B-124998, JAN. 19, 1956

B-124998: Jan 19, 1956

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TO THE HONORABLE SECRETARY OF THE NAVY: REFERENCE IS MADE TO LETTER DATED AUGUST 1. FROM THE UNDER SECRETARY OF THE NAVY REQUESTING A DECISION WHETHER THERE IS LEGAL OBJECTION TO THE NAVY DEPARTMENT'S ENTERING INTO A CONTRACT WITH ONE OF ITS EMPLOYEES FOR THE PAYMENT OF ROYALTIES FOR THE USE OF AN INVENTION UNDER THE CIRCUMSTANCES RELATED THEREIN AND WHETHER SUCH A CONTRACT MAY BE ENTERED INTO DURING THE PENDENCY OF THE APPLICATION FOR THE PATENT. AN ANALOGUE COMPUTER WHICH YOUR DEPARTMENT IS INCORPORATING INTO CERTAIN EQUIPMENT. HE WAS ASSIGNED TO A GROUP WORKING ON THE REDESIGN AND IMPROVEMENT OF THE COMPUTER WHICH WAS THEN BEING USED. ABOUT EIGHTY OF WHICH THE EMPLOYEES SPENT IN THE NAVAL LABORATORY WHERE HE WAS EMPLOYED.

B-124998, JAN. 19, 1956

TO THE HONORABLE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO LETTER DATED AUGUST 1, 1955, FROM THE UNDER SECRETARY OF THE NAVY REQUESTING A DECISION WHETHER THERE IS LEGAL OBJECTION TO THE NAVY DEPARTMENT'S ENTERING INTO A CONTRACT WITH ONE OF ITS EMPLOYEES FOR THE PAYMENT OF ROYALTIES FOR THE USE OF AN INVENTION UNDER THE CIRCUMSTANCES RELATED THEREIN AND WHETHER SUCH A CONTRACT MAY BE ENTERED INTO DURING THE PENDENCY OF THE APPLICATION FOR THE PATENT.

FROM THE UNDER SECRETARY'S LETTER AND THE DOCUMENTS ATTACHED IT APPEARS THAT THE EMPLOYEE DEVELOPED, ENTIRELY OUTSIDE HIS REGULAR HOURS OF WORK, AN ANALOGUE COMPUTER WHICH YOUR DEPARTMENT IS INCORPORATING INTO CERTAIN EQUIPMENT. AT THE TIME THE EMPLOYEE BEGAN WORK ON THE COMPUTER, HE WAS ASSIGNED TO A GROUP WORKING ON THE REDESIGN AND IMPROVEMENT OF THE COMPUTER WHICH WAS THEN BEING USED. THE GROUP HAD THE GENERAL OBJECTIVE OF EFFECTING A REDUCTION IN SIZE AND WEIGHT AND OF OBTAINING OTHER IMPROVEMENTS. THE EMPLOYEE'S SPECIFIC ASSIGNMENT RELATED TO THE DEVELOPMENT OF A MORE SATISFACTORY POWER SUPPLY.

THE DEVELOPMENT OF THE INVENTION REQUIRED APPROXIMATELY SEVEN HUNDRED HOURS OF WORK, ABOUT EIGHTY OF WHICH THE EMPLOYEES SPENT IN THE NAVAL LABORATORY WHERE HE WAS EMPLOYED, BUT OUTSIDE OF HIS REGULAR WORKING HOURS. APPARENTLY ALL OF THE MACHINERY AND EQUIPMENT USED IN MAKING THE INVENTION WAS GOVERNMENT PROPERTY, AND IT WAS CONSTRUCTED ENTIRELY OF GOVERNMENT MATERIALS. IN A MEMORANDUM DATED OCTOBER 16, 1952, THE EMPLOYEE ADMITS THAT THE EQUIPMENT NECESSARY FOR THE CONSTRUCTION OF A PHYSICAL SYSTEM TO TEST THE ACCURACY OF HIS THEORY WAS NOT AVAILABLE TO HIM PRIVATELY.

UPON BEING TESTED AT THE NAVAL LABORATORY ON JUNE 4, 1952, THE INITIAL MODEL WAS SHOWN TO HAVE AN ERROR OF ABOUT FOUR PERCENT--- AN UNPERMISSIBLE MARGIN. FOLLOWING THE TEST AN OFFICIAL NAVY PROJECT WAS ESTABLISHED TO DEVELOP THE COMPUTER AND INCORPORATE IT INTO THE EQUIPMENT. THE EMPLOYEE- INVENTOR WAS ASSIGNED TO THE PROJECT AND FOR MANY MONTHS THEREAFTER HE DID NOT DISCUSS OR MAKE ANY DEMAND FOR COMPENSATION FOR THE USE OF HIS DEVICE. ON THE CONTRARY, IN THE MEMORANDUM DATED 16 OCTOBER 1952, THE INVENTOR INDICATED HE FELT THAT, BY REASON OF THE FACT THAT GOVERNMENT EQUIPMENT WAS USED IN THE PROCESS OF DEVELOPMENT, THE GOVERNMENT WAS ENTITLED TO A ROYALTY-FREE LICENSE. HE DID, HOWEVER, DISCLOSE THE INVENTION TO THE HEAD OF THE PATENT BRANCH AT THE STATION, LATER REQUESTED A DETERMINATION AS TO HIS AND THE GOVERNMENT'S RESPECTIVE RIGHTS, AND THEREAFTER, AT HIS OWN EXPENSE, FILED AN APPLICATION FOR A PATENT.

PURSUANT TO EXECUTIVE ORDER NO. 10096, OF JANUARY 23, 1950, YOUR DEPARTMENT LATER MADE A DETERMINATION TO LEAVE TO THE INVENTORY EMPLOYEE THE ENTIRE RIGHT, TITLE, AND INTEREST IN AND TO THE INVENTION, SUBJECT TO LAW, WHICH DETERMINATION WAS CONCURRED IN BY THE CHAIRMAN OF THE GOVERNMENT PATENTS BOARD ESTABLISHED BY SUCH ORDER. LATER, THE MATTER WAS AGAIN SUBMITTED TO THE BOARD WHICH, AFTER AN ORAL FACT-FINDING INQUIRY, AFFIRMED ITS ORIGINAL FINDING.

PARAGRAPH 1 OF EXECUTIVE ORDER 10096 PROVIDES:

"1. THE FOLLOWING BASIC POLICY IS ESTABLISHED FOR ALL GOVERNMENT AGENCIES WITH RESPECT TO INVENTIONS HEREAFTER MADE BY ANY GOVERNMENT EMPLOYEES:

(A). THE GOVERNMENT SHALL OBTAIN THE ENTIRE RIGHT, TITLE AND INTEREST IN AND TO ALL INVENTIONS MADE BY ANY GOVERNMENT EMPLOYEE,

(1) DURING WORKING HOURS, OR

(2) WITH A CONTRIBUTION BY THE GOVERNMENT OF FACILITIES, EQUIPMENT, MATERIALS, FUNDS, OR INFORMATION, OR OF TIME OR SERVICES OF, OTHER GOVERNMENT EMPLOYEES ON OFFICIAL DUTY, OR

(3) WHICH BEAR A DIRECT RELATION TO OR ARE MADE IN CONSEQUENCE OF THE OFFICIAL DUTIES OF THE INVENTOR.'

PARAGRAPH 1 (B) OF THE ORDER PROVIDES, IN ANY CASE WHERE THE CONTRIBUTION OF THE GOVERNMENT AS MEASURED BY THESE CRITERIA IS INSUFFICIENT EQUITABLY TO JUSTIFY REQUIREMENT OF ASSIGNMENT TO THE GOVERNMENT OF THE ENTIRE RIGHT TO THE INVENTION, FOR THE GOVERNMENT'S LEAVING TITLE TO THE EMPLOYEE SUBJECT TO RESERVATION TO THE GOVERNMENT OF A NON-EXCLUSIVE ROYALTY-FREE LICENSE IN THE INVENTIONS WITH POWER TO GRANT LICENSES FOR ALL GOVERNMENTAL PURPOSES. PARAGRAPH 1 (C) OF THE EXECUTIVE ORDER REQUIRES THAT AN INVENTION BE PRESUMED TO FALL WITHIN THE PROVISIONS OF SECTION 1 (A) IN ANY CASE WHERE IT IS MADE BY AN EMPLOYEE WHO IS EMPLOYED OR ASSIGNED:

"/I) TO INVENT OR IMPROVE OR PERFECT ANY ART, MACHINE, MANUFACTURE OR COMPOSITION OF MATTER,

"/II) TO CONDUCT OR PERFORM RESEARCH, DEVELOPMENT WORK OR BOTH"

EXECUTIVE ORDER NO. 10096 PROVIDES FOR THE ISSUANCE OF ADMINISTRATIVE REGULATIONS, BUT IT SPECIFIES THAT SUCH REGULATIONS SHALL NOT BE INCONSISTENT THEREWITH. THE REGULATIONS ISSUED BY THE NAVY PUBLISHED IN VOL. XIX, NO. 2, NAVY DEPARTMENT BULLETIN, SEMIMONTHLY EDITION, 31 JULY, 1951, AT PAGE 8, PROVIDE, IN PERTINENT PART:

6. "DEFINITION OF CONDITIONS.--- IN DETERMINING WHETHER A CONDITION SET FORTH ABOVE WAS PRESENT IN THE MAKING OF THE INVENTION THE FOLLOWING DEFINITIONS SHALL APPLY:

(B) A CONTRIBUTION OF FACILITIES SHALL MEAN THAT THE FACILITIES WERE USED IN THE MAKING OF THE INVENTION AND WHILE SO USED WERE MADE UNAVAILABLE FOR OTHER PURPOSES;

(C) A CONTRIBUTION OF EQUIPMENT SHALL MEAN THAT THE EQUIPMENT WAS USED IN THE MAKING OF THE INVENTION AND WAS THUS MADE UNAVAILABLE FOR OTHER PURPOSES;

(D) A CONTRIBUTION OF MATERIALS SHALL MEAN THAT THE MATERIALS WERE SPECIFICALLY OBTAINED AND USED FOR THE PURPOSE OF MAKING THE INVENTION AND WERE THUS RENDERED UNAVAILABLE FOR OTHER USE;

(H) BEARING A DIRECT RELATION TO OR MADE IN CONSEQUENCE OF THE OFFICIAL DUTIES OF THE INVENTOR MEANS THAT THE DUTIES TO WHICH THE INVENTOR HAD BEEN ASSIGNED WERE SUCH THAT THE INVENTION COULD REASONABLY BE EXPECTED TO ARISE THEREFROM.'

CONSTRUED LITERALLY, IT APPEARS THAT SUCH DEFINITIONS MIGHT HAVE THE EFFECT OF LEAVING TO AN EMPLOYEE ALL RIGHT, TITLE AND INTEREST IN AND TO THE INVENTIONS MADE WITH GOVERNMENT FACILITIES, EQUIPMENT AND MATERIALS, WHERE SUCH ITEMS ARE NOT THEREBY MADE UNAVAILABLE "FOR OTHER PURPOSES," THE MATERIALS WERE NOT "SPECIFICALLY OBTAINED" FOR THE INVENTION, AND THE INVENTIONS WERE NOT MADE DURING WORKING HOURS AND COULD NOT "REASONABLY BE EXPECTED TO ARISE" FROM THE EMPLOYEE'S OFFICIAL DUTIES. HOWEVER, BY LETTER OF DECEMBER 1, 1955, YOUR DEPARTMENT ADVISES THAT THE DEFINITIONS WERE NOT INTENDED AND HAVE NOT BEEN CONSTRUED TO HAVE SUCH EFFECT, AND THE PRESENT CHAIRMAN OF THE GOVERNMENT PATENTS BOARD ADVISES BY LETTER OF DECEMBER 7, 1955, THAT THE REGULATIONS WERE ISSUED SOLELY TO IMPLEMENT THE ORDER AND THERE WAS NO INTENT TO MODIFY OR REDUCE IN RESTRICTION THE PROVISIONS OF THE ORDER. ACCORDINGLY, THESE DEFINITIONS ARE NOT REGARDED AS GRANTING TO EMPLOYEES ANY LEGAL RIGHTS TO THEIR INVENTIONS IN ADDITION TO, OR GREATER THAN, THE RIGHTS AUTHORIZED TO BE GRANTED EMPLOYEES UNDER THE LANGUAGE OF THE EXECUTIVE ORDER OR ACCRUING TO THEM BY OPERATION OF LAW. HOWEVER, TO THE EXTENT THAT BY LITERAL INTERPRETATION THE LANGUAGE OF THE REGULATIONS MIGHT BE CONSTRUED AS ENLARGING THE RIGHTS OF EMPLOYEE- INVENTORS, WE WOULD BE REQUIRED TO HOLD SUCH REGULATIONS TO BE INCONSISTENT WITH LAW AND THE EXECUTIVE ORDER AND UNAUTHORIZED.

IT APPEARS THAT THE DETERMINATION TO LEAVE TO THE INSTANT EMPLOYEE ALL RIGHT, TITLE AND INTEREST IN AND TO HIS INVENTION WERE BASED, INSOFAR AS PERTINENT HERE, UPON CONCLUSIONS THAT THERE WAS NO "CONTRIBUTION" BY THE GOVERNMENT OF FACILITIES, EQUIPMENT, OR MATERIALS, AND THAT THE INVENTION IS NOT "DIRECTLY RELATED" TO HIS OFFICIAL DUTIES WITHIN THE MEANING OF SUCH TERMS AS USED IN THE EXECUTIVE ORDER. IT FURTHER APPEARS THAT THE CONCLUSION AS TO THE FACILITIES, EQUIPMENT AND MATERIALS WAS PREDICATED UPON EVIDENCE THAT THE USE OF GOVERNMENT EQUIPMENT AND MATERIALS BY EMPLOYEES TO CONDUCT PRIVATE PROJECTS AFTER HOURS AND ON WEEKENDS HAD AT LEAST THE TACIT APPROVAL OF THE AUTHORITIES IN CHARGE OF THE STATION HERE INVOLVED. IT APPARENTLY WAS BELIEVED THAT SUCH "PERMISSIVE USE" WAS NOT UNDER THE CIRCUMSTANCES A CONTRIBUTION BY THE GOVERNMENT WHICH WOULD ENTITLE IT EQUITABLY TO ASSERT ANY RIGHTS IN THE INVENTION.

HOWEVER, ALREADY POINTED OUT, ALL OF THE FACILITIES, EQUIPMENT AND MATERIAL USED IN THE MAKING OF THE INITIAL MODEL WERE GOVERNMENT PROPERTY, AND THE EMPLOYEE HAS ADMITTED THAT FACILITIES AND EQUIPMENT WERE NOT AVAILABLE TO HIM PRIVATELY. THERE WOULD THUS BE A SUBSTANTIAL BASIS FOR CONCLUDING THAT THE INVENTION WAS MADE WITH A CONTRIBUTION OF GOVERNMENT FACILITIES, EQUIPMENT AND MATERIALS WITHIN THE MEANING OF EXECUTIVE ORDER 10096. ALSO, AS ALREADY STATED, THE DUTIES TO WHICH THE EMPLOYEE WAS ASSIGNED RELATED TO THE DEVELOPMENT AND IMPROVEMENT OF THE COMPUTER THEN IN USE. THE GOVERNMENT PATENT BOARD'S DETERMINATION INDICATES THAT AT LEAST TWICE PRIOR TO THE DEMONSTRATION OF THE FIRST WORKING MODEL THE INVENTOR DISCUSSED WITH HIS SUPERIORS THE POSSIBILITY OF USING LOGARITHMS AS "A NEW APPROACH TO THE PROBLEM OF SOLVING EQUATIONS AUTOMATICALLY, AS WAS THEN BEING DONE" IN THE COMPUTER ON WHICH HE WAS WORKING. MOREOVER, AFTER THE SUCCESSFUL DEMONSTRATION, WORK ON THE OLD COMPUTER WAS DISCONTINUED, AS THE EMPLOYEE'S INVENTION "GAVE PROMISE OF MEETING THE REQUIREMENTS OF REDUCTION IN SIZE AND WEIGHT, AS WELL AS OBTAINING OTHER DESIRED IMPROVEMENTS"--- THE VERY OBJECTIVE BEING SOUGHT BY THE GROUP TO WHICH THE INVENTOR WAS ASSIGNED. FINALLY, IT APPEARS THAT THE INVENTION IS TO BE USED TO PERFORM THE VERY FUNCTION WHICH THE DEVICE ON WHICH HE HAD BEEN WORKING WAS DESIGNED TO PERFORM, AND FOR PRECISELY THE SAME PURPOSE. THE EVIDENCE THUS SEEMS TO ESTABLISH THAT THERE IS A CONSIDERABLE BASIS FOR THE VIEW THAT GOVERNMENT EQUIPMENT WAS USED IN MAKING THE INVENTION AND THAT THE INVENTION IS DIRECTLY RELATED TO THE EMPLOYEE'S OFFICIAL DUTIES SO AS TO REQUIRE THE CONCLUSION UNDER EXECUTIVE ORDER 10096 THAT THE GOVERNMENT IS ENTITLED AT THE LEAST TO A NON- EXCLUSIVE ROYALTY-FREE LICENSE TO USE THE INVENTION. THE DETERMINATION OF YOUR DEPARTMENT AND THE GOVERNMENT PATENTS BOARD, WHICH IN PART AT LEAST SEEMS TO HAVE BEEN BASED UPON THE UNAUTHORIZED WORDING OF THE NAVY REGULATIONS, THUS MAY NOT BE ACCEPTED AS CONCLUSIVE OF WHETHER APPROPRIATED FUNDS MAY BE USED TO PURCHASE RIGHTS TO USE THE INVENTION.

MOREOVER, THERE IS FOR CONSIDERATION IN THE INSTANT CASE THE PROVISIONS OF 28 U.S.C. 1498, AUTHORIZING SUITS BY OWNERS OF PATENTS WHERE AN INVENTION IS USED BY THE UNITED STATES WITHOUT LICENSE OR LAWFUL RIGHT TO USE OR MANUFACTURE THE INVENTION. THE FOURTH PARAGRAPH OF THAT SECTION IN PERTINENT PART PROVIDES:

"A GOVERNMENT EMPLOYEE SHALL HAVE THE RIGHT TO BRING SUIT AGAINST THE GOVERNMENT UNDER THIS SECTION EXCEPT WHERE HE WAS INA POSITION TO CLEAR, INFLUENCE, OR INDUCE USE OF THE INVENTION BY THE GOVERNMENT. THIS SECTION SHALL NOT CONFER A RIGHT OF ACTION ON ANY PATENTEE OR ANY ASSIGNEE OF SUCH PATENTEE WITH RESPECT TO ANY INVENTION DISCOVERED OR INVENTED BY A PERSON WHILE IN THE EMPLOYMENT OR SERVICE OF THE UNITED STATES, WHERE THE INVENTION WAS RELATED TO THE OFFICIAL FUNCTIONS OF THE EMPLOYEE, IN CASES IN WHICH SUCH FUNCTIONS INCLUDED RESEARCH AND DEVELOPMENT, OR IN THE MAKING OF WHICH GOVERNMENT TIME, MATERIALS OR FACILITIES WERE USED.'

THE EFFECT OF SUCH LANGUAGE WAS EXPLAINED IN HOUSE REPORT NO. 1726, 82ND CONGRESS, ON THE BILL WHICH BECAME THE ACT OF JULY 17, 1952, 66 STAT. 757, AS FOLLOWS:

"THE AMENDMENT PASSED BY THE SUBCOMMITTEE WILL PERMIT A GOVERNMENT EMPLOYEE WHO MAKES AN INVENTION BEFORE ENTERING THE GOVERNMENT SERVICE TO SUE ON THE PATENT COVERING THAT INVENTION THE SAME AS ANY OTHER PATENTEE, EXCEPT WHERE HE IS ACTUALLY IN A POSITION TO INDUCE THE USE OF HIS PATENTED DEVICE BY THE GOVERNMENT. IT WILL ALSO PERMIT A GOVERNMENT EMPLOYEE WHO MAKES AN INVENTION COMPLETELY OUTSIDE OF HIS OFFICIAL FUNCTION TO MAINTAIN A SUIT AGAINST THE GOVERNMENT WITHOUT PENALIZING THE GOVERNMENT UNDULY BY INVITING THE FILING OF NUMEROUS SUITS BY THE GOVERNMENT EMPLOYEE-PATENTEES WHERE THE INVENTION IS MADE IN THE GENERAL LINE OF DUTY.

"IT IS RECOGNIZED THAT GOVERNMENT EMPLOYEES SOMETIME MAKE INVENTIONS THAT ARE WHOLLY UNRELATED TO THEIR OFFICIAL FUNCTIONS AND IN THE MAKING OF WHICH NEITHER GOVERNMENT TIME OR MATERIALS ARE USED. IN THESE CASES, EQUITY DEMANDS THAT THE EMPLOYEE-INVENTOR BE ADEQUATELY REWARDED IF HIS INVENTION IS USED BY THE GOVERNMENT.

"MOREOVER, THE BILL SPECIFICALLY STATES THAT THE OFFICIAL FUNCTIONS SHALL INCLUDE RESEARCH AND DEVELOPMENT AND SPECIFICALLY STATES THAT THERE SHALL NOT BE A RIGHT OF ACTION IN THE GOVERNMENT EMPLOYEE PATENTEE WHERE GOVERNMENT TIME, MATERIALS, OR FACILITIES HAVE BEEN EMPLOYED.'

SIMILAR LANGUAGE IS INCLUDED IN SENATE REPORT NO. 1992, 82ND CONGRESS, CONCERNING THE SAME PROVISIONS. ALTHOUGH THE STATUTE ITSELF MERELY PRECLUDES THE BRINGING OF SUITS, THE LANGUAGE USED AND THE QUOTED EXPLANATION APPEAR TO REQUIRE THE CONCLUSION THAT IT IS THE SETTLED POLICY AND INTENT OF CONGRESS THAT PUBLIC FUNDS SHOULD NOT BE EXPENDED FOR THE USE OF INVENTIONS OF GOVERNMENT EMPLOYEES WHICH ARE NOT WHOLLY UNRELATED TO THE DUTIES OF SUCH EMPLOYEES, OR IN THE DEVELOPMENT OF WHICH GOVERNMENT FACILITIES OR MATERIAL ARE USED.

IN VIEW OF THE FOREGOING, WE WOULD BE REQUIRED TO OBJECT TO THE MAKING OF THE PROPOSED CONTRACT TO PAY ROYALTIES FOR USE OF THE INSTANT INVENTION, AND TO THE MAKING OF SUCH PAYMENTS FROM APPROPRIATED FUNDS. HAVING REACHED THIS CONCLUSION, WE DEEM IT UNNECESSARY TO DETERMINE WHETHER ..END