Order Code RL33527
CRS Report for Congress
Received through the CRS Web
Technology Transfer:
Use of Federally Funded
Research and Development
Updated August 3, 2006
Wendy H. Schacht
Specialist in Science and Technology
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

Technology Transfer:
Use of Federally Funded
Research and Development
Summary
The federal government spends approximately one third of its annual research
and development budget1 for intramural R&D to meet mission requirements in over
700 government laboratories (including Federally Funded Research and Development
Centers). The technology and expertise generated by this endeavor may have
application beyond the immediate goals or intent of federally funded R&D. These
applications can result from technology transfer, 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. It is a way for the results of the
federal R&D enterprise to be used to meet other national needs, including the
economic growth that flows from new commercialization in the private sector; the
government’s requirements for products and processes to operate effectively and
efficiently; and the demand for increased goods and services at the state and local
level.
Congress has established a system to facilitate the transfer of technology to the
private sector and to state and local governments. Despite this, use of federal R&D
results has remained restrained, although there has been a significant increase in
private sector interest and activities over the past several years. Critics argue that
working with the agencies and laboratories continues to be difficult and
time-consuming. Proponents of the current effort assert that while the laboratories
are open to interested parties, the industrial community is making little effort to use
them. At the same time, State governments are increasingly involved in the process.
At issue is whether incentives for technology transfer remain necessary, if additional
legislative initiatives are needed to encourage increased technology transfer, or if the
responsibility to use the available resources now rests with the private sector.
This report replaces CRS Issue Brief IB85031, Technology Transfer: Use of
Federally Funded Research and Development, by Wendy H. Schacht.
1 The total federal R&D budget was an estimated by the National Science Foundation to be
approximately $133.7 billion in FY2006.

Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Technology Transfer to Private Sector: Federal Interest . . . . . . . . . . . . . . . . . . . . 3
Technology Transfer to State and Local Governments: Rationale for Federal
Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Current Federal Efforts to Promote Technology Transfer . . . . . . . . . . . . . . . . . . . 5
Federal Laboratory Consortium for Technology Transfer . . . . . . . . . . . . . . . 5
P.L. 96-480, P.L. 99-502, and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 6
P.L. 100-418, Omnibus Trade and Competitiveness Act . . . . . . . . . . . . . . . 8
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Small Business Technology Transfer Program . . . . . . . . . . . . . . . . . . . . . . 14
Further Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
109th Congress Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Technology Transfer:
Use of Federally Funded
Research and Development
Most Recent Developments
Past Administrations have made expanded use of federal laboratories and
industry-government cooperation integral to efforts associated with technology
development. In support of this approach, Congress enacted 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 Congress, 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 direct federal funding of private sector technology initiatives. While
none of the relevant programs have been terminated, several have seen significant
decreases in support. FY2006 appropriations contained in P.L. 109-108 include
$104.6 million for MEP and $79 million for ATP (after mandated rescissions). For
FY2007, the Administration’s budget requests $46.3 million for MEP but does not
provide support for ATP. H.R. 5672, the FY2007 Science, State, Justice, Commerce,
and Related Agencies Appropriations Act, as passed by the House on June 29, 2006,
funds MEP at $92 million with no financing for ATP. The version of H.R. 5672
reported from the Senate Committee on Appropriations also does not fund ATP but
provides $106 million for MEP. As part of the President’s “American
Competitiveness Initiative” announced in the 2006 State of the Union Address, the
Administration is seeking to expand and make the research and experimentation tax
credit permanent (as well as to increase basic research funding and make
improvements in math and science education). Various bills, including H.R. 4654,
H.R. 4845, S. 2109, S. 2199, and S. 2720, would make the research and
experimentation tax credit permanent. H.R. 250, passed by the House on September
21, 2005, establishes several new manufacturing technology programs for small and
medium-sized firms, as does S. 2134. H.R. 3331 would create and authorize funding
for a grant program in the National Science Foundation to assist universities in
promoting the application of new inventions developed within their institutions. S.
1581 and S. 2198 provide financing and other assistance for the development of
science parks. The National Innovation Act (S. 2109, S. 2390, and H.R. 4654), has
several provisions to promote innovation including the establishment of a President’s
Council on Innovation, innovation acceleration grants, and programs for regional
economic development. Similar measures are contained in S. 2802, the American
Innovation and Competitiveness Act.

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Background and Analysis
The federal government is estimated to spend $133.7 billion in FY2006 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.
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 Report
RL33528, Industrial Competitiveness and Technological Advancement: Debate Over
Government Policy
, by Wendy Schacht.)
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 various
reasons for this, including the fact that many of these technologies and patents had
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

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“market pull.” In other words, a technology is developed and a use for it established
because the expertise exists rather than because it is perceived to be 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.
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, the government has neither the mandate nor the capability to
commercialize the results of the federal R&D effort. 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.

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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 that available in 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 evolution 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 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 98-859, State Technology
Development Strategies: The Role of High Tech Clusters
, by Wendy Schacht.)

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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.
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.

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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 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

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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. According to the
Department of Commerce, between FY1999 and FY2003, approximately 2,800 -
3.000 traditional CRADAs were active each year. During this time frame, between
700 - 950 new, traditional agreements were initiated yearly (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 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.

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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. As
of the end of 2004 (the last year that new awards were made), 768 projects had been
funded representing approximately $2.3 billion in federal dollars matched by $2.1
billion 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 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, by Wendy Schacht.)
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

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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 budget proposal associated with
the House Republican “Contract with America” would have eliminated the Advanced
Technology Program. The FY1996 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 FY1997, P.L. 104-208 provided $225 million
in financing for ATP. P.L. 105-18 rescinded $7 million from this amount. The
following year, P.L. 105-119 appropriated $192.5 million for ATP.
The Clinton 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 did
fund ATP at $197.5 million, 3% above the previous year. This reflected a $6 million
rescission of “deobligated” funds resulting from early termination of certain projects.
For FY2000, the Administration requested support for ATP at $238.7 million, an
increase of 21% above earlier funding. The appropriation bill originally passed by the
House contained no funding for the program. The report to accompany the bill (H.R.
2670) 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 provided $142.6 million for ATP, although this represented
a 28% decrease over the earlier fiscal year.
Former President Clinton’s FY2001 budget called for financing ATP at $175.5
million, 23% above the prior year’s support. The original version of the
appropriations bill passed by the House again 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 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, financed the program at $184.5 million, an increase of almost 27% over
the previous fiscal year.
In the FY2003 budget request, the Advanced Technology Program would have
received $108 million, 35% below the FY2002 figure. No relevant appropriations
legislation was enacted in the 107th Congress. A series of Continuing Resolutions
provided support at the FY2002 level until the 108th Congress passed P.L. 108-7
which appropriated $178.8 million for the program in FY2003 (after a 0.65% across
the board recision mandated by the legislation).
The President’s FY2004 budget would have provided $27 million for ATP to
cover on-going commitments; no new projects would be funded. Again, the
appropriation bill initially passed by the House contained no money for ATP.
However, P.L. 108-199, the FY2004 Consolidated Appropriations Act, provided
$170.5 million for the program after a rescission mandated in the bill. The following

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year, the Administration’s budget request and H.R. 4754, the appropriations bill
originally passed by the House, did not include funding for ATP. S. 2809, as
reported to the Senate by the Committee on Appropriations, would have provided
$203 million for the program. P.L. 108-447, the FY2005 Omnibus Appropriations
Act, funds ATP at $136.5 million (after several rescissions mandated in the
legislation), a 20% decrease from the previous fiscal year.
The Administration’s FY2006 budget, and H.R. 2862, as initially passed by the
House, did not include support for the Advanced Technology Program. The version
of H.R. 2862 originally passed by the Senate would have provided $140 million for
the program. The final FY2006 appropriation legislation, P.L. 109-108, finances
ATP at $79 million (after mandated rescissions), 42% below the FY2005 funding
level.
For FY2007, the Administration budget does not provide any support for ATP,
nor does H.R. 5672, the FY2007 Science, State, Justice, Commerce, and Related
Agencies Appropriations Act, as passed by the House on June 29, 2006 and as
reported from the Senate Committee on Appropriations.
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

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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. P.L. 104-208
appropriated $95 million for manufacturing extension in FY1997, while temporarily
lifting the six-year limit on federal support for individual centers. For FY1998, P.L.
105-119 provided $113.5 million in funding and permitted government support for
centers to be extended, for periods of one year and at a rate of one-third the centers
annual cost, if a positive evaluation was received. The following year, P.L. 105-277
appropriated $106.8 million for the program, reflecting a reduced federal financial
commitment as centers mature, not a decrease in program support. In addition, the
Technology Administration Act of 1998, P.L. 105-309, permitted the federal
government to fund centers at one-third the cost after the six years if a positive
independent evaluation is made every two years. In FY2000, $104.2 million (after
a mandated rescission) was appropriated for MEP by P.L. 106-113. The next year,
P.L. 106-553 provided $105.1 million for manufacturing extension; for FY2002, P.L.
107-77 funded MEP at $106.5 million.
The Bush Administration’s FY2003 budget proposed 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.”
A series of Continuing Resolutions financed the activity at the FY2002 level until the
108th Congress enacted P.L. 108-7 which appropriates $105.9 million for FY2003
(after a mandated rescission).
The President’s FY2004 budget included another cut in support for MEP,
proposing $12.6 million to support those centers that have not reached six years of
federal financing. H.R. 2799, the FY2004 appropriations bill, as initially passed by
the House, financed the Partnership at $39.6 million. This bill was incorporated into
H.R. 2673, which was signed into law as P.L. 108-199, the FY2004 Consolidated
Appropriations Act. The legislation funded MEP at $38.7 million after a mandated
rescission contained in the bill.
For FY2005, the Bush Administration’s budget included $39.2 million for MEP.
H.R. 4754, the Commerce, Justice, State appropriations bill originally passed by the
House, would have financed manufacturing extension at $106 million. S. 2809,
reported to the Senate by the Committee on Appropriations, would have provided
$112 million to “fully fund” existing centers and to provide additional assistance to
small and rural States. The FY2005 Omnibus Appropriations Act, P.L. 108-447,
restored earlier cuts to the program and financed MEP at $107.5 million after several
rescissions mandated by the legislation.

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In the President’s FY2006 budget proposal, support for manufacturing extension
would have been reduced to $46.8 million, 63% below the previous fiscal year. H.R.
2862, as originally passed by both the House and the Senate, would have funded the
program at $106 million. After mandated rescissions, MEP was appropriated $104.6
million by P.L. 109-108.
The Administration’s FY2007 budget provides $46.3 million for MEP. The
FY2007 appropriations legislation passed by the House, H.R. 5672, funds the
program at $92 million. The version of H.R. 5672 reported from the Senate
Committee on Appropriations includes $106 million for manufacturing extension.
(For additional information see CRS Report 97-104, Manufacturing Extension
Partnership Program: An Overview
, by Wendy Schacht.)
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. 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

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RL32076, The Bayh-Dole Act: Selected Issues in Patent Policy and the
Commercialization of Technology
; 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
, all by Wendy Schacht.) 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 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.

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P.L. 106-404, the Technology Transfer Commercialization Act, signed into law
on November 1, 2000, made alterations in current practices concerning patents held
by the government to make it easier for federal agencies to license such inventions.
The law amends P.L. 98-480 and P.L. 96-517 to decrease the time necessary to obtain
an exclusive or partially exclusive license on federally owned patents. Previously,
agencies were required to publicize the availability of technologies for three 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 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.
The CREATE Act, P.L. 108-453, makes changes in the patent laws to promote
cooperative research and development among universities, government, and the
private sector. The legislation amends section 103(c) of title 25, United States Code,
such that certain actions between researchers under a joint research agreement will
not preclude patentability.
Small Business Technology Transfer Program
P.L. 102-564 created a three-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 two 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 reauthorized funding through FY2001, while P.L. 107-50 extended the
STTR program through FY2009. The set-aside used to fund the activity was
increased to 0.3% in FY2004. In addition, the amount of money available for
individual Phase II grants increased from $500,000 to $750,000. (For additional
information see CRS Report 96-402, Small Business Innovation Research Program,
by Wendy Schacht.)
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 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

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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 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 25 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 government is expressly
prohibited from providing direct financial support to partners in the cooperative

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venture under a CRADA. Thus, it appears that this approach may meet the criteria
expressed as acceptable to the Congress. While the Advanced Technology Program
has faced much opposition in the House, the program continues to be funded,
although at decreased levels. Recently, the Manufacturing Extension Partnership had
its budget cut, but these cuts were restored the following fiscal year with the support
of the Congress. As the 109th Congress continues to make decisions concerning
funding for R&D, the role of the federal government in technology transfer,
technology development, and commercialization might be expected to be explored
further.
109th Congress Legislation
P.L. 109-108 (H.R. 2862)
Makes appropriations for science and the Departments of State, Justice, and
Commerce. As passed by the House, the bill would provide $106 million for the
Manufacturing Extension Partnership and no financing for the Advanced Technology
Program. The version of the legislation reported to the Senate from the Committee
on Appropriations would fund MEP at $106 million and provide $140 for ATP. The
final appropriations legislation financed MEP at $104.6 million and ATP at $79
million (after mandated rescissions). Introduced June 10, 2005; referred to the House
Committee on Appropriations. Passed the House, amended, on June 16, 2005.
Received in the Senate on June 16, 2005; referred to the Senate Committee on
Appropriations. Reported to the Senate, with an amendment in the nature of a
substitute, on June 23, 2005. Passed the Senate, amended on September 15, 2005.
Conference report filed November 7, 2005. House agreed to conference report on
November 9, 2005; Senate agreed on November 16, 2005. Signed into law by the
President on November 22, 2005.
H.R. 250 (Ehlers)/S. 2134 (Smith)
Manufacturing Technology Competitiveness Act. Creates an interagency
committee to coordinate federal manufacturing R&D. Establishes and authorizes
funding for a pilot collaborative manufacturing research grants program to promote
the development of new manufacturing technologies through cooperative applied
research among the private sector, academia, states, and other non-profit institutions.
Mandates and authorizes financing for a manufacturing fellowship program. Creates
and authorizes support for a manufacturing extension center competitive grants
program to focus on new or emerging manufacturing technologies. Authorizes
funding for the Manufacturing Extension Partnership, among other things.
Introduced January 6, 2005; referred to the Committee on Science. Reported to the
House, amended, May 23, 2005. Passed House on September 21, 2005. Received
in Senate and referred to the Senate Committee on Commerce, Science, and
Transportation on September 22, 2005. S. 2134 introduced December 16, 2005;
referred to the Senate Committee on Commerce, Science, and Transportation.
H.R. 3331 (Miller, B.)
Creates and authorizes funding for a grant program in the National Science
Foundation to assist universities in promoting the application of new inventions

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developed within their institutions. Introduced July 27, 2005; referred to the House
Committee on Science.
H.R. 4845 (Goodlatte)
Innovation and Competitiveness Act. Makes permanent the research and
experimentation tax credit, among other things. Introduced March 2, 2006; referred
to the House Committees on the Judiciary, Ways and Means, science, Education and
the Workforce, and Energy and Commerce.
H.R. 5672 (Wolf)
FY2007 Science, State, Justice, Commerce, and Related Agencies
Appropriations Act. Funds the Manufacturing Extension Partnership at $92 million
but provides no support for the Advanced Technology Program, among other things.
Introduced on June 22, 2006; referred to the House Committee on Appropriations.
Reported to the House on June 22, 2006 and passed the House on June 29, 2006.
Reported from the Senate Committee on Appropriations, with an amendment in the
nature of a substitute, on July 13, 2006.
S. 1581 (Bingaman)
Provides financing and other assistance (including tax incentives for private
sector investments) for the development of science parks, among other things.
Introduced July 29, 2005; referred to the Senate Committee on Finance.
S. 2109 (Ensign)/H.R. 4654 (Schiff)/S. 2390 (Ensign)
National Innovation Act. Establishes a President’s Council on Innovation and
provides innovation acceleration grants. Promotes innovation through regional
economic development and makes permanent the research and experimentation tax
credit, among other things. S. 2109 introduced December 15, 2005; referred to the
Senate Committee on Finance. H.R. 4654 introduced January 3, 2006; referred to the
House Committees on Science, Energy and Commerce, Ways and Means, Armed
Services, Judiciary, Transportation and Infrastructure, and Financial Services. S.
2390 introduced March 8, 2006; referred to the Senate Committee on Commerce,
Science, and Transportation.
S. 2198 (Domenici)
Protecting America’s Competitive Edge Through Education Act. Among other
things creates mechanisms to develop and fund Science Parks. Introduced January
26, 2006; referred to the Senate Committee on Health, Education, Labor, and
Pensions.
S. 2199 (Domenici)
Protecting America’s Competitive Edge Through Tax Incentives Act. Expands
and makes permanent the research and development tax credit, among other things.
Introduced January 26, 2006; referred to the Senate Committee on Finance.
S. 2720 (Baucus)
Research Competitiveness Act of 2006. Simplifies the research tax credit and
makes it permanent. Allows for tax exempt financing of research park facilities,
among other things. Introduced May 4, 2006; referred to the Senate Committee on
Finance.

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S. 2802 (Ensign)
American Innovation and Competitiveness Act of 2006. Among other things,
establishes the President’s Council on Innovation and Competitiveness, provides
innovation acceleration grants, and facilitates regional economic development.
Introduced May 15, 2006; referred to the Senate Committee on Commerce, Science,
and Transportation. Reported, with amendments, on July 18, 2006.