The President’s memorandum attempted to strike a middle ground between a “title” policy and a “license” policy. The “title” policy is based on the precept that since the research leading to the invention was carried out with public funds, the rights to the invention must be taken by the Government and-dedicated to the free use of the public. The practice of permitting such rights to rest in the hands of a private corporation endangers the public interest by further concentrating economic power, to the detriment of a freely competing economy.
Conversely, the “license” policy provides the Government with only a royalty-free, nonexclusive license under the patent, with all other rights being granted to the contractor. The contractor is permitted to patent and market the invention as though it were an ordinary commercial item developed, at his own expense. The proponents of this policy argue that the public interest is best served by providing incentives of exclusive rights to those who invent or discover. They feel that a practice of making the creative efforts of Government contractors freely available for the use of everyone does not benefit the public interest or carry out the intent of the patent law…
Now, the companies take a different stand toward their Government than they do to their own employees. Generally, their own employees must sign an agreement providing that the company takes title to the patents they develop. Apparently, the companies desire better treatment from the U.S. Government than they accord their own employees. This is a classic refutation of the proverb, “what’s sauce for the goose is sauce for the gander.”
Thus, when defenders of the giveaway patent policy argue that contractors have a right to patent inventions made under Government contract, they demand for themselves different rights than they are willing to give their own employees and subcontractors. Mass production and the virtual disappearance of the independent inventor have changed the original intent of the patent law which was to encourage individual inventiveness. Patents do not generally belong to the inventor; they belong to those who employ him.
Statistics show that only 24 percent of the patents issued for inventions in 1967 were issued to individuals, 73 percent to corporations, and 3 percent to the U.S. Government. Comparable figures for the period 1946 to 1950 show that individuals received 41 percent of the patents issued, corporations were granted 58 percent and the Government 2 percent.
That was Admiral Rickover testifying to the joint economic committee in November, 1968.
Could there be a symmetric stance on intellectual property for the companies to take between their interactions with government and their own employees? After all, the situations are similar. The government provides R&D funding to companies, and companies provide R&D funding to employees, who ultimately do the innovating. The question is in who has rights to the patent, and thus, the profits.
Some say the government should retain the patent and either earn profits or put it into the commons for everyone to use. Some say the companies should hold the patents because they put capital at risk. Others say the employees who created the idea should hold all rights to their ideas.
Ultimately, the rights to the patent have to go one place. That is probably best in the hands of a company, which is the entity best organized to deploy the innovation into the market and earn profits, which otherwise couldn’t be realized without the company’s business expertise. In some cases, the lone inventor and the company are aligned, if the inventor owns 100% of the company.
Fortunately, the company is an abstraction itself, and financial gains accrue to the shareholders. Equity sharing between all levels of R&D, from individual to company to government, could perhaps provide that symmetry on intellectual property. Equity sharing with employees seems to be on the rise, particularly in tech sectors, but what would equity sharing between the government R&D and companies look like?
One of the hardest problems there is the valuation process. How much equity? For what kind of work? How good are you? And so forth. We have a decent idea what this process looks like within firms, and also between venture capital and startups, but these processes are very different than the official R&D process between government and firms. Perhaps that is a good thing.
Source: ECONOMICS OF MILITARY PROCUREMENT, HEARINGS BEFORE THE SUBCOMMITTEE ON ECONOMY IN GOVERNMENT OF THE JOINT ECONOMIC COMMITTEE, CONGRESS OF THE UNITED STATES, NINETIETH CONGRESS, SECOND SESSION, NOVEMBER 11, 12, 13, AND 14, 1968
PART 2, [Thursday, November 14, 1968].
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