Order Code RL33526
Cooperative R&D:
Federal Efforts to Promote
Industrial Competitiveness
Updated August 20, 2008
Wendy H. Schacht
Specialist in Science and Technology
Resources, Science, and Industry Division

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Cooperative R&D: Federal Efforts to Promote
Industrial Competitiveness
Summary
In response to the foreign challenge in the global marketplace, the United States
Congress has explored ways to stimulate technological advancement in the private
sector. The government has supported various efforts to promote cooperative
research and development activities among industry, universities, and the federal
R&D establishment designed to increase the competitiveness of American industry
and to encourage the generation of new products, processes, and services.
Collaborative ventures are intended to accommodate the strengths and
responsibilities of all sectors involved in innovation and technology development.
Academia, industry, and government often have complementary functions. Joint
projects allow for the sharing of costs, risks, facilities, and expertise.
Cooperative activity covers various institutional and legal arrangements
including industry-industry, industry-university, and industry-government efforts.
Proponents of joint ventures argue that they permit work to be done that is too
expensive for one company to support and allow for R&D that crosses traditional
boundaries of expertise and experience. Such arrangements make use of existing,
and support the development of new, resources, facilities, knowledge, and skills.
Opponents argue that these endeavors dampen competition necessary for innovation.
Federal efforts to encourage cooperative activities include the National
Cooperative Research Act; the National Cooperative Production Act; tax changes
permitting credits for industry payments to universities for R&D and deductions for
contributions of equipment used in academic research; and amendments to the patent
laws vesting title to inventions made under federal funding in universities. Technol-
ogy transfer from the government to the private sector is facilitated by several laws.
In addition, there are various ongoing cooperative programs supported by various
federal departments and agencies.
Given the increased popularity of cooperative programs, questions might be
raised as to whether they are meeting expectations. Among the issues before
Congress are whether joint ventures contribute to industrial competitiveness and what
role, if any, the government has in facilitating such arrangements.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Joint Industrial Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Industry-University Cooperative Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Federal Laboratory-Industry Interaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Federal Initiatives in Cooperative R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Defense vs. Civilian Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Access by Foreign Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Direct vs. Indirect Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Legislation in the 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

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Cooperative R&D:
Federal Efforts to Promote
Industrial Competitiveness
Most Recent Developments
Congressional initiatives over the past 25 years have promoted cooperative
research and development among industry, universities, and the federal R&D
establishment. This is evident in legislation creating technology transfer mechanisms
as well as in support for two extramural programs of the National Institute of
Standards and Technology (NIST): the Advanced Technology Program (ATP) which
provided seed funding, matched by private sector investment, to companies or
consortia for the development of generic technologies that have broad application
across industrial sectors, and the Manufacturing Extension Partnership (MEP) which
offers technical assistance to small and medium-sized firms through regional centers
in conjunction with state or local government, universities, or the private sector.
The President’s FY2008 budget proposed a significant decrease in support for
manufacturing extension to $46.3 million and did not include funding for ATP. The
final appropriations legislation, P.L. 110-161, provides MEP with $89.6 million and
replaces ATP with a new initiative the Technology Innovation Program (TIP) which
is funded at $65.2 million (with an additional $5 million from FY2007 ATP
unobligated balances). P.L. 110-69, the America COMPETES Act, authorizes
funding for NIST programs through FY2010 and creates various new activities
within the laboratory. The Administration’s original FY2009 budget request
proposed funding MEP at $4 million to terminate federal support for the program and
provided no financing for TIP. On June 6, 2008, the President submitted a series of
amendments to his budget one of which reduced the amount for the MEP program
to $2 million. The FY2009 appropriations bill ordered reported from the House
Committee on Appropriations would finance MEP at $112 million while support for
TIP would total $65.2 million. S. 3182, as reported by the Senate Committee on
Appropriations, provides $110 million for manufacturing extension and $65 million
for TIP.
Several bills introduced in the current Congress are consistent with parts of the
“American Competitiveness Initiative” announced by the President in the 2006 State
of the Union Address that proposed several innovation-related activities including
increased basic research funding, making permanent the research and
experimentation tax credit (which was extended through the end of 2007 by P.L. 109-
432), and improved math and science education. S. 833, the Competitiveness
Through Education, Technology, and Enterprise Act of 2007, would make the
research tax credit permanent, as does H.R. 2133, H.R. 2138, H.R. 2734, H.R. 3907,
H.R. 5105, H.R. 5681, and S. 2209. S. 41, the Research Competitiveness Act of

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2007, and H.R. 1712, the Research and Development Tax Credit Act of 2007, also
make the research credit permanent and create tax exempt facility bonds for the
development of research park facilities, among other things. H.R. 6049, as passed
by the House, and S. 2552 would extend the research credit through the end of 2008;
S. 592 and S. 2884 extend it through the end of 2012.
S. 1373 and H.R. 4250 provide grants and loan guarantees for the development
and construction of science parks. Title VI of P.L. 110-229 establishes a program of
grants to non-profit institutions, state and local governments, cooperative extension
services, or universities to transfer energy efficient methods and technologies. S.
3078 creates a National Innovation Council to coordinate federal innovation-related
activities and promote state and local initiatives in this area, among other things.
Rationale
In response to concerns over competition from foreign firms, the U.S. Congress
has increasingly looked for ways the federal government can stimulate technological
innovation in the private sector. This technological advancement is critical in that
it contributes to economic growth and long term increases in our standard of living.
New technologies can create new industries and new jobs; expand the types and
geographic distribution of services; and reduce production costs by making more
efficient use of resources. The development and application of technology also plays
a major role in determining patterns of international trade by affecting the
comparative advantages of industrial sectors. Since technological progress is not
necessarily determined by economic conditions, it can have effects on trade
independent of shifts in macroeconomic factors that may affect the marketplace.
Joint ventures are an attempt to facilitate technological advancement within the
industrial community. Academia, industry, and government can play complementary
roles in technology development. While opponents argue that cooperative ventures
stifle competition, proponents assert that they are designed to accommodate the
strengths and responsibilities of these sectors. Collaborative projects attempt to
utilize and integrate what the participants do best and to direct these efforts toward
the goal of generating new goods, processes, and services for the marketplace. They
allow for shared costs, shared risks, shared facilities, and shared expertise.
The lexicon of current cooperative activity covers various different institutional
and legal arrangements. These ventures might include industry-industry joint
projects involving the creation of a new entity to undertake research, the
reassignment of researchers to a new effort, and/or hiring new personnel.
Collaborative industry-university efforts may revolve around activities in which
industry supports centers (sometimes cross-disciplinary) for research at universities,
funds individual research projects, and/or exchanges personnel. Cooperative
activities with the federal government might include projects that use federal
facilities and researchers, federal funding for industry-industry or industry-university
efforts, or financial support for centers of excellence at universities to which the
private sector has access.

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There are many different types of cooperative arrangements. The flexibility
associated with this concept can allow for the development of institutional and
organizational plans tailored to the specific needs of the particular project. Issues of
patent ownership, disclosure of information, licensing, and antitrust are to be
resolved on an individual basis within the general guidelines established by law
governing joint ventures.
Collaborative ventures can be structured either “horizontally” or “vertically.”
The former involves efforts in which companies work together to perform research
and then use the results of this research within their individual organizations. The
latter involves activities where researchers, producers, and users work together. Both
approaches are seen as ways to address some of the perceived obstacles to the
competitiveness of American firms in the marketplace.
Joint Industrial Research
Traditionally, the federal government has funded research and development to
meet mission requirements; in areas where the government is the primary user of the
results; and/or where there is an identified need for R&D not being performed in the
private sector. Most government support is for basic research which is often
long-term and highly risky for individual companies; yet research can be the
foundation for breakthrough achievements which can revolutionize the marketplace.
Studies have shown that inventions based on R&D are the more important ones.
However, the societal benefits of research tend to be greater than those that can be
captured by the firm performing the work. Thus the rationale for federal funding of
research in industry.
The major emphasis of legislative activity has been on augmenting research in
the industrial community. This focus is reflected in efforts to encourage companies
to undertake cooperative research arrangements and expand the opportunities
available for increases in research activities. Collaboration permits work to be done
which is too expensive for one company to fund and also allows for R&D that
crosses traditional boundaries of expertise and experience. A joint venture makes use
of existing, and supports development of new resources, facilities, knowledge, and
skills.
The concentration on increased research as a prelude to increased technological
advancement was based upon the “pipeline model” of innovation. This process was
understood to be a series of distinct steps from an idea through product development,
engineering, testing, and commercialization to a marketable product, process, or
service. Thus increases at the beginning of the pipeline — in research — were
expected to result in analogous increases in innovation at the end. However, this
model is no longer considered valid. Innovation is rarely a linear process and new
technologies and techniques often occur that do not require basic or applied research
or development. Most innovations are actually incremental improvements to existing
products and processes. In some areas, particularly biotechnology, research is closer
to a commercial product than this conception would indicate. In others, the
differentiation between basic and applied research is artificial. The critical factor is
the commercialization of the technology. Economic benefits accrue only when a

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technology or technique is brought to the marketplace where it can be sold to
generate income and/or applied to increase productivity.
In the recent past, it was increasingly common to find that foreign companies
were commercializing the results of U.S. funded research at a faster pace than
American firms. In the rapidly changing technological environment, the speed at
which a product, process, or service is brought to the marketplace is often a crucial
factor in its competitiveness. The recognition that more than research needs to be
done has lead to other approaches at cooperative efforts aimed at expediting the
commercialization of the results of the American R&D endeavor. These include
industry-university joint activities, use of the federal laboratory system by industry,
and industry-industry development efforts where manufacturers, suppliers, and users
work together.
Industry-University Cooperative Efforts
Industry-university cooperation in R&D is one important mechanism intended
to facilitate technological innovation. Traditionally, universities perform much of the
basic research integral to certain technological advancements. They are generally
able to undertake fundamental research because it is part of the educational process
and because they do not have to produce for the marketplace. The risks attached to
work in this setting are fewer than those in industry where companies must earn
profits. Universities also educate and train the scientists, engineers, and managers
employed by companies.
Academic institutions do not have the commercialization capacity available in
industry and necessary to translate the results of research into products and processes
that can be sold in the marketplace. Thus, if the work performed in the academic
environment is to be integrated into goods and services, a mechanism to link the two
sectors must be available. Prior to World War II, industry was the primary source of
funding for basic research in universities. This financial support helped shape
priorities and build relationships. However, after the war the federal government
supplanted industry as the major financial contributor and became the principal
determinant of the type and direction of the research performed in academic
institutions. This situation resulted in a disconnect between the university and
industrial communities. Because industry and not the government is responsible for
commercialization, the difficulties in moving an idea from the research stage to a
marketable product or process appear to have been compounded.
Efforts to encourage increased collaboration between the academic and
industrial sectors might be expected to augment the contribution of both parties to
technological advancement. Company support for research within the university
provides additional funds and information on the concerns and direction of industry.
For many companies, access to expertise and facilities outside of the firm expands
or complements available internal resources. Yet, such cooperation should not
necessarily be seen as a panacea. Oftentimes, collaborative ventures fail because of
various factors including conflicting goals, differing research cultures, and financial
disagreements.

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Federal Laboratory-Industry Interaction
The federal government can share its extensive facilities, expertise, knowledge,
and new technologies with partners in a cooperative venture. In certain cases, the
government laboratories have scientists and engineers with experience and skills, as
well as equipment, not available elsewhere. The government also has a vested
interest in technology development. It does not have the mandate or resources to
manufacture goods but has a stake in the availability of products and processes to
meet mission requirements. In addition, technological advancement contributes to
the economic growth vital to the health and security of the nation.
Collaboration between government laboratories and industry is not, however,
just a one way street. In several technological areas, particularly electronics and
computer software, the private sector is more advanced in technologies important to
the national defense and welfare of this country. Interaction with industry offers
federal scientists and engineers valuable information to be used within the
government R&D enterprise.
Federal Initiatives in Cooperative R&D
The cooperative venture concept is not new. In the early 1970s, the National
Science Foundation established its Industry-University Cooperative Research Centers
program. The Electric Power Research Institute, a research organization supported
by the electric power utilities, has been in operation since 1973. In the private sector,
the Microelectronics and Computer Technology Corporation (MCC), which performs
research for its member firms, and the Semiconductor Research Corporation (SRC),
which funds research in universities, were created in the early 1980s. The difference
today is the number of projects and the scope of legislative activity designed to
promote cooperative ventures.
Faced with pressures from foreign competition, the government’s interest
appears to be expanding beyond that of funding R&D, to meeting other critical
national needs including the economic growth that flows from new
commercialization in the private sector. While acknowledging that the
commercialization of technology is the responsibility of the business community, in
the past several years the government has attempted to stimulate innovation and
technological advancement in industry. These activities often involve the removal
of barriers to technology development in the private sector, thereby permitting market
forces to operate and the provision of incentives to encourage increased innovation
related efforts in industry. Cooperative R&D efforts are a part of both these trends.
The National Cooperative Research Act (P.L. 98-462) is designed to encourage
companies to undertake joint research which is typically long-term, risky, and often
too expensive for one company to finance. This legislation clarifies the antitrust laws
and requires that the “rule of reason” standard be applied in determinations of
violations of these laws; that cooperative research ventures are not to be judged
illegal “per se”. It also eliminates treble damage awards for those research ventures
found in violation of the antitrust laws if prior disclosure (as defined in the law) has

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been made. In addition, P.L. 98-462 makes some changes in the way attorney fee
awards are made to discourage frivolous litigation against joint research ventures
without simultaneously discouraging suits of plaintiffs with valid claims. Between
1985 (when the law went into effect) and 2003, over 900 joint ventures have filed
with the Justice Department.1
P.L. 103-42, the National Cooperative Production Amendments Act of 1993,
amends the National Cooperative Research Act by, among other things, extending
the original law’s provisions to joint manufacturing ventures. These provisions are
only applicable, however, to cooperative production when the principal
manufacturing facilities are “located in the United States or its territories, and each
person who controls any party to such venture ... is a United States person, or a
foreign person from a country whose law accords antitrust treatment no less favorable
to United States persons than to such country’s domestic persons with respect to
participation in joint ventures for production.”
The Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418) created
the Advanced Technology Program (ATP) at the Department of Commerce’s
National Institute of Standards and Technology. This program provided seed
funding, matched by private sector investment, to companies or consortia comprised
of universities, companies, and/or government laboratories for the development of
generic technologies that have broad application across industrial sectors. As of the
end of 2007, 824 projects have been funded representing approximately $2.4 billion
in federal financing matched by $2.2 billion in financing from the private sector. Of
these projects, approximately 28% were or are joint ventures. Eleven initial R&D
programs were selected for funding, almost half of which involved consortia.
Twenty-seven awards were made to programs in the second year; approximately
one-third were consortia. In December 1992, 21 new ATP awards were made,
including three joint ventures. Thirty additional projects were funded in 1993, and,
in October 1994, 41 awards were made in four key technology areas: information
infrastructure for healthcare; tools for DNA diagnostics; component-based software;
and computer-integrated manufacturing for electronics. Fourteen are cooperative
efforts. In November 1994, 47 additional awards were made in the general
competition and in the area of manufacturing composite structures. Twenty-four
involve collaborative R&D. Of the 24 awards announced on July 13, 1995, 35% of
the projects in the general competition were joint ventures and 29% in the focused
competition. The following month 21 additional awards were made of which 9 were
cooperative efforts. In early September, another 44 grants were awarded including
19 joint ventures. Later in that month, 10 more awards were made of which three
were to cooperative efforts. On January 25, 1996, an additional four projects
received awards; three involved multiple firms. In March 1997, NIST announced
that it would fund 8 new proposals from the FY1996 general competition of which
2 were collaborative projects. Sixty-four awards were made in October 1997; 15
involving multiple companies. In October 1998, NIST awarded funding for 79 new
projects involving more than 150 companies, 11 universities, and several federal
laboratories. This reflects changes in the ATP selection criteria designed to
1 National Science Board, Science and Engineering Indicators 2006, available at
[http://www.nsf.gov/statistics/seind06/c4/c4s5.htm#fn38].

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encourage large companies to participate in joint ventures with small firms and
academic institutions. Thirty-seven awards for FY1999 were made on October 7,
1999. Of these, 27 are either joint ventures or involve additional organizations
working as subcontractors. In FY2001, 13 of the 59 grants involved collaborative
projects while in FY2002, 10 of the 61 awards went to joint ventures. Of the 16
awards made in July 2003, 3 were for collaborative projects. In September of 2003,
44 awards were made of which 9 were joint ventures. An additional 32 awards were
made in 2004, seven involving cooperative activities. Of the 56 awards provided in
2007, 9 were made to joint ventures. (For more information, see CRS Report 95-36,
The Advanced Technology Program, by Wendy H. Schacht.)
P.L. 110-69, the America COMPETES Act, creates and authorizes a new
Technology Innovation Program (TIP) to replace ATP. P.L. 110-161, the FY2008
Consolidated Appropriations Act, provides the funding for this new initiative. While
similar to ATP in the intent to promote high-risk R&D that would be of broad-based
economic benefit to the Nation, there are several differences in the operation of the
new activity. Funding under TIP is limited to small and medium-sized businesses
whereas grants under ATP were available to companies regardless of size. In the
Advanced Technology Program, joint ventures were required to include two
separately owned for-profit firms and could include universities, government
laboratories, and other research establishments as participants in the project but not
as recipients of the grant. Under TIP, a joint venture may involve two separately
owned for-profit companies but may also be comprised of one small or medium-sized
firm and a university. A single company was able to receive up to $2 million for up
to three years under ATP; under TIP, the participating company (which must be a
small or medium-sized business) may receive up to $3 million for up to three years.
In ATP, small and medium-sized companies were not required to cost share (large
firms provided 60% of the total cost of the project) while in TIP there is a 50% cost
sharing requirement which, again, only applies to the small and medium-sized
businesses that are eligible. There were no funding limits for the five-year funding
available for joint ventures under ATP; the TIP limits joint venture funding to $9
million for up to five years. The Advisory Board that was created to assist in the
Advanced Technology Program included industry representatives as well as federal
government personnel and representatives from other research organizations. The
Advisory Board for the Technology Innovation Program would be comprised of only
private sector members.

Appropriations for the Advanced Technology Program were $35.9 million in
FY1991, $47.9 million in FY1992, and $67.9 million in FY1993. FY1994
appropriations expanded significantly to $199.5 million and even further to $431
million in FY1995. However, P.L. 104-6, the DOD Emergency Supplemental
Appropriations and Rescissions Act, rescinded $90 million of this amount. The
Clinton Administration’s FY1996 budget request for ATP was $490.9 million. The
original appropriations bill, H.R. 2076, which passed the Congress but was vetoed
by the President, provided no financing for ATP. The final appropriations
legislation, P.L. 104-134, funded the Advanced Technology Program at $221 million
for FY1996. The following year, FY1997, the Omnibus Consolidated Appropriations
Act (P.L. 104- 208) provided support levels of $225 million, but $7 million was
rescinded by P.L. 105-18. P.L. 105-119 funded ATP at $192.5 million in FY1998.
The President’s FY1999 budget included $259.9 million for this program, an increase

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of 35%. However, P.L. 105-277, the Omnibus Consolidated Appropriations Act,
funded ATP at $197.5 million, 3% above the previous year. This figure reflected a
$6 million rescission to account for “deobligated” funds resulting from prior projects
that had been terminated early.
In the FY2000 budget, the Clinton Administration requested $238.7 million for
ATP, an increase of 21% over FY1999. Yet H.R. 2670, as originally passed by the
House, contained no appropriated funding for ATP. The report accompanying the
House 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.” S. 1217, as initially passed by the Senate, would have appropriated
$226.5 million, 15% more than the previous year. P.L. 106-113, the final FY2000
appropriations legislation, provided the Advanced Technology Program with $142.6
million, financing that was 28% below the level of the previous year. For FY2001,
the President requested ATP funding of $175.5 million, an increase of 23% over
prior year funding. The original appropriations bill, as passed by the House, again
provided no support for the program. However, P.L. 106-553 did fund ATP at
$145.7 million for FY2001, 2% above the previous fiscal year.
The Bush Administration’s FY2002 budget proposed suspending all funding for
new ATP awards pending an evaluation of the program. However, $13 million
would have been provided to meet financial commitments for on-going projects.
H.R. 2500, as first passed by the House, provided no support for new ATP projects
but did include $13 million to fund prior year commitments. The original Senate-
passed version of H.R. 2500 would have funded the program at $204.2 million. The
final legislation, P.L. 107-77, financed ATP at $184.5 million, a 27% increase over
FY2001.
In the FY2003 budget, the President requested $108 million for the Advanced
Technology Program. This figure was 35% below the FY2002 appropriation. A
number of Continuing Resolutions supported the program at FY2002 levels until the
108th Congress passed P.L. 108-7 which appropriated $178.8 million in FY2003
(after a 0.65% across the board mandated by the legislation).
The Administration’s FY2004 budget included $27 million for ATP to cover on-
going commitments; no new projects would be funded. H.R. 2799, the
appropriations bill initially passed by the House, contained no funding for ATP. As
reported to the Senate from the Committee on Appropriations, S. 1585 would have
provided $259.6 million for ATP. P.L. 108-199, the FY2004 Consolidated
Appropriations Act, financed the program at $170.5 million (after a mandated
rescission).
For FY2005, the President’s budget proposal, as well as H.R. 4754, the FY2005
appropriations bill originally passed by the House, did not include funding for ATP.
As reported to the Senate by the Committee on Appropriations, S. 2809 would have
financed the program at $203 million, an increase of 19% over the previous fiscal
year. The FY2005 Omnibus Appropriations Act, P.L. 108-447, provided ATP with
$136.5 million (after several rescissions mandated in the legislation), 20% less than
FY2004.

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President Bush’s FY2006 budget request, as well as the version of H.R. 2862
initially passed by the House, did not include support for ATP. H.R. 2862, as
originally passed by the Senate, would have funded the program at $140 million. The
final FY2006 appropriations legislation, P.L. 109-108, provides $79 million for the
program (after mandated rescissions), 42% below the previous fiscal year.
The Administration’s FY2007 budget did not include funding for ATP, nor did
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. While no final FY2007 appropriations
legislation was enacted during the 109th Congress, a series of continuing resolutions
finances ATP at FY2006 levels through February 15, 2007 when the 110th Congress
passed P.L. 110-5 which appropriated $79 million for the program.
The President’s FY2008 budget request again did not include support for this
program. The initial appropriations bill that passed the House, H.R. 3093, would
have provided ATP with $93.1 million (acknowledging that a new TIP program
would replace ATP) while the version passed by the Senate would have funded the
activity at $100 million (with $30.8 million of this directed to other programs in the
Federal Bureau of Investigation and the U.S. Marshals Service). The Senate-passed
bill also would have limited single applicant awards to companies with revenues less
than $1 billion. The final FY2008 appropriations legislation, P.L. 110-161, funds the
new Technology Innovation Program, which replaces ATP, at $65.2 million (with an
additional $5 million from FY2007 ATP unobligated balances).
The President’s FY2009 budget request does not include funding for TIP. The
appropriations bill ordered reported from the House Committee on Appropriations
would finance the program at $65.2 million while S. 3182, as reported from the
Senate Committee on Appropriations, provides $65 million.
Several laws have attempted to facilitate industry-university cooperation. Title
II of the Economic Recovery Tax Act of 1981 (P.L. 97-34) provided, in part, a
temporary 25% tax credit for 65% of all company payments to universities for the
performance of basic research. Firms were also permitted a larger tax deduction for
charitable contributions of equipment used in scientific research at academic
institutions. The Tax Reform Act of 1986 (P.L. 99-514) kept this latter provision,
but reduced the credit for university basic research to 20% of all corporate
expenditures for this work over the sum of a fixed research floor plus any decrease
in non-research giving.
The 1981 Act also provided an increased charitable deduction for donations of
new equipment by a manufacturer to an institution of higher education. This
equipment must be used for research or training for physical or biological sciences
within the United States. The tax deduction was equal to the manufacturer’s cost
plus one-half the difference between the manufacturer’s cost and the market value,
as long as it does not exceed twice the cost basis.
This research and experimentation tax credit expired in June 1992 when an
extension contained in H.R. 11, the Enterprise Zone Tax Act, was vetoed by former
President Bush. The Omnibus Budget Reconciliation Act, P.L. 103-66, reinstated the

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credit through July 1995 and made it retroactive to the date of its previous expiration.
The credit again expired. However, P.L. 104-188, the Small Business Job Protection
Act, reinstated the tax credit for application between July 1, 1996 and May 31, 1997.
The Taxpayer Relief Act of 1997, P.L. 105-34, extended the credit for 13 months
from June 1, 1997 through June 30, 1998. The tax credit expired once again but was
reinstated through June 30, 1999, by P.L. 105-277. Several bills also were introduced
that would have permitted the research tax credit to be applied to support for certain
collaborative research consortia. The 106th Congress once again extended the credit.
Title V of P.L. 106-170 reinstated the research and experimentation tax credit
through June 30, 2004 and increased the credit rate applicable under the alternative
incremental research credit by one percentage point per step. P.L. 108-311 extended
the research credit through December 31, 2005 while in the 109th Congress, P.L.109-
432 extended the credit through the end of 2007.2
Amendments to the patent and trademark laws contained in P.L. 96-517 also
were designed to foster interaction between academia and the business community.
This law provides, in part, for title to inventions made by contractors receiving
federal R&D funds to be vested in the contractor if it is a university, not-for-profit
institution, or a small business. Certain rights to the patent are reserved for the
government and these organizations are required to commercialize within a
predetermined and agreed upon time frame. Providing universities with patent title
is expected to encourage licensing to industry where the technology can be
manufactured or utilized, thereby creating a financial return to the academic
institution. University patent applications and licensing have increased since this law
was enacted. (For more discussion on this topic see CRS Report RL32076, The
Bayh-Dole Act: Selected Issues in Patent Policy and the Commercialization of
Technology, by Wendy H. Schacht and CRS Report RL30320, Patent Ownership and
Federal Research and Development (R&D): A Discussion on the Bayh-Dole Act and
the Stevenson-Wydler Act, by Wendy H. Schacht.)
Many cooperative industry-industry or industry-university programs are
supported and/or organized by the federal departments and agencies. These include,
but are not limited to, the National Science Foundation’s Engineering Research
Centers, the approximately 40 Industry-University Cooperative Research Programs,
and the more recent Science and Technology Centers. A program to match small
businesses interested in joint manufacturing technology efforts has been created in
the Department of Commerce.
While most legislative activities are intended to facilitate technological advance
across industries, there have been several recent efforts to provide direct assistance
for cooperative ventures in a particular industry. These initiatives are based, in part,
on national defense and economic security concerns over specific technologies that
are, or are perceived as, potentially critical to a wide range of businesses. Among the
joint ventures, funded primarily by the Department of Defense, have been
SEMATECH (a joint private sector semiconductor manufacturing research effort
which is now privately financed), the National Center for Manufacturing Sciences,
2 For additional information see CRS Report RL31181, Research Tax Credit: Current Status
and Selected Issues for Congress, by Gary Guenther.

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and the steel initiative. In addition, DOD supported the Software Engineering
Institute and the Department of Energy assisted in the Partnership for a New
Generation Vehicle initiative that, among other things, encouraged joint R&D
between federal laboratories and private firms leading to commercialization.
Cooperation between industry and the federal R&D enterprise is another facet
of the effort to increase industrial competitiveness through joint ventures. The
federal government will spend an estimated $137 billion for research and
development in FY2007 to meet the mission requirements of the federal departments
and agencies. This has led to many technologies and techniques, as well as to the
generation of knowledge and skills, which may have applications beyond their
original intent. To foster their development and commercialization in the industrial
community, various laws have established institutions and mechanisms to facilitate
the movement of ideas and technologies between the public and private sectors.
The Stevenson-Wydler Technology Innovation Act (P.L. 96-480), as amended
by the Federal Technology Transfer Act (P.L. 99-502) and the Department of
Defense FY1990 Authorizations (P.L. 101-189), provides, in part, a legislative
mandate for technology transfer from the federal government to the private sector,
establishes a series of offices in the agencies and/or laboratories to administer
transfer efforts, provides incentives for federal laboratory personnel to actively
engage in technology transfer, and creates new contractual means for industry to
work with the laboratories including cooperative research and development
agreements (CRADAs). P.L. 104-113, the National Technology Transfer and
Advancement Act, attempts to clarify existing policy with respect to the dispensation
of intellectual property under a CRADA by amending the Stevenson-Wydler Act.
P.L. 106-404, the Technology Transfer Commercialization Act, makes changes in
current practices concerning patents held by the government to make it easier for
federal agencies to license such inventions to the private sector for
commercialization. (For additional information see CRS Report RL33527,
Technology Transfer: Use of Federally Funded Research and Development, by
Wendy H. Schacht.)
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 bill amend section 103(c) of title 25, United States Code, such
that certain actions between researchers under a joint research agreement will not
preclude patentability. (For more detail see CRS Report RS21882, Collaborative
R&D and the Cooperative Research and Technology Enhancement (CREATE) Act,
by Wendy H. Schacht.)
The Omnibus Trade and Competitiveness Act (P.L. 100-418) established a
program of regional Centers for the Transfer of Manufacturing Technology (now part
of the Manufacturing Extension Partnership effort) to facilitate the movement to the
private sector of knowledge and technologies developed under the aegis of the
National Institute of Standards and Technology. (For more discussion, see CRS
Report 97-104, Manufacturing Extension Partnership Program, by Wendy H.
Schacht.) In addition, the law required that NIST provide technical assistance to state
technology extension programs in an effort to improve private sector access to federal
technology. (For additional Information, see CRS Report RL33528, Industrial

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Competitiveness and Technological Advancement: Debate over Government Policy,
by Wendy H. Schacht.) Government-industry collaboration is further facilitated by
a provision of the FY1991 National Defense Authorization Act (P.L. 101- 510) that
amends Stevenson-Wydler to allow government agencies and laboratories to develop
partnership intermediary programs to augment the transfer of laboratory technology
to the small business community.
A pilot activity under the Small Business Development Act of 1992, the Small
Business Technology Transfer (STTR) program, facilitates cooperative work between
small companies and federal labs leading to the commercialization of new
technology. Scheduled to sunset in FY1996, the program was extended for one year
until P.L. 105-135 reauthorized it through FY2001. Subsequently, P.L. 107-50
extended the STTR activity through FY2009, increased the set-aside used to fund the
program to 0.3% (beginning in FY2004), and expanded the amount of money
available for individual Phase II grants to $750,000. (See CRS Report 96-402, Small
Business Innovation Research Program, by Wendy H. Schacht and CRS Report
RS22865,The Small Business Innovation Research Program: Reauthorization
Efforts, by Wendy H. Schacht.)
Issues
It is not yet known whether federal support of cooperative ventures signals a
long-term commitment to the development of technology. The former Clinton
Administration set out a policy to actively promote joint R&D activities utilizing
both direct and indirect federal support for expanded cooperative work leading to
commercialization. However, given current concerns over the federal budget, it is
unlikely that large sums of government money will be forthcoming for such efforts
in the future. Yet, other actions may reflect federal interest in the process of
technological advancement. The use of the extensive government R&D system, with
its expensive state-of-the-art facilities, can provide both academia and industry with
resources that may be beyond their financial ability. And despite the often short-term
focus of budget decisions, federal funds and non-monetary contributions to
cooperative ventures may be leveraged by contributions from state and local agencies
and the private sector.
If the proliferation of programs is any indication, state and local jurisdictions
have been in the forefront of cooperative endeavors. Many state and local economic
development activities focus on increasing innovation and the use of technology in
the private sector. Instead of competing for companies to relocate, many of these
jurisdictions now see additional benefits accruing from the creation of new firms and
the modernization of existing ones through the application of new technology.
Various states and localities are attempting to foster an entrepreneurial climate by
undertaking the development and support of a variety of programs to assist existing
high technology businesses, to promote the establishment of new companies, and to
facilitate the use of new technologies and processes in traditional industries. While
these efforts vary by state and locality, many of them include
industry-university-government cooperation. Several congressional proposals for
increasing cooperative ventures built upon existing state and local activities in these

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areas. (For additional discussion, see CRS Report 96-958 SPR, Technology
Development: Federal-State Issues (out of print; contact the author, Wendy H.
Schacht, for copies, 202-707-7066) and CRS Report 98-859, State Technology
Development Strategies: The Role of High Tech Clusters, by Wendy H. Schacht.)
Proponents of cooperative work argue that certain benefits are associated with
joint ventures. The increased popularity of this concept, and expanding federal
support for this approach, however, might suggest some questions be raised to assess
whether cooperative ventures are meeting expectations. Are there drawbacks to this
effort in general and in specific instances? Are cooperative projects addressing the
problems associated with the competitiveness of U.S. industry? Are they moving
technology development in the right direction?
It might be expected that an increasing number of industries and/or companies
will come to the federal government for assistance in supporting cooperative R&D
activities. Despite opposition by some to what has been described as “picking
winners or losers,” various sectors of the government have chosen to provide funding
for cooperative ventures in specific industries while requiring that the private sector
generate matching funds. At the same time, there are programs and policies that
attempt to facilitate cooperative efforts across industry in general. Decisions might
need to be made whether one approach is better than the other, or if both should
continue.
If part of government policy is to respond to individual industry requests for
assistance, Congress may opt to consider developing procedures to select between
industries and/or companies competing for limited federal funds. Can, and should,
federal guidelines be established? In addition, is it possible to determine at this time
what type of cooperative ventures are the most effective and efficient? Is there, in
fact, one best model or should each venture be tailored to the specific situation? And
finally, what are the implications of these decisions for policymaking in Congress?
Development
As noted above, innovation is a dynamic process that can involve idea
origination, research, development, commercialization, and diffusion throughout the
economy. However, it is not a linear process and an innovation may occur without
developing through these steps. In fact, most innovations are actually incremental
changes in existing goods and services in response to unmet market needs. The most
crucial factor is the availability or use of the technology or technique in the
marketplace.
In the recent past, the commercialization and diffusion of products and
processes often stood out as significant problems in terms of the ability of U.S.
industries to compete. Firms in several other countries, particularly Japan and the
East Asian newly industrializing countries, have been successful in commercializing
the results of R&D. In various instances, this was research initially performed in the
United States, as evidenced by the VCR and semiconductor chips. Basic research
and the pursuit of science are done successfully in the United States as indicated, in
part, by the number of Nobel prizes awarded to Americans. However, excellence in
science does not necessarily assure leadership in world markets. It has been noted

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that the United States was the world’s premiere economic power in the 1920s when
this nation was far from being in the forefront of science. Instead, market leadership
is significantly affected by the development and application of technology to make
the goods and services the consumers want to purchase.
Thus, questions may be raised as to whether programs and policies encouraging
increased cooperative research, without concomitant efforts to facilitate the
development and commercialization of technologies and techniques, can be effective
mechanisms to increase the competitiveness of American industry. Do we need to
know more about how to encourage the application of the research resulting from
joint ventures in the manufacture of products and processes and in the delivery of
services? Do these cooperative activities include mechanisms to facilitate the
effective and timely transfer of the results back to the companies where they can be
developed into goods for the marketplace? Since the major portion of the costs
associated with bringing out a new product occur at the development and marketing
stages, not in the research phase, should there be additional government incentives
to encourage companies to spend funds for commercialization in addition to
research?
Manufacturing
It is in the manufacturing arena where American companies appear to be the
most vulnerable to foreign competition. Process technologies (those used in
manufacturing) can significantly lower the costs of production and increase the
quality of goods and services. In Global Competition, the President’s Commission
on Industrial Competitiveness (under former President Reagan) concluded that “...
competitive success in many industries today is as much a matter of mastering the
most advanced manufacturing processes as it is in pioneering new products.”
The costs associated with the development and purchase of new manufacturing
equipment are high. This is particularly true for the 350,000 small companies which
make up a major segment of the manufacturing community. Several of the
cooperative efforts supported by the federal government address these manufacturing
concerns. The Manufacturing Technology program of the Department of Defense,
the advanced manufacturing initiatives in the Department of Energy, and the
Manufacturing Extension Centers operated by the National Institute of Standards and
Technology, although all different, are examples of government activities devoted to
facilitating the development of new manufacturing techniques and their use in
industry.
Enacted in the current Congress, P.L. 110-69 authorizes a new program of
partnerships between industry and other educational or research institutions to
develop new manufacturing processes, techniques, or materials. In addition, a
manufacturing fellowship program would be created with stipends available for post-
doctoral work at NIST. These activities differ from the established MEP effort where
no new manufacturing research is conducted as existing manufacturing technology
is applied to the needs of small and medium-sized firms.
Considering the importance of manufacturing, the existing cooperative programs
may not be sufficient to increase the competitiveness of American industry. Are

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there more effective types of joint ventures? Cooperative efforts, where resources
could be pooled and the equipment shared, may be one way to improve the
manufacturing capability of U.S. firms, large or small. Will joint manufacturing
prove to be a viable option? Should existing cooperative manufacturing programs
in certain agencies be expanded or should new efforts in other departments be
developed? Should one government agency have the lead in policy determinations;
if so, which federal department?
Defense vs. Civilian Support
Many of the industries interested in cooperative ventures with federal financial
support have approached the Department of Defense and, to a lesser extent, the
Department of Energy’s Defense Programs because these agencies have the greatest
amount of available resources and/or funding. They also tend to have the expertise
to operate large-scale programs and maintain close ties with certain industrial sectors
which could be encouraged to increase cooperation. In addition, both DOD and DOE
have a vested interest in the availability of certain technologies which could be
provided by a healthy domestic commercial market. However, questions remain
whether sponsorship of certain cooperative ventures by DOD and the Department
of Energy’s defense-related programs will lead to increased commercialization in the
civilian marketplace.
Critics argue that defense spending is not an effective mechanism to increase
industry’s ability to innovate and develop new technologies. Much of the research
and development in the defense arena may be too specialized, overdesigned, and/or
too costly to have value for commercial markets. The R&D also tends to concentrate
on weapon systems and other defense hardware rather than on process technologies
that are often necessary to improve manufacturing productivity. One reason cited for
the competitive problems of the machine tool industry was its focus on defense needs
rather than on the commercial market which is larger in the aggregate.
On the other hand, the U.S. commitment to military R&D has contributed to a
favorable balance of trade in the defense and aerospace industries. In the
SEMATECH effort, the purpose of DOD support was to facilitate the commercial
development of technologies with critical defense applications. The companies
involved in SEMATECH were experienced semiconductor manufacturers and were
knowledgeable about the markets’ needs and operations. Thus, although the initial
work performed by this semiconductor consortium may have been partially funded
by the Defense Advanced Research Project Agency, it was designed to result in new
products and processes in the civilian marketplace where both defense and
commercial demand can be met. SEMATECH now operates without direct federal
financing.
The issue of cooperative work between the Defense Department and the private
sector leading to commercial technologies was addressed in the former Technology
Reinvestment Project and was part of the more recent Dual-Use Partnership Project.
The Department of Energy has been expanding cooperative R&D activities in
Defense Program laboratories in conjunction with an increase in all DOE
collaborative efforts with industry. Decreased technology transfer budgets may

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impeded this effort, but several DOE defense laboratories are actively pursuing joint
ventures with industry.
Access by Foreign Firms
With worldwide communications systems, it is virtually impossible to prevent
the flow of scientific and technical information. What is critical to competitiveness
is the speed at which this knowledge is used to make products, processes, and
services for the marketplace. However, it appears that many foreign firms are willing
and able to take the results of research performed both in the United States and their
own countries and rapidly make high quality commercial goods. Many of these
companies are purchasing American businesses or establishing U.S. subsidiaries to
access American expertise. With the increased activity in research consortia,
particularly those with federal support, questions might be asked as to whether or not
foreign companies should or could be barred from access to the results. A larger
issue is how to define an “American company.” Is it determined by majority
ownership, manufacturing, location, value added to the U.S. economy, or by some
other definition? In addition, since technology is most effectively transferred by
person-to-person interaction, would cooperative activities between American
industry and foreign firms produce an outflow of information which could be used
to increase competitive pressures?
Direct vs. Indirect Support
Government efforts to facilitate cooperative ventures have included both
indirect supports and direct federal funding. Indirect measures include such things
as tax policies, intellectual property rights, and antitrust laws that create incentives
for the private sector. Other initiatives include government financing (on a cost
shared basis) of joint efforts such as the Advanced Technology Program and
Manufacturing Extension Partnerships. In the past, participants in the legislative
process generally did not make definite (or exclusionary) choices between these two
approaches. However, these activities were revisited in the 104th Congress given
apparent Republican preferences for the funding of basic research and not technology
development. For example, efforts to eliminate the Advanced Technology Program,
funding for flat panel displays, and agricultural extension reflected concern over the
role of government in developing commercial technologies and generally resulted in
reductions of direct federal financing for such public-private partnerships. Issues
were again raised in subsequent Congresses although no relevant, on-going program
was terminated until FY2008 when ATP was replaced by the Technology Innovation
Program. As the 110th Congress continues to make budget decisions, the future of
cooperative R&D may be expected to be explored further.
Legislation in the 110th Congress
P.L. 110-69 (H.R. 2272)
America COMPETES Act. Title III authorizes funding for the National Institute
of Standards and Technology (NIST) through 2010 and creates several new
manufacturing R&D programs in that organization. Funding for the Scientific and

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Technical Research and Services account within NIST is authorized at $502.1 million
for FY2008, $541.9 million for FY2009, and $584.8 for FY2010. Support for
construction and maintenance would be authorized at $150.9 million for FY2008,
$86.4 million for FY2009, and $49.7 million for FY2010. Authorization of
appropriations for Industrial Technology Services programs within NIST would
include $210 million ($100 million for the Technology Innovation Program (TIP) and
$110 million for MEP) for FY2008, $253.5 million ($131.5 million for TIP and $122
million for MEP) for FY2009, and $272.3 million ($140.5 million for TIP and $131.8
million for MEP) for FY2010. Among the new programs established within NIST
would be a Technology Innovation Program (to replace the Advanced Technology
Program), collaborative manufacturing research pilot grants, a manufacturing
fellowship program, and a manufacturing research database. Introduced on May 10,
2007; referred to the House Committee on Science and Technology. Passed House
on May 21, 2007 and received in the Senate on May 22, 2007. Placed on Senate
Legislative Calendar under General Orders. Senate struck out all after the Enacting
Clause and substituted the language of S. 761. Passed Senate, with the amendment,
on July 19, 2007. Conference held and conference report agreed to on July 31, 2007.
House and Senate agreed to conference report on August 2, 2007. Signed into law
by the President on August 9, 2007.
P.L. 110-161 (H.R. 2764)
Consolidated Appropriations Act, FY2008. Appropriates $89.6 million for the
Manufacturing Extension Partnership and $65.2 million for the Technology
Innovation Program which replaces the Advanced Technology Program (with an
additional $5 million from FY2007 ATP unobligated balances), among other things.
Introduced June 18, 2007; referred to the House Committee on Appropriations.
Passed House on June 22, 2007, and received in Senate the same day and referred to
the Senate Committee on Appropriations. Reported from the Senate Committee on
Appropriations, with an amendment in the nature of a substitute, on June 28, 2007.
Passed Senate, amended, on September 6, 2007. Signed into law by the President on
December 26, 2007.
P.L. 110-229 (S. 2739)
Consolidated Natural Resources Act of 2008. Title VI creates a program of
grants to non-profit institutions, state and local governments, cooperative extension
services, or universities to transfer energy efficient methods and technologies.
Introduced in the Senate on March 10, 2008. Passed the Senate without amendment
on April 10, 2008. Passed the House on April 29, 2008. Signed into law by the
President on May 8, 2008.

H.R. 1712 (Johnson, E. B.)
The Research and Development Tax Credit Act of 2007. Makes the research
tax credit permanent and allows for the issuance of tax exempt facility bonds for
research park facilities used for research and experimentation, among other things.
Introduced March 27, 2007; referred to the House Committee on Ways and Means.
H.R. 2133 (Allen)
Small Business Investment and Promotion Act of 2007. Makes the research tax
credit permanent, among other things. Introduced May 8, 2007; referred to the House
Committee on Ways and Means.

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H.R. 2138 (Levin)
Investment in America Act of 2007. Makes the research tax credit permanent,
among other things. Introduced May 3, 2007; referred to the House Committee on
Ways and Means.
H.R. 2734 (Walberg)
Tax Increase Prevention Act of 2007. Makes the research tax credit permanent,
among other things. Introduced June 14, 2007; referred to the House Committee on
Ways and Means.
H.R. 3907 (Murphy, C.)
Small Business Tax Relief Act of 2007. Makes the research tax credit
permanent, among other things. Introduced October 18, 2007; referred to the House
Committee on Ways and Means.
H.R. 5105 (Dreier)
Fair and Simple Tax Act of 2008. Makes the research tax credit permanent,
among other things. Introduced January 23, 2008; referred to the House Committee
on Ways and Means.
H.R. 5681(McNerney)
Innovation Tax Credit Act of 2008. Revises the tax credit for increased research
activities and makes it permanent, among other things. Introduced April 2, 2008;
referred to the House Committee on Ways and Means.
H.R. 6049 (Rangel)
Renewable Energy and Job Creation Act of 2008. Extends the research tax
credit through the end of 2008, among other things. Introduced May 14, 2008;
referred to the House Committee on Ways and Means. Reported, amended, from the
House Committee on Ways and Means on May 20, 2008. Passed the House on May
21, 2008.
S. 41 (Baucus)
Research Competitiveness Act of 2007. Amends the Internal Revenue Code to
make the research and experimentation tax credit permanent. Among other things,
this bill would allow the issuance of tax exempt facility bonds for research park
facilities used for research and experimentation. Introduced January 4, 2007; referred
to the Senate Committee on Finance.
S. 592 (Collins)
GoMe Act. Extends the research tax credit through 2012, among other things.
Introduced February 14, 2007; referred to the Senate Committee on Finance.
S. 833 (Coleman)
COMPETE Act of 2007. Makes the research and experimentation tax credit
permanent, among other things. Introduced March 9, 2007; referred to the Senate
Committee on Finance.

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S. 1373 (Pryor)/H.R. 4250 (Wilson)
Building a Stronger America Act. Provides for grants and loan guarantees for
the development and construction of science parks, among other things. Introduced
May 11, 2007; referred to the Senate Committee on Commerce, Science, and
Transportation. Hearings held by the Subcommittee on Science, Technology, and
Innovation on October 18, 2007. H.R. 4250 introduced November 15, 2007; referred
to the House Committee on Science and Technology.
S. 2209 (Hatch)
Research Credit Improvement Act of 2007. Simplifies the research tax credit
and makes it permanent, among other things. Introduced October 19, 2007; referred
to the Senate Committee on Finance.
S. 2552 (Snowe)
Small Business Stimulus Act of 2008. Extends the research tax credit through
the end of 2008. Introduced January 24, 2008; referred to the Senate Committee on
Finance.
S. 2884 (Collins)
Research and Development Tax Credit Improvement Act of 2008. Revises the
tax credit for increased research activities and extends the credit through 2012,
among other things. Introduced April 17, 2008; referred to the Senate Committee on
Finance.
S. 3078 (Collins)
National Innovation and Job Creation Act of 2008. Establishes a National
Innovation Council to coordinate federal innovation policy and provide support for
state and local initiatives in this area. Provides funding for cluster development
activities and information dissemination, among other things. Introduced June 3,
2008; referred to the Senate Committee on Commerce, Science, and Transportation.

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