relating to the subject matter of this Contract which was done upon an understanding in writing that a contract would be awarded;

provided that the term "Subject Invention" shall not include any invention which is specifically identified and listed in said Schedule A for the purpose of excluding it from the license granted by this Article.

(ii) The term "Technical Personnel" means any person employed by or working under contract with the Contractor (other than a subcontractor whose responsibilities with respect to rights accruing to the Government in inventions arising under subcontracts are set forth in (f), (g), and (h) below) who, by reason of the nature of his duties in connection with the performance of this Contract, would reasonably be expected to make inventions.

(iii) The terms "subcontract" and "subcontractor" mean any subcontract or subcontractor of the Contractor, and any lowertier subcontract or subcontractor under this Contract.

(b) (1) The Contractor agrees to and does hereby grant to the Government an irrevocable, nonexclusive, nontransferable, and royaltyfree license to practice, and cause to be practiced by or for the United States Government, throughout the world, each Subject Invention in the manufacture, use and disposition according to law, of any article or material, and in the use of any method. No license granted herein shall convey any right to the Government to manufacture, have manufactured, or use any Subject Invention for the purpose of providing services or supplies to the general public in competition with the Contractor or the Contractor's commercial licensees in the licensed fields.

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(2) With respect to:

(i) any Subject Invention made by other than Technical Personnel;

(ii) any Subject Invention conceived prior to, but first actually reduced to practice in the course of any of the experimental, developmental, or research work specified in (a) (i) above; and

(iii) the practice of any Subject Invention in foreign countries; the obligation of the Contractor to grant a license as provided in (b) (1) above, to convey title as provided in (d) (ii)(B) or (d) (iv) below, and to convey foreign rights as provided in (e) below, shall be limited to the extent of the Contractor's right to grant the same without incurring any obligation to pay royalties or other compensation to others solely on account of said grant. Nothing contained in this Patent Rights Article shall be deemed to grant any license under any invention other than a Subject Invention. (c) The Contractor shall furnish to the Contracting Officer the following information and reports concerning Subject Inventions which reasonably appear to be patentable:

(i) a written disclosure promptly after conception or first actual reduction to practice of each such Invention together with a written statement specifying whether or not a United States patent application claiming the Invention has been or will be filed by or on behalf of the Contractor;

(ii) interim reports, at least every twelve months, commencing with the date of this Contract, each listing all such Inventions conceived or first actually reduced to practice more than three months prior to the date of the report, and not listed on a prior interim report, or certifying that there are no such unreported Inventions; and

(iii) prior to final settlement of this Contract, a final report listing all such Inventions including all those previously listed in interim reports.

(d) In connection with each Subject Invention referred to in (c) (i) above, the Contractor shall do the following:

(i) if the Contractor specifies that a United States patent application claiming such Invention will be filed, the Contractor shall file or cause to be filed such application in due form and time; however, if the Contractor, after having specified that such an application would be filed, decides not to file or cause to be filed said application, the Contractor shall so notify the Contracting Officer at the earliest practicable date and in any event not later than eight months after first publication, public use or sale.

(ii) if the Contractor specifies that a United States patent application claiming such Învention has not been filed and will not be filed (or having specified that such an application will be filed thereafter notifies the Contracting Officer to the contrary), the Contractor shall

(A) inform the Contracting Officer in writing at the earliest practicable date of any publication of such Invention made by or known to the Contractor or, where applicable, of any contemplated publication by the Contractor, stating the date and identity of such publication or contemplated publication; and

(B) convey to the Government the Contractor's entire right, title, and interest in such Invention by delivering to the Contracting Officer upon written request such duly executed instruments (prepared by the Government) of assignment and application, and such other papers as are deemed necessary to vest in the Government the Contractor's right, title, and interest aforesaid, and the right to apply for and prosecute patent applications covering such Invention throughout the world, subject, however, to the right of the Contractor specified in (e) below to file foreign applications, and subject further to the reservation of a nonexclusive and royalty-free license to the Contractor (and to its existing and future associated and affiliated companies, if any, within the corporate structure of which the Contractor is a part) which license shall be assignable to the successor of that part of the Contractor's business to which such Invention pertains; (iii) the Contractor shall furnish promptly to the Contracting Officer on request an irrevocable power of attorney to inspect and make copies of each United States patent application filed by or on behalf of the Contractor covering any such Invention;

(iv) in the event the Contractor, or those other than the Government deriving rights from the Contractor, elects not to continue prosecution of any such United States patent application filed by or on behalf of the Contractor, the Contractor shall so notify the Contracting Officer not less than sixty days before the expiration of the response period and, upon written request, deliver to the Contracting Officer such duly executed instruments (prepared by the Government) as are deemed necessary to vest in the Government the Contractor's entire right, title, and interest in such Invention and the application, subject to the reservation as specified in (d) (ii) above; and

(v) the Contractor shall deliver to the Contracting Officer duly executed instruments fully confirmatory of any license rights herein agreed to be granted to the Government.

(e) The Contractor, or those other than the Government deriving rights from the Contractor, shall have the exclusive rights to file applications on Subject Inventions in each foreign country within: (i) nine months from the date a corresponding United States application is filed;

(ii) six months from the date permission is granted to file foreign application where such filing has been prohibited for security reasons; or

(iii) such longer period as may be approved by the Contracting Officer. The Contractor shall, upon written request of the Contracting Officer, convey to the Government the Contractor's entire right, title and interest in each Subject Invention in each foreign country in which an application has not been filed within the time above specified, subject to the reservation of a nonexclusive and royalty-free license to the Contractor together with the right of the Contractor to grant sublicenses, which license and right shall be assignable to the successor of that part of the Contractor's business to which the Subject Invention pertains. (f) The Contractor shall exert all reasonable effort in negotiating for the inclusion of this Patent Rights Article in any subcontract