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To the Secretary of the Army, September 9, 1966:

Reference is made to letter of August 1, 1966, from the Assistant Secretary of the Army (Financial Management) requesting a decision whether it is legally permissible under the provisions of the Reserve Officers' Training Corps Vitalization Act of 1964, Public Law 88-647, approved October 13, 1964, 78 Stat. 1063, 10 U.S.C. 2031 note, to:

a. Pay all undergraduate expenses of a four-year Reserve Officers' Training Corps scholarship over a five-year period, these expenses to include tuition, fees, books and laboratory expenses; or;

b. Prorate the cost of the fifth year over the preceding semesters in order to comply with the four-year limitation.

The letter states that section 2107 of Title 10, U.S. Code, appears to provide that ROTC scholarships may be awarded for a maximum of 4 years, and that Drexel Institute of Technology is a cooperative institution where periods on campus are interspersed with tours in industry and the 4 years of college leading to a baccalaureate degree are actually spread over a 5-year period, it being the policy to charge students for tuition and fees each semester whether or not the student is on campus. It is further stated that the semester tuition and fee costs at Drexel Institute are correspondingly less than at other cooperative institutions though the total cost for the entire program is about the same, but that Drexel Institute has expressed its willingness to make an exception to its policy for Army ROTC scholarship recipients by prorating the cost of the fifth year over the preceding semesters. The Assistant Secretary states further that it appears that the intent of Congress under the Reserve Officers' Training Corps program is to provide assistance for the entire undergraduate education of specially selected members contemplating a minimum participation of 4 years and that it is the view of the Department of the Army that limiting payments to 4 calendar years, even though the academic and military requirements of the 4-year program might be spread over 5 calendar years at comparable cost, would discriminate against members attending schools having programs similar to that of Drexel Institute.

The 1964 law extended to all military departments the 4-year ROTC program with scholarship assistance that was established for the Navy by the act of August 13, 1946, ch. 962, 60 Stat. 1057, 34 U.S.C. 1020 (1952 Ed.). See 42 Comp. Gen. 669, 671. Subsection (c) of section 2107 provides that the Secretary of the military department concerned may provide for the payment of all expenses in his department of administering the 4-year financial assistance program under that section, including tuition, fees, books, and laboratory expenses, which at the time of enactment of the statute were estimated at $800 to $850 a year. Section 209 (b) of Title 37, U.S. Code, as amended by the

1984 law provides that a student receiving scholarship assistance under section 2107(c) is entitled to a subsistence allowance at the rate of $50 a month while attending college, "but not for more than four years."

In discussing the financial assistance to students under the 4-year ROTC program, the House Committee on Armed Services said that this scholarship program "could consist of a maximum of 4 years or a minimum of 1-year scholarship assistance, or any figure in between." See H. Rept. No. 925, 88th Cong., 1st sess. 22. The Senate Committee on Armed Services stated that:

*** This scholarship assistance could be provided for a minimum of 1 year or a maximum of 4 years, and would be virtually the same as that now provided by the Navy in the so-called Holloway program.

The Committee said that it expected the scholarship programs of the Army and the Air Force would be administered substantially in the same manner as the Navy then administered the Holloway program. See S. Rept. No. 1514, 88th Cong., 2d sess. 2, 3.

In an opinion of September 12, 1949, The Judge Advocate General of the Navy pointed out that the 1946 Holloway law limited Government financed education to a period not exceeding 4 academic years per student, that no student was entitled to receive retainer pay (now subsistence allowance) and other monetary benefits for a period in excess of 4 academic years, and that the legislative history of the 1946 law indicated that periods of education that exceed 4 years must be paid for by the individual concerned-despite his satisfactory academic performance at all times. He concluded, “A fortiori, the Government did not intend to be more liberal with those individuals who take more than four academic years to acquire a normal four-year degree." See Navy C.M.O. No. 3, 1950. pp. 92, 93.

Navy regulations under the Holloway program and currently applicable regulations provide that the total time during which a Regular ROTC student may be retained in a regularly enrolled NROTC status, receiving benefits and retainer pay (subsistence allowance), may not exceed 4 academic years. In cases of students who are regularly enrolled in college cooperative programs requiring alternate periods of employment in industry or business and normally requiring 5 years for completion of the requirements for a baccalaureate degree, leave status may be established during the periods in which the student is engaged in such employment and is not effectively in residence at the educational institution, or upon the completion of the fourth year of As academic program if he has remained in residence on a part-time has throughout 4 years of the program. A student enrolled in a entrvala in norma "y nquiring 3 years for completion will be placed

in a leave status for one of the 5 years in order that he may complete the curriculum leading to his degree. While in such leave status he is not eligible to receive the compensation or benefits paid to, or in behalf of, NROTC students under instruction, nor will he be required to take any Naval Science courses. The Navy prefers that 5-year students take leave during an intermediate year rather than in the fifth year, but in any event monetary benefits are limited to 4 academic years. See 32 CFR 711.311.

It seems reasonably clear that it was not the intent of Congress that the 4-year ROTC scholarship program or the subsistence allowance should necessarily be limited to a period of 4 consecutive years, but rather that a program totaling 4 academic years was contemplated. Where the undergraduate program is so arranged that it takes 5 years to complete the requirements for a degree, there is nothing in the statute that precludes payment of the scholarship assistance and subsistence allowance during the fifth year of academic training if payment has not been made for 4 years. However, in view of the specific monthly rate of subsistence allowance established by the statute for ROTC students and the statutory limitation to 4 years of that benefit, the statutory prescription of the 4-year ROTC scholarship assistance program, as well as the discussions in the legislative history. of the 1946 and the 1964 laws concerning the maximum 4-year ROTC program, there is no authority of law for payment of such benefits for more than 4 academic years. Question a is answered accordingly. The provisions of 31 U.S.C. 529 constitute a statutory bar to the advance payment of public funds unless authorized by the appropriation concerned or other law, and hence the cost of academic training in the fifth year may not be prorated over the preceding semesters. Question b must, therefore, be answered in the negative.

[B-136916]

Patents Devices, Etc., Used by Government-Preprocurement Licenses

A regulatory procedure issued under the authority of 42 U.S.C. 2473 (b) (3), proposing to secure a preprocurement license from a patent holder and pay a royalty to the holder if the patented item is procured from an unlicensed source, the amount of the royalty to be considered in bid evaluation, is approved for a trial period, future problems for resolution on the basis of the experience gained under the procedure, and as all potential procurement sources will be solicited under the procedure, the purpose of 28 U.S.C. 1498, to assure the Government private industry resources unfettered by private patent rights will not be restricted, rather, the proposal to add the license fee to the bid or quotation of an unlicensed supplier represents a more realistic approach in determining the most advantageous price to the Government for the item than is possible when infringement damages are not considered.

To the Administrator, National Aeronautics and Space Administration, September 12, 1966:

We refer to your letters of June 13 and July 14, 1966, regarding a proposed new approach to the procurement of patented items. Our views are requested on a proposed section 9.102 of the NASA Procurement Regulations which sets forth this new approach.

Under 28 U.S.C. 1498, Government contractors and subcontractors are relieved entirely of liability for infringing patents embodied in items accepted or to be accepted by the Government pursuant to its contracts. Section 1498 provides that in such circumstances the patent holder's remedy is exclusively against the Government by an action in the Court of Claims for damages. The courts have recognized section 1498 as constituting in effect an eminent domain statute, which vests in the Government the right to use any patent granted by it upon payment of reasonable compensation to the patent holder. Richmond Screw Anchor Co. v. United States, 275 U.S. 331 (1928); Stelma, Incorporated v. Bridge Electronics Co., 300 F. 2d 761 (1962). The act was intended to give patent holders an adequate and effective remedy for infringement of their patents while saving the Government from having its procurement programs thwarted, delayed or obstructed pending litigation of patent disputes. Bereslavsky v. Esso Standard Oil Co., 175 F. 2d 148 (1949).

Considering the act and its purposes, this Office has concluded that Government contracts should not be restricted to patent holders and their licensees where patents are held, but rather all potential sources should be permitted to compete for Government contracts regardless of possible patent infringement. 38 Comp. Gen. 276; 39 id. 760. Specifically, we held in 38 Comp. Gen. 276 that a procuring agency may not refuse to advertise for an item because of a patent nor refuse to make award to the low bidder because he was not licensed by the patent holder to manufacture the patented article. The procuring agency, of course, is free to require patent indemnity agreements from its suppliers, perhaps should require such agreements in some cases. Even though patent indemnity is not provided for in the invitation, it has been our view that a low bid may not be rejected on the basis that the Government might incur liability for patent infringement. 45 Comp. Gen. 13.

You report that, in accordance with our view, your agency does not consider the possible infringement liability of the Government as a factor in evaluating competing bids or proposals in the procurement of patented items; that NASA contracts are currently awarded without regard to private patent rights; and that if a patent holder feels that his patent has been infringed, he may file an administrative claim

for patent infringement with NASA under 42 U.S.C. 2473 (b) (3), as complemented by section 9.104 of the NASA Procurement Regulations, or sue the Government for patent infringement in the Court of Claims under 28 U.S.C. 1498.

You advise that as a practical matter section 1498 does not always afford an adequate and effective remedy to the patent holder. Small business concerns, for example, often are loath to engage in protracted litigation with the Government, and administrative settlements tend to be time consuming and costly.

Further, you report that NASA does not generally include "Patent Indemnity" clauses in its contracts. You explain that there are several reasons for this. Such clauses may have the effect of unnecessarily increasing contract costs because of the inclusion of a contingency for patent infringement. They discourage some prospective bidders from bidding. In addition, they tend to encourage the use of inferior materials to avoid possible patent infringement. Also, such clauses are not considered entirely appropriate for R&D contracts, which constitute the major type of contract used by NASA; and, finally, they make it difficult for the agency to settle administrative claims for patent infringement, since the indemnitor's consent would have to be obtained for the settlement. Martin Co. v. United States, 143 Ct. Cl. 551, 163 F. Supp. 376.

Under current NASA practice, (1) patent infringement liability is not considered in evaluating competing bids or proposals, and (2) meritorious claims for patent infringement resulting from a procurement are settled by entering into either a paid-up or royalty bearing license agreement with the patent owner. If a royalty bearing license agreement has been entered into and the item is being reprocured, NASA will consider the royalty fee as a factor in the evaluation of a bid or proposal from an unlicensed source.

You point out that after purchasing from an unlicensed source on the initial procurement, your agency must then settle with the patent holder. Hence the total cost of the item could well exceed what the cost would have been if the item had been purchased from the patent owner or one of his licensees in the first place. More important, you feel that the present practice has an adverse effect on private research efforts in the aerospace field. In this area the Government is often the primary customer. At present, the unlicensed firm is offered free use of a patent on a Government contract. Consequently, where a patented invention would be useful on Government programs, a prospective licensee would be discouraged from taking out a license on the patent when free use of it is likely to be offered by the Government. You feel that privately financed research is definitely discour

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