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7. IMPLICATIONS FOR SPACE INDUSTRIES
THE HIGH RATE OF CHANGE of space technology and the extent of
government participation in stimulating, directing, and consuming this
technology appear to have confronted the involved corporations (herein termed
collectively “the space industry”), the federal government, and certain other
sectors of society with a variety of problems -- economic, social, and
organizational. Some of them appear to be new to our competitive economy; some
are old problems made acute by the special demands of space activities; and
some may be old problems made to look new, unique, or important by association
with the novelty of space activities. The efforts being made to solve both the
new and old problems may have significant implications for corporate
organization and philosophy, for public policy affecting government-industry
relationships, and for the use of important national resources.
The material to follow is chiefly a reflection of various opinions and viewpoints of qualified observers of the space industry regarding what they believe to be significant aspects of the involvement of private industry in the space program. 1/ When the opinions and viewpoints are summarized, it is evident that the issues that generated them are complex indeed, including as they do the special situation of the space industry, the intricacies of financing new enterprises whose end-results can at present only be surmised, and the role of government as both stimulator and regulator of a combination of technological and economic activity. Resolution of the issues would seem to require a thorough knowledge of each factor involved and the interrelationships of all factors. Much of this knowledge may need to be derived from intensive research -- which first of all should test the validity and pertinence of the issues themselves.
Two ambiguities that underlie many of the issues to be discussed here should be recognized:
1. It is unclear to what extent a specific corporate situation may be an exemplar of the serious implications of space activities for corporate, government relations, and the consequences of these for society at large. In part this is because at least two types of situation may give rise, each in its own way, to problems for and protests from both government and industry: there are firms whose raison d'etre consists entirely of missilery and space projects; there are others which conduct or wish to conduct substantial activities in the space field but which probably are not dependent upon the development of the field for their corporate survival (many members of the electronics industry, for example, are in this category). The implications for each category are obviously different in kind and in degree.
2. The present situation confronting the space industry and government derives chiefly from a background of military rockets and missilery. The non-military space program has recently played a role, but the full impact of the program is yet to come -- as and if peaceful space activities expand greatly. Whether the problems will then be the same as they are now, or what the implications will be for possibly different combinations of problems remains to be seen and studied.
In the light of these ambiguities and other preliminary considerations, research would be desirable to:
• Set criteria for defining and discovering the corporate situations which are being significantly affected by space activities.
• Determine which of the trends and problems described here (or otherwise known) do and will derive from peaceful space activities and do and will have significance for the general character of corporate organization and activity.
• Determine which of these trends and problems are the private business of private business, and which have consequences of sufficient public concern to merit further study.
• Examine the history of technological change in an environment of government participation to
(1) discover possible tendencies and directions in corporateadjustment to such change and
(2) discover whether the historical- pattern (if any) can assist inunderstanding and anticipating present and future changes in the space industry. **
Corporate Response to Space Activities
Space technologies are evolving at a high rate of speed, and the responses of corporate strategies reflect the ferment and change. Conventional price mechanisms and market relationships are claimed to be inadequate for coping with the needs of both private industry and government in regard to the new technologies. The role of government as chief consumer and possibly chief stimulator of new products complicates the role of the producer operating in a profit-motivated economy. Yet the problems for industry, necessitating reorientation of many procedures, are in many respects traditional -- as are the solutions -- for corporations faced with the challenge of adjusting to and taking advantage of new technologies and new markets. Nevertheless, certain corporate responses to space activities may represent potentially important and socially significant changes in the way firms operate and perhaps in the way important sectors of the economy will operate.
Investments and risks in space enterprise
For some firms, space programs have forced a reappraisal of traditional precepts on profitable markets, long-term reinvestment or “plowback,” and reasonable long-run risks or return on investment. 2/ The following characteristics of present space enterprise have affected outlooks in corporate philosophy: negotiated profits from limited production of custom-made space equipment; high precontract competition costs from company-sponsored research and development and contract preparation costs; the large proportion of professional personnel, and corresponding problems in personnel management and utilization; continual need to adjust capability to rapidly advancing technologies. 3/ (“Capability” is used here to mean a firm’s ability to design and manufacture space components and its competence and skill in terms of facilities and manpower for industrial performance on space projects.)
Adjusting to the new conditions has meant for some firms changing their investment and risk outlook. Allocation of investment between short-term and long-term payoff from space contracts is apparently still a matter of trial in many cases. Decisions on what to do next depend in part on the prevailing optimism or pessimism about what the future holds for industry in the development and production of space activity components. Two opposing views have been cited here.
One view holds that two situations will pertain (and probably a mixture of them), both of which will tend to keep the industry broad-based and perhaps expanding:(1) once the government decides on particular components for a series of space efforts, there will be enough of them manufactured to permit some profit from a quasi-production-line run of items; (2) ambitious space efforts will require research and development on a variety of alternative solutions to each of an increasing number of problems, and this will support many companies working on new ideas to meet new challenges.
The counterview holds that it will be the natural evolution of the space industry to thin down to a very few companies, each producing very few products for one major client -- the United States Government. The argument is based on the assumption that the government cannot afford to carry second- and third-best proposals to insure the survival of the also-rans for a day when they might have the best proposal; this support pattern,, standard in the days of airframe competitions, can no longer be sustained because of the huge development costs. Therefore, sooner or later in the development of space systems, the contract winners will have achieved the special expertise and plant which those who did not participate in the contract will not have and cannot gain. Thus, at a later stage of development, new contracts would tend to go to the same firms. The argument then bifurcates: either all system capabilities would be incorporated in one organization or there would be one or two contenders in each of the major fields'-propellants, engines, space frames, and so on.
It is generally conceded that neither the economics of these possible evolution of the industry nor the factors affecting the development and application of technology have been examined closely enough to permit more than tentative appraisals.
Therefore, research would be useful to:
• Attempt to foresee and delineate the economic, technological, and organizational factors which might contribute to an eventual thinning down or expansion of the number and variety of organizations producing prime space activity products. **
Partially as an attempt to be prepared for either eventuality or, out of a belief in one eventuality rather than the other, some firms have chosen, as one major strategy for meeting the profit and risk problems facing them, to invest heavily in broad-ranging research and development facilities. 4/ These are intended to supply one means for generating methods and products permitting diversification into areas outside the traditional markets of the firms. 5/ it is also hoped that they will give rise to sufficiently interesting new possibilities in the space area to stimulate the government to invest in feasibility studies, prototype development and the like, thus initiating a technological wave which, by virtue of its original role, the. corporation could ride for several years as an especially qualified contractor, At least three implications of this approach to long-range investments and payoff merit closer study.
1. Should the methods and technologies developed through government financed space contract research and development be the property of the government or the firm? If the results are to be government property (subject to waiver by the government, as is now the case) how can the government be sure that it hag control over the ideas and products, especially if the firm chooses not to patent them or to exclude from the patent crucial technological information central to utilization There has been much concern over such questions. Industry argues that the derivative ideas should be its own to patent, since space research, which it conducts in part out of concern for the national interest, cannot provide profits sufficient t satisfy corporate interests. (This matter and recommended research are discussed further in the section of this chapter on patents,)
2. How much research should the government do in-house and how much should it contract out -- when each-of a number of firms has a broad range of R&D capabilities and specializations to offer? Further, what is the best distribution (and from whose standpoint) of outside research capabilities: several across-the-board facilities, each competing with the others, or a number of facilities, each emphasizing one research and development area? Research is necessary here to!
• Evaluate the advantages and disadvantages of various levels and kinds of apportionment of R&D between space firms and NASA's inhouse facilities; and the advantages and disadvantages of various mixes of multipurpose R&D facilities and special purpose facilities. **
3. To establish and operate their research laboratories and to demonstrate a capability that could expand into the development stage if a contract were awarded, some firms have a strong tendency “stockpile”” scarce engineering and scientific personnel in order to maximize chances for gaining major contracts. Questions arise about the effective allocation and use of this national resource, (This matter will be discussed more fully later in this chapter.)
Small-firm participation
Some observers have expressed concern about the ability of small-scale enterprise to compete and survive -- even as subcontractors -- since the usual growth and stability problems are exacerbated by the risks in performing intermittent roles in space enterprise. 6/ Small firms can afford only limited staffs and facilities to compete for and engage in space projects; moreover, allowable profits on research contracts, with little or no production, se . am to confront some small firms with special difficulties. 7/ In this regard, the implications of longer-term commitments to smaller enterprises -- unfeasible under current federal budget practice -- deserve careful examination. Research is recommended to:
• Delineate the unique problems and opportunities which confront small firms which participate in peaceful space activities. (Case studies on situations of the sort summarized in Note 7 would be most helpful in this respect.)
• On the basis of the above findings, discover, if possible, means for determining the conditions under which small-firm participation in space activities is desirable.
• On the basis of the above, develop legal and governmental facilities for assisting small-firm participation. In particular, determine the cost and benefits and other consequences of long term funding of specific space activities compared to present governmental practices. The implications of such a funding approach for small firms as compared to large firms should be examined too.
Negotiated Contracts and the social value of space activities
The entire Philosophy of government contracting may need re-examination in its implications for both small and large firms. 8/ There is a basic difficulty to be resolved concerning what is produced and at what price in the absence of the conventional market relationships that normally prevail between supplier and consumer. As the government has expanded its role, not only as a major consumer but as a stimulator of new products, negotiated decisions have emerged as a major economic arrangement alongside the conventional market and price mechanisms. 9/ These practices are also characteristic of weapon system procurement and of practices in atomic energy development, but the space effort, because of the special attention it claims, tends to draw particular attention to difficulties of arriving at price levels that are mutually acceptable to government and industry.
Widespread dissatisfaction has been expressed by space firms over the profit margins allowed in the negotiated price on research contracts. In the absence of a price mechanism, however, the social value” of space systems becomes especially difficult to determine. 10/ The question then remains whether the criteria arrived at outside a market mechanism are either valid or satisfactory for determining what from the national standpoint is worth producing, at what price (and what profit) and with what apportionment of public and private funds for research. 11/ Moreover, the negotiated contracts for R&D can affect the ultimate price of new products derived from the research and thereby can influence the competitive position of firms and industries involved through the subsidy of particular technologies.
A prerequisite for better understanding of the intricacies of this situation is a concurrence between industry and government on the interpretation of industrial accounting as it relates to public finance. Needed are adequate measures of corporate costs and profits over the long run where public funds become involved. 12/ The complex problem of measuring performance efficiency on space contracts in the absence of a price mechanism is also pertinent here. 13/
As indicated above, problems of costs, profits, and negotiated contracts are not unique to space activities and especially not to peaceful space activities. Much attention is being directed to the matter in general, including considerable research. 14/ Therefore this report will reserve its research recommendations to suggesting that:
• A systematic effort be made to delineate the economic and social problems associated with the negotiated contract which are uniquely contributed to it by the goals or operating nature of peaceful and scientific space activities; and those aspects of the negotiated contract situation which present unique problems for the conduct and costing of peaceful space activities.
Such information should be useful to those deeply engrossed in the intricacies of the general problem, in their efforts to develop contract arrangements which meet both the economic goals of industry and the economic and social goals of government.
Manpower problems
Space enterprise presents some firms with new and complicated manpower needs and personnel procedures, related to the great increase in the number of professional personnel involved. Management personnel need special abilities to cope with the technical subject matter and also to coordinate an extraordinarily complex variety of men and tasks. 15/ organizing creative space technology teams and retaining them is a persistent challenge to management: there seems always to be the possibility that scientific talent and engineering skill will disrupt a program by leaving, either to accept an attractive offer of better financial or working arrangements or to go into business for themselves.
The personnel practices usual to a firm do not always work well with these innovative personnel, who seem, if effective use is to be made of them, to require special working environments and other kid-glove treatment. Practices considered useful from the profit and risk outlook of the firm -the “stockpiling” of skill, for example, or the transfer of a man hired for work in a specific R&D area to unrelated activities where his talents can be applied to more profitable developments -- have apparently had adverse effects on the motivations of some personnel. 16/ It is not clear under what circumstances the turnover in industry personnel may increase or decrease both the quality and cost of the space products finally invented and produced. However, to the extent that government funds and national policies support the space industry, it is in the public interest to have these personnel used as effectively as is possible.
Space enterprise requires technicians and craftsmen who have meticulous “watchmaker” standards. The emphasis is on custom-crafted skills -- to turn out a wide variety of prototypes in small quantities -- coupled with increased emphasis upon versatility, imagination, and adaptation -- qualities that were considered unnecessary or even undesirable in the days of mass-produced aircraft. There has been a corresponding upgrading in the maintenance skills required for the complex equipment supporting space activities; obtaining and maintaining very high quality work adds to the personnel problems of the industry.
Since, as noted above, it is very much in the economic and social interest of the nation, as well as of the organizations using them, to provide the most effective working environment for engineers, scientists, and craftsmen devoting their creative talents to the space industry effort, research is desirable to:
• Learn what personnel practices inhibit creativity and productivity in the space industry environment; discover managerial and operational methods that will yield a more effective working environment; develop means for encouraging industry to learn of and use such methods.
There are wider public aspects to the personnel recruitment problem which in the long run could have profound implications for both industry and other parts of society. If space firms want highly qualified managers, engineers, scientists, and craftsmen in the numbers necessary for the wideranging laboratories and production facilities, they can, with the support implicit in negotiated contracts, attract scarce personnel from other socially important activities -- and especially from the laboratories and lecture rooms of universities and nonprofit organizations. They are thereby doing nothing wrong or that differs from the tactics of other industries in bidding for scarce personnel. The point is that the space industry has become a major source of competition for a scarce national resource for which many industries, nonprofit organizations (including the government, and universities are also, and will be, bidding especially in future years as society's demands in other areas increase.
The following questions then become of central importance: Are these scarce and valuable personnel being attracted to activities which use their creative abilities as effectively as possible? in the increasingly sharp competitive bidding for their skills, is the perspective of goals being lost -- by them and by the bidders? What interests have the greatest need to be served -- those of the private corporation, of the institution of learning, of the nation, of the creative individual himself? This is a complex problem involving conflicting values about the individual, free enterprise, and the nation's needs, and careful study of the implications of pursuing one approach to the use of creative manpower rather than an other is merited.
Clarify, as much as is possible (1) the ethical, economic, social, or political nature of the problems of how scarce talent can and/or should be distributed, as required by the pressing needs of society, and (2) the implications of such distribution for the rights of free occupational choice and the free-enterprise right of competing for these personnel. What are the special contributions of the space industry toward complicating or resolving these problems?
Two further problems in this area deserve special attention (again, by no means solely in relation to the space industry). in the first place, there has been much concern both within and outside the industry over tie effects on the research environment in the universities of industry's essays into socalled basic research. It is argued that, by providing special incentives, the space industry (among others) has added substantially to an undermining of an important social resource (as well as their future personnel supply) by attracting away from the universities the teachers and researchers necessary to develop tomorrow's engineers and scientists. It is not clear to what extent this is true. And, if it is true, what alternatives are available to industry and society to compensate for important imbalances. Research is needed to:
• Determine the extent and ways in which industrial recruitment of professional personnel is affecting the university research and teaching situation. To what extent have teachers and researchers left the universities specifically because of more attractive offers by industry? Are there demonstrable changes in the quality, interests, and commitment of those who choose to remain at the university? Are there significant consequences for the quality and quantity of teachers as a result of this situation? To what extent have consulting relationships between faculty and industry stimulated or degraded university teaching and research? To what extent has industrial activity in basic research affected research interests in the universities? To what extent has industry replaced the university as a teaching and research facility?
• On the basis of the above and other related questions are there reasons to believe that the teaching and research function of the university is seriously threatened and thereby the facilities for turning out new scientists and engineers? What is the role of the space industry in complicating or resolving the situation?
In the second place, industries (including the space industry) have been attracting engineers and scientists from countries where they are in even scarcer supply than here. As European and Asian scientists are drawn to work in the United States, we may be depriving their home countries of critical skills; our national posture may suffer thereby, as well as the development of the countries involved. 17 1 If this demand for foreign science personnel persists, it is not clear under what conditions the results may be good or bad for society at large, since little is definitely known in general about manpower skills in the international labor market that may be interchangeably usable from one country to another. Research is recommended to:
• Determine the various good and bad consequences for the nations involved from the exodus of their scientists, engineers, and craftsmen who are attracted to work in the United States. What is the role of the space industry in complicating or resolving this situation?
The space industry may, however, be making a special contribution toward easing the professional personnel reservoir for science and knowledge in general. The quality of personnel it requires and the attitude toward craftsmanship engendered by its necessarily exacting standards might also contribute to changes in perspective and ambition that could carry over to other areas of endeavor now suffering from shoddy efforts and indifferent attitudes. The stimulation of space projects may motivate more careers in science, engineering, and precision craftsmanship; the inflow could also encourage improvements in curriculums and education standards. It would be desirable to know:
• In what ways the recruiting and promotional activities of the spate industry may be affecting attitudes toward quality work and ambitions about science and engineering careers here and abroad? Is there evidence that these activities encourage or discourage realistic career aspirations and expectations? What is or can be the role of the space industry in stimulating work standards and providing motivation for education, so as to meet the anticipated needs of the industry as well of society?
Industry and Government Relations
The greatly accelerated pace and the increased scope and significance of peaceful space activity developments as well as the expansion and intensification of government involvement in the private-profit economy all emphasize the need for adaptation of the mechanisms that heretofore have maintained relations between industry and government. Research is needed to delineate the issues clearly and to suggest new models which could be examined for their desirability as substitutes for traditional patterns of relationships. Among the political and economic issues closely affecting governmental policy and business operations are those concerning pricing and the allocation of national product, the regulatory function, patent rights, antitrust policies, and space enterprise abroad.
Regulatory functions 18/
Since the federal government is the near-exclusive purchaser of space components, certain regulatory functions are already implicit in contractual arrangements between it and industry. Complex technical problems in space activities rule out a static legalistic approach that would disregard the operational and functional demands of society. 19/ Since flexibility in adaptation to changing roles and operations for government and industry may be necessary to take advantage of potentialities in space activities, there would be benefits in examining the implications of a regulatory role defined in terms of an evolving public interests-/ with the function able to act as a positive and socially enhancing instrument, rather than as a negative force to inhibit or control. Such an approach would take into account market mechanisms, antitrust considerations, and the equitable criteria for issuing commercial franchises in space operations. An early recognition of the problems and issues in space development can benefit from the government's earlier supportive activities in economic development, thereby affording the opportunity to use the regulatory instrument judiciously. Political relationships between the regulatory agency and the space community as these influence space functions and roles will also have to be taken into account.
In addition to the economic implications, there are other technical operational aspects. Inquiries have already been received by NASA from private firms about commercial launching facilities for communication satellites. Some feel it is not too early to study the conditions and provisions under which a space authority may eventually wish to control or license either the launchings of rockets or subsequent operations of space systems. Already at issue is the question of whether the government will wish to undertake launchings for industry or license them under franchise. Public safety and noxious use ire two apparent areas of police-power regulatory function, and further thought would be beneficial on the full range of licensing and control that may be necessary. other factors may warrant the sharing of responsibilities among federal, state, and local authorities. (See Chapter 6.) National and international institutions will have to set safety standards and inspection systems for commercial space vehicles and space traffic, including launching and recovery areas, noise levels, and space vehicle radio frequencies. (See Chapters 3 and 8.) There are also problems related to indemnity liabilities of private firms here and abroad for accidents incurred at the launching pad or from re-entering space vehicles. 21/ Whether the indemnity factor in space enterprise will loom as large as did safety considerations in nuclear energy radiation remains to be seen. Also to be considered will be assurance by public law (as under the Atomic Energy Act) of nondiversion of space activities to military purposes or other harmful uses.
An overlapping regulation area has to do with nuclear powered rocket motors. Radioactive particles could be spread by malfunctions at launching (if nuclear first stage engines are used or if upper stage nuclear engines are demolished on explosions of first stage chemical engines) or by impact on land or water if the nuclear engine fails to go into orbit or beyond. They could also be put into orbit if a nuclear powered engine or power reactor in a satellite were to be demolished. These last two possibilities would seem to imply international regulatory arrangements.
In the light of the foregoing problems and issues, research is recommended to clarify 1) concepts and objectives of regulatory functions and roles, 2) economic and legal implications of government-industry enterprise, and 3) the role of interest groups as they affect the governmental authority. In particulate
• A continuing study should be done on the economic and political objectives of regulation of space activities. Among the major questions which space activities at are to be regulated and what are the contingent factors involved? **
• Case studies are also recommended on the economic and legal implications of mixed public-private enterprise. Pertinent material may be found in the history of hydroelectric power and atomic energy development. The experience of the Atomic Energy Commission and the Federal Aviation Agency is replete with what appear to be analogous problems and may be suggestive of certain lines of solution. 22/
• So that any proposed space regulatory function will not be static and thwart further potentialities for growth in the pertinent space activity, preparatory research would be desirable to clarify and specify the processes and arrangements involved, congressional appropriations and powers granted, and the potential influence of space interest groups.
Patent policies
The conflict over patent policy in space enterprise ostensibly concerns the ownership of devices invented by private enterprise and developed with public funds, but much of the inconsistency in arguments and confusion of issues stems from attempts to evaluate an invention law devised in the time of Benjamin Franklin and applied in the age of Von Braun. Organizational research within a much more complex industrialized society poses intricate questions on the implications of the patent system.
The relative merits of the patent system in a free enterprise economy are not lightly resolved. A well-known political economist has concluded: “No economist, on the basis of present knowledge, could possibly state with certainty that the patent system, as it now operates, confers a new benefit or a net loss upon society.” 23/ It bears noting that the incentive to innovate, originally encouraged by patent privileges, may now be paralleled or superseded by the encouragement of government support, especially in areas such as space activities. The issue over proprietary rights in invention is not limited to arguing the pros and cons of the patent system. 24/ Alternative means may have to be sought to encourage, for the national benefit, vigorous exploitation of new technologies, since under some circumstances patents are considered inadequate protection and firms, therefore, decide to restrict the dissemination of new findings entirely The government’s intentions, as expressed in present or revised patent policy, and industry's desire to retain title to technology that may be commercialized in the future must somehow be reconciled. Contractor equity is a matter that concerns efficient government operations, but the side effects upon our economy are of no lesser importance. 25/
Aside from legal, institutional arrangements between government and industry, many scientists and engineers object to the kind of publication that is legally required under the patent system. They object to limiting the amount of scientific knowledge and the compromise in professional standards that institutional and legal considerations often demand in preparing a patent statement, Legally avoidable scientific and technological information is purposefully left out of commercial patents to protect competitive positions. 26/ As a result, there has been speculation about new systems that might exist alongside traditional patent practices, permitting alternative means of publication. Such new systems would be intended to fit much more closely to professional standards for scientific publication and would be designed to bring about an acceleration in the accumulation of knowledge.
Clearly, the patent question transcends space interests, even if they have helped to draw attention to the problem. Research requirements in terms of the space industry's interests center upon the need to clarify and understand the issues about
(1) the effects of patents in helping or hindering creativity and enhancing or inhibiting the spread of innovation,
(2) the effects of the patent system upon other economic aspects of our society, and
(3) specific aspects related to federal government patent policy, as follows:
Case studies are desirable on the way organizations may have used or avoided patents to enhance their own position in space activities, and if the patents were so used, what the good or bad effects upon competition and the spread of innovation and information have been. Aspects meriting examination:
• Are there significant differences between profit and nonprofit organizations in the way patentable ideas are handled in the space area? If there are differences, what, if any, are the effects upon creative output and professional standards?
What is the contribution of government programs and purchases in stimulating industrial innovation? How does this compare with the contribution of the patent in stimulating industrial innovation? In the space industry in particular, under what conditions is government initiative and support considered a better path to profitable activities than that provided by patents? Under what conditions would investments in major developments have been likely if the possibility of patents were the major stimulus instead of government support?
Related to this, what are the prevailing attitudes in the space industry about the likelihood of getting patents on complex developments -and of having them successfully contested or being able to contest a competitor's patent? Under what circumstances is it believed that patenting something will weaken the firm’s competitive position by revealing too much about the product and its manufacture?
Are there specific types of delays and difficulties in dealing with contractors -- under the patent policy that retains waiverable government property rights, as compared with those agencies retaining only a “royalty-free, non-exclusive” license? If so, what are the specific adverse consequences? What means could be used to avoid these consequences?
• In the light of the findings from such case studies, research is necessary to determine the specific areas of compatibility and incompatibility between patent law and space technology research and development. 27/
• Research is needed to develop alternative ways to publish technological information and other claims on methods-and products so as to retain proprietary rights without compromising the professional standards of the scientist and engineer.
• Under what circumstances would a uniform federal agency patent policy be useful or desirable at least from the standpoint of developing space activity products? 28/ How does the patent policy of one agency affect that of another in dealing with contractors -- e.g., the Department of Defense and the National Aeronautics and Space Administration? Are there useful analogies in the histories of government-retained patents by the Atomic Energy Commission as compared to the National Aeronautics and Space Administration: have valuable ideas merely disappeared into the files, or have they in fact entered the public domain?
• How would patent arrangements with other nations affect the international aspects of space programs and our national posture?
• In the light of the findings of such studies as those enumerated above, how effective is the patent concept in meeting the intentions originally embodied in it? Can its present assets be enhanced and its liabilities eliminated in general or for specific situations (such as the space industry context), or are alter native or supplementary arrangements necessary in this area of organized invention and complexly interrelated and interdependent ideas and methods? if the latter is so, what are the conditions which a supplemental approach must meet?
Restraint of trade considerations
Space firms are proposing that the antitrust provisions be amended to permit large-scale cooperative enterprises. 29/ There appear to be good reasons for examining the legalistic concepts of competitive practice and unreasonable restraint of trade” in the light of the functional requirements of developing space programs efficiently, as well as from the standpoint of general public policy for avoiding monopolistic practices contrary to the public interest. 30/
Some observers argue that the great costs of space research and development and the interdependency of separate R&D organizations on the knowledge gained by each other imply that a more efficient arrangement for developing space activities would permit greater cooperation and integration between corporations than is now permitted by law. In particular, there is concern that, despite the growing need to pool information, some firms, in the light of the antitrust history, are very wary of exchanging information with one another because such exchanges might appear as collusion with intent to restrain trade. That such in fact might be the intent of the exchange worries other observers. This is a special problem for those firms which have a “mix of products” which include competitive commodities in the open market.
The prime contractor system is felt by some to have inherent in it possibilities for restraining trade, since the prime contractor has great power over what parts of the contract it will do and what parts will be subcontracted out. Whether or not the prime contract system is reinforcing economic concentration, and if so whether or not this tendency is contrary to the public interest, are subjects for study.!'-/ Finally, if the number of corporations involved in space enterprise narrows down as described earlier, this economic concentration will itself involve monopoly issues. @2/ There is a question of whether it is possible merely to bridge a gap between extant law and practice or whether these space-inspired interdependencies call for rethinking the entire approach to lawful arrangements appropriate to the scale and mode of space enterprise. In general, the question arises of how much reliance needs to be put on competition or regulations and how much can be accomplished through the government’s own purchasing policies.
There are, ;f course, many aspects to restraint of trade which are not unique consequences of space activities but which have their influence on the space situation. (To be sure, weapons systems developers face these problems, too.) Those studies which have as their object an assessment of 'the implications of complex system development for antitrust policy could be aided by research intended to:
• Make clear the specific aspects of space activity research and development which are inhibited or stimulated by existing anti trust limitations on cooperation and data exchange. A case study approach should be of great value here. In the light of these studies, specify what arrangements would benefit the space program; in what ways these arrangements are incompatible with present antitrust laws; and what changes might be introduced into the laws which would benefit the space program and yet protect the public interest above and beyond the requirements for efficient space system development.
Space enterprise abroad
The $12 billion national defense budgets in West Europe, which include rockets and missiles, in part account for the establishment of American firms in Europe. 33/ One firm at least has expressed an interest in marketing disk antennas and other satellite tracking equipment to such countries as France, Japan, and Australia, and private firms now furnish a small number of rockets to foreign governments for scientific space probes. 34/ If present trends continue, many space components may be developed or manufactured overseas. Some overseas installations are already taking advantage of foreign technological capabilities in space programs. 35-/ Lower costs in many cases also contribute to the move into foreign enterprise.
As space enterprise moves into foreign countries, it will be exporting techniques and industrial capability either in extending markets or in seeking technical support. In the field of atomic energy, the “Nth” country problem is concerned with the diffusion of nuclear capability among many nations. This diffusion of capability carries with it contingent political implications of strategic power and control. 36/ There may be analogous implications for the space duopoly between the United States and the USSR. Hence, the potential divergence or reinforcement of commercial and national objectives (and its expression in foreign policy) is a vital consideration in anticipating and planning for emerging space enterprise abroad. (The dealings between German and American firms during World War II over patents and markets is an indicative case where sharp divergences developed between legitimate commercial criteria and the national interests of security. 37/) On the other hand, the international competitive position of some aspects of space enterprise (such as global communications by satellites) may eventually become a question of national image, as was the case with our world maritime position and later with air power.
Research is recommended to determine:
• The social and economic costs and benefits of exchanges of information, methods, science, and technology, related to the development and/or use of space equipment, between United States corporations and foreign organizations. Detailed study is necessary to systematically explore the complex relation ships between foreign policy and its several goals, and the stimulation or inhibition of free enterprise overseas in the space area, Worth special attention in this regard are:
The role of the government in supporting and stimulating the technology which may then be shared overseas' for private and/or national reputation purposes. -1
The extent to which classified information-and/or devices associated with space may help or hinder opportunities for industrial enterprise overseas.
The ways in which the exchange of information might have broader effects on the general competitive position of the United States by enhancing the comparative technological and production capabilities of this nation or other nations. Each of these studies should be done with particular space developments or products and particular foreign policy goals in mind. An examination of a variety of these hypothetical situations should help indicate common problems which require legal and political resolution to meet both national and private interests.