Order Code IB85031
Issue Brief for Congress
Received through the CRS Web
Technology Transfer:
Use of Federally Funded
Research and Development
Updated July 12, 2002
Wendy H. Schacht
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Technology Transfer to Private Sector: Federal Interest
Technology Transfer to State and Local Governments: Rationale for Federal Activity
Current Federal Efforts to Promote Technology Transfer
Federal Laboratory Consortium for Technology Transfer
P.L. 96-480, P.L. 99-502, and Amendments
P.L. 100-418, Omnibus Trade and Competitiveness Act
Patents
Small Business Technology Transfer Program
Further Considerations
LEGISLATION

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Technology Transfer: Use of Federally Funded Research and
Development
SUMMARY
The government spends approximately
Congress has established a system to
one third of the $83 billion federal R&D
facilitate the transfer of technology to the
budget for intramural research and develop-
private sector and to state and local govern-
ment to meet mission requirements in over
ments. Despite this, use of federal R&D
700 government laboratories (including Feder-
results has remained restrained, although there
ally Funded Research and Development Cen-
has been a significant increase in private
ters). The technology and expertise generated
sector interest and activities over the past
by this endeavor may have application beyond
several years. Critics argue that working with
the immediate goals or intent of federally
the agencies and laboratories continues to be
funded R&D. This can be achieved by
difficult and time-consuming. Proponents of
technology transfer, a process by which tech-
the current effort assert that while the labora-
nology developed in one organization, in one
tories are open to interested parties, the indus-
area, or for one purpose is applied in another
trial community is making little effort to use
organization, in another area, or for another
them. The Clinton Administration made
purpose. It is a way for the results of the
expanded use of the federal laboratories and
federal R&D enterprise to be used to meet
industry-government cooperation integral to
other national needs, including the economic
its articulated technology policy. State gov-
growth that flows from new commercializa-
ernments are increasingly involved in the
tion in the private sector; the government’s
process. At issue is whether additional legis-
requirements for products and processes to
lative initiatives are necessary to encourage in-
operate effectively and efficiently; and the
creased technology transfer or if the responsi-
demand for increased goods and services at
bility to use the available resources now rests
the state and local level.
with the private sector.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
The Clinton Administration made expanded use of the federal laboratories and
industry-government cooperation integral to its articulated technology policy. In support
of this approach, Congress passed various laws facilitating cooperative research and
development agreements (CRADAs) between federal agencies and the private sector, and
increasing funding for technology transfer activities included in the Advanced Technology
Program (ATP) and the Manufacturing Extension Partnership (MEP) at the National
Institute of Standards and Technology (NIST), a laboratory of the Department of Commerce.
However, many of these efforts have been revisited since the 104th Congresses, reflecting the
Republican majority’s preferences for indirect measures such as tax policies, intellectual
property rights, and antitrust laws to promote technology development rather than to direct
federal funding of private sector technology initiatives. While none of the relevant programs
have been terminated, several have seen significant decreases in their budgets. The 106th
Congress enacted the Technology Transfer Commercialization Act, P.L. 106-404, which
amends existing law to improve the ability of the government to license federally owned
inventions and to promote the transfer of technology from federal laboratories. P.L. 106-
398, the National Defense Authorization Act for FY2001, includes provisions to create a
pilot program designed to facilitate collaborative R&D between the national laboratories
of the Department of Energy (DOE) and industry. In the current Congress, S. 517, as
incorporated in the Senate-passed version of H.R. 4, would establish a technology
infrastructure program in DOE to promote technology transfer among the national
laboratories, academia, and the private sector. Also in the 107th Congress, H.R. 1418 and
S. 432, the Entrepreneurial Incubators Development Act of 2001, would establish a grants
program to support business incubators for small and medium-sized companies. H.R. 1417
and S. 429 would expand the Manufacturing Extension Program to increase the application
of new technologies by small and medium-sized businesses to create jobs. For FY2002, P.L.
107-77, appropriated $106.5 million for MEP and $184.5 million for ATP. The
Administration’s FY2003 budget requests $108 million for ATP and $13 million for MEP.
The budget document states that all manufacturing extension centers operating for more
than 6 years need to continue without federal funding. P.L. 107-50 extends the Small
Business Technology Transfer Program through FY2009.
BACKGROUND AND ANALYSIS
The federal government spends approximately $83 billion per year on research and
development to meet the mission requirements of the federal departments and agencies.
Approximately one-third of this is spent for intramural research and development (R&D) by
federal laboratories (including support for Federally Funded Research and Development
Centers). While the major portion of this activity has been in the defense arena, government
R&D has led to new products and processes for the commercial marketplace including, but
not limited to, antibiotics, plastics, airplanes, computers, microwaves, and bioengineered
drugs. Given the increasing competitive pressures on U.S. firms in the international
marketplace, proponents of technology transfer argue that there are many other technologies
and techniques generated in the federal laboratory system which could have market value if
further developed by the industrial community. Similarly, the knowledge base created by the
agencies’ R&D activities can serve as a foundation for additional commercially relevant
efforts in the private sector.
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The movement of technology from the federal laboratories to industry and to state and
local governments is achieved through technology transfer. Technology transfer is a process
by which technology developed in one organization, in one area, or for one purpose is
applied in another organization, in another area, or for another purpose. In the defense arena
it is often called “spin-off.” Technology transfer can have different meanings in different
situations. In some instances, it refers to the transfer of legal rights, such as the assignment
of patent title to a contractor or the licensing of a government-owned patent to a private firm.
In other cases, the transfer endeavor involves the informal movement of information,
knowledge, and skills through person-to-person interaction. The crucial aspect in a
successful transfer is the actual use of the product or process. Without this, the benefits from
more efficient and effective provision of goods and services are not achieved. However,
while the United States has perhaps the best basic research enterprise in the world — as
evidenced in part by the large number of Nobel Prizes awarded to American scientists —
other countries sometimes appear more adept at taking the results of this effort and making
commercially viable products to be sold in U.S. and world markets. (For further discussion
of innovation and economic growth, see CRS Issue Brief IB91132, Industrial
Competitiveness and Technological Advancement: Debate Over Government Policy.)
Despite the potential offered by the resources of the federal laboratory system, the
commercialization level of the results of federally funded research and development
remained low through the 1980s. Studies indicated that only approximately 10% of federally
owned patents were ever used. There were many reasons for this, including the fact that
many of these technologies and patents have no commercial application. A major factor in
successful transfer is a perceived market need for the technology or technique. However,
because federal laboratory R&D is generally undertaken to meet an agency’s mission or
because there are insufficient incentives for private sector research that the government
deems in the national interest, decisions reflect public sector, rather than commercial needs.
Thus, transfer often depends on attempts to ascertain commercial applications of
technologies developed for government use — “technology push” — rather than on “market
pull.” In other words, a technology is developed and a use for it established because the
expertise exists rather than because it is needed.
Additional barriers to transfer involve costs. Studies have estimated that research
accounts for approximately 25% of expenditures associated with bringing a new product or
process to market. Thus, while it might be advantageous for companies to rely on
government-funded research, there are still significant added costs of commercialization after
the transfer of technology has occurred. However, industry unfamiliarity with these
technologies, the “not invented here” syndrome, and ambiguities associated with obtaining
title to or exclusive license for federally owned patents also contribute to a limited level of
commercialization. Complicating the issue is the fact that the transfer of technology is a
complex process that involves many stages and variables. Often the participants do not know
or understand each other’s work environment, procedures, terminology, rewards, and
constraints. The transfer of technology appears to be most successful when it involves
one-to-one interaction between committed individuals in the laboratory and in industry or
state and local government. “Champions” are generally necessary to see a transfer through
to completion because it is so often a time- and energy-consuming process. Given this,
technology transfer is best approached on a case-by-case basis that can take into account the
needs, operating methods, and constraints of the involved parties.
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Technology Transfer to Private Sector: Federal Interest
The federal interest in the transfer of technology from government laboratories to the
private sector is based on several factors. The government requires certain goods and
services to operate. Much of the research it funds is directed at developing the knowledge
and expertise necessary to formulate these products and processes. However, because the
government has neither the mandate nor the capability to commercialize the results of the
federal R&D effort, it must purchase technologies necessary to meet mission requirements
from the private sector. Technology transfer is a mechanism to get federally generated
technology and technical know-how to the business community where it can be developed,
commercialized, and made available for use by the public sector.
Federal involvement in technology transfer also arises from an interest in promoting the
economic growth that is vital to the nation’s welfare and security. It is through further
development, refinement, and marketing that the results of research become diffused
throughout the economy and can generate growth. It is widely accepted that technological
progress is responsible for up to one-half the growth of the U.S. economy and is the principal
driving force in long-term economic growth and increases in our standard of living.
Economic benefits of a technology or technique accrue when a product, process, or service
is brought to the marketplace where it can be sold or used to increase productivity. When
technology transfer is successful, new and different products or processes become available
to meet or induce market demand. Transfer from the federal laboratories can result in
substantial increases in employment and income generated at the firm level.
Cooperation with the private sector provides a means for federal scientists and engineers
to obtain state-of- the-art technical information from the industrial community, which in
various instances is more advanced than the government. Technology transfer is also a way
to assist companies that have been dependent on defense contracts and procurement to
convert to manufacturing for the civilian, commercial marketplace. Successful efforts range
from advances in the commercial aviation industry, to the development of a new technology
for use in advanced ceramics, to the development of the biotechnology sector.
Technology Transfer to State and Local Governments:
Rationale for Federal Activity
The increasing demands on state and local governments to provide improved goods and
services have been accompanied by a recognition that expanded technological expertise can
help meet many of these needs. The transfer of technology and technical knowledge from
government laboratories to state and local jurisdictions can allow for additional use of ideas
and inventions that have been funded and created through federal R&D. Intergovernmental
technology transfer can also help state and local officials meet responsibilities imposed by
federal legislation.
As state and local governments increasingly look for technological solutions, the
concept of “public technology” — the adaptation and utilization of new or existing
technology to public sector needs — has emerged. The application of technology to State
and local services is a complex and intricate procedure. In transferring technology from the
federal laboratories, the application often can be direct. At other times, alterations in
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technical products and processes may be necessary for application in the state and local
environment. However, this “adaptive engineering” generally is not extensive or expensive
and can be accomplished by federal laboratory and state and local personnel working
together.
State and local government concerns with regional economic growth also have focused
attention on technology transfer as a mechanism to increase private sector innovation related
activities within their jurisdiction. In order to develop and foster an entrepreneurial climate,
many states and localities are undertaking the support of programs that assist high technology
businesses, and that often use the federal laboratory system. State and local efforts to
develop “incubator centers” for small companies may rely on cooperation with federal
laboratories, which supply technical expertise to firms locating at the center. Other larger
programs to promote innovation in the state, such as the Ben Franklin Partnership in
Pennsylvania, use the science and technology resources of federal personnel. Additional
programs have been created involving state universities, private companies, and the federal
laboratories, with each program geared to the specific needs and desires of the participating
parties. (For more discussion see: CRS Report 96-958 SPR, Technology Development:
Federal-State Issues and CRS Report 98-859, State Technology Development Strategies: The
Role of High Tech Clusters.)
Current Federal Efforts to Promote Technology Transfer
Over the years, several federal efforts have been undertaken to promote the transfer of
technology from the federal government to state and local jurisdictions and to the private
sector. The primary law affording access to the federal laboratory system is P.L. 96-480, the
Stevenson-Wydler Technology Innovation Act of 1980, as amended by the Federal
Technology Transfer Act of 1986 (P.L. 99-502), the Omnibus Trade and Competitiveness
Act (P.L. 101-418), the 1990 Department of Defense (DOD) Authorization Act (P.L.
101-189), the National Defense Authorization Act for FY1991 (P.L. 101-510), the
Technology Transfer Improvements and Advancement Act (P.L. 104-113), and the
Technology Transfer Commercialization Act (P.L. 106-404). Several practices have been
established and laws enacted that are aimed at encouraging the private sector to utilize the
knowledge and technologies generated by the federal R&D endeavor. These are discussed
below.
Federal Laboratory Consortium for Technology Transfer
One of the primary federal efforts to facilitate and coordinate the transfer of technology
among various levels of government and to the private sector is the Federal Laboratory
Consortium for Technology Transfer (FLC). The Consortium was originally established
under the auspices of the Department of Defense in the early 1970s to assist in transferring
DOD technology to state and local governments. Several years later, it was expanded to
include other federal departments in a voluntary organization of approximately 300 federal
laboratories. The Federal Technology Transfer Act of 1986 (P.L. 99-502) provided the FLC
with a legislative mandate to operate and required the membership of most federal
laboratories. Today, over 600 laboratories are represented.
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The basic mission of the Federal Laboratory Consortium is to promote the effective use
of technical knowledge developed in federal departments and agencies by “networking” the
various member laboratories with other federal entities, with state, local, and regional
governments, and with private industry. To accomplish this, the Consortium establishes
channels through which user needs can be identified and addressed. It also provides a means
by which federal technology and expertise can be publicized and made available through
individual laboratories to private industry for further development and commercialization.
Access to the resources of the full federal laboratory system can be made through any
laboratory representative, the FLC regional coordinators, the Washington area representative,
or by contacting the Chairman or Executive Director.
The FLC itself does not transfer technology; it assists and improves the technology
transfer efforts of the laboratories where the work is performed. In addition to developing
methods to augment individual laboratory transfer efforts, the Consortium serves as a
clearinghouse for requests for assistance and will refer to the appropriate laboratory or
federal department. The work of the Consortium is funded by a set-aside of 0.008% of the
portion of each agency’s R&D budget used for the laboratories.
P.L. 96-480, P.L. 99-502, and Amendments
In 1980, the U.S. Congress enacted P.L. 96-480, the Stevenson-Wydler Technology
Innovation Act. Recognizing the benefits to be derived from the transfer of technology, the
law explicitly states that:
It is the continuing responsibility of the federal government to ensure the full use of the
results of the Nation’s federal investment in research and development. To this end the
federal government shall strive where appropriate to transfer federally owned or
originated [non-classified] technology to state and local governments and to the private
sector.
Prior to this law, technology transfer was not part of the mission requirements of the federal
departments and agencies, with the exception of the National Aeronautics and Space
Administration. This left laboratory personnel open to questions as to the suitability of their
transfer activities. However, P.L. 96-480 “legitimized” the transfer effort and mandated that
technology transfer be accomplished as an expressed part of each agency’s mission.
Section 11 created the mechanisms by which federal agencies and their laboratories can
transfer technology. Each department with at least one laboratory must make available not
less than 0.5% of its R&D budget for transfer activities, although this requirement can and
has been waived. To facilitate transfer from the laboratories, each one is required to establish
an Office of Research and Technology Applications (ORTA); laboratories with annual
budgets exceeding $20 million must have at least one full-time staff person for this office
(although the latter provision can also be waived). The function of the ORTA is to identify
technologies and ideas that have potential for application in other settings.
Additional incentives for the transfer and commercialization of technology are
contained in various amendments to Stevenson-Wydler. P.L. 99-502, the Federal
Technology Transfer Act, amends P.L. 96-480 to allow government-owned, government-
operated laboratories (GOGOs) to enter into cooperative research and development
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agreements (CRADAs) with universities and the private sector. The authority to enter into
these agreements was extended to government-owned, contractor-operated laboratories
(generally the laboratories of the Department of Energy) in the FY1990 Defense
Authorization Act (P.L. 101-189). A CRADA is a specific legal document (not a
procurement contract) which defines the collaborative venture. It is intended to be developed
at the laboratory level, with limited agency review. In agencies which operate their own
laboratories, the laboratory director is permitted to make decisions to participate in CRADAs
in an effort to decentralize and expedite the technology transfer process. Generally, at
agencies which use contractors to run their laboratories, specifically DOE, the CRADA is
to be approved by headquarters. P.L. 106-398, however, allows the agency to define certain
conditions under which the CRADA may be approved by a laboratory itself rather than
headquarters.
The work performed under a cooperative research and development agreement must be
consistent with the laboratory’s mission. In pursuing these joint efforts, the laboratory may
accept funds, personnel, services, and property from the collaborating party and may provide
personnel, services, and property to the participating organization. The government can
cover overhead costs incurred in support of the CRADA, but is expressly prohibited from
providing direct funding to the industrial partner. In GOGO laboratories, this support comes
directly from budgeted R&D accounts. Prior to the elimination of a line item in the budget
to support non-defense energy technology transfer, the Energy Department generally relied
on a competitive selection process run by headquarters to allocate funding specifically
designated to cover the federal portion of the CRADA. Now these efforts are to be supported
through programmatic funds. A line item still exists for DOE defense program technology
transfer, but at reduced levels from previous years.
Under a CRADA, title to, or licenses for, inventions made by a laboratory employee
may be granted in advance to the participating company, university, or consortium by the
director of the laboratory. In addition, the director can waive, in advance, any right of
ownership the government might have on inventions resulting from the collaborative effort
regardless of size of the company. This diverges from other patent law which only requires
that title to inventions made under federal R&D funding be given to small businesses,
not-for-profits, and universities. In all cases, the government retains a nonexclusive,
nontransferable, irrevocable, paid-up license to practice, or have practiced, the invention for
its own needs.
Laboratory personnel and former employees are permitted to participate in
commercialization activities if these are consistent with the agencies’ regulations and rules
of conduct. Federal employees are subject to conflict of interest restraints. In the case of
government-owned, contractor-operated laboratories, P.L. 101-189 required the
establishment of conflict of interest provisions regarding CRADAs to be included in the
laboratories’ operating contracts within 150 days of enactment of the law. Preference for
cooperative ventures is given to small businesses, companies which will manufacture in the
United States, or foreign firms from countries that permit American companies to enter into
similar arrangements. To date, over 5,000 CRADAs have been signed (including NASA
Space Act Agreements).
P.L. 99-502 provides for cash awards to federal laboratory personnel for activities
facilitating scientific or technological advancements which have either commercial value or
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contribute to the mission of the laboratory and for the transfer of technology leading to
commercialization. As an additional incentive, federal employees responsible for an
invention are to receive at least 15% of royalties generated by the licensing of the patent
associated with their work. The agencies may establish their own royalty sharing programs
within certain guidelines. If the government has the right to an invention but chooses not to
patent, the inventor, either as a current or former federal employee, can obtain title subject
to the above-mentioned licensing rights of the government.
To further facilitate the transfer process, a provision of the National Defense
Authorization Act for FY1991 (P.L. 101-510) amends Stevenson-Wydler allowing
government agencies and laboratories to develop partnership intermediary programs
augmenting the transfer of laboratory technology to the small business sector.
P.L. 104-113, the Technology Transfer Improvements and Advancement Act, clarifies
existing policy with respect to the dispensation of intellectual property under a CRADA by
amending the Stevenson-Wydler Act. Responding to criticism that ownership of patents is
an obstacle to the quick development of CRADAs, this bill guarantees an industrial partner
the option to select, at the minimum, an exclusive license for a field of use to the resulting
invention. If the invention is made solely by the private party, then they may receive the
patent. However, the government maintains a right to have the invention utilized for
compelling public health, safety, or regulatory reasons and the ability to license the patent
should the industrial partner fail to commercialize the invention.
P.L. 100-418, Omnibus Trade and Competitiveness Act
In response to concerns over the development and application of new technology, the
1988 Omnibus Trade and Competitiveness Act contained several provisions designed to
foster technology transfer. The law redesignated the National Bureau of Standards as the
National Institute of Standards and Technology (NIST), and mandated the establishment of
(among other things): (1) an Advanced Technology Program to encourage public-private
cooperative efforts in the development of industrial technology and to promote the use of
NIST technology and expertise; (2) Regional Manufacturing Technology Transfer Centers;
and (3) a Clearinghouse on State and local innovation related activities. The set-aside for
operation of the Federal Laboratory Consortium created in P.L. 99-502 was also increased
from 0.005% of the laboratory R&D budget to 0.008%.
The Advanced Technology Program (ATP) provides seed funding, matched by
private-sector investment, to companies or consortia of universities, industries, and
government laboratories to accelerate the development of generic technologies that have
broad application across industries. The first awards were made in 1991. To date, 522
projects have been funded representing approximately $1,638 million in federal dollars and
over $1,651 million in financing from the private sector.
The first four ATP competitions (through August 1994) were all general in nature.
However, in response to large increases in federal funding, NIST, in conjunction with
industry, identified various key areas for long-range support including: information
infrastructure for healthcare; tools for DNA diagnostics; component-based software;
manufacturing composite structures; computer-integrated manufacturing for electronics;
digital data storage; advanced vapor-compression refrigeration systems; motor vehicle
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manufacturing technology; materials processing for heavy manufacturing; catalysis and
biocatalysis technologies; advanced manufacturing control systems; digital video in
information networks; engineering; photonics manufacturing; premium power;
microelectronics manufacturing infrastructure; selective-membrane platforms; and adaptive
learning systems. The general competition continued. Since FY1999, NIST dropped the
focused areas in favor of one competition open to all areas of technology. (For additional
information see CRS Report 95-36, The Advanced Technology Program.)
Appropriations for the Advanced Technology Program included $36 million in FY1991,
$48 million in FY1992, $67.9 million in FY1993, and $199.5 million in FY1994.
Appropriations for FY1995 expanded significantly to $431 million, but $90 million of this
amount was rescinded by P.L. 104-6 as funding for ATP met with opposition in the 104th
Congress. The initial House Republican budget proposal associated with the House
Republican “Contract with America” would have eliminated the Advanced Technology
Program. In addition to rescinding $90 million from the FY1995 funding of ATP, both the
House and Senate failed to authorize spending for this activity. The appropriations bill that
originally passed Congress, H.R. 2076, was vetoed by the President, in part, because it
offered no support for ATP. The legislation that was finally signed into law, P.L. 104-134,
funded the program at $221 million. In the last session of the 104th Congress, again there
were no FY1997 authorizations for the Advanced Technology Program. However, the
Omnibus Consolidated Appropriations Act, P.L. 104-208, provided $225 million in FY1997
financing for ATP. P.L. 105-18 rescinded $7 million from this amount. President Clinton
requested $276 million for ATP in his FY1998 budget. While no authorization legislation
was enacted, P.L. 105-119 appropriated $192.5 million for ATP in FY1998.
The Administration’s FY1999 budget proposed $259.9 million for ATP, an increase of
35%. While not providing such a large increase, P.L. 105-277, the Omnibus Consolidated
Appropriations Act, does fund ATP for FY1999 at $197.5 million, 3% above the previous
year. This reflects a $6 million rescission of “deobligated” funds resulting from early
termination of certain projects. For FY2000, the Administration proposed support for ATP
at $238.7 million, an increase of 21% above last year’s funding. No authorization legislation
was enacted. S. 1217, passed by the Senate on July 22, 1999, would have appropriated
$226.5 million for ATP, 15% more than the current year. In contrast, the appropriations bill
passed by the House on August 5, 1999, H.R. 2670, contained no funding for the Advanced
Technology Program. The report to accompany the bill stated that “. . .the program has not
produced a body of evidence to overcome those fundamental questions about whether the
program should exist in the first place.” Yet P.L. 106-113, the Consolidated Appropriations
Act, provided $142.6 million for ATP, although this represented a 28% decrease over
FY1999.
President Clinton’s FY2001 budget called for financing ATP at $175.5 million, 23%
above the prior fiscal year. The original version of the appropriations bill passed by the
House did not fund the program. However, P.L. 106-553 appropriated $145.7 million for
ATP, an increase of 2% from the previous funding level.
For FY2002, the Bush Administration’s budget proposal would have suspended support
for all new awards pending an evaluation of the program; $13 million would be made
available to meet financial commitments for on-going projects. H.R. 2500, as initially passed
by the House, contained no funding for new ATP grants but also provided $13 million to
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support prior project commitments. The original version of H.R. 2500 passed by the Senate
funded ATP at $204.3 million. The final legislation, P.L. 107-77, finances the program at
$184.5 million, an increase of almost 27% over the past fiscal year.
In the FY2003 budget request, the Advanced Technology Program would receive $108
million. This is a 35% decrease from the FY2002 appropriation.
The Omnibus Trade and Competitiveness Act (P.L. 100-418) also created a program
of regional centers to assist small manufacturing companies’ use of knowledge and
technology developed under the auspices of the National Institute of Standards and
Technology and other federal agencies. Federal funding for the centers is matched by
non-federal sources including state and local governments and industry. Originally, seven
Regional Centers for the Transfer of Manufacturing Technology were selected and are
operational: the Great Lakes Manufacturing Technology Center at the Cleveland Advanced
Manufacturing Program in Ohio; the Northeast Manufacturing Technology Center at
Rensselaer Polytechnic Institute in Troy, New York (now called the New York
Manufacturing Extension Partnership); the South Carolina Technology Transfer Cooperative
based at the University of South Carolina in Columbia; the Midwest Manufacturing
Technology Center at the Industrial Technology Institute in Ann Arbor, Michigan; the
Mid-American Manufacturing Technology Center at the Kansas Technology Enterprise
Corporation of Topeka; the California Manufacturing Technology Center at El Camino
College in Torrance; and the Upper Midwest Manufacturing Technology Center in
Minneapolis.
The original program expanded in 1994 creating the Manufacturing Extension
Partnership (MEP) to meet new and growing needs of the community. In a more varied
approach, the Partnership involves both large centers and smaller, more dispersed
organizations sometimes affiliated with larger centers. Also included is the NIST State
Technology Extension Program which provides states with grants to develop the
infrastructure necessary to transfer technology from the federal government to the private
sector (an effort which was also mandated by P.L. 100-418) and a program that electronically
ties the disparate parties together along with other federal, state, local, and academic
technology transfer organizations. There are now centers in all 50 states and Puerto Rico.
Since the program was created in 1989, awards made by NIST for extension activities
resulting in the creation of approximately 400 regional offices. [It should be noted that the
Department of Defense also funded 36 centers through its Technology Reinvestment Project
(TRP) in FY1994 and FY1995. When the TRP was terminated, NIST took over support for
20 of these programs in FY1996 and financed the remaining ones during FY1997.]
Funding for this program was $11.9 million in FY1991, $15.1 million in FY1992, and
$16.9 million in FY1993. The FY1994 appropriation for the expanded Manufacturing
Technology Partnerships was $30.3 million. P.L. 103-317 appropriated $90.6 million for this
effort in FY1995, although P.L. 104-19 rescinded $16.3 million from this appropriation. For
FY1996, H.R. 2076, which passed the Congress but was vetoed by the President, included
appropriations of $80 million for MEP. This amount was retained in the final legislation,
P.L. 104-134. The President’s FY1997 budget request for this program was $105 million.
No FY1997 authorization legislation was enacted, but P.L. 104-208 appropriated $95 million
for Manufacturing Extension while temporarily lifting the 6-year limit on federal support for
individual centers. The Administration’s MEP budget request for FY1998 was $123 million.
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Again, no authorizing legislation was enacted but P.L. 105-119 provided $113.5 million in
appropriations for FY1998. The law also permitted government funding for the centers to
be extended, for periods of one year and at a rate of one-third the centers annual costs if a
positive evaluation was received. The President requested MEP funding of $106.8 million
for FY1999, a decrease of 6%. P.L. 105-277 appropriated the $106.8 million. The decrease
in funding reflects a reduced federal financial commitment as the centers mature, not a
decrease in program support. In addition, the Technology Administration Act of 1998, P.L.
105-309, permits the federal government to fund centers at one-third the cost after the 6 years
if a positive independent evaluation is made every two years. For FY2000, the
Administration proposed support for MEP at $99.8 million. There were no authorizations
enacted. S. 1217, as passed by the Senate, would have appropriated $109.8 million for the
program, an increase of 3% over FY1999. H.R. 2670, as passed by the House, would have
provided an appropriation of $99.8 million, as per the President's request. The version of
H.R. 2670, as passed by both the House and Senate, appropriated $104.8 million; however,
this legislation was vetoed by President Clinton. P.L. 106-113, the Consolidated
Appropriations Act, provided $104.2 million (after the mandated rescission).
The FY2001 Clinton budget requested $114.1 million in MEP funding, almost 9%
above the previous fiscal year. The increase was designated for a new e-commerce outreach
effort with the Department of Agriculture and the Small Business Administration. P.L. 106-
553 appropriates $105.1 million for the Manufacturing Extension Partnership but does not
permit the creation of any new programs.
The Bush Administration’s FY2002 budget proposal included funding of $106.3 million
for MEP. The version of H.R. 2500 first passed by the House would provide $106.5 million
for MEP; the original Senate-passed version would fund the activity at $105.1 million. P.L.
107-77 provides $106.5 million. The FY2003 budget request includes an 89% decrease in
funding for MEP to $13 million. According to the budget document, “...consistent with the
program’s original design, the President’s budget recommends that all centers with more than
six years experience operate without federal contribution.” (For additional information see
CRS Report 97-104, Manufacturing Extension Partnership Program: An Overview.)
Patents
The patent system was created to promote innovation. Based on Article I, Section 8 of
the U.S. Constitution which states: “The Congress Shall Have Power... To promote the
Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors
the exclusive Right to their respective Writings and Discoveries...”, the patent system
encourages innovation by simultaneously protecting the inventor and fostering competition.
Originally, it provided the inventor with a lead time of 17 years (from the date of issuance)
to develop his idea, commercialize, and thereby realize a return on his initial investment.
Today, in response to the Uruguay Round Agreements Act, the term of the patent has been
changed to 20 years from date of filing. The process of obtaining a patent places the idea in
the public domain. As a disclosure system, the patent can, and generally does, stimulate
other firms or inventors to invent “around” existing patents to provide parallel technical
developments or meet similar market needs.
Ownership of patents derived from research and development performed under federal
funding affects the transfer of technology from federal laboratories to the private sector.
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Generally, the government retains title to these inventions and can issue to companies either
an exclusive license or, more commonly, a nonexclusive license. However, it is argued that
without title (or at least an exclusive license) to an invention and the protection it conveys,
a company will not invest the additional time and money necessary for commercialization.
This contention is supported by the fact that, although a portion of ideas patented by the
federal government have potential for further development, application, and marketing, only
about 10% of these are ever used in the private sector. However, there is no universal
agreement on this issue. It also is asserted that title should remain in the public sector where
it is accessible to all interested parties since federal funds were used to finance the work.
Despite the disagreements, the Congress has accepted to some extent the proposition
that vesting title to the contractor will encourage commercialization. P.L. 96-517,
Amendments to the Patent and Trademark Laws (commonly known as the Bayh-Doyle Act),
provides, in part, for contractors to obtain title if they are small businesses, universities, or
not-for-profit institutions. Certain rights are reserved for the government and these
organizations are required to commercialize within a predetermined and agreed-on time.
(For more information see CRS Report 98-862, R&D Partnerships and Intellectual Property:
Implications for U.S. Policy and CRS Report RL30320, Patent Ownership and Federal
Research and Development: A Discussion on the Bayh-Dole Act and the Stevenson-Wydler
Act.) Yet it continues to be argued that patent exclusivity is important for both large and
small firms. In a February 1983 memorandum concerning the vesting of title to inventions
made under federal funding, President Reagan ordered all agencies to treat, as allowable by
law, all contractors regardless of size as prescribed in P.L. 96-517. This, however, does not
have a legislative basis.
Further changes in the patent laws made by the enactment of P.L. 98-620 also affect the
transfer of technology from federal laboratories to the private sector. In a provision that was
designed to increase interaction and cooperation between government-owned,
contractor-operated (GOCO) laboratories and private industry in the transfer of technology,
Title V permits decisions to be made at the laboratory level as to the award of licenses for
laboratory generated patents. The contractor is also permitted by this legislation to receive
patent royalties for use in additional research and development, for awards to individual
inventors on staff, or for education. A cap exists on the amount of the royalty returning to the
laboratory so as not to distort the agency’s mission and congressionally mandated R&D
agenda. However, the creation of discretionary funds gives laboratory personnel added
incentive to encourage and complete technology transfers.
P.L. 98-620 also permits private companies, regardless of size, to obtain exclusive
license for the full life of the government patent. Prior restrictions on large firms allowed
exclusive license for only 5 of the (then) 17 years of the patent. The law permits those
government laboratories that are run by universities or nonprofit institutions to retain title to
inventions made in their institution (within certain defined limitations). Federal laboratories
operated by large companies are not included in this provision.
The Federal Technology Transfer Act and the FY1990 DOD authorization gives all
companies (not just small businesses, universities, and nonprofits) the right to retain title to
inventions resulting from research performed under cooperative R&D agreements with
government laboratories. If this occurs, the federal government retains a royalty-free license
to use these patents. In addition, the Federal Technology Act states that the government
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agencies may retain a portion of royalty income rather than returning it to the Treasury. After
payment of the prescribed amount to the inventor, the agencies must transfer the balance of
the total to their government-operated laboratories, with the major portion distributed to the
laboratory where the invention was made. The laboratory may keep all royalties up to 5%
of their annual budget plus 25% of funds in excess of the 5% limit. The remaining 75% of
the excess returns to the Treasury. Funds retained by the laboratory are to be used for
expenses incurred in the administration and licensing of inventions; to reward laboratory
personnel; to provide for personnel exchanges between laboratories; for education and
training consistent with the laboratories’ and agencies’ missions; or for additional transfer.
P.L. 106-404, the Technology Transfer Commercialization Act, signed into law on
November 1, 2000, makes alterations in current practices concerning patents held by the
government to make it easier for federal agencies to license such inventions. This law
amends P.L. 98-480, the Stevenson-Wydler Technology Innovation Act and P.L. 96-517, the
Bayh-Dole Act to decrease the time delays associated with obtaining an exclusive or partially
exclusive license on federally owned patents. Previously, agencies were required to
publicize the availability of technologies for 3 months using the Federal Register and then
provide an additional 60 day notice of intent to license by an interested company. The new
law shortens the period to 15 days in recognition of the ability of the Internet to offer
widespread notification and the necessity of time constraints faced by industry in
commercialization activities. Certain rights would be retained by the government. The
legislation also allows licenses for existing government-owned inventions to be included in
CRADAs.
Small Business Technology Transfer Program
P.L. 102-564 created a 3-year pilot program designed to facilitate the commercialization
of university, nonprofit, and federal laboratory R&D by small companies. The Small
Business Technology Transfer program (STTR) provides funding for research proposals
which are developed and executed cooperatively between a small firm and a scientist in a
research organization and fall under the mission requirements of the federal funding agency.
Up to $100,000 in Phase I financing is available for one year to test the viability of the
concept. Phase II awards of $500,000 may be made for 2 years to perform the research.
Funding for commercialization of the results is expected from the private sector. Financial
support for this effort comes from a phased-in set-aside of the R&D budgets of departments
which spend over $1 billion per year on research and development. Originally set to expire
at the end of FY1996, the program was extended one year. P.L. 105-135 reauthorizes
funding through FY2001. In the current Congress, P.L. 107-50 extends the STTR program
through FY2009. The activity will be funded by an increase in the set-aside to 0.3%
beginning in FY2004. Also in FY2004, the amount of money available for individual Phase
II grants will increase from $500,000 to $750,000. (For additional information see CRS
Report 96-402, Small Business Innovation Research Program.)
Further Considerations
The federal laboratories have received a mandate to transfer technology. This, however,
is not the same as a mandate to help the private sector in the development and
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commercialization of technology for the marketplace. While the missions of the government
laboratories are often broad, direct assistance to industry is not included, with the exception
of the National Institute of Standards and Technology. The laboratories were created to
perform the R&D necessary to meet government needs, which typically are not consistent
with the demands of the marketplace.
The missions of the federal laboratories are currently under review, due, in part, to
budget constraints and the changing world order. National security is now being redefined
to include economic well-being in addition to weapons superiority. The laboratories which
have contributed so much to the defense enterprise are being re-evaluated. These discussions
provide an opportunity to debate whether the mandate of the federal R&D establishment
should include expanded responsibilities for assistance to the private sector. Whether or not
the missions of the U.S. government laboratories are changed to include expanded assistance
to industry, there are various initiatives which may facilitate the technology transfer process
under the laboratories’ current responsibilities. These include making the work performed
in government institutions more relevant to industry through augmented cooperative R&D,
increased private sector involvement early in the R&D efforts of the laboratories, and
expanded commercialization activities.
Because a significant portion of the laboratories are involved in defense research,
questions arise as to whether or not the technologies in these institutions can be transferred
in such a way as to be useful to commercial companies. In addition, the selection of one
company over another to be involved in a transfer or in a cooperative R&D agreement raises
issues of fairness and equity of access, as well as conflict of interest. And, while it is
virtually impossible to prevent the flow of scientific and technical information abroad, there
is ongoing interest in the extent of foreign access to the federal laboratory establishment.
How these concerns are addressed may be fundamental to the success of U.S. technology
transfer.
Over the past 20 years, the Congress has enacted various laws designed to facilitate
cooperative R&D between and among government, industry, and academia. These laws
include (but are not limited to) tax credits for industrial payments to universities for the
performance of R&D, changes in the antitrust laws as they pertain to cooperative research
and joint manufacturing, and improved technology transfer from federal laboratories to the
private sector. The intent behind these legislative initiatives is to encourage collaborative
ventures and thereby reduce the risks and costs associated with R&D as well as permit work
to be undertaken that crosses traditional boundaries of expertise and experience leading to
the development of new technologies and manufacturing processes for the marketplace.
Since the 104th Congress, the perspectives on joint R&D, technology transfer, and
cooperative research and development agreements appear mixed. The results of legislative
activity are open to discussion. In the recent past, both national political parties have
supported measures to facilitate technological advancement. There are indications that the
congressional majority favors refocusing federal support for basic research as well as indirect
measures to encourage technology development in the private sector. CRADAs, in
particular, are a means to take this government-funded basic research from the federal
laboratory system and move it to the industrial community for commercialization to meet
both agency mission requirements and other national needs associated with the economic
growth which comes from new products and processes. It should also be recognized that the
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government is expressly prohibited from providing direct financial support to partners in the
cooperative venture under a CRADA. Thus, it appears that this approach may meet the
criteria expressed as acceptable to the Congress. There has also been support for
manufacturing extension, and while the Advanced Technology Program has faced much
opposition, after several years of declining budgets received an increase for FY1999 and in
FY2001 (after a 28% cut in funding during FY2000). As the 107th Congress begins to make
decisions concerning support for R&D, the role of the federal government in technology
transfer, technology development, and commercialization might be expected to be explored
further.
LEGISLATION
P.L. 107-50, H.R. 1860
Small Business Technology Transfer Program Reauthorization Act of 2001.
Reauthorizes the Small Business Technology Transfer Program through FY2009. In FY2004
the set-aside is to increase to 0.3% while Phase II awards may expand to $750,000.
Introduced May 16, 2001; referred to the House Committees on Small Business and Science.
Reported, amended, by the Committee on Small Business and discharged from the
Committee on Science on September 21, 2001. Passed the House, amended, September 24,
2001. Received in Senate on September 25 and passed Senate, without amendment, on
September 26, 2001. Signed into law by the President on October 15, 2001.
P.L. 107-77, H.R. 2500
Makes FY2002 appropriations for the National Institute of Standards and Technology,
among other things. The Manufacturing Extension Partnership is funded at $106.5 million
while the Advanced Technology Program is provided $184.5 million. Introduced July 13,
2001; referred to the House Committee on Appropriations. Reported to the House on the
same day. Passed the House, amended, on July 18, 2001. Received in Senate July 19 and
passed Senate, with an amendment, on September 13, 2001. Measure amended in Senate
after passage by unanimous consent on September 13 and September 21, 2001. Conference
held. The House agreed to the conference report on November 14, 2001; the Senate agreed
the following day. Signed into law by the President on November 28, 2001.
H.R. 895 (Royce)
Abolishes the Advanced Technology Program. Introduced March 6, 2001; referred to
the House Committee on Science.
H.R. 1417 (Hinchey)
Technology Extension Act of 2001. A bill to expand the Manufacturing Extension
Program to bring the new economy to small and medium-sized businesses. Introduced April
4, 2001; referred to the House Committee on Financial Services.
H.R. 1418 (Quinn)
Entrepreneurial Incubators Development Act of 2001. A bill to provide for business
incubator activities to promote entrepreneurial activity and job creation. Introduced April
4, 2001; referred to the House Committee on Financial Services.
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S. 259 (Bingaman)
National Laboratories Partnership Improvement Act of 2001. Authorizes funding for
the Department of Energy to enhance its mission areas through technology transfer and
partnerships. Introduced February 6, 2000; referred to the Senate Committee on Energy and
Natural Resources. Hearings held July 18, 2001.
S. 429 (Clinton)
Technology Extension Act of 2001. A bill to expand the Manufacturing Extension
Program to bring the new economy to small and medium-sized businesses. Introduced
March 1, 2001; referred to the Senate Committee on Commerce, Science, and
Transportation.
S. 432 (Clinton)
Entrepreneurial Incubators Development Act of 2001. A bill to provide for business
incubator activities to promote entrepreneurial activity and job creation. Introduced March
1, 2001; referred to the Senate Committee on Banking, Housing, and Urban Affairs.
S. 517 (Bingaman)
National Laboratories Partnership Improvement Act of 2001. Creates a technology
infrastructure program in the Department of Energy to promote technology transfer and
partnerships with academia and the private sector. Introduced March 12, 2001; referred to
the Senate Committee on Energy and Natural Resources. Reported to the Senate on June 5,
2001. Incorporated in H.R. 4 as an amendment and passed by the Senate on April 25, 2002.
House disagreed with Senate amendment on June 12, 2002. Conference held on June 27,
2002.
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