Technology Transfer: Use of Federally Funded
Research and Development
Wendy H. Schacht
Specialist in Science and Technology Policy
December 7, 2010
Congressional Research Service
7-5700
www.crs.gov
RL33527
CRS Report for Congress
P
repared for Members and Committees 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
(R&D) budget for intramural work 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.
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Technology Transfer: Use of Federally Funded Research and Development
Contents
Background and Analysis ............................................................................................................ 1
Technology Transfer to Private Sector: Federal Interest ............................................................... 2
Technology Transfer to State and Local Governments: Rationale for Federal Activity.................. 3
Current Federal Efforts to Promote Technology Transfer ............................................................. 3
Federal Laboratory Consortium for Technology Transfer....................................................... 4
P.L. 96-480, P.L. 99-502, and Amendments ........................................................................... 4
P.L. 100-418, Omnibus Trade and Competitiveness Act ......................................................... 6
Patents .................................................................................................................................. 9
Small Business Technology Transfer Program ..................................................................... 11
Further Considerations .............................................................................................................. 11
Contacts
Author Contact Information ...................................................................................................... 12
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Technology Transfer: Use of Federally Funded Research and Development
Background and Analysis
The federal government is estimated to have spent $147.4 billion in FY2010 on research and
development (not including funds allocated under the American Recovery and Reinvestment Act)
to meet the mission requirements of the federal departments and agencies.1 Approximately one-
third of this is 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.2
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 1970s and 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 “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.
1 CRS Report RL34448, Federal Research and Development Funding: FY2009, coordinated by John F. Sargent Jr.
2 See CRS Report RL33528, Industrial Competitiveness and Technological Advancement: Debate Over Government
Policy, by Wendy H. Schacht.
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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.
In addition, 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.
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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 H. Schacht.)
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.
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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.
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
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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, DOE) in
the FY1990 Defense Authorization Act (P.L. 101-189). A CRADA is a specific legal document
(not a procurement contract) which defines the collaborative venture. It is intended to be
developed at the laboratory level, with limited agency review. In agencies which operate their
own laboratories, the laboratory director is permitted to make decisions to participate in CRADAs
in an effort to decentralize and expedite the technology transfer process. Generally, at agencies
which use contractors to run their laboratories, specifically DOE, the CRADA is to be approved
by headquarters. P.L. 106-398, however, allows the agency to define certain conditions under
which the CRADA may be approved by a laboratory itself rather than headquarters.
The work performed under a cooperative research and development agreement must be consistent
with the laboratory’s mission. In pursuing these joint efforts, the laboratory may accept funds,
personnel, services, and property from the collaborating party and may provide personnel,
services, and property to the participating organization. The government can cover overhead costs
incurred in support of the CRADA, but is expressly prohibited from providing direct funding to
the industrial partner. In GOGO laboratories, this support comes directly from budgeted R&D
accounts. Prior to the elimination of a line item in the budget to support non-defense energy
technology transfer, the Energy Department generally relied on a competitive selection process
run by headquarters to allocate funding specifically designated to cover the federal portion of the
CRADA. Now these efforts are to be supported through programmatic funds.
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 that requires 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
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Commerce, between FY2004 and FY2008, approximately 3,500 – 4,000 traditional CRADAs
were active each year.3
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.
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 now-terminated Advanced Technology Program (ATP) provided 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.4 The first awards were made in 1991. By the end of the program in 2007, 824
3 U.S. Department of Commerce, National Institute of Standards and Technology, Federal Laboratory Technology
Transfer, Fiscal Year 2008, March 2010, 8, available at http://www.nist.gov/tpo/publications/upload/
Fed_Lab_Tech_Transfer_Report_Congress_FY08_3-8-2010.pdf.
4 See CRS Report 95-36, The Advanced Technology Program, by Wendy H. Schacht.
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projects had been funded representing approximately $1.6 billion in federal dollars matched by
$1.5 billion in financing from the private sector. Approximately 28% of awards (227) were made
for joint ventures.5
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. In FY1999, NIST dropped the focused
areas in favor of one competition open to all areas of technology.
P.L. 110-69, the America COMPETES Act, created the new Technology Innovation Program
(TIP) to replace the Advanced Technology Program.6 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 addition, in the Advanced Technology Program, joint ventures were required to include
two separately owned for-profit firms and could involve universities, government laboratories,
and other research establishments as participants in the project but not as recipients of the grant.
In the TIP initiative, 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
could 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 is comprised of only private sector
members.
In January 2009, nine TIP awards were announced for “new research projects to develop
advanced sensing technologies that would enable timely and detailed monitoring and inspection
of the structural health of bridges, roadways and water systems that comprise a significant
component of the nation’s public infrastructure.” According to the agency, $42.5 million in
federal money is expected to be matched by $45.7 million in private sector support. Twenty
additional awards were announced in December 2009 totaling almost $71.0 million in NIST
funding with approximately $145.7 million in financing from other sources. In April 2010, NIST
5 National Institute of Standards and Technology, Historical Statistics on ATP Awards/Winners, available at
http://www.atp.nist.gov/eao/statistics.htm.
6 See CRS Report RS22815, The Technology Innovation Program, by Wendy H. Schacht.
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announced a new TIP competition in the area of “Manufacutring and Biomanufacturing:
Materials Advanced and Critical Processes.”7 This program is expected to fund 25 new projects
totaling approximately $25 million for the first year. The intent is to facilitate the use and
commercialization of new materials in the production process.8
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.9 Federal funding for the centers is matched by non-federal sources including state and
local governments and industry. Originally, seven Regional Centers for the Transfer of
Manufacturing Technology were selected and are operational: the Great Lakes Manufacturing
Technology Center at the Cleveland Advanced Manufacturing Program in Ohio; the Northeast
Manufacturing Technology Center at Rensselaer Polytechnic Institute in Troy, New York (now
called the New York Manufacturing Extension Partnership); the South Carolina Technology
Transfer Cooperative based at the University of South Carolina in Columbia; the Midwest
Manufacturing Technology Center at the Industrial Technology Institute in Ann Arbor, Michigan;
the Mid-American Manufacturing Technology Center at the Kansas Technology Enterprise
Corporation of Topeka; the California Manufacturing Technology Center at El Camino College in
Torrance; and the Upper Midwest Manufacturing Technology Center in Minneapolis.
The original program expanded in 1994 creating the Manufacturing Extension Partnership (MEP)
to meet new and growing needs of the community. In a more varied approach, the Partnership
involves both large centers and smaller, more dispersed organizations sometimes affiliated with
larger centers. Also included is the NIST State Technology Extension Program which provides
states with grants to develop the infrastructure necessary to transfer technology from the federal
government to the private sector (an effort which was also mandated by P.L. 100-418) and a
program that electronically ties the disparate parties together along with other federal, state, local,
and academic technology transfer organizations. There are now centers in all 50 states and Puerto
Rico. Since the program was created in 1989, awards made by NIST for extension activities
resulting in the creation of approximately 400 regional offices. [It should be noted that the
Department of Defense also funded 36 centers through its Technology Reinvestment Project
(TRP) in FY1994 and FY1995. When the TRP was terminated, NIST took over support for 20 of
these programs in FY1996 and financed the remaining ones during FY1997.]
The America COMPETES Act authorized (but did not fund) a new NIST 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.
In October 2010, NIST announced the award of $9.1 million in cooperative agreements for 22
projects “designed to enhance the productivity, technological performance and global
competitiveness of U.S. manufacturers.”10 The funding was granted on a competitive basis to
7 National Institute of Standards and Technology, 2010 TIP Competition Focuses on Manufacturing Technologies,
April 15, 2010, available at http://www.nist.gov/tip/20100413_tip_comp_announce.cfm.
8 Ibid.
9 See CRS Report 97-104, Manufacturing Extension Partnership Program: An Overview, by Wendy H. Schacht.
10 National Institute of Standards and Technology, NIST Manufacturing Extension Partnership Awards $9.1 Million for
22 Projects to Enhance U.S. Manufacturers’ Global Competitiveness, Press Release, October 5, 2010, available at
http://www.nist.gov/mep/upload/100410-MEP-Competition-press-release-FINAL.pdf.
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non-profit organizations that will work with the MEP centers and address one or more of the areas
that have been identified by NIST as critical to U.S. manufacturing. These activities differ from
the established MEP effort in which no new manufacturing research is conducted and funded as
existing manufacturing technology is applied to the needs of small and medium-sized firms.
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.11 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
11 See CRS Report RL32076, The Bayh-Dole Act: Selected Issues in Patent Policy and the Commercialization
of Technology, by Wendy H. Schacht.
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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 give 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.
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, made changes in the patent laws to promote cooperative
research and development among universities, government, and the private sector. The legislation
amended section 103(c) of title 25, United States Code, such that certain actions between
researchers under a joint research agreement will not preclude patentability.12
12 See CRS Report RS21882, Collaborative R&D and the Cooperative Research and Technology Enhancement
(CREATE) Act, by Wendy H. Schacht.
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Technology Transfer: Use of Federally Funded Research and Development
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 the STTR through FY2001, while P.L.
107-50 extended the program through FY2009. Since its last expiration on October 31, 2008, the
program has been temporarily extended five times and is now operating through January 31,
2011. 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 $750,000.13
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 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 situation. 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
13 See CRS Report 96-402, Small Business Innovation Research (SBIR) Program, by Wendy H. Schacht.
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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 or more 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.
Today, 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 some indications that there may be a refocus on 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. While the Advanced
Technology Program faced much opposition in the House, the program continued to be funded,
although at decreased levels until FY2008 when it was replaced by the Technology Innovation
Program which appears to have more support from the Congress. When the Manufacturing
Extension Partnership had its budget cut the funds were restored the following fiscal year. As the
Congress makes 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.
Author Contact Information
Wendy H. Schacht
Specialist in Science and Technology Policy
wschacht@crs.loc.gov, 7-7066
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