Thank you Madam Chairwoman. I am very happy to have the opportunity to testify today concerning the promotion of technology transfer through patent licensing.
Since we first saw the proposed legislation yesterday, neither NASA nor the Administration has had the opportunity to formulate a detailed official position on it. However, I hope that some of the lessons that I have learned over the years in licensing patentable inventions and my experiences under the current statute would be helpful to you when considering any proposed changes to the law.
Two of the major improvements in the licensing process that I have seen during my career are (1) the personal involvement of technical experts, and individuals with marketing, negotiation and other business experience in the licensing process and (2) the statutory authority given to our negotiators to require written commercialization plans and yearly status reports describing progress toward commercialization of our technology.
In the not too distant past, the work of deciding on which invention to file a patent application and to what company to license the technology fell on the shoulders of one person, the local patent attorney. There was simply no way for one individual to possess all the skills required for these varied tasks. In recent years, most research centers have hired individuals with marketing and business experience to assist in this process. Out of the 900 invention disclosures that NASA receives each year, we only have the resources to file approximately 150 patent applications in the U.S. Patent and Trademark Office. It is critical to file on those with the highest value; that is, those most likely to have commercial potential for a private company. Then, to maximize the intellectual property embodied in the patent, we must select a licensee with the capability to commercialize the technology.
One of the tools that we use to assess capability is the commercialization plan required from all prospective licensees. These plans are actually used for a multitude of purposes. Since U.S. patent law does not require compulsory licensing of patented inventions, all licensing is discretionary. As a Government Agency, we should have a rational basis for any discretionary decision, such as granting a license to a specific company. The plans submitted by the license applicant are necessary to meet the rational basis test and to help us select between applicants when more than one applicant is interested in a technology. They are also used to define fields of use consistent with a company’s capabilities and resources, to build milestones into the license agreement and to modify or revoke a license when a company is not progressing toward commercialization. It is very important to match our technology with the capabilities of the prospective licensee. In many cases our inventions are generic and have application in more than one industry or area of technology. Based upon the information that the applicant supplies us, it is not unusual for us to divide our patent licenses into various fields of use which match the capabilities of the prospective licensees. It has been my experience that if we provide a wider area of technology to a company than they are capable of commercializing, we have simply reduced the use of that technology and reduced the value of our intellectual property. Since we are not experts in every field of use of our technology, it is also important to use the private sector’s commercialization plan to set milestones in the license agreement so that we can track whether the company is progressing towards commercialization. Because we depend heavily on the company’s own plan for development, I believe that it is very fair to also use these milestones to evaluate performance. In those cases where a company is not making progress towards commercializing a technology, we use their own plan as a basis for reducing the scope of the license or terminating the license completely. Without such plans being provided by the private sector, I do not know how we would be able to set fair milestones and evaluate performance.
Another useful provision of the current statute is the requirement for a notice of intent to grant an exclusive license. One can argue whether the Federal Register is the proper forum for the notice or whether 30 days would be sufficient, but some notice is useful. In my mind, this requirement is akin to the Competition in Contracting Act and adds an openness or fairness to the process. Without such a notice, we would always be subject to claims of favoritism or that we are taking arbitrary action. I understand that publication takes time and some argue that it delays the licensing process, but my experience has been that if you publish the notice as soon as you begin discussions with a prospective licensee, there is usually no delay in signing the license. We have also found that the Federal Register Notice has uncovered other capable licensees for our technology. In a number of cases, we have ended up granting multiple co-exclusive licenses based on the responses to our notice.
In conclusion, there are certain effective tools, such as the requirement for notice to the public, for plans from prospective licensees and status reports from licensees, which the Congress has provided Government agencies for licensing and monitoring their technologies. I believe that any legislation in the area of patent licensing should keep in mind how these tools are being used by those in the agencies performing the work.