REF ID:A4148472~ 

REPORT ON LEGISLATION CONTROLLING PATENTS 

IMPORTANT IN THE NATIONAL DEFENSE 

26 April 1948 

1. Existing laws and regulstions~--a. There are presently in effect thFee lays which ·may be 1nv.oked to prevent the 

issuance or release of .pat~nts applying to inventions dee~d 

important in the national defense. The first, commonly designated 8 Publ1c Law 700, 0 is a war-time.measure and was 

d.esigned for security control of inventions 'in which the · Government does not have a iroperty interestb the second, · commonly designated·as the Three-Year Rule, is a part or permanent legislation and only applies to inventions in which the 

Government has a·property interest; and the third, Public Lav 

535, commonly designated as the "Atomic Energy Act of 1946,n 

is also. permanent legisla-tion but is only applicable to 1nven- . t1ons 1n the field of atomic enerSJ', regardless of whet~er or 

not the Government has a property interest therein •. The lastnamed law is 1neluded in this report only tor the sake of 

completeness and its possible bearing on the pattern of future 

legislation of direct interest in the cryptologic .field .• 

b. In.addition to the foregoing lave there are 

presently also in effect two Executive Orders which have a 

direct or indirect bear!~ on.'tli.is subject. These are . Executive Orders Nos. 9668 .and 9604. . · 

c. The foregoing lavs and.Executive Orders will be , dealt with in detail in the subsequent paragraphs. ., 1 j 

2. · Public Lav . 700 • - -a. A copy of tbi s Law Act of Oct. o 

6, 1917., 4o Stat. 394. (u.s.c •. ,, Title 35, Sec. 42j, with its t1 

various amendments,, is attached as Incloaure 1. It was - originally enacted,, as indicated by the date cited above, as o? 

a war measure in .World War I,, lapsing on the of'ticial termina- -i . tion thereof. The law va.s re-enacted on.(21 August 1941, - - shortly before our entrance' into World War II. This law is 

specirically designed to prevent the publication or disclosure 

of any intormat!on concerning a U.S. Patent·App11cat1on covering any invention 'the Commissioner or Patents .deems illlportant'. in the national defense. However, just as was the case in 

World War I, a 11m1tation included in the law itself' provides that !t shall remain in force only "during the tlii8 when the · United States is at war. n " 

• 

· @'pproved for Release by NSA on 11-04-2014 pursuantto E.O. 1352a 
e. REF ID:A4148472-

b. Since, so far as this Government is concerned, 

World War II has not yet been officially declared tel'lllinated, 

Public Law·700 is still in toree. About a ye~r ago, when the 

terllination or var controls was be1Dg considered by the 

Congress, the various departments, bureaus, and agencie.s ot 

the Governaent were consulted and a report on their recomaendations was prepared by the Department ot Justice (Senate 

Document No. 42, 80tb Congress, lat Session). Sections 476, 477, and 478 thereof' (see Inclosure 2) reter to Public Lav 700 

and the recommendation was made that the authority contained 

in the cited statute be continued in ettect until certain 

proposed new legislation had been considered by the Congress. This reco1111endation was apparently accepted, since the measure 

bas not been repealed. However, unless·tb1s·lav or a sim1lar 

one 1s ms.de permanent legislation, so as to cover p~ace-tiae 

control, the present var-time control over the issuance ot 

patents covering cryptologic inventions vill lapse the de.I 

that the war is of'tic1ally declared terminated. In Par •. 8 

there is a brief discussion of what is .being attempted in the 

way of nev legislation to cover this contingency. 

c. Public Law 700 attords adequa.te protection to. - the nat1onal defense as regards security of information 

relative to inventions important thereto; but it also protects the property interests or the inventors by providing & aechanism 

tor compensating the la~and when a patent finally . issues~ for any damages·~ to have been'suttered by reascn 

ot the application of secrecy orders preventing proapt issuance 

of the patent and thus deterring illmediate commercial exploita- tion ot the righta inherent -therein. 

;. The Three-Year Rule.--a. The so-called Three-Year 

Rule 'arises trom a proviso in e. l~w J. tecbnicall7 known as 

Section 4894,..(u.s.c., Title 35, Sec-• 37), which deals with the 

abandonment ot pa.tent applications by failure on the part of 

an· applicant to complete aetion thereon or to prosecute it. 

within the time allowed. The proviso referred to above reads: 

"Provided, however, that no application shall be regarded as 

abandoned which bas become the· property ot the Government of 

the United States and vi.th respect to vhich the hea.d ot any 

department of the- Goverllllent shall have certified to the 

Commissioner or P&te.nts, Within a period of three.yea.rs, that. 

the invention disclosed 'l;here1n is ~port&nt to the armaae~t 

or detense or the United States." Provision is also made tor 

renewing the three-year period as Mny. tillles as may bo necessary (see Inclosure 3). . · 

b. As a general rule the foregoing proviso "is currently invoked only in the case ot inventions made by otticera or 

civilian employees of the Armed Services, since only in those 

2 
~ REF ID:A414847. 

cases do the pa.tent applications generally fall in the 

category of ap~licationa· "vhicb have become the property ot 

the Govermaent and which are "important to the &l'll&ment or 

defense ot the.United States." .All Government-employee inventions of this category, however., do not automatically becoae 

the property of the Government, because under a U. S. Supreae Colirt interpretation of ex1st1llg lav relating to patents, only 

an. invention which.baa been produced as a result of a specific employment or contract to invent the spec1f 1c device or article 

automati·cally becomes the property of the Government. In all 

other cases the Goverwaent bas only a license or "shop rightsa 

to inventions ma.de 1n the course of their nor&l duties by 

Government employees; the patents in these cases., when issued, 

become the property of the inventors. 

c. Departmental poli_cies vary considerably in respect to the entorcement or appl1aab111ty of the above-mentioned 

interpretation ot the Supr~me Court. In certain Departments the policy is to require the inventor to assign all rights in the invention to the Government. This has not been the 

policy of the Departments of the Army, ·wavy, or Air Force, 

which Departments normally adhere strictly to the letter ot 

the lav as interpreted by the Supreae Court. In the Department of the Navy and in the Department of the Air Force, whenever 

an invention 1s· deemed to require secrecy, the patent applica- tion is placed under Public Law 700, with or without the 

consent of the inventor. Unless there has been e specific designation to invent the specific thing., full ownership of· 

the patent when finally issued rests in the inventor, the 

GoverDllent retaining Qnly shop rights. However, within only 

two agencies ot the Department or the Army., viz., the Signal Corps and the Ar117 Security Agency, bas it been deemed necessary or desirable to provide a special mechanism whereby the 

patent application becomes t!J!Porarily the property ·or the 

Government. The mechanism referred to in the preceding sentence 

consists in.requiring all personnel likely to ·invent to sign 

a document according to vhich such personnel agree to assign 

patent applications to the Secretary ot the Army. The theory behind this mechanism appears to b~ that it enables the 

Gover!lDlent, in peace time, to avail itself of the Three-Year 

Rule,· ~nd thus hold up issuance of the p&tent. However; it. is 

the general rule that even in the. ca~e ·of these inventions 

ownership of the patent application reverts to the inventor 

when the need ~or secrec~ has passed, in vhich case the appli- cation is alloved to go to issue. The Government, hovever, 

still retains a license or lt:shop rights·"; the inventor 0'1IlB 

the patent.and has 0 cOJ1111.ercial rights" Vbich he is tree to 

exploit if he so wishes. · 

. d. Unlike the case ot Public Lav 700, the TbreeYear Rule makes no provision for·com.pensa.ting the inventor 

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.for any damages alleged to have been euff'ered b7 holding up . issuance of the patent. Section 4894 is entirely silent on 

this point. 

e. It appears that the Navy, the Air Force, and the 

majority of the branehes. o~ the Army prefel'_, in var-time, .and . · in all cases of' Government-employee inventions, to oper$.te under ·public Lav 700 rather than under the Tnree-Year Rule. 

For e'1t:ample, currently -the Air For.ce does not have a. single 

case involving a Government-employee patent application that 

is being held up under the Three-Year Rule, but many under 

Public Lav 700.· · 

f. However, there seems to be no bar to the simultaneous application of both Public Law 700 and the Three-Year 

Rule to the same invention. This .has been done in a nU11ber 

of cases tor special reasons not ·germane to this report. 

g. Since the Three,-Year Rule is permanent leg1slat1on, it can be invoked at any time, whether in war o~ in peace. 

But, as noted, it applies only to patent applications Vhich 

have become the property of the Government, and this situation' 

is now generally applicable only to 1nvent1ona made by Government persoJUlel. However, there is a possibility that 

in some cases inventions .made by non-Government inventors may 

or could be placed wider the Three-Year Rule. For example, in the case of an invention maqe by personnel ot a contractor 

performing work under a Government contract, ~hould the latter 

.deal with equipment classified conf"idential ·or higher, the 

contract us~lly calls fop a complete ass1gnllent of applica- tions for ·patents covering all inventions made under the · contract. ~bus, the Government then would have a property interest in the applications and hence the Tbree-Year Rule 

could be invoked in such e&$es. However, this is now rarely, 

if ever, done, because Public Law 700 provides better and 

specific means tor security protection or the invention in 

the case or non-Government inventions than does the ThreeYee.r Rule. It will be 'noted that the latter (Sec. 4894) makes 

no prov1s1on·vb.atsoever tor enjoining secrecy upon the inventor, 

as does the former. 'Wba·t is preferred, tharet'ore,. is to put the applications under Public Lav 700,. which permits the 

contractor to have and to exercise reversionary rig~ts, at the 

same time giving better security control to the Government as 

long as secrecy is necessary. 

· 4. The Atomic Energy Act or: 1946.--a. It is possible that this recently enacted law may set & pattern tott.other 

fields involving considerations or Dat1ona1 defense or public 

4 
. 'REF ·rn:A414847. 

interest. Inclosure 4 cites the sections pr!ncips.117 dealing . vi th the security control of' pa t.ents and inventions in the 

atomic energy f'ield. 

b. This law does not differentiate between the inventions ot Governmental and non-Governmental personnel. It 

iives the Government power to prevent any patent being granted for any invention vbich is useful solely in the production · ot fissionable material or in the utilization of fissionable 

material or atomic ene~gy tor a military weapon." Moreover, 

1t provides also for· the revocation ot any patent already granted tor any such invention. 

c. The lav establishes a mechanism whereby the 

Government .ay acquire such patents .by authorizing the Atomic .E~ergy COll1lR1saion to purchase, or take, requisition, or condemn 

such inventions or any patents applicable thereto; at the same 

tiJlle, however, the law t&kes cognizance of the property rights 

ot inventors and prov.ides a epecific mechanism for determining coapeneation. · 

d. ·The law provides .QS.eans tor enjoining secrecy upon inventors and penalties for violations thereof. It also pro- vides that "The Commissioner ot Pa.tents shall notify the ~tomic Ener~ Collllission of all applications tor pa.tents heretotore or hereafter filed which in his opinion disclose 

such inventions or discoveries and shall provide the Commission 

access to all ·such applications." 

5. Executive Orders.--&. Executive Order 9865.of 14 

June 1947 (see Inclosure 5) has a bearing on the subject ot 

this report. It ord~rs all Government departments and agencies, vhen practicable, to acquire the right to tile toreign patent appl1eat1Qns on inventions resulting from research conducted 

or rinanced by the Govermaent. However, the order specifically ex~mpts (1) all inventions within the jurisdiction or the 

Atomic Enera Commission (vith certain exceptions) and (2) all 

other inventions officially clasa1t1ed as secret or conf'ident1al 

tor reasons or national secur1t7. 

b. Executive Order 9604 ot 27 A~ust 1945 also has 

a bearing on this report.(see Inclosure 6). It deals with the 

release ot sc1ent1t1c and industt1al information obtained trom 

the enemy during Worid War II. It sets up the policy that 

there shall be prompt, public, tree and genefal dissemination 

of such information. But the order specifically provides that 

nnoth1ng in this order shall be construed to lillit or modify the pover of the Secretary ot War or the Secretary or the'Navy 

5 
REF ID:A414847~ 

to dete·rJline .finslly whether the nationa.l mill tary secur1 ty 

peraits the release, in whole or in part, of enemy scientir1c 

or industrial information.n Therefore, even it USCICC regula- tions did.not already provide against the release of inf'orma.-

tion ot certain enemy cryptologic' equipment, Executive Order 

9604 would be effective to prevent such release. 

6. ·. Special provisions in contracts. -·-a. Reference bas 

already been made to the tact that patent applications covering inventions arising 1n connection with Goverllllent contracts J 

can be placed in a secrecy status. This is provided tor in 

the standard Government contract torm as it appears in Par. 8 

ot Joint Prooureaent Regulations No. 101.3 (see Inclosure 10). 

In clause (c) it will be seen that while &nd so long as the ~ 

subject matter ot a contract is clas.sitied confidential or . higher, the "contractor agrees upon request ot the contracting officer or his des1gnee to assign and convey to the Government 

the entire right, title and interest in and.to each United 

States patent application ••• " Tb!s would be sutticient to 

place the application under the 'lbree-Year Rule but currently .~-j the practice is to place the application under Public L&w 700 I~'-' 

and not under the Three-Year Rule. Upon the lapsing ot Public if> ~ 

Lav 700 and a failure to enact permanent legislation similar ~ · to it, security eontrQl ot inventions and patent applications i . arising from Government contracts will be hindered, if not lost 

altogether. . , "~ 

b. In addition, however, the standard GoverDJllent ,...; & 

contract form specifically gives the Government the pov~r to +.~J sequester a patent application covering classified equipment ·~ 

developed by a contractor. In these cases. the patent a. pplica- _ f ~101' My be drawn up but may be held in secret tiles- and not ~ 

even entered 1n the Patent Office at all until the Government ~ 

sees tit to· do so.. It will be noted under clauses (a) and {b) ~ ~ ot Inclosure 10 th.at sequestration is possible by virtue or 

tbe phrase "or otherwise withheld from issue by the Government ~ 

for reasons of national .security ... rr This has been $nte~ted,.(""" 

that the application~ be v1thh,e,ld from filing in the Patent 

Office tor better security, if deemed advisable. The power granted bas been employed in connection with patent appl1cat1ons arising from contracts covering certain ASA equip•ent being developed under contract. 

7. The Joint Army-Navy Patents Advisory Board.--a. 

Acting under the authority conferred on him by Public Law 700, 

the.CoJIJlissioner or Patents upon our entry into World War II, 

established certain. Boards to advise him 1n the execution ot 

his Pesponsibil1t1es under th.at law. There was therefore 

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established the Joint Army-Navy Patents Advisory Board, with 

various subcommittees for the different fields •. One such subcommi·ttee· handled all patent applications covering crypto- graphic and allied apparatus, and the Sign.al Security. Agency had a member oh this subcommittee. During the war a .considerable number of such applications was· examined b,- the committee 

and many were recommended ~or secrecy orders. to be- served on 

the inventors. · 

b. In the last_tvo years, hovever, not a single case 

covering a cryptographic patent appl:ication bas come to the · attention of the committee. Therefore, it appeared th.at either 

the Advisory Board had been eli.lllinated .o.r else the Commiss1·0.ner 

or Patents had failed -to continue the var-time practice of · sut>mitting cases to the Board. An inquiry was therefore 

recently made to, ascertain if the Board was still in exis.tence. 

This produced an affirmative answer. There is left then the 

question as to why no cryptographic pa.tent-applications·bave 

co•e to the Board for consideration ih the past two years. This point is being investigated. . I 

8. Nev or pending leg1alat1on.--a. Three bills have 

been introduced in the present Congress with & view to the 

enactment of permanent legislation to give the Government 

better security control over inventions and patents important in the national defense •. ~hey a~e H.R. 4420, s.1726~ and . R.R. 5740. 

b. H.R. 4420 and s.1726 are identical bills. (Bee 

InclosUI"es 7 and 8.) They vere sponsored by the Department of the Ar,. The State-Army-Navy-Air Force Coordinating · COlllDlittee SANACC1 which bas recently been studying the matter 

of industrial security, presented its conclusions and recommenda t1ons in a docum.ent issued on 26 February 1948, SANAC~C 

386/2 (aee Inclosure 11). SANACC has recommended that the 

State De~rtment and the other.two services give their support 

to· H.R. 4420 and s.1726, the intent of Which is to strengthen Public Lav 700 and to make it permanent legislation. These · bills include provision for compensating inventors vho abide 

by the terms of the legislati.on. 

' 

c. R.R. 5740 (see Inclosure 9) 1s a bill "to extend 

the jurisdiction of district courts to patent suits," but it 

contains a section (See. 7) which also represents an attempt 

to make Public La;·w .700 permanent legislation. Apparently it 

is sponsored by some Department other than the Army~ Navy, or 

Air Force. lt is not mentioned in SANACC 386/2. 

1 
d. In a.cld1t1on to the foregoing bills the1~e is, 

of course$ S.1019,, which U8CIB-USCICC 1s eponsor1ng and which 

includes ~eatures vhich, while not ~pec1f1cally dealing Vith 

pa.tents a~ such.t Qould be used to control patont applications. Thie PoSS1b111t~ &rises rrom the· inclusion or a prohibition against una.uthor1 zed d1 sclot1ure of' ola..ssitied tnt'orma t1on 

"concerning the des1gn ..• or any device: appara.tue..:o o:r 

applicnce used or prep!lred or plenned for use by the United 

States or any foreign governttlent for eryptograph1c .•• purpoees." If this bill is en~cted, p~esU!!Vtbly it could be applied to 

certain p..'1tent applications, whether the inventions 1fe~e made 

by Go~ernm.cnt or non-Government personnel. This bill, however, 

mnkefl no P,rov:toion ~or compensating inventors. 

e. The foregoing bills mive not progressed beyond the :;:,age of ba1ng tntrod:uced and rererred to the Committee 

or the Judiciary. It is doubtful if there vill be opportunity 

to debate them during the present sessi.on o~ the Congress. 

On the other hand, it 1a probable that ~bl1c Law 700 will 1 be 

reto1ned lUltil permanent legislation v111 have been enacted. 

9. ?lew proposed leg1slnt1on. --a •. Included 1n new legis- lation recently. proposed by a subcommittee of SANACC designated 

as the Uaclass1ficC. Technological !n.f'ormation Committee 1s a 

draft of s. bill to p!'ov.1de· tor the registration of' certain 

disclosures or applied technological information effected 

through teohn1cal a.id contracts. Th:1.s draft torms·Inclosure 

12 of this report. Thia legislation would give .f'urther seour1 ty protection for technical information obtained by contractors 

who perform research and develop•ent work for the Government 

in all fielde, including that or cryptology, Data contained 

in pa.tent appl1:cat1ons would obviously fa.11 Yi th1.n this 

category. ' 

. b. Another proposed bill which 18 being sponsored 

by 3ANACC a..nd Vhich ls pert1trent to tbis report {see Inclosure 

13), deals with measures to tighten up on contractors' person- nel who may be given a.cces.$ to pla.ns or specifications covering equipment being developed under Government contracts. This 

would help prevent the· disclosure or information relative to 

inventions and pa.tent applications. 

10. General rema.rk.--s. It·1B apparent that piecemeal leg1sle.tion and uncoordinated ef'fort3 to produce multiple 

lavs to take c-,are. or various and d1tf'erent p1•oblems or the 

control of information important in the national detense is 

not the best way to find -the proper answers to those problems. A general law, of wide applicability and in·broad terms, ll!ght possibly be dratted to apply to most casee. 

a· 
,_,. . REF ID:A4148472. 

b~ Should the USCIB-USCICC sponsored 5.1019 fail 

of debate or passage in the 80th' Session of the Congress, a. 

fresh attempt along the foregoing lines could be ma.de, this 

to include not only what is now covei"'ed in S.1019, but s.lao 

.what -1s covered in the various other bills discussed above 

as well as in 3ect1o.n 11 of Pub'l.ic; La."f 585, the Atomic Energy Act of 1946. .· - . -

11. Recommenda.tiqns ... -"".It is recommended that: 

a.. USCIB-USCICC lend its supp'ort to H.R. 4420 and 

s.1726 as a. matter.of immediacy and e]t:pediency in view of the . flOSsible lapsing of Public Law 700, even though this contingency 

appears currently remote. · · 

b~ An appropriate &ubcoDIDtl.ttee of USCICC study the 

c11tire subject-of patents.insote.r aa it conW,ins implications 

or applicability to or threats against U. S. communication 

intelligence 1nteresta~ 6 · · 

c. In such a study, consideration be given to the 

drafting of new legislation not specifically directed or ,. applicable to communication .intelligence but of a very broad 

and general character U:$eful: to s.11 -bran.ches of' the Armed 

Forces. · 

d. Such a bill, insofar as patents and inventions 

are concerned, be patterned after Public Lav 585, The Atomic -Energy Act ot 1946. · · 

. 13 Incls: 

1. Public Lav ·700 

2. 

3 • ., 4. 

.5. 

6. 

~-: 

Sections from S. Doc. ·42 

Sec. 4894 (Three-Year Rule) Sec. 11, Atomic Energy Act 

Ex. Order 9865 

Ex. Order 9604 

H.R. 4420· 

s.1726 

H.R. 5740 

Par. 8, Joint ~oc. Regs. SANACC 386/2 

WILLIAM F. FRmDMAN 

Chief', Communic&t1ons 

Research 

9. 

10. 

11. 

12. 

13. B~ll Prop~sed bi UT~ ot SA~ACG 

9