Mr. O'MEARA. Mr. Hosmer, I can't add much to what I have said. Mr. HOSMER. I just want you to say what the situation is now and what it would be under your amendment.

Mr. O'MEARA. The way it is now, the companies that have the strongest background patents in desalinization do not feel that they can work closely with the Office of Saline Water because it would mean that they would have to surrender their background rights in order to continue the development of desalting under our present operations. If we go under the President's memorandum on patents and follow the Government-wide policy, we would have some discretion in evaluating the background position of a company and giving them some exclusivity for the sale of desalting equipment that is patented under Government work.

Now this could be for a period of 1 year or 2 years. It would depend on the amount of investment on the background patents of the individual contractor.

Mr. HOSMER. Would this exclusivity be subject to the discretion of OSW or the Government patent agency of the President or whom?

Mr. O'MEARA. The discretion would be within the Department of Interior, with the negotiations we conduct and with the approval of the Solicitor's Office.

Mr. HOSMER. A fellow could have a contract then, with OSW, one who had some background patents. Then after he got through with the contract or during the period of the contract he could get some exclusivity or whatever you call it on any sale.

Mr. O'MEARA. That is sole rights for a predetermined period; not perpetual rights. The Government owns the patent.

Mr. HOSMER. But what are we talking about-a thousand years, that's a specific term or 10 months or what?

Mr. O'MEARA. One to 3 years would be the length of time for which we could give exclusive rights to the development of that patent. This would give them some opportunity to recover their investment.

Mr. HOSMER. Would this be kind of a general thing that you would give a fellow when he signed a contract with OSW? Or is it something that he comes in and asks for when he wants to peddle one of these plants or what?

Mr. O'MEARA. Well, it would be general in that we would apply it to all of the contractors, based on their experience.

If a firm comes to us that has no background

Mr. HOSMER. When do they get it, when they sign a contract with OSW or do they come in and plead for it later when they want to make a sale someplace?

Mr. O'MEARA. The agreement would have to be made at the time the contract is signed.

It does not mean, as a result of that contract that there will be a patent. We can not predict that in advance.

But, if one does occur, then they want enough protection to recover their investment.

Mr. HOSMER. Well, do they then get that exclusivity just on the background patent materials or the stuff that they have contributed to the technology while they are under contract to the Government and got paid for it?

Mr. O'MEARA. We would propose that they have exclusivity for a period of time long enough to enable them to recover part of the in

vestment that they have put into the development of this process. That is where we have to exercise discretion.

We can't say that everyone gets 1 year sole rights or 2 year sole rights.

Mr. HOSMER. In other words, as they get payment on the new process that Uncle Sam has paid them to develop

Mr. O'MEARA. That is correct. Yes, sir.

Mr. HOSMER. Is this double compensation?

Mr. O'MEARA. In no way. We are only trying to give them a chance to recover their investment and not to double compensate them for it. Mr. HOSMER. Now we have had situations, you cited yesterday, companies that would not do business with OSW and I gather Du Pont is one of them

Mr. O'MEARA. Yes, sir.

Du Pont was unwilling to develop their hollow fine fiber technology under the regulations that we have in effect.

Mr. HOSMER. So they go and develop it on their own?

Mr. O'MEARA. They have developed it on their own and Du Pont happened to be one company that had enough financial resources to do that, but there are other companies that have excellent ideas and not the same kind of financial resources.

Mr. HOSMER. Who is on that sick list?

Mr. O'MEARA. We could provide you with a list of companies.

I cited one in my statement. Amicon Corp. is a small but very agressive company that had some good ideas but were not willing to reveal them to us for development.

They did not want to give up their ideas and their corporate opportunity in order to get some support from the Office of Saline Water. Mr. HOSMER. And so they're going right ahead and staying in business anyway?

Mr. O'MEARA. They are staying in business but they are not developing their desalting ideas.

Mr. HOSMER. How about this, does it apply to these people, that are given foreign research contracts?

Mr. O'MEARA. We obtain any patents that result from foreign research we sponsor. The likelihood of patentable activities resulting from the work we are sponsoring in foreign countries, is rather

remote.

I would point out, Mr. Hosmer, that at the present time we have one contract with a foreign country-that is a contract with the Wiseman Institute in Israel that is a basic research contract in the amount of $60,000 that runs for a 2-year period.

We do not anticipate that there will be anything patentable in that but if that did occur, the patent would belong to the U.S. Government and there is no exclusivity.

Mr. HOSMER. And it would be a basic patent, wouldn't it?

Mr. O'MEARA. There would be no exclusivity rights for a foreign

country.

Mr. HOSMER. And there would be a lot of money potential if it were any good.

Mr. O'MEARA. Yes, sir. And the patent would belong to the U.S. Government.

Mr. HOSMER. And the Wiseman Institute would for some length of time have been given exclusivity?

Mr. O'MEARA. Sole rights would not be given on foreign contracts. Mr. HOSMER. Is that specified in your amendment or in the Code of Federal Regulations or what?

Mr. O'MEARA. Can anybody answer? Is that specifically spelled out in the President's memorandum?

I don't recall. But in our negotiations, there will be no granting of patents to any foreign organization that is developing work under our

contracts.

Mr. HOSMER. Mr. Chairman, I want to thank the witness for his contributions to my confusion.

(There is general laughter.)

Mr. JOHNSON. Before we get off the subject matter, you have already stated that there were many fine companies that would like to do business with OSW and on account of the patent restrictions they are now faced with, that they would not come forward?

Mr. O'MEARA. Yes, sir.

Mr. JOHNSON. Now, in your last year of experience, since you have been acting director, who were these companies?

Mr. O'MEARA. Mr. Chairman, with your permission, I would like to have time to develop a list and submit it for the record by tomorrow. I have a few here but I would rather make a complete list of the firms that have objected to our patent policy and those firms that could not work under the terms that we now must apply.

Mr. McCLURE. Would the gentleman yield?

Mr. JOHNSON. Yes.

Mr. McCLURE. It seems to me that this morning you said you have a requirement that they agree to license background patents and that that is a matter of policy established by OSW, that may or may not be required by the present existing provisions of the statute.

Is that correct?

Mr. O'MEARA. That is correct.

Mr. McCLURE. So it is a matter of policy rather than a matter of law that requires this licensing provision?

Mr. O'MEARA. Yes, sir.

Mr. McCLURE. Then I think we should understand very clearly that what we are asked to do here is to go beyond that and say in exchange for this, we are willing to grant sole rights because in your judgment, that is the proper way for us to stimulate greater participation by the companies but it is not required now by statute.

Mr. O'MEARA. That is absolutely correct.

Mr. JOHNSON. If you would prepare the list, we would like to have them listed for the record.

(The list follows:)

REPRESENTATIVE ORGANIZATIONS THAT HAVE OBJECTED TO OWS'S PATENT POLICY

1. Havens Industries, 8133 Aero Drive, San Diego, Calif. 92123.

2. Amicon Corp., 25 Hartwell Avenue, Lexington, Mass. 02173.

3. American Cyanamid, 1937 W. Main Street, Stamford, Conn. 06904.

4. Dow Chemical Co., 566 Building, Midland, Mich. 48640.

5. Eastman Kodak-Eastman Chemical Product Inc., Kingsport, Tenn. 37662.

6. North American, 6633 Canoga Avenue, Canoga Park, Calif. 91304.

7. Cornell University, Ithaca, N.Y. 14850.

8. University of California, Berkley, Calif. 94720.

9. Kansas State University, Seaton Hall, Manhattan, Kans.

10. General Electric, P.O. Box 43, Schenectady, N.Y. 12301.

11. Ionics, Inc., 65 Grove Street, Watertown, Mass. 02172.
12. Koppers Corp., Grant Street, Pittsburgh, Pa. 15219.
13. Colt Industries, 701 Lawton Avenue, Beloit, Wis. 53511.
14. Aerojet-General, 9200 E. Flair Drive, El Monte, Calif.

15. Cuno Engineering, SO S. Vine Street, Meriden, Conn. 06450.

16. Union Carbide, P.O. Box 324, Tuxedo, N.Y. 10987.

17. General Dynamics, San Diego, Calif.

18. United Aircraft, East Hartford, Conn. 06108.

19. Catalytic Construction Co., 1528 Walnut Street, Philadelphia, Pa. 19102. 20. Battelle Memorial Institute, 505 King Avenue, Columbus, Ohio.

21. Burns and Roe, 700 Kinderkamack Road, Oradell, N.J. 07649.

22. E. I. duPont de Nemours and Co., Inc., Wilmington, Del. 19898.

Mr. JOHNSON. Now, another question in connection with the elimination of 6(d).

What would your position be if we were to eliminate that from the legislation and move forward with the authorizing legislation for the continuance of the operation of the Office of Saline Water. Then in the interim, you could work up a piece of legislation that would consider the patent considerations. Or perhaps you could develop something prior to the Senate hearings that would be acceptable in the bill.

Mr. O'MEARA. Mr. Chairman, it would be desirable to have section. 6(d) considered by the committee at this time, but it is far more important to the Office of Saline Water that we have our authorization request for fiscal 1973 than it is to have a change in the patent requirements.

Mr. JOHNSON. The gentleman from Pennsylvania, Mr. Saylor?
Mr. SAYLOR. Thank you, Mr. Chairman.

Mr. O'Meara, I don't know why all of the confusion has suddenly developed on the subject of patents.

Very frankly, I think, as an Irishman, that your English is excellent, your explanation has been lucid to anybody who just makes a sincere effort to try to find out what is going on.

All you are trying to say is that you would like to have the Office of Saline Water comply with and have the same requirements that everybody else has.

Now, let us get down to something a little more mundane.

What is the best price that the Office of Saline Water has been able to produce potable water for?

Mr. O'MEARA. Mr. Saylor, I am hesitating to answer your question because the cost of producing water in the equipment that we build is far more expensive than the cost of water in commercial operations and this comes about because we build a different kind of plant.

We build a plant that is designed to produce information rather than water. Our plants are overinstrumented and overdesigned and as a result they produce expensive water, but they produce the kind of information that is not available from commercial operations.

Now, the results of our work have been applied to areas like the Tijuana plant and that plant, the Mexican's report, is producing water for 65 cents a thousand gallons.

Mr. SAYLOR. How about the Virgin Islands plant?

Mr. O'MEARA. The report that we had from the Virgin Islands on their plants is that they are producing water in the range of 85 cents a thousand gallons, but in all candor, I do not believe their plants are achieving that cost. That cost is based on full operation and the plants have not achieved full operation.

There is down time on those plants and the down time means that the cost of water is more costly than 85 cents a thousand gallons.

Mr. SAYLOR. I have been down to the Virgin Islands and I have discovered that when the Westinghouse officials are there operating the plant, they have no difficulty in having the plant function perfectly. When they walk out leaving their instructions with the local employees, things seem to go awry.

For example, Westinghouse went back into that plant and put large tags on certain of the valves that said when the plant is operating this valve is to be closed.

The plant failed to function and they went down and found out that somebody had opened some of the valves and turned some others that shouldn't have been on when the plant was in operation. Because of that, they didn't seem to be getting any results down there.

In other words, it's inefficiency in the operation of the plant itself that causes the cost to go up.

Is that right?

Mr. O'MEARA. That is correct, sir.

Mr. SAYLOR. All right.

Now, what have the figures been in Jidda, if you know?

Does anybody know what they are producing water for?

Mr. O'MEARA. Mr. Saylor, let me report it this way, that Prince Mohamed Al-Faisal, who is in charge of the desalting operations in Jidda, says that the cost of water from the plant there is 12 cents per thousand gallons.

Now that is how he has computed the cost.

We estimate the cost of water from that plant at around 70 cents per thousand gallons, but he has the opportunity to decide what his water costs are. How he amortizes his capital investment, how he assigns interest expense, how he handles his fuel costs, are all decisions that he makes. But, he has decided, in his judgment, that 12 cents per thousand gallons is the cost of water from that plant. And at that price it is cheap enough to consider for irrigation in Saudi Arabia.

Now, that is not too unusual that somebody would devise a system that they might have even learned in the United States for multipurpose development and the plant produces power and they can make whatever charge they want for the power. I have been told that he's only charging 5 cents per million B.t.u. for his fuel. Now, in this country, if we could get fuel for 60 cents a million B.t.u. we would be very pleased. Our estimates of the cost of water from the plant is around 70 cents a thousand gallons.

Mr. SAYLOR. Apparently, the Prince has sent some obvious peopleor he himself has spent some time with former representatives in the Bureau of Reclamation.

I detect a strange resemblance to the figures, used by certain former heads of that agency, with regard to allocating costs. It doesn't surprise me that we get a report from Jidda that they are producing water for 12 cents.

Now, in Israel, what is the figure that we have for the production of water?

Mr. O'MEARA. They have one major plant in Israel that is operating at Elat and that plant is producing water for about a dollar a thousand gallons.

It is a 1-million-gallon-per-day plant.