Federal Patenting and commercializing the invention,2 (2) provide notice of a prospective license in the Federal Register identifying the invention and prospective licensee and allowing a 60-day period for any interested party to file written objections, and (3) justify granting an exclusive license. The Air Force, Army, and Navy in the Department of Defense; Energy; From fiscal year 1981 through fiscal year 1990, the federal agencies and contractor-operated laboratories that we surveyed filed 15,669 patent applications, received 11,075 patents issued by the U.S. Patent and Trademark Office, granted 981 nonexclusive licenses and 455 exclusive licenses for the use of patented inventions, and received $37.5 million in license income. (Tables III.1 to III.3 in app. III present data for each agency.) Patent Applications and The number of patent applications filed by the federal agencies and contractor-operated laboratories surveyed fluctuated considerably in the past 10 years, declining from 1,708 in fiscal year 1981 to 1,208 in fiscal year 1987 before climbing to 1,837 in fiscal year 1990. The number of patents that the Patent and Trademark Office issued to these agencies and laboratories ranged from a high of 1,321 in fiscal year 1984 to a low of 889 in fiscal year 1988 before increasing to 998 in fiscal year 1990. Federal patent trends do not necessarily reflect agencies' and laboratories' efforts to commercialize their inventions; some agencies, particularly Defense, have other reasons for seeking patent protection. 2Federal agencies may exclude these submissions from disclosure under the Freedom of Information Act by treating them as commercial and financial information under 5 U.S.C. 552(b)(4). According to Air Force, Army, and Navy patent attorneys, their prin- Patent Licensing Activities The federal agencies and contractor-operated laboratories surveyed have modestly increased the average number of patent licenses granted per year from 130 licenses per year between fiscal years 1981 and 1986 to 164 licenses per year between fiscal years 1987 and 1990. The agencies and laboratories also increased the percentage of licenses requiring royalty payments from less than 50 percent of the licenses granted in the early 1980s to 95 percent of the licenses granted in fiscal year 1990.3 This increase in federal patent licensing activity primarily reflects implementation of provisions in (1) the Patent and Trademark Amendments of 1980, which allow federal agencies to grant exclusive licenses; (2) 1984 amendments to the Patent and Trademark Amendments of 1980, which allow nonprofit organizations that operate Energy's contractor-operated laboratories, with few exceptions, to retain title to federally funded inventions they make; and (3) the Federal Technology Transfer Act of 1986, which allows federal inventors and laboratories to share in any royalty and other income earned on licensed patents. Over the past 10 years the following changes in federal patent licensing occurred: The percentage of exclusive licenses granted by the agencies and laboratories surveyed increased from only 6 percent of 173 licenses granted in fiscal year 1981 to 32 percent of 114 licenses granted in fiscal year 1986 to 41 percent of 191 licenses granted in fiscal year 1990. Federal patent licensing officials said that businesses generally seek an exclusive license to protect their investment in developing an invention into a commercial product. In fiscal year 1981, all 28 licenses that Agriculture granted were on a nonexclusive, royalty-free basis. NTIS also granted two licenses for Agriculture patents and collected $7,300 on Agriculture licenses. In fiscal year 1986, Agriculture granted nine nonexclusive, royalty-free licenses while NTIS granted eight licenses for Agriculture patents and collected During fiscal year 1987, Energy approved modifications to the contracts In response to the royalty-sharing provisions of the Federal Technology The number of licenses that NTIS granted dropped to 48 in fiscal year 1990, after growing from 20 in fiscal year 1981 to 51 in fiscal year 1986 and 70 in fiscal year 1989. According to an NTIS official, this decline reflected (1) the downturn in the U.S. economy, which discouraged businesses from seeking government licenses, and (2) other agencies' increased involvement in patent licensing. Licensing of Defense inventions had minimal importance until the last 2 years, when Defense began to incorporate technology transfer into its mission in response to the Federal Technology Transfer Act of 1986. In fiscal years 1989 and 1990, the Air Force, Army, and Navy granted 16 licenses per year and received $190,000 in license income per year. During the 5 preceding fiscal years, they granted eight licenses per year and received $31,000 per year. The federal agencies and contractor-operated laboratories surveyed increased their patent licensing income from $348,000 in fiscal year Views of Federal 1981 to $5 million in 1986 and $9.4 million in 1990.4 Nonexclusive licenses that NTIS granted for two inventions made at NIH, a hepatitis B vaccine and an Acquired Immune Deficiency Syndrome test kit, earned $22.6 million, or 60 percent, of the $37.5 million received from fiscal year 1981 through fiscal year 1990. Energy's contractor-operated laboratories have earned $4.8 million since they began licensing inventions in fiscal year 1987. Despite only modest improvement in licensing federal patents, the patent attorneys and licensing officials interviewed at NTIS, the Air Force, the Army, the Navy, Energy, NASA, NIH, Agriculture, and NIST are generally satisfied with the procedures outlined in legislation and governmentwide regulations for licensing government-owned inventions. These agencies have granted almost all of the exclusive licenses for government inventions. Patent attorneys and licensing officials noted that the Patent and Trademark Amendments of 1980, while encouraging the commercial use of federal inventions by granting exclusivity, also protect the public's interests by establishing procedures to ensure fairness and openness in licensing. In particular, NTIS and NASA officials believe that the requirements to ensure fairness are appropriate and have proved to be workable. Some of the federal licensing officials, however, suggested changes to address particular problems they have experienced in granting licenses and responding to requests under the Freedom of Information Act (5 U.S.C. 552) for documents submitted by licensees. In addition, several of the officials mentioned that they do not have an effective means for officially notifying businesses and other organizations of federal patents available for licensing or of other technology transfer opportunities. Ensuring Fairness in NTIS licensing officials stated that negotiating an exclusive federal 4License income may include an initial fee payable with the execution of the license, an annual minimum fee, and royalties, which typically represent a percentage of the resulting product's sales. after comparing the costs and benefits of commercializing a federal invention with the costs and benefits of undertaking alternative company projects. Governmentwide regulations require that a federal agency publish a notice in the Federal Register of its intent to grant an exclusive license. This notice provides 60 days for the filing of objections, and if an outside party submits its own plans, the agency is required to consider the appropriateness of granting a license to the objecting party. The federal patent attorneys and licensing officials interviewed generally support the 60-day notice requirement, citing (1) the need to ensure fairness of opportunity, (2) the public's right to know who is getting exclusive rights to commercialize government-owned inventions, and/or (3) the opportunity to attract other licensees who were not aware of the invention's availability and who are willing to pay royalties for a license. All of these officials stated that if a company requested an exclusive license to a government-owned invention as a basis for a cooperative research and development agreement, their agencies would follow the 60-day notice procedures before signing an agreement. Patent licensing officials stated that their agencies have handled objections to the granting of exclusive licenses differently. On the one hand, NTIS normally does not begin to negotiate until the 60-day period is complete because it interprets governmentwide regulations as requiring agencies to negotiate with the original applicant and any qualified objectors. On the other hand, Energy and the Air Force give preference to an original applicant while trying to accommodate a qualified objector by, for example, granting the objector a patent license for a specific field of use. While the patent licensing officials interviewed generally support the current procedures, they cited a few cases in which an objection to the granting of an exclusive license constrained their licensing efforts. Air Force and Navy licensing officials stated that in at least two instances the process of handling objections resulted in no license being granted because (1) the licensing process was drawn out too long, causing the potential licensee to lose interest, and/or (2) the primary motive of the objector apparently was to block the granting of an exclusive license to a competitor, rather than any direct interest in commercializing the technology. Similarly, Energy licensing officials stated that they typically grant exclusive licenses only to small businesses because competitors would object to granting an exclusive license to a large corporation. Further, Army technology transfer officials noted that one company |